The Lastest Macroeconomic News
13.03.2015 23:38 Russia`s GDP cheer may not last
Decent macro results in January may have showcased Russia`s economic flexibility, but it might be a false dawn. A respectable economic thinktank predicts a turn for the worse, and some preliminary February numbers already point to a deteriorating budget situation. The Russian economy did pretty well in January. Official statistics from the economy ministry show that GDP was down a modest 1.5% year-on-year (minus 1.1% y/y adjusted for fewer working days). Industrial output was up 0.9% y/y with a number of industries showing double-digit growth, offsetting double-digit declines in some others. There is evidence that the rouble devaluation is helping commodity exporters, while import substitution has had a visibly positive impact on, among others, food producers (benefiting from sanction-related import bans) and pipe manufacturers (offsetting a sharp drop of imports from Ukraine). At the same time, investments were sharply down ( minus 6.3% y/y) as well as retail trade (minus 4.4% y/y). Real disposable income shrank 0.8% y/y in January after a 6.2% drop in December. The release of January stats coincided with the publication of a 2015 forecast from the Gaidar institute for economic policy, an independent economic thinktank. It argues that the economic contraction in 2015 will be sharper than forecast by the Russian government, because of a deeper cut in investments and a steeper fall in disposable income.
12.03.2015 14:39 Three Ways Sanctions Have Weakened Russia`s Economy
Next week, EU leaders will meet to discuss effective, long-term strategies for policy with Russia. So far, sanctions have not been effective in changing Russian public support of Putin`s government. “We can see with full clarity that they are trying to divide us inside of Europe, as well as Europe and America,” EU Council chief Donald Tusk said at the White House after a meeting with President Obama ahead of next week`s summit. “But when we are united, we will be able to put a stop to the aggressive policy of Russia.” The White House declared last week that sanctions launched against Russia last March prohibiting banks and other financial institutions from doing business with Russia will continue for another year. Western sanctions -- on top of falling oil prices -- have sunk Russia`s economy in an almost steady decline over the past year. According to a new analysis by Bloomberg Business, Russia currently has the 7th most miserable economy in the world -- worse than Colombia, Croatia and Slovakia. Despite this, Russians remain resilient, overcoming food shortages with innovations in product creation, and ultimately overwhelmingly supporting President Vladimir Putin`s policies. Here are three ways Russia`s economy has declined over the past year, but haven`t actually affected popular opinion: FOOD EMBARGO. In response to sanctions from the west, the Kremlin banned imported foodstuffs from any country which had issued sanctions against Russia. As a result, food prices have spiked. INFLATION. The inflation rate in Russia reached a thirteen-year high for the nation in the month of February 2015 was 16.7, up from 15.0 in January, according to the Bank of Russia. DWINDLING RESERVES. Unstable markets have forced Russia liquidate a chunk of its foreign currency and gold reserves. The Central Bank`s reserve of about $600 billion has dwindled by more than $200 billion since 2008.
09.03.2015 23:15 Russian inflation reaches 16.7% in February 2015
Russian inflation reached 16.7 per cent in February as lower oil prices and Western sanctions over Ukraine caused the biggest jump in prices over one year since 2002, the state statistics service said. Prices rose a further 2.2 per cent in February after leaping 3.9 per cent in January - a rate unseen in 16 years - as the economy remains fragile after the rouble, at the end of last year, lost half its value against the dollar. The most dramatic rise was in food prices, soaring 23.3 per cent over the past year and 3.3 per cent in February alone. This increase resulted from Moscow`s ban on European Union and US food imports in retaliation for sanctions slapped on Russia over its backing of rebels in eastern Ukraine. Basic vegetables consumed regularly in Russian households were among the worst-affected with onions, carrots and beetroot increasing by around 10 per cent each in February. The economy ministry is expecting inflation to peak at 17 per cent by April, while the annual rate for 2015 has been forecast at 12.2 per cent. Russia`s inflation was estimated at 11.4 per cent in 2014, the highest level since the financial crisis of 2008, after coming in at 6.5 per cent in 2013.
06.03.2015 16:35 No, Obama, Russia`s economy isn`t in tatters
Western politicians and pundits should be more careful with their predictions for the Russian economy: Reports of its demise may prove to be premature. Bashing the Russian economy has lately become a popular pastime. In his state of the nation address last month, U.S. President Barack Obama said it was “in tatters.” And last week, Anders Aslund of the Peterson Institute for International Economics published an article predicting a 10 percent drop in gross domestic product this year - more or less in line with the apocalyptic predictions that prevailed when the oil price reached its nadir late last year and the ruble was in free fall. Aslund`s forecast focuses on Russia`s shrinking currency reserves, some of which have been earmarked for supporting government spending in difficult times. At $364.6 billion, they are down 26 percent from a year ago and $21.6 billion from the beginning of this year. Aslund expects $166 billion to be spent on infrastructure investments and bailing out companies, and another $100 billion to exit via capital flight and other currency outflows. As a result, given foreign debts of almost $600 billion, “Russia`s reserve situation is approaching a critical limit,” he says. What this argument ignores is that Russia`s foreign debts are declining along with its reserves - that`s what happens when the money is used to pay down state companies` obligations.
05.03.2015 22:25 The 15 most miserable economies in the world. Sorry, Venezuela
Inflation is a disease that can wreck a society, Milton Friedman, the late Nobel laureate economist, once said. Add rising unemployment to the diagnosis, and his profession ascribes a rather non-technical term to the debilitating effect on people: misery. That affliction this year will be most acute in Venezuela, Argentina, South Africa, Ukraine and Greece - the five most painful economies in which to live and work, according to Bloomberg survey data that make up the so-called misery index for 2015. (It`s a simple equation: unemployment rate + change in the consumer price index = misery.) In Ukraine`s case, war will exact greater economic casualties. Tension with Russia-backed rebels will prolong joblessness in the eastern-European nation, and inflation won`t offer much relief, the surveys showed. The one-two punch means Ukrainian consumers are set to be the fourth-saddest among 51 economies (including the euro area) based on forecasts for the misery measure. The three countries that will probably see the most economic misery in 2015 - South Africa, Argentina and Venezuela - haven`t budged much from their 2014 rankings, when they occupied three of the top four spots, the data showed. Greece is 5th, Spain is 6th, Portugal is 10th and Italy is 11th in this year`s ranking, though each show about average projected income levels relative to survey peers. (Ireland happily sits further down the chain at No. 16 in the misery ranking and with a much-better-than-average GDP per capita of US$48,787. The 51 economies in our misery index average GDP per capita of US$31,079.)
04.03.2015 21:19 Why Russia`s economy will not collapse
The rapid depreciation of the rouble, despite a dramatic – and seemingly desperate – late-night interest-rate hike by the Central Bank of Russia (CBR) in December last year, has raised the spectre of Russia`s economic meltdown in 1998. Indeed, the West has sought to animate that spectre in its ongoing confrontation with Russian President Vladimir Putin. But, though Russia`s economy is undoubtedly in trouble, a full-blown collapse is unlikely. Oil and gas account for more than 60% of Russia`s exports; other primary commodities make up much of the rest. Given this, the recent sharp decline in world oil prices obviously represents a major shock – large enough, when combined with the effect of increasingly strict Western sanctions – to provoke a sizeable recession. To make matters worse, commodity prices are expected to remain low for some time. In that case, the income loss would become much more than a temporary setback. But Russia is no economic basket-case-in-waiting – at least not yet. The situation today is very different from that in 1998, when Russia was running twin fiscal and current-account deficits. Russia needed to borrow, and it was borrowing heavily in foreign currency. This meant that as the ruble depreciated, Russia`s debts rose. Eventually, default became inevitable. By contrast, in recent years, Russia has enjoyed a sizeable budget surplus, and public debt is below 20% of GDP. It is true that income from oil and gas, which represents the bulk of government revenues, has been halved when measured in dollars.
26.02.2015 15:40 Russia`s Economy: Good, Bad, And Everything In Between
Rosstat, Russia`s state statistics service, released figures on January 2015 industrial production. They`re worth taking a close look at because they are an excellent example of how, when it comes to Russia`s economy, truth is largely in the eye of the beholder. On a macro level, the figures were OK. Total industrial production was up by 0.9% in comparison to January 2014. That`s not great, obviously, but considering the enormous pressure that Russia is under at the moment it`s actually a pretty decent figure. Things certainly could have been a whole lot worse. However, when you step one level down, from the total level of industrial production to the sector-by-sector breakdown, you immediately start to see a few problems. The first is that manufacturing actually shrank fractionally (0.1%) on a year-over-year basis. Meanwhile the extraction of natural resources and the total output of gas, water, and electric utilities grew by 1.5 and 1.2% respectively. What is clear, however, is that there isn`t any consistently positive, optimistic story to be told about the broader Russian manufacturing industry In the midst of a perfect storm for import substitution (e.g. a savage currency devaluation and sweeping restrictions on the purchase of foreign goods) Russian industry basically stayed in place. That`s not consistent with a thesis of “the whole rotten structure will soon come crashing down!” but nor is it consistent with a thesis of Russian dynamism.
22.02.2015 17:15 Russia`s Anti-Crisis Plan: Old Solutions To New Problems?
This past week, as the Russian ruble weakened again and the rating agency Standard & Poor lowered the country`s sovereign credit rating status to “junk,” the Russian government unveiled a 2.3 trillion ruble ($35 billion) “anti-crisis” plan. The Kremlin hopes this plan will lead the country out of its current recession. Earlier this week, Russian President Vladimir Putin assured the Russian public that plan will bring stability. “It [social stability] can only be achieved if acceptable parameters are preserved in the economy, first of all, it is linked with the budget, inflation, foreign debt, reserves, and so on,” he said, “This is all we have been rightly proud of in the recent years and it is called macroeconomic stability.” Yet Russian experts raise doubts. Their main critique is, the plan offers no new thinking to confront the current crisis, which is a different problem than the last economic crisis Russia faced in 2008-2009. According to FBK Institute for Strategic Analysis Director Igor Nikolayev, the plan`s authors “are acting about the same way as they had done six years ago – on the principle of `let`s pour money [on the problem], and then, maybe, everything will end, oil prices will bounce back again.`” The plan`s priorities, too, according to Nikolayev, are about the same as they were during the global financial crisis, but “you have to consider that this is a different crisis,” he said.
19.02.2015 14:32 Russia Economy Moves Further Toward Recession
Economic data published Wednesday showed Russia`s economy moving further toward recession under the weight of Western sanctions and a sharp decline in the price for oil, its main source of hard currency. Although the rate of inflation is slowing, a sharp decline in retail sales and a drop in real wages indicated that consumers are bearing the brunt of the economic pressure. The government expects gross domestic product to shrink by 3% in 2015, the first drop since 2009; many private economists expect a deeper contraction. The Wednesday data from the Federal Statistics Service RosStat showed a decline in domestic demand, which had been one of the main drivers of the economy for years, but has been hit by a drop in consumer confidence. The consumer-price index added another 0.4% in the week to Feb. 16, making an annualized inflation rate of 15.9%. However the weekly price rise was the lowest since mid-December, when a sharp ruble devaluation led to record high weekly inflation figures. Retail sales fell in January for the first time since 2009, while the decline in real wages was the steepest on record. Sales contracted by 4.4% year on year in January, and real wages fell by 8% from January 2014.
18.02.2015 14:49 Japan`s recession is over
Japan`s economy rebounded from recession to grow an annualized 2.2 percent in the final quarter of last year, giving a much-needed boost to premier Shinzo Abe`s efforts to shake off decades of stagnation even as the global outlook deteriorates. But the expansion was smaller than a 3.7 percent increase forecast in a Reuters poll, suggesting a fragile recovery for the world`s third-largest economy as consumer mood remained soft and uneven global growth weighed on exports. Still, the return to growth will allow the Bank of Japan to hold off on expanding monetary stimulus in coming months, even as slumping oil prices push inflation further away from its 2 percent target, analysts say. The data will be one of the key factors the BOJ will scrutinize at its two-day rate review ending on Wednesday, where it is widely set to maintain the current pace of asset purchases in its monetary stimulus program. The preliminary reading for gross domestic product (GDP), which translates into a quarter-on-quarter increase of 0.6 percent, follows two straight quarters of contraction blamed on the hit on consumption from a sales tax hike last April. External demand added 0.2 percentage point to growth in the quarter, a sign the weak yen was finally driving up exports. Private consumption, which makes up about 60 percent of the economy, rose 0.3 percent in the final quarter, less than a median market forecast for a 0.7 percent increase.