The Lastest Macroeconomic News
18.07.2016 19:48 Oil Must Go to $40 and Stay There to Buy Russia Some Reforms
At an oil price of $40 or below, Russian President Vladimir Putin introduced a flat income tax, built a sovereign wealth fund and delivered speeches to the Bundestag in German. When it was over $100, he fought two wars with neighbors and splashed over $40 billion on a Winter Olympics. Brent crude at $40 is the key threshold for Russia, so low that institutional reforms become unavoidable but high enough to prevent a financial meltdown, according to a Bloomberg survey of economists. While more than a decade of booming revenue brought a $2.1 trillion energy windfall -- and with it prosperity the like of which Russia has never seen -- the economy hasn`t grown faster than 5 percent in eight years and has spent the last two in recession. The latest crisis, after oil prices crashed, set the stage for a long-overdue overhaul -- or almost did. "When oil was at $30, there was some commotion, and when it`s near $50, those people who are making decisions calm down," said Evgeny Gontmakher, chief economist at the Institute of Contemporary Development, whose board of trustees is headed by Prime Minister Dmitry Medvedev. "Starting real reforms is a risky business."
16.07.2016 13:51 Russia Economy Shows Signs Of Green Shoots
There are budding signs that the worst over in Russia with data showing the federal budget deficit narrowed, and oil revenue helped boost the economy. Indeed, the bottoming out of commodities demand should eventually fuel emerging market economic growth. Lazard Asset Management writes: "While we don`t expect a v-shaped recovery in emerging markets growth, we expect a turnaround driven not only by commodity exporting countries, such as Russia and Indonesia, but also by the base effects of last year`s dismal growth … We are watching the secondary effects of Brexit on global confidence and, more importantly, global growth."
14.07.2016 12:36 The amount of energy needed to run the world`s economy is decreasing on average
According to a report from the Energy Information Administration (EIA), the world is getting better, on average, at using energy to power its economic activity. The latest numbers measure “global energy intensity” or the number of British thermal units used for every unit of gross domestic product (GDP) created. A falling energy intensity measurement doesn`t mean the world is using less energy in total—but it does mean that global economic activities are getting more efficient on the whole. Specifically, the EIA says that global energy intensity has fallen by nearly one-third in the 25 years between 1990 and 2015. “Energy intensity has decreased in nearly all regions of the world,” the EIA says, in developed and developing countries alike.
12.07.2016 12:54 IMF improves outlook on Russia`s economy
The International Monetary Fund (IMF) has improved the outlook for the Russian economy. In April 2016, the IMF said that Russia`s economy could decline by an additional 1.8% this year; in May it improved the forecast on Russia`s GDP decline to -1.5% in 2016. According to new data, the Fund expects the Russian economy will decline by 1.2% in the current year, and will grow by 1% in 2017. Earlier, the director of the International Monetary Fund (IMF) Christine Lagarde said that in 2016, Russian economy will continue to "shrink". Current adjustments were made on the basis of a regular annual review of the Russian economy, conducted by specialists of the Fund in accordance with the statutory requirements of the organization. These results were discussed in the end of June at a meeting of the IMF Board of Directors. The Fund`s forecast for 2017 remains the same as in May.
09.07.2016 15:33 How Is Russia`s Economy? A Yeltsin-Style `Not Good`
Sometime in the mid-1990s, British Prime Minister John Major reportedly asked Russian President Boris Yeltsin to describe the Russian economy in one word. Yeltsin replied, “Good.” Seeking greater detail, Major asked Yeltsin if he could describe it in two words. Yeltsin replied, “Not good.” While this old joke is probably a myth, the current state of the Russian economy matches that “not good” of lore, and its prospects of getting better any time soon look dubious -- and this could lead to a serious geopolitical altercation.
07.07.2016 16:55 Negative effect of normalization with Russia on inflation
Inflation, which has followed a low course in recent months, started climbing again in June. Inflation is expected to climb further because the normalization process with Russia will have an increasing effect on inflation even as it makes a huge contribution to the economy. However, due to its huge contribution to the economy, the negative effect on inflation will be accepted as a bearable consequence. While the annual consumer price increase fell to 6.58 percent at the end of May, the annual inflation went up to 7.64 percent last month. The biggest contribution to this was food prices. With the effect of the halt of food exports to Russia, food prices have been low in recent months. There has been a correction, in a sense, and food prices increased at a rate of 1.2 percent in June, corresponding to the annual rate from 1.8 to 6.3 percent. The base effect has been huge in this high rate of increase. Both the opening of trade with Russia, the base effect and the developments in energy prices are expected to increase food inflation in the coming months and, correspondingly, the headline inflation rates.
05.07.2016 13:03 Britain doesn`t matter to the global economy, China does
With all due respect, Britain doesn`t really matter that much. To be sure it`s upsetting to see the UK political establishment - both major parties - being torn asunder amid a significant turn inward for one of the world`s great democracies. But when we`re talking about the future direction of the global economy, Britain has been playing a diminishing role for decades. According to the IMF, the UK accounted for roughly 2.4% of global GDP in 2015, down from about 4% in the early 1980s. This means that the slowdown in the UK will barely nudge the world`s large economies at all. For example, Goldman Sachs economists now estimate that the spillover effects on the US economy from the Brexit vote will be a scant 0.1%. No, if you`re looking for something to worry about, spin the globe and plant your pudgy finger on the People`s Republic of China, which continues to grapple with an economic slowdown that has significant implications for almost every country on earth.
03.07.2016 12:55 Europe 2020 Forecast
Ever since the Maastricht Treaty went into effect, the world began to speak of Europe as if it were a single entity governed by the European Union. This was never really true. Nevertheless, the world began to take it for granted, though European countries differed in their approach to the bloc. This was always a tenuous position, more psychological than institutional. We have long regarded the ambiguity in governance to be the Achilles` heel of Europe`s political arrangements. This was partly because it was difficult to understand and agree on the boundaries of the EU`s authority and that of the nations. But even more, the Achilles` heel was that the Europeans were incapable of clarifying the EU`s role. They couldn`t clarify it, because they didn`t agree on what it should be. Nor could they. The EU was a series of compromises between irreconcilable views. And inevitably, at some point, one of the members would throw up their hands and leave, revealing the basic truth of the EU: it is neither a federation nor a confederation. It is simply a treaty organization that can only survive as long as its internal contradictions don`t become unbearable. Our forecast on the EU said that it would last until about 2020. We hold with that, in the sense that the EU continues to function. But we see over the next few years that the bloc`s ability to function will deteriorate, followed by the onset of a new European reality that is actually an old one. The nation-state will return as the fundamental organizational principle of Europe, and with it ad hoc alliances and treaties will emerge, designed to allow nations to pursue their interests on the basis of temporary arrangements of convenience.
01.07.2016 14:46 World Bank keeps Thai growth forecast at 2.5%
The World Bank has maintained Thailand`s economic growth forecast this year at 2.5% due to impetus from fiscal stimulus and increasing tourism revenue. But the figure remains the lowest GDP growth projection among Asean member states excluding Brunei and Singapore. Timely implementation of public infrastructure projects this year and next can contribute to a more positive outlook for the Thai economy, said Kiatipong Ariyapruchya, the bank`s senior country economist. However, growth could be below 2.5% if fiscal disbursement in the second and third quarters cannot be accelerated, he said. In April, the World Bank revised up Thailand`s GDP growth forecast from 2% to 2.5% on the back of state stimulus measures implemented late last year and signs of improving exports. The Bank of Thailand recently forecast economic growth will be 3.1% this year, while the Fiscal Policy Office is predicting 3.3% and the National Economic and Social Development Board 3-3.5%.
29.06.2016 13:42 4 possible effects of Brexit on Russia`s economy
Despite Russia being called one of Brexit`s possible beneficiaries, in reality the UK`s potential exit from the EU poses more risks for the Russian economy than advantages. Experts believe that Russia`s economy is threatened by the fall in oil prices due to the reduction of world trade. Russian companies could delist their stocks from the London Stock Exchange, which would decrease their value. As a result, the government could postpone the sale of the shares of Russia`s largest oil company, Rosneft. However, it is also possible that the EU will soften its anti-Russian sanctions, since the UK was a consistent proponent of prolonging them.
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