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15.09.2019 14:18 IMF: Trade war could cut world GDP by 0.8%

Tariffs imposed or threatened by the United States and China could shave 0.8 per cent off global economic output in 2020 and trigger more losses in future years, the International Monetary Fund says. IMF spokesman Gerry Rice says trade tensions are beginning to affect a world economy already facing challenges including a weakening of manufacturing activity not seen since the global financial crisis of 2007-08. US Treasury Secretary Steven Mnuchin says he has not seen the new IMF forecast but does not expect the impact to be as significant in the United States. "I don`t see it in US as that big an impact," he said on Thursday when asked about the IMF forecast after an event hosted by the New York Times. Rice told a regularly scheduled IMF news conference the global lender is to release a new revised economic outlook next month but provided no details.

06.09.2019 20:36 Russian CPI underperforms in August, supporting rate cut

Deceleration in the Russian CPI growth from 4.6% year-on-year in July to 4.3% in August is a positive surprise, as it underperformed the consensus forecast of 4.4% and our cautious 4.5% expectations. This time the food segment (c.38% of the CPI basket) was the key driver of the slowdown, with price growth there decelerating from 5.5% YoY in July to 5.0% YoY in August, mainly thanks to the strong 10.1% month-on-month deflation in the fruit and vegetable segment (the annual growth rate remained positive but decelerated from 5.4% to 1.3%. Noteworthy, prices for almost all other food items showed an acceleration in the annual growth rate. Prices for non-food products and services decelerated by 0.1 percentage point to 3.5% YoY and 4.4% YoY, respectively, being a minor drag on overall CPI. We note that the gasoline prices, which is included into the non-food product segment, are posting continued acceleration - from 1.4% YoY in June to 1.8% YoY in July and 2.2% YoY in August, reflecting expiration of the agreement between the government and the oil majors, as well as the end of the high base effect.

22.08.2019 20:21 Japan GDP growth to slow to 0.5% in 2019

The looming implementation of consumption tax hike will weigh on economic growth. Japan`s economy is tipped to grow 0.5% by end-2019 from 0.8% in the previous year despite a stronger-than-expected Q2 growth of 0.4%, according to Fitch Solutions. Private consumption is expected to contract 0.3% in light of higher consumption tax. In October, the tax will be raised from 8% to 10%. This draws parallels to a similar development when private consumption contracted 0.9% in 2014 after Japan increased consumption tax in April of that year. Household consumption grew 0.7% and 1.0% yoy in Q1 and Q2, but Fitch noted this to be a potential frontloading of purchases ahead of the tax hike. Likewise, exports is projected to contract 1.2% this year, in light of the US-China trade war and dispute with South Korea on restrictions in exporting chemicals as well as public backlash against Japanese goods. Exports have already contracted 2.2% and 2.9% yoy in Q1 and Q2. However, Japan may use the revenue from the tax hike to finance the rise in social security. As such, government consumption is expected to grow 1.9% in 2019.

16.08.2019 13:37 Russian ruble takes a hit from US sanctions, hits two-month low

The ruble headed for its weakest close in two months and Russian borrowing costs jumped after the U.S. stepped up measures against countries it has sanctioned for using chemical or nuclear weapons. The executive order, released by the White House, includes curbs to international financing and U.S. bank loans. Russia isn`t named, but it has been facing another round of U.S. penalties over the 2018 nerve-agent attack on a former Russian spy in the U.K. The Kremlin denies any role in the poisoning. Adding to the shock for investors was Russia`s position as one of the most popular trades in emerging markets in recent months due to its high real yields. Foreigners now own about a third of the nation`s local-currency debt market, the highest level in more than a year. "It`s partially a U.S. internal political question how it plays out and we investors have little insight into it," said Viktor Szabo, who invests in Russia as a money manager at Aberdeen Asset Management in London. "Some profit-taking is warranted" given heavy positioning in Russian assets, he said.

15.08.2019 15:32 Russia records slightly improved but still weak GDP growth of 0.9% in 2Q19

Russia recorded slightly stronger GDP growth of 0.9% in the second quarter of this year, up from the soggy 0.5% the economy grew by in the first quarter, Rosstat reported on August 12. The result was anticipated by analysts, who pointed out that the economy`s core sectors were doing better than expected over the summer, and the final result has come in at the top of the predicted range. Forecasts for Russia`s growth this year have been downgraded multiple times. The Ministry of Economy was predicting 2% growth for this year after Russia put in a surprise 2.8% growth in 2018, but Minister of Economy Maxim Oreshkin quickly backed off in face of widespread disbelief and revised the ministry`s estimate back to 1.2%. Russia will probably struggle to cross even that low bar. The slightly better-than-expected 0.9% y/y rise in Russian GDP in Q2, up from 0.5% y/y in Q1, is likely to be followed by a further improvement in the second half of the year. But growth is still likely to be weaker than most expect and this will give the green light to the central bank to cut rates further, Capital Economics said in a note following the release of the results.

06.08.2019 14:39 The Global Economy Lives in Wonderland Now

There was a period not so long ago when it looked as though the world`s central banks were on course to normalize. We were nearing a significant milestone on the long road back from 2008, when, in response to the implosion of the global financial system, central banks around the world had adopted a suite of unconventional policy measures. They had dropped interest rates to zero. Under the sign of quantitative easing, they purchased mountains of bonds. Janet Yellen, then-chair of the U.S. Federal Reserve, ended its quantitative easing program in October 2014. By that point, America`s central bank had piled up $4.5 trillion in assets. Since then, the balance sheet has been run down, and interest rates have nudged up. The European Central Bank (ECB) didn`t get into the quantitative easing game until March 2015, but it ended its purchases in December 2018. Meanwhile, the Bank of Japan never eased up. But it was the exception that proved the rule. The consensus nine months ago was that, with the world economy picking up steam, it was time to tighten monetary policy. That would allow financial markets to recover something like their normal balance. And it would give central bankers some room for maneuver in the event of an eventual downturn.

28.07.2019 22:18 Russian central bank slashes key interest rate, predicts more cuts

The Russian central bank (CB) trimmed its key interest rate to 7.25%, as expected, and said more cuts were likely later this year amid slowing inflation. Russia needs lower rates as cheaper lending could rekindle its now sluggish economic growth. As inflation is now slowing towards the 4% target and hovers well below double-digit readings seen a few years ago, the central bank has room to reduce rates further. Friday`s cut became the second this year and was in line with market expectations. Twenty-three analysts and economists who took part in a Reuters poll unanimously predicted that the central bank would trim the rate to 7.25% from 7.50% at Friday`s meeting. If the situation develops in line with the baseline forecast, the Bank of Russia admits the possibility of further key rate reduction at one of the upcoming Board of Directors` meetings, the central bank said in a statement. The latest move puts the rate back at a level where it was before a hike in September last year, something the central bank said was possible due to abating inflationary pressure. That, it said, should help it hit its inflation target of 4% in early 2020. Consumer inflation slowed to 4.6% as of July 22. Weak economic activity, along with temporary factors, limits inflation risks over the short-term horizon, the central bank said.

18.07.2019 14:55 IMF Downgrades Russia`s 2019 GDP Growth Forecast To 1.2%

The International Monetary Fund (IMF) said in a press release on Wednesday that it downgraded its forecast for Russia`s gross domestic product (GDP) growth in 2019 to 1.2 percent, raising the forecast for 2020 to 1.9 percent. In January, the IMF downgraded its forecasts for the growth of the Russian economy in 2019 and 2020 by 0.2 and 0.1 percentage points respectively, to 1.6 percent and 1.7 percent respectively. The head of the IMF mission in Russia, James Roaf, said in May that the fund would present a new forecast within a month or two. "Growth is projected at 1.2 percent in 2019, reflecting a weak first quarter estimate, lower oil prices and the impact of the higher VAT [value-added tax] rate on private consumption. At the same time, GDP growth should be supported by an increase in public sector spending in the context of the national projects announced in 2018. Inflation has begun to fall and is expected to return to the 4 percent target by early 2020," the IMF said. According to a table attached to the press release, the IMF expects Russia`s GDP growth in 2020 to reach 1.9 percent.

14.07.2019 15:07 Russian inflation could come in below 4% in 2019

The chief economist of Russian state-owned retail bank Sberbank Anton Stroutchenevski says that inflation could end this year at below 4%. If it does that would be well below the consensus. Inflation fell to a historic low of 2.3% last year, but by the end of the year it had ticked up to around 5% and was spurred on by a 2pp hike to VAT rates in January. However, economists were surprised how fast those inflationary pressures receded and now they are surprised that inflation has continued to fall faster than expected. The inflation question is important as lower than expected inflation will allow the Central Bank of Russia (CBR) to cut rates more aggressively. After the first quarter Russian growth came in at 0.5% -- well belwo consensus cuts are needed and some analysts speculate that the CBR resume cutting rates at the upcoming meeting in July.

07.07.2019 17:21 Russian GDP growth to pick up, modestly

The scheduled pick-up in state-sponsored investments leaves hopes for a recovery in Russian GDP growth following the disappointing 0.5% y/y in 1Q19. However, the weakness in exports and consumption, which have little fundamental support now, suggests that the recovery, at least in 2019, will be quite modest. The recently released structure of the 1Q19 GDP growth by usage supports our earlier take that at least part of the deceleration of the GDP growth from 2.3% in 2018 (including 2.7% y/y in 4Q18) to the disappointing 0.5% y/y in 1Q19 was due to temporary factors, mainly related to the budget spending.


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