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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.

20.01.2016 12:21 China economy grows at slowest pace in 25 years

China`s economy grew at its slowest rate in a quarter of a century in 2015, data released on Tuesday showed, increasing pressure on Beijing to address fears of a prolonged slowdown and ease the jitters affecting global markets. The full-year growth of 6.9% was only just short of government expectations of 7% but by contrast, growth in 2014 stood at 7.3%. The national bureau of statistics` bulletin showed GDP growth at 6.8% in the three months to December, easing from 6.9% in the previous quarter the slowest quarterly rate since 2009, when growth slowed to 6.2%. The slide from the previous quarter was expected, but will add to concerns about the health of the world`s second-biggest economy as it confronts a range of challenges, including weak exports, high debt levels and slowing investment. China`s industrial output in December rose 5.9% from a year earlier, compared with forecasts for a 6.0% increase.

19.01.2016 12:07 Sanctions-free Iran re-enters world economy with a bang

Iran has re-entered the world economy following its decade-long isolation, sending oil prices and Middle East stock markets tumbling. With UN-led sanctions lifted, Iran is gearing up to increase its oil output by 500,000 barrels a day and is also eyeing the implementation of a flurry of economic measures. It is estimated that Tehran would be able to unlock nearly $100bn (£70bn, 91.8bn) of frozen assets as part of the financial windfall it has received, following the formal implementation of its nuclear deal with world powers. More than $30bn in foreign assets would be immediately available to Tehran as it comes out of economic hibernation. Backed up by 38 million oil barrels in floating reserves, the country`s banks are allowed to reconnect to the SWIFT international payment system. The SWIFT said in a statement: "Those banks that are delisted by the Implementing Regulation will now automatically be able to reconnect to SWIFT, following the completion of our normal connection process [i.e. administrative and systems checks, connectivity and technical arrangements]." A European oil embargo on Iran will also come to an end. Iran, currently the world`s fourth largest oil producer, has been reeling under double-digit inflation for the last few years due to the crippling sanctions imposed by the West over Tehran`s ambitious nuclear programme. Economic clampdown on Iran was formally lifted on 16 January after the UN`s nuclear watchdog said Tehran complied with the necessary conditions. The Middle East heavyweight`s rejoining of the world economy has already reverberated in the region. All seven stock markets in the Gulf states, including that of Dubai and Saudi Arabia, collapsed with the prospect of Iran injecting more oil into the global market. On 18 January, oil prices hit another lowest since 2003, with Brent crude falling to $27.67 a barrel before stabilizing at $28.56. Iran`s re-entry has also come at a time when the market is suffering from chronic oversupply.

18.01.2016 13:13 IMF downgrades Russia`s economic contraction forecast to 1% in 2016

The International Monetary Fund (IMF) has downgraded its forecast for Russia`s economic contraction in 2016 to 1%, sources familiar with the matter said. For 2017 the IMF expects the Russian economy to grow by 1%. According to the sources, those are figures from the updated report on economic outlook due to be officially presented in London on January 20. Last year the IMF expected Russia`s economy to contract by 0.6% in 2016. Meanwhile, for 2015 the Fund forecasted a 3.8% contraction. According to its updated forecast, Russia`s economy contracted by 3.7% last year. Last week the World Bank published its reviewed forecasts, which say the Russian economy will contract by 0.7% in 2016 and grow by 1.3% in 2017.

15.01.2016 14:14 Russia to cut social spending in 2016

All government social programs will get less funding this year, according to Russia`s Deputy Economic Development Minister Oleg Fomichev. However, no programs will be shut down, he added. "Such programs are a very important part of state activity. Cuts in spending are certainly possible, but complete termination of programs is out of the question, he told RIA Novosti. The Russian government has decided to optimize the budget for 2016. The ministries have until mid-January to prepare and submit proposals to the Finance Ministry to reduce costs by 10 percent. Fomichev didn`t specify which programs will face cuts. The list of state programs includes healthcare, education, social security, pensions, culture, tourism and sports.

15.01.2016 12:56 World Bank confirms forecast for Ukraine`s GDP growth by 1% in 2016

Ukraine`s economy may rebound starting from 2016 after the contraction in 2014 and 2015, although the restoration will be slow - 1% in 2016 and 2% in 2017 and 2018, according to the World Bank`s forecast in its Global Economic Prospects published in January 2016. World Bank`s experts revised downward the assessment of Ukraine`s GDP growth in 2018 from 3% to 2% compared to the previous forecast published in September 2015. "After a 12% contraction in 2015, Ukraine`s economy may rebound modestly in 2016-18, supported by an easing of the conflict in the east and continued progress on its IMF-backed reform program," the World Bank said. The experts said that fiscal consolidation measures have been introduced aiming to lower the deficit from 4.2% of GDP in 2015 to 3.2% of GDP in 2017. These include cuts in pension benefits, reductions in the government workforce, and an increase in utility tariffs combined with more targeted social assistance. This fiscal tightening may weaken private consumption. The World Bank said that lower fuel costs are helping narrow the current account deficit, but external financing needs remain substantial. While the bulk of Ukraine`s debt has been restructured, the moratorium on payments to Russia raises uncertainty around the resolution of the debt dispute. The costs of restructuring banks and reforming state-owned enterprises may pose further challenges to fiscal consolidation.

13.01.2016 20:28 The Possibility of $20 Oil Doesn`t Sound So Crazy Anymore

The world mostly ignored Ed Morse 11 months ago when the head of commodities research at Citigroup said oil could drop as low as $20. It`s paying attention now that crude has tipped below $30. Crude futures in the U.S. sank into the $20s for the first time in more than 12 years on Tuesday, hours after BP Plc said it would slash an additional 4,000 jobs, Petroleo Brasileiro SA cut its spending plan and Petroliam Nasional Bhd. warned that it faces several tough years. Morse, who wrote in a Feb. 9 research note that oil could fall "perhaps as low as the $20 range for a while," said in Calgary Tuesday that the world is now confronting $20 oil. The $20 number is something you have to talk about, Morse said. When you`ve seen a $10 price slide and WTI is trading just slightly above $30, the likelihood is fairly great. Clearly oil markets cannot maintain a price at below the $30 level for very long. The question is how much longer. West Texas Intermediate fell as low as $29.93 a barrel before settling at $30.44 Tuesday, the lowest since December 2003. It traded on Wednesday morning in London at $30.79.

12.01.2016 13:17 Russian Economy Killers: Oil and Sanctions

Russian President Vladimir Putin gets a bad report card, even a failing grade, for his handling of the economic crisis in his country, according to 27 percent of analysts who participated in a major survey conducted by Bloomberg Business. These are hard times in Russia, with the collapse in oil prices, economic sanctions against the country for its actions in Ukraine, the collapse of the ruble and significantly impaired economic growth. Russia`s growth started to decline rapidly in the first quarter of 2012, well before oil prices fell or economic sanctions took hold. The World Bank estimates that by 2017, Russia`s GDP will be smaller than it was in 2012. Russia`s former finance minister, Alexei Kudrin, says he believes the economy is likely to decline in 2016, although he thinks growth is possible in 2017. Others see growth even earlier. "The worst, I think, is over at this point, said world-renowned Russian expert Timothy Frye of Columbia University`s Harriman Institute. From 2012 to 2015, economic growth in Russia decelerated at a rate of around 1.5 to 2 percent a year. The last quarter, we`ve seen the economy start to stabilize and adjust to the new reality of lower oil prices. "So, although the consensus forecasts are for around zero or around 0.5 percent or maybe 1 percent growth in the coming year, what`s really concerning about the economy going forward is that nobody is predicting rates of economic growth beyond 1 percent, 2 percent, barring some really significant change in government policy," he added. Frye believes that people don`t expect those government policies to change very much because they would come at great political cost.


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