The Lastest Macroeconomic News

21.11.2013 21:01 OECD sees economic rebound in CEE in 2015

The OECD expects central and eastern Europe`s economies to advance in 2015 after a mixed picture next year as the region tries to overcome the impact of a slump in the euro zone, it said. The organisation urged Slovenia to move quickly to repair bank balance sheets and shore up the sector as the most pressing task to stabilise its economy. The OECD raised Poland`s growth forecasts for this year and next to 1.4 and 2.7 percent from May`s outlook for 0.9 and 2.2 percent, citing rising exports and domestic demand. It saw 2015 growth of 3.3 percent. Slack in the economy will hold inflation pressure down for some time before price increases rise to above 2 percent in 2015. "With diminishing spare capacity, the central bank will need to begin removing monetary stimulus by increasing its policy rate in 2014," it said. As growth pick ups and monetary policy remains fairly accommodative, the government had scope in 2015 to reach medium-term fiscal consolidation objectives faster than planned. The OECD raised its outlook for Hungarian growth to 1.2 percent this year and 2.0 percent next from a previous 0.5 and 1.3 percent. It then sees growth slipping back to 1.7 percent in 2015. It suggested Budapest could foster lending by allowing better bank profitability and cleaning up bank balance sheets. "Since further monetary easing entails risks, notably of currency depreciation, and domestic demand is already picking up, the policy rate should stay on hold for now. As economic slack diminishes and inflation begins to rise, the monetary stance should start to gradually normalise," it said. The OECD cut its Czech GDP forecast to -1.5 percent and 1.1 percent for 2013 and 2014, from a previous -1.0 and 1.3 percent. Growth in 2015 was seen at 2.3 percent. Growth was expected to gather pace in 2014 as fiscal consolidation pauses and external demand accelerates, although unemployment was likely to decrease only marginally. "Positive growth surprises should be used to halt and eventually reverse the rising debt-to-GDP ratio. Monetary policy should remain accommodative as inflation is low and expectations appear well anchored," the OECD said. Slovakia`s growth forecasts were little changed at 0.8 percent this year and 1.9 percent in 2014, from 0.8 and 2.0 percent respectively, before the economy expands 2.9 percent in 2015. Growth will strengthen as improved export markets boost investment and exports, especially in the automotive industry, the OECD said. But joblessness will weigh on private consumption growth, and austerity to cut the budget deficit will damp demand. "Downside risks are related to the uncertainty concerning the euro area crisis and the fragility of the recovery of Slovakia`s main export industries," it said. Slovenia, the euro zone country, grappling with big losses in its largely state-owned banking sector, should see its economy shrink by 2.3 percent this year and 0.9 percent next year before swinging back to 0.6 percent growth in 2015. In May the OECD had seen GDP down 2.3 percent this year and up 0.1 percent in 2014. "Repairing bank balance sheets and ensuring recapitalisation of banks are the most important policy issues for stabilising the economy," it said.

19.11.2013 17:07 The OECD again cut its 2013-2014 growth outlook for Russia

The OECD again cut its 2013 growth outlook for Russia, to 1.5 percent from the 2.3 percent it forecast in May. It also reduced its 2014 outlook to 2.3 percent from 3.6 percent, but saw growth picking up to 2.9 percent in 2015. Growth should gradually strengthen thanks to infrastructure spending and investment in the mining sector as the euro area recovers. Low unemployment should keep consumption growth solid, it said. Interest rate cuts would not be appropriate until core inflation declines more rapidly, while currency depreciation adds to inflation pressures, it said, adding: "Little space is available for monetary policy rate cuts in 2013 and 2014." Russia`s economy grew less than estimated in the third quarter as a lack of investment kept the world`s largest energy exporter from reversing its worst slowdown since a 2009 recession. Gross domestic product expanded 1.2 percent from a year earlier, the same pace as in the previous three months, the Federal Statistics Service in Moscow said. That matched the Economy Ministry`s forecast and trailed the 1.4 median of 19 estimates in a Bloomberg survey.

15.11.2013 16:10 Eurozone economic recovery falters in third quarter

The eurozone`s economic woes persisted in the third quarter as Italy`s longest recession continued and a contraction in French output dragged growth down to 0.1%. In the summer, hopes of a strong recovery were boosted by a second-quarter GDP rise of 0.3%, but the momentum of the first half of the year has fizzled out. The figures gave weight to fears that high unemployment, low inflation and disagreements among political leaders over further moves towards integration will keep the currency zone locked into a prolonged period of low growth. In France, a slump in exports and business investment failed to offset strong consumer spending to leave François Hollande`s socialist administration to cope with a 0.1% decline in GDP. Italy, which has faced prolonged period of political instability, was also mired in economic gloom after a 0.1% decline in GDP in the third quarter extended the country`s recession from the summer of 2011 to nine quarters. Of the smaller eurozone members, Austria returned to growth after a flat summer period with a 0.2% rise in GDP, while the Netherlands, which also flatlined in the summer, nudge 0.1% higher and Finland managed a 0.4% expansion. German growth fell from 0.7% in the second quarter to 0.3%, though several analysts said the eurozone`s powerhouse economy was merely returning to its expected annualised rate of 1.2% a year.

06.11.2013 18:19 Japan is likely to see a sharp slowdown in its expansion in the July-September period

After two quarters of pacesetting growth among the world`s leading economies, Japan is likely to see a sharp slowdown in its expansion in the July-September period, as stalling exports and weaker consumer spending weigh on the economy. Gross domestic product likely expanded by 0.4% during the quarter from the previous one, or at an annualized pace of 1.7%, according to a median forecast of 12 economists surveyed by The Wall Street Journal. Preliminary GDP data for the quarter will be released Nov. 14. The estimate is less than half the annualized 3.8% increase in the April-June quarter and the 4.1% gain during the January-March period. Japan`s industrial output rose 1.5 percent in September from the previous month, as stronger production of vehicles and electronic components added to signs the recovery in the world`s third-largest economy is gaining traction. The Ministry of Economy, Trade and Industry said Wednesday a survey found manufacturers expect output to rise 4.7 percent in October but to decline in November. The increase in September compares with a 0.9 percent decline in output in August. Increased shipments by refineries and of telecoms equipment also contributed to September`s rise. The unemployment rate also fell slightly in September, to 4.0 percent from 4.1 percent the month before. However the ratio of jobs available to job seekers remained flat at 95 per 100 job seekers. Japan`s exports have so far failed to recover as robustly as hoped. The trade deficit ballooned to 932 billion yen ($9.5 billion) in September, a fresh record for the month, as costs for imports of food and other necessities outstripped growth in exports. A recovery in consumer demand is thus crucial for Abe`s economic strategy, which has focused on aggressive monetary easing aimed at spurring inflation, and strong government spending. Reforms meant to shore up Japan`s waning industrial competitiveness have yet to be enacted or spelled out in detail. So far, there is scant sign that Japanese companies are making significant commitments of new investment at home, despite the extremely low cost of capital given the central bank`s commitment to keeping interest rates near zero. But while business sentiment has markedly improved, excess capacity has kept most from spending more on plants and equipment in Japan. Instead, most are opting to shift factories overseas or to step up acquisitions of foreign companies. Wage increases have likewise been scant, raising the prospect that Japanese consumers will face higher prices without a commensurate increase in their purchasing power.

28.10.2013 19:32 UK GDP: fastest growth for three years

UK economic output rose by 0.8% between July and September, official GDP figures show. The Office for National Statistics said there had been a "fairly strong" performance across all sectors. The data builds on a 0.7% GDP rise in the April-June period and is the best quarterly performance since 2010. Chancellor of the Exchequer George Osborne tweeted: "This shows that Britain`s hard work is paying off & the country is on the path to prosperity." Deputy Prime Minister Nick Clegg said the figures "show that we are firmly on the road to economic recovery". The ONS data for construction was up 2.5% over the quarter, the second successive quarter of growth after a volatile performance over the past year. The BBC`s chief economics correspondent, Hugh Pym, said: "This could signal that a recovery in that sector is really under way." House-builders have been buoyed by the Government`s Help to Buy scheme, which recently launched a new phase offering mortgage guarantees. The ONS said that production grew by 0.5%, though this remains 12.8% off its 2008 level, while within this, manufacturing improved 0.9% in the third quarter. The services sector, which represents three-quarters of economic output, grew by 0.7%. Output from services is now 0.4% above its pre-crisis peak in the first quarter of 2008.

19.10.2013 12:37 World economic outlook gloomy, UN report says

The world economy is still in disarray five years after the financial crash, a new UN economic report said. The UN Conference on Trade and Development issued a gloomy assessment of a stagnant global economy. "The global economy is still struggling to return to a strong and sustained growth path, Unctad reported. World output grew 2.2 per cent last year and is forecast to grow at a similar rate this year, it said. Developed countries are expected to show the poorest performance, with about 1 per cent increase in gross domestic product. Developing economies are likely to grow by almost 5 per cent, and and transition economies by 3 per cent. Prior to the Great Recession, exports from developing and transition economies grew rapidly owing to buoyant consumer demand in the developed countries, mainly the United States. This seemed to justify the adoption of an export-oriented growth model," a formula bound to crash, the report said. "But the expansion of the world economy, though favourable for many developing countries, was built on unsustainable global demand and financing patterns. Thus, reverting to precrisis growth strategies cannot be an option," Unctad said. Even after five years of crisis, the report said, The dominance of finance over real economic activities persists, and may even have increased further. Yet financial reforms at the national level have been timid at best, advancing very slowly, if at all." Unctad said: "The momentum in pushing for reform has all but disappeared from the international agenda. Consequently, the outlook for the world economy and for the global environment for development continues to be highly uncertain."

05.10.2013 12:07 Ukraine`s GDP in the second quarter of 2013 fell by 1.3% compared with the second quarter of 2012

Ukraine state statistics service reported that Ukraine`s GDP in the second quarter of 2013 fell by 1.3% compared with the second quarter of 2012. At the end of July, the State Statistics Service preliminary assessed the fall of GDP at 1.1%, which was the same as in the first quarter of 2013. According to updated data, GDP in April to June 2013 rose by 0.1% compared to the first quarter of 2013, taking into account seasonal factors. Ukraine`s GDP will rise 0.6 percent from a year earlier between July and September, 0.3 percent this year and 2.1 percent in 2014, according to the median estimate of 20 economists in a Bloomberg survey carried out Sept. 20-25. Ukraine is struggling with an economic contraction, a widening current-account gap, shrinking foreign reserves and trade restrictions from Russia, its biggest export market. Moodys Investors Service cut Ukraines debt rating on Sept. 20 by one level to Caa1, seven steps below investment grade, citing growing political and economic risks and a lack of progress on an international bailout.

25.09.2013 14:02 Economists Cut Mexico GDP Estimate to 1.8% in 2013 and 3.7% in 2014

Economists surveyed by the Bank of Mexico lowered their expectations for the country`s economic growth this year and next after a surprise contraction in gross domestic product in the second quarter. Mexico`s economy now is expected to grow 1.8% this year, according to the average of 35 economists polled in August by the central bank, compared with 2.7% in July, the Bank of Mexico said. The latest estimate is in line with that of the Finance Ministry, which cut its forecast to 1.8% from 3.1% after the government statistics institute reported that GDP shrank 0.74% from the first quarter and expanded just 1.5% from the second quarter of 2012.
The economists also lowered their average estimate for economic growth in 2014 to 3.7% from 4%. The slowdown in the Mexican economy has coincided with an easing of consumer price inflation, which is running at an annual rate of 3.5%, creating conditions for possible interest rate cuts by the Bank of Mexico, although those conditions are seen countered by the likelihood of a reduction in monetary stimulus by the U.S. Federal Reserve that could lead to further weakening of emerging market currencies, including the Mexican peso.
On the inflation front, economists expect the consumer price index to end the year up 3.55%, compared with 3.64% in July, while core inflation is seen ending the year at 2.87% instead of the previous 2.98%. Mexico`s industrial production fell in July from the year-earlier month, and was also down from June, due to lower construction activity, mining and crude-oil output, the National Statistics Institute, or Inegi, said. Inegi said industrial output fell 0.5% from July 2012, with construction off by 6.3% compared with a year earlier, and mining down by 2.1%. Crude-oil output, a subsector of mining, fell 1.9% on year. In contrast, manufacturing rose 2.8% and utilities like electricity and water gained 1.1%, Inegi said. The negative result compared to expectations of a year-on-year drop of 0.7% in a survey of 11 economists by Dow Jones. In seasonally adjusted terms, industrial activity fell in July by 0.08% from June.
The construction sector has been battered in recent months by financial problems at the major home builders, and even the export-oriented auto sector showed some rare weakness in July. Auto production in July slipped 1.4% from a year earlier, while exports were 7.3% lower, according to data from the Mexican Auto Industry Association. Auto production showed signs of a pickup in August, however, when production of cars and light trucks rose 4.1% from a year earlier to 259,100 vehicles, and exports rose 20% to 226,900 vehicles, according to the association. In July, crude-oil production by state oil monopoly Petroleos Mexicanos fell to 2.482 million barrels a day from 2.528 million barrels a day in the year-earlier month. The oil firm is in its ninth year of falling production.

11.09.2013 16:00 The Economist Intelligence Unit says world growth is on the way down

The Economist Intelligence Unit says world growth is on the way down, according to its 2013 year-end forecast released in August 2013. Much of the downturn is due to the big emerging markets. China is growing slower. Russia and India are weaker than expected, and Brazil continues to be a disappointment with major bulge bracket banks lowering their GDP forecasts for the world`s sixth largest economy in August. For analysts at EIU, global economic growth is continuing to weaken in the heart of the countries that once could be counted on to drive growth since the 2008 financial crisis. The EIU reduced their 2013 GDP growth forecasts for Brazil, India and Russia due to soft external demand, weak investment, poor policy choices and financial market pressures stemming from monetary policy in the U.S. The BRICs aren`t the only problem for growth. The U.S. is also weaker than EIU originally expected. They`ve cut 2013 GDP for the U.S. to 1.6%, down from 2%. Despite the downgrade, the U.S. economy continues to recover at a slow but steady pace. The thing is, its growing less than it did over the last five years. On the positive side, the Euro zone is doing better and moving closer to zero growth rather than its current negative output. Euro zone GDP is expected to decline by just 0.5% from 0.8% in EIU`s previous forecast. Overall, global growth this year won`t be as good as 2012′s. The EIU is forecasting global GDP of 2.9% from 3% growth last year, 3.8% in 2011 and 5.1% in 2010 based on purchase power parity rates. Using the market exchange rate methodology for measuring GDP, 2013 is seen coming in at 2% versus 2.2% last year. If the EIU is right in their forecast, 2013s world output will be the slowest annual growth since the financial crisis. In 2009, world output was -2.3%, and in 2008 it was 1.3%. While global growth stagnated in the crisis years because of the U.S. and Europe, this year`s slower growth is mainly due to emerging markets. And, worth noting, emerging markets are slow because of conservative policy responses there (no monetary stimulus and reductions of government investments in China) and weak export markets in the core economies. It is premature and almost certainly wrong to declare an end to the emerging market growth story. Most of these countries are in a far better position than they were, say, in the 1990s, when emerging markets endured a series of shocks. Most have less external debt, higher levels of foreign reserves, expanding middle classes, improving productivity and greater access to technology. Many also have relatively young populations, which will swell labor forces and support growth. But the growth momentum has clearly slowed, and reviving it may be more difficult than many emerging market leaders imagine. from The Economist Intelligence Unit`s Sept 2013 Global outlook.

22.08.2013 16:52 Russia`s GDP growth has dipped to 1.4 per cent in the first six months of 2013

Russia`s gross domestic product growth has dipped to 1.4 per cent in the first six months of 2013. This is three times less than the figure for June-January 2012 which stood at 4.5 per cent. However, GDP rose by 1.8 percent year-on-year in July, Deputy Economy Minister Andrei Klepach said on Tuesday, up from 1.5 percent in June. The Bank of Russia has published a report about a week ago saying GDP growth will not exceed 2 per cent this year. Natalya Volchkova, Policy Director at the Center for Economic and Financial Research, says the GDP decline is driven by substantial drop in investments. On one hand, state sector cannot support the previous volume of investments because of cuts in budget spending brought by slow down of oil price increase. On another hand, business climate for private investors is not getting better and for some segments of business, it is worsening, Volchkova told The BRICS Post. The slowing growth rate has raised concerns about a possible recession in the Russian economy, but officials in Moscow assert the economy is "stagnant", but not in a recession. There is no recession. And will not be. Stagnation is probably an appropriate term. There are low growth rates, and these are institutional, structural and macroeconomic factors. This is what we will be tackling for a long time, Alexei Ulyukayev, Russias Minister of Economic Development said in an interview with Kommersant daily earlier this month. The minister claims that the state is burdened by massive social spending that is much higher in Russia compared to other middle income countries. On one hand, we have huge pension system burden. On the other expenses on tariff policy have significantly increased gas supply expenses, goods transportation expenses, railroad expenses, network expenses, energy supply expenses. Finally, we have a very bad income to GDP growth ratio, Ulyukaev said. Despite the dip in the recent figures, many see this indicator as healthy. But at the same time, this year`s growth, which we expect to hit only 1.7%, can be easily called healthy: it is not supported either by fiscal expansion (growth in federal government spending will likely decline from 18% in 2012 to just 3% this year), nor by monetary easing (money market rates are at the highest level since crisis times while lending growth has peaked in mid of 2012 and since then decelerating), writes Maxim Oreshkin, Chief Economist for Russia at VTB Capital, adding that when Russia`s Central Bank starts loosening monetary policy, analysts expect a powerful recovery, as there is clearly a cyclical factor in the recent slowdown.

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