The Lastest Macroeconomic News
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.
10.01.2016 11:47 The World Bank: Outlook for World Economy
The World Bank has cut its forecast for global growth this year, citing weakness in the developing world. The aid agency said Wednesday that it expects the world economy to expand 2.9 percent in 2016, down from the forecast of 3.3 percent it made in June. The global economy grew 2.4 percent in 2015. Several big developing economies -- including Brazil and China -- are slowing or shrinking. Their troubles have disproportionately hurt their smaller trading partners, which have also been squeezed by depressed commodity prices. The World Bank expects developing countries to collectively grow 4.8 percent, up from a six-year low of 4.3 percent in 2015. China, the world`s second-biggest economy, is expected to register 6.7 percent growth, down from 6.9 percent in 2015 and the slowest pace since 1990. The economic prospects of advanced economies appear to be brightening as the developing world struggles. The World Bank expects the U.S. economy to grow 2.7 percent this year, up from 2.5 percent in 2015 and the fastest pace since 2006. The agency foresees the 19-country Eurozone economy expanding 1.7 percent, up from 1.5 in 2015 and fastest since 2011. And it expects the Japanese economy, buoyed by the Bank of Japan`s easy-money policies, to grow 1.3 percent, up from 0.8 percent in 2015.
08.01.2016 18:32 World economy feels the impact when China takes a knock
If the past six months` economic news has taught the world one thing, it is that a bump in China`s economy cannot be ignored. The question is whether the rest of the world feels a gentle ripple or a tidal wave. China is now the world`s largest economy measured by the quantity of goods and services produced, and the International Monetary Fund expects the country to account for almost 18 per cent of world economic activity in 2016. This implies that the drop in its growth rate from an expansion of more than 10 per cent in 2010 to 6.3 per cent expected this year has directly knocked about 0.75 percentage points off the global growth rate. The spillover effects, however, are much broader than this direct calculation of China`s importance. Maury Obstfeld, the IMF chief economist, says he is most worried about these knock-on effects in 2016. “The global spillovers from China`s reduced rate of growth... have been much larger than we would have anticipated,” he said this week.
06.01.2016 18:28 What a strong US dollar means for the Russian economy
The decision by the US Federal Reserve to raise rates for the first time since the financial crisis marks the beginning of the strong dollar era. This in combination with falling crude prices poses a new challenge for the Russian economy in 2016. But out of all the major oil producers, Russia may be best suited to deal with a strong dollar and cheap crude. Russian oil companies pay most of their expenses in domestic currency (a weak ruble) while getting hard currency (a strong US dollar) for their product. The Kremlin has the option to force Russian oil companies to sell more of their dollar revenues and increase taxes. This would solve two problems. Converting dollars to rubles would strengthen the domestic currency and extra taxes would fill the budget holes. Other oil producers may not be as fortunate. Despite falling oil prices, Saudi Arabia is refusing to cut crude output in order to defend its market share. Riyadh is hoping to squeeze out its competitors, primarily the US and Russia. But that`s a dangerous game as Saudi Arabia is at risk of depleting its financial assets within five years.
04.01.2016 13:52 World economy of so-so growth and fat-tailed risk
What lies ahead for the world economy in 2016? The good news is that it is almost certain to grow. Only a huge adverse shock - another global financial crisis or a war among great powers - would stop growth altogether. According to Consensus Forecasts, global growth is expected to be 2.8 per cent in 2016, up from 2.6 per cent in 2015. This forecast looks quite tolerable. But it hides important economic divergences and downside risks. Virtually all high-income economies have returned to growth. The Eurozone economy is forecast to grow 1.7 per cent in 2016, up from 1.5 per cent in 2015. The UK economy is forecast to grow by 2.3 per cent and the US economy by 2.5 per cent. Japan`s is forecast to grow 1.2 per cent in 2016, up from 0.6 per cent. Asia (excluding Japan) is forecast to lead the world economy, once again, with growth of 5.7 per cent. India`s is expected to be the fastest-growing large economy in the world, with growth of 7.8 per cent in 2016, against 6.5 per cent in China. But Brazil and Russia are in recession: the former`s growth is forecast at minus 2.2 per cent in 2016, after minus 3.5 per cent in 2015. Russia`s growth is forecast at minus 0.2 per cent, against minus 3.8 per cent in 2015.
02.01.2016 13:11 The World Economy`s Winners and Losers in 2015
When the final numbers are tallied, 2015 will probably count as another disappointing year for global growth. The muted performance came even as central banks continued to pump in liquidity, oil prices plunged again and inflation was moderate. It was also a year of divergent performers. While tumbling commodity prices took the shine off big emerging markets Russia and Brazil, other emerging economies like India and Vietnam surprised on the upside. In the developed world, robust U.S. jobs growth prompted the Federal Reserve to tighten monetary policy for the first time since 2006, while the gloom around neighboring Canada deepened.
31.12.2015 15:29 Oil Crash Shrinks Russian GDP; Energy Minister Blames Saudis
Russia`s oil-dependent economy appears headed for a second year of recession, and Energy Minister Alexander Novak says the blame falls squarely on the Saudis. The Russian gross domestic product fell by 4 percent in November from its level in the same month in 2014, and had shrunk 3.7 percent in October from its levels a year earlier, the Economy Ministry reported Monday. The reason, to no one`s surprise, is the plunge in oil prices over the past 18 months. The global average value of a barrel of oil has crashed from over $110 per barrel in the summer of 2014 to just below $40 per barrel today. Because Russia`s government relies on oil production for half its revenues, it`s preparing for a 3 percent deficit in the budget for the coming 2016 fiscal year. Making matters worse, profits in any industry related to oil are down so far that it appears its current recession may last as long as two years.
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