The Lastest Macroeconomic News

28.07.2014 13:35 Harsher Sanctions Would Cost Russia 0.3% of GDP

An upsurge in international tensions and further sanctions slapped on sectors of the Russian economy over the country`s annexation of Crimea from Ukraine would cost Russia 0.2 to 0.3 percent of the GDP this year, according to Russia`s Finance Ministry. But longer-term implications could be broader, crippling the country`s much-needed modernization drive and hampering Russia`s ability to emerge from an sharp economic slowdown, the ministry said in a budgetary policy outline for 2015-2017 published on its website. In the international furore that followed Russia`s land grab in March, the European Union blacklisted about 60 Russian top officials, businessmen and companies, while the U.S. sanctioned some 50 names, banned cooperation in the nuclear and space industries and restricted the sale of hi-tech products to Russia. Broader sanctions against whole sectors of the Russian economy, including its main staple, oil and gas, have been threatened, but not implemented. Skeptics said such sanctions would backfire against the EU, Russia`s leading trade partner which is also heavily reliant on Russian petroleum exports. The ministry`s forecast assumes no "sectoral" sanctions will be imposed. Broad damage has been done, however - the spike in uncertainty has sent the perceived risks of operating in Russia skyrocketing, leading Western banks to shy away from the country, while many companies not already tied into Russia have put investment plans on hold. The value of syndicated loans granted to Russian commodities producers plummeted by 82 percent to $3.5 billion in the first half of this year, Bloomberg reported. Russian economic growth has been sputtering since 2012, and the country entered technical recession in the first half of 2014, according to HSBC, though official statistics indicated GDP growth of 1.1 percent between January and May.

21.07.2014 12:27 What`s Making US Economy a World Beater? 5 Factors

How does the U.S. economy do it? Europe is floundering. China faces slower growth. Japan is struggling to sustain tentative gains. Yet the U.S. job market is humming, and the pace of economic growth is steadily rising. Five full years after a devastating recession officially ended, the economy is finally showing the vigor that Americans have long awaited. Last month, employers added 288,000 jobs and helped reduce the unemployment rate to 6.1 percent, the lowest since September 2008. June capped a five-month stretch of 200,000-plus job gains - the first in nearly 15 years. After having shrunk at a 2.9 percent annual rate from January through March - largely because of a brutal winter - the U.S. economy is expected to grow at a healthy 3 percent pace the rest of the year. Here are five reasons the United States is outpacing other major economies: an aggressive central bank, stronger banks, a more flexible economy, less budget-cutting, a roaring stock market. Most economists agree it`s worked.

15.07.2014 15:30 Mexico`s Economy in Recovery Mode, Financial Council Says

Mexico`s economy will continue to recover during the rest of this year, but the situation in international markets poses risks, the Financial System Stability Council (CESF) said. Foreign demand and the federal government`s stimulus policies should help bolster the recovery in the wake of first-quarter gross domestic product (GDP) growth that came in lower than expected, the CESF said in a statement. Demand in developed countries has given a boost to Mexico`s economy, but “signs of relative weakness persist,” said the CESF, whose members are the heads of Mexico`s main economic organizations. Monetary policy in the main developed economies is likely to experience “gradual” normalization, the CESF said. Investors` outlook for monetary policy “has contributed to low volatility” in the financial markets and “encouraged capital flows to return to emerging economies,” the council said, referring to the low interest policies adopted by many central banks around the world. Mexico`s GDP grew 1.8 percent in the first quarter, compared to the same period in 2013, a figure that was well below expectations. The government has revised its economic growth forecast for this year downward from 3.9 percent to 2.7 percent. Mexico`s economy grew just 1.1 percent in 2013 due to a strong deceleration in the first half of the year.

10.07.2014 15:57 World Bank cuts South Africa`s 2014 growth outlook to 2%

The World Bank has joined other institutions that are revising downwards their 2014 economic growth forecasts for South Africa as strikes, higher interest rates, rising inflation and weak demand weigh. South Africa`s economy contracted by 0.6% in the first quarter of 2014. In its latest global economic prospects report, the bank cut South Africa`s economic growth forecast for 2014 to 2% from an earlier forecast of 2.7%. The bank also downwardly revised its economic growth forecast for 2015 to 3% from 3.4% previously, and left its outlook for 2016 unchanged at 3.5%. Most institutions are downwardly revising their economic growth forecasts for the country as a strike at platinum mines and disruptions to power supply cause lower output by key sectors such as manufacturing. The World Bank forecast that South Africa`s current account deficit - which has often been one of the main reasons behind rand weakness - would improve slightly but remain large. Forecasts are for a deficit of 5.9% in 2014, 4.7% in 2015, and 5% in 2016. The World Bank said in its report that it expected economic growth in sub-Saharan Africa to remain flat at about 4.7% in 2014 mainly due to economic weakness in South Africa and oil-infrastructure bottlenecks in Angola. Growth in the rest of the region was expected to remain robust, boosted by resilient domestic demand. Economic growth in the region is then expected to pick up to about 5.1% in 2015 and 2016.

01.07.2014 19:22 India Can Become The World`s Largest Economy, Says Facebook`s Sandberg

India has the potential to become the world`s largest economy, said Facebook`s chief operating officer (COO) Sheryl Sandberg. Sandberg, who served as the Chief of Staff for the US Treasury Department under President Bill Clinton, said the over $2 trillion Indian economy has potential to create jobs and drive growth. "India has the potential to become the largest economy in the world. And if you look at economic growth, particularly recently, jobs are a very hard situation all over the world. From the US to developing markets, everyone is very concerned about jobs. And the majority of the growth, as I understand it, is certainly here, certainly in the US. In most countries, I have visited, SMBs are the way to growth," she said. Emphasising on entrepreneurship, she said, "The answer to growth is entrepreneurship." "Individuals are creating businesses and employing other people, and in India, the small and medium businesses (SMBs) growth is strong. And the Internet provides more growth stories to SMBs. People are connecting to people and getting more customers and that`s what leads to economic growth," she added. Micro, small and medium businesses contribute almost 8% of India`s GDP, 45% of the manufacturing output and 40% of exports. Recalling her association with India, she said she started her career in India in 1981, working with the World Bank on leprosy. "And now when I look at leprosy, it`s no longer a threat here. The way I see it, India has grown so much in the past two decades," she added. Sandberg said Facebook wanted to be a part of India`s growth story. "India is Facebook`s second largest market, fastest growing market, fastest growing Internet connectivity in the Asia Pacific. It is of high priority for us," she said. India has more than 100 million Facebook users, with around 84 million of them accessing the social networking site from their mobile phones.

30.06.2014 12:07 What Japan`s Economic Reforms Mean for the Them

Japan`s Prime Minister Mr. Shinzo Abe is the one leading the charge with his economic reform policies, commonly termed as “Abenomics”. It concentrates on 3 main areas to stimulate growth and these are: 1) Monetary policies; 2) fiscal policies; and 3) structural reforms that would help reduce unemployment. After enduring a stagnant economy over the past two decades, Mr. Abe has set out to achieve an annual growth rate of at least 2% annually. While the small figure may seem to be an easy feat, Japan will have to potentially double its current pace of growth to achieve the Prime Minister`s aims. The main obstacle Japan faces is similar to that of all advanced economies - an aging population. However, the case at Japan is way more amplified: The country expects a 40% decline in its labor force by 2050, indicating a much smaller workforce and thus, lower output. Although Mr. Abe has since relaxed Japan`s immigration rules for highly skilled foreign workers, this may still not suffice. As a result, part of Abenomics also involves encouraging Japanese women to play a more active role in economic activities to help plug the gap in workforce numbers due to Japan`s severe aging population problem. The economic reforms of Japan also has a focus on increasing investments in the country and one action taken in this regard is the slashing of corporate taxes in the country from a rate of over 35% to less than 30%; with lower corporate taxes, more foreign and local companies might be inclined to invest in Japan. Lastly, Japan is also aiming for inflation to rise to 2%; for context, that`s a rate not seen since 1991 when it hit 3.3% according to the World Bank. Decades of deflation or slowing inflation has led to a halt in consumer spending with purchases hitting a record low. To induce more production and spending, it is critical that Japan reaches its 2% inflation goal. On that front, there`s some good news; according to the BOJ (Bank of Japan), the 2% inflation target is expected to be met soon sometime next year. Currently, Japan`s growth is estimated at only 0.75% by the OECD and with the country having endured three recessions in the last five years, it would not be easy by any means for Japan`s economy to hit the targets set by Mr. Abe. That said, Reuters had polled economists and they are confident that the aggressive measures taken by Mr. Abe and the areas he has initially targeted will help increase the probability of Japan eventually ending up on the right-growth track.

29.06.2014 18:16 US Economy Shrank at Steep 2.9 Percent Rate in Q1 2014

The U.S. economy shrank at a steep annual rate of 2.9 percent in the January-March quarter as a harsh winter contributed to the biggest contraction since the depths of the recession five years ago. But the setback is widely thought to be temporary, with growth rebounding solidly since spring. The first-quarter contraction reported by the government was even more severe than the 1 percent annual decline it had estimated a month ago. Much of the downward revision reflected an unexpectedly sharp drop in health care spending. Another factor was a bigger trade deficit than earlier estimated. Though such a sharp economic decline would typically stoke fears of another recession, analysts see it as a short-lived result of winter storms that shut factories, disrupted shipping and kept Americans away from shopping malls and auto dealerships. Many expect growth to reach a robust annual rate of 3.5 percent or better this quarter. Some analysts think growth is rebounding to a 3.8 percent annual rate in the current quarter and will average a solid 3 percent rate in the second half of the year. Other analysts noted that several likely temporary factors slowed the economy last quarter - from businesses reducing their pace of restocking to companies paring their purchases of equipment. Also, a wider trade deficit cut 1.5 percentage points from growth. Housing construction slumped. Those negative forces will likely turn positive this quarter, analysts said. The economy is getting a lift from an improving job market, which has added more than 200,000 jobs each month over the past four months. Last quarter`s 2.9 percent annual decline, as measured by the gross domestic product, followed a 2.6 percent gain in the fourth quarter. It was the weakest showing since the economy shrank at a 5.4 percent annual rate in the first quarter of 2009 in the midst of the Great Recession. Two-thirds of downward revision in overall activity reflected weaker spending on health care. Instead of growing at a 1 percent rate in the first quarter, health care spending actually fell at a 0.2 percent annual rate, the government estimated. It was the first quarterly drop in health care spending since 2011.

29.06.2014 16:42 Russia`s GDP shows growth of more than 1% in January-May 2014

Russia`s gross domestic product (GDP) grew 1.1% in January-May and may grow at the same pace in the whole of in 2014, Economic Development Minister Alexei Ulyukayev said. “Our GDP growth amounts to 1.1% in five months. This is our estimate. To get an annual growth of 0.5% we need to have a zero growth for the rest of the year, and we have no reason for this. That is why I would hold the idea of the five month growth trend maintaining through the year as realistic,” he said. According to the Federal Statistics Service, Russia`s GDP grew to 0.9% in January-March. Previously the ministry expected Russia`s economy to grow 0.5% in 2014, and, according to its 2014-2017 forecast, expected annual GDP to grow 0.9% in April-June and then slow down to 0.1% for the rest of the year. In addition, Ulyukayev said that cancelling the decreasing coefficient of the households` tariffs indexation in 2015 will add up to 0.1% point to inflation. “The cancelling of the coefficient cannot drastically change the inflation dynamics. The tariff contribution to the inflation is less than 10%. Changing the coefficient to 1 from 0.7 means an increase of slightly more than 1 percentage point. 10% from one is 0.1 percentage point. This is the maximum influence on inflation,” he said. The decision to cancel the coefficient was made to “not increase cross-subsidization.” The maximum amount of the households` tariffs increase will be the same as for the industrial customers - last year`s forecasted inflation, the minister added.

19.06.2014 15:21 Russia may revise 2014 GDP forecast upwards - economy minister

Russia`s gross domestic product growth forecast of 0.5 percent for 2014 may be revised upwards in September due to the slowing pace of a decline in investment, Economy Minister Alexei Ulyukayev said. "For now our official (forecast) for this year is 0.5 percent, but most likely we will revise it in September, most likely upwards," Ulyukayev told journalists. Investment by Russian companies in tangible goods such as plant infrastructure, a major contribution to the country`s economic wellbeing, had been falling since last year and plummeted after the West imposed sanctions on Moscow for annexing Ukraine`s Crimea region. There are no figures for investment for May yet, but Ulyukayev said there were signs that the fall had eased. In April, investment was down 2.7 percent year-on-year. "There are no concrete figures," Ulyukayev said. "But the dynamics of the decline have flattened. ... We are still in negative territory. From now on (the numbers) should show a growing trend." Russia`s Central Bank expects consumer price inflation to peak at between 7.7 percent and 7.9 percent in June before slowing to 6.8-7.0 percent by September. The inflation rate is significantly higher than the Central Bank`s target of a 5 percent rise in consumer prices, with the increase spurred by a weaker ruble and an asset sell-off on emerging markets earlier this year. The bank also said it expected quarterly GDP growth to come in at around zero for the second quarter, excluding seasonal factors.

17.06.2014 14:32 IMF Cuts U.S. 2014 Growth Forecast to 2%

The International Monetary Fund, forecasting that U.S. inflation will sit below the Federal Reserve`s 2% target through 2017, said the central bank should keep its policy rate near zero even longer than investors now expect. In its annual review of the U.S. economy, the IMF cut its forecast for U.S. economic growth this year by 0.8 percentage point to 2%, citing a harsh winter, a struggling housing market and weak international demand for the country`s products. The fund maintained its 3% growth outlook for next year, saying a meaningful economic rebound is under way. Still, the IMF said significant slack remains in the economy and U.S. officials must do more to stimulate growth in the near term. At the same time, the U.S. must cut spending and raise revenue in the long term to avoid public debt overwhelming the country`s finances, the fund said. Even if inflation were to temporarily rise above the central bank`s target, the IMF said the Fed should be willing to accommodate higher price increases with the economy still well short of full employment. The fund warned that markets don`t seem to be adequately factoring in "substantive ambiguities" in the economic outlook that could force the Fed to adjust its monetary policies. "This sets up the risk, even with a successful and well-communicated increase in interest rates, for significant swings in market flows and prices in the months ahead," the IMF said. As part of its review of the U.S. economy, the IMF also weighed in on a host of other controversial topics. Among its recommendations, fund economists said the U.S. should hike the minimum wage to help cut poverty levels and "significantly increase" gasoline taxes to bulk up federal revenues.

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