The Lastest Macroeconomic News
02.02.2016 18:34 Sorry Haters, Russia Survives $30 Oil
Russia`s economy has adjusted relatively well to lower oil prices thanks in large part to the ruble, which has tracked oil`s fortunes since 2014. But if oil falls below $30 for an extended period, then all bets are off and Russia`s economy will be in for a prolonged recession. The investment research arm of Sberbank, Russia`s largest lender, warned that if oil does average under a $30 per barrel, then Russia`s budget deficit easily widens to around 3.5 trillion to 3.9 trillion rubles, or around $48.7 billion. Government expenditures are budgeted at around 16 trillion rubles. In a sub-30 oil scenario, the Russian government will be forced to cut its budget by 10% in order to reduce the deficit, according to Sberbank CIB. Russia`s federal government remains highly solvent. The country is run by a bend-don`t-break mentality in the economic policy centers. Western sanctions have helped prolong a recession. Oil just made it worse. Last year, Russian government accounts declined by around 900 billion rubles. But the Finance Ministry held 250 billion rubles on deposits with banks as of January 1, as well as some more cash not spent in 2015. Investors have told FORBES that lifting of sanctions on Russian energy and finance will be a boon for sentiment, but won`t translate into economic growth overnight.
01.02.2016 20:04 Russian Central Bank forecasts GDP decline more than in base case scenario in 2016
The Bank of Russia does not rule out Russia`s GDP will decline more in 2016 than assumed earlier in the base case scenario (0.5-1%) due to probably lower oil prices, the regulator said on Friday after its Board of Directors` meeting on the key rate. The GDP growth rate will be positive in 2017 but will remain low, the Bank of Russia said. According to the base case scenario of the Central Bank released last December, the GDP will decline 0.5-1% in 2016 and may grow up to 1% in 2017. "Oil prices in 2016-2017 will probably be lower than assumed in the base case scenario. The floating rate will partly compensate the adverse impact of low energy prices on the economy. Nevertheless, further adaptation of the payment balance and the economy to lowered level of global prices on Russian export will be required. The GDP decline will therefore be more substantial than forecasted earlier in the base case scenario," the regulator said. The period of additional adaptation of the Russian economy may take several quarters. According to regulator`s forecast, oil prices will be $50 a barrel under the base case scenario and $35 per barrel under the risky scenario.
30.01.2016 12:59 How Cheap Oil Is Squeezing Russia`s Economy
When Vladimir Putin first became Russia`s president back in 2000, oil traded at an average $28.40 a barrel. After spending much of the past five years above $100 a barrel, crude prices have come nearly full circle. In just the past few weeks, oil prices have fallen about 16 percent. That`s poised to squeeze an economy that`s heavily dependent on the commodity for its revenues. The Finance Ministry in Moscow has already warned about a higher deficit if spending cuts and other austerity measures aren`t implemented in the face of cheaper crude.
29.01.2016 14:07 Fitch Highlights More Risks to Emerging Markets and High-Yield Credit
Fitch Ratings has released its latest global credit outlook. The good news is that overall credit ratings outlooks are said to be improving in most sectors in developed market regions. The bad news is that credit rating outlooks are worsening in emerging markets, which is on top of having fallen for the past five years. In fact, Fitch said that emerging markets are now more negative than their developed market equivalents in core sectors. One issue here is the strong dollar. Fitch points out that there is a correlation between a strengthening U.S. dollar and weakening emerging market sovereign credit worthiness, as falling U.S. dollar incomes can affect credit fundamentals. The other issue brought up is the environment of low commodity prices. Fitch points out that low commodity price are the greatest risk to emerging market sovereign ratings. After all, emerging markets generally are considered to be net exporters of commodities (outside of India and China).
28.01.2016 12:24 Russian Economy Holding On For Dear Life
Russians are a patient lot. They will have to wait a little longer for their economy to turn the corner. The lows aren`t as low anymore in some sectors but not all. In other words, Russia`s economy is holding on for dear life. That`s not to say it`s falling off a cliff; rather…it`s hanging off a cliff. It needs to build some strength to climb back up. With oil $20 below what the government budgeted for this year, it`s hard to say if Russia`s economy gains its footing this year as predicted. The final month of 2015 showed that the trends observed for most of the year had become well entrenched - retail consumption is adjusting to lower disposable real incomes and wage growth is now at record lows. Russians are spending less. Headline growth for retail was down 15.3% year-over-year in December after falling 13.1% in November. Retail sales have been in sharp decline since May, when they fell by 8.9% annually, then just kept getting worse from there. In December of 2014, for instance, retail sales were up 5.1%. And this occurred during the sharpest devaluation of the ruble in the nation`s history, from around 35 to the dollar to 71. The Russian central bank raised rates three times in a five week period, sapping the country`s confidence. A weaker ruble is making imported goods more expensive, keeping inflation in the double digits. The only thing that will lower inflation at this point is continual demand destruction.
27.01.2016 20:48 Too Corrupt Not to Fail: Ukrainian Economy Won`t Recover Soon
Despite its free trade agreement with the EU, the Ukrainian economy remains in a dire state, mostly due to rampant corruption and widespread tax evasion. Even though the free trade agreement between the European Union and Ukraine came into force on January 1, EU ambassador to Kiev Jan Tombinski has remarked that the country`s economy is unlikely to recover anytime soon, according to WirtschaftsBlatt, an Austrian financial newspaper. Speaking at the Europe-Ukraine forum, an event held in the Polish city of Lodz and organized by the local Institute of Oriental Studies, the ambassador remarked that the situation in Ukraine is unlikely to improve over the next two years. Head of the Poland`s Supreme Audit Office Krzysztof Kwiatkowski also pointed out that a staggering 97% of all of Ukrainian exports are being directed to so-called `tax havens`, resulting in a significant decrease in tax revenues.
26.01.2016 15:04 US Industry Expects Increasing Demand for Engineered Wood Products
From 2015 to 2019, APA expects increasing demand for North American engineered wood products; structural panels are forecast to grow 19 percent, and other engineered wood products will see growth of 20 to 25 percent. Driven by a 12 percent increase in housing starts in the U.S., demand for structural panels in residential construction in North America is expected to rise 10 percent in 2015, while growth in the other end-uses is projected to be 2.5 percent. North American production of OSB and plywood is predicted to hit 32.2 billion square feet in 2015, an increase of nearly 8 percent over 2014. Glulam production is on the rise, up 2 percent in 2014, and is projected to grow 8 percent this year, to 255 million board feet, and continue to increase steadily through 2019.
25.01.2016 14:28 Russian economy hit by oil price slide
Russia`s economy contracted by 3.7% in 2015, according to preliminary figures published by the country`s statistics service. Retail sales plunged by 10% and capital investment fell by 8.4% in the economy`s worst performance since 2009. In contrast, Russian GDP increased by 0.6% in 2014. The economy has been hit hard by the extraordinary collapse in oil prices, which have fallen by 70% in the past 15 months. Sanctions imposed by the West after Russia annexed Ukraine`s Crimea region in 2014 have also had an impact. Prime Minister Dmitry Medvedev warned earlier this month that the fall could force Russia`s 2016 budget to be revised.
25.01.2016 12:15 Russia to Run Out of Foreign Reserves in 18 Months
Russia`s foreign currency reserves reportedly may be exhausted within 18 months as the nation`s economic woes are keeping pace with quickly plunging oil prices. With tax revenue taking a big hit from the ongoing plunge in oil and gas prices, the main Russian government strategy is to cut spending 10 percent across the board and to rely on its reserves until oil prices improve. “Russia has around $360 billion in foreign currency reserves and some $120 billion in two rainy day funds, down from just under $160 billion a year ago,” The New York Times reported. “At current spending rates, however, the two funds are expected to last only 18 months. It might also sell significant stakes in state-run companies like the oil giant Rosneft or Sberbank, and it will not increase military spending,” the Times reported.
22.01.2016 11:38 Why BRIC is no longer a saleable idea
In 2003, Goldman Sachs came out with its report on the four BRIC economies (Brazil, Russia, India and China). It forecast that they would drive global growth for the next half century, indeed that their combined GDP would exceed that of the G6 (the six largest economies of the time, led by the US) in less than 40 years. Key aspects of what Goldman forecast in 2003 have materialized over the first decade since its release. But early into a second decade, the time may have come to bury the BRIC classification.
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