The Lastest Macroeconomic News
27.05.2015 14:10 The Debt To GDP Ratio For The Entire World: 286%
Did you know that there is more than $28,000 of debt for every man, woman and child on the entire planet? And since close to 3 billion of those people survive on less than 2 dollars a day, your share of that debt is going to be much larger than that. If we took everything that the global economy produced this year and everything that the global economy produced next year and used it to pay all of this debt, it still would not be enough. According to a recent report put out by the McKinsey Global Institute entitled “Debt and (not much) deleveraging“, the total amount of debt on our planet has grown from 142 trillion dollars at the end of 2007 to 199 trillion dollars today. This is the largest mountain of debt in the history of the world, and those numbers mean that we are in substantially worse condition than we were just prior to the last financial crisis. When it comes to debt, a lot of fingers get pointed at the United States, and rightly so. Just prior to the last recession, the U.S. national debt was sitting at about 9 trillion dollars. Today, it has crossed the 18 trillion dollar mark. But of course the U.S. is not the only one that is guilty. In fact, the McKinsey Global Institute says that debt levels have grown in all major economies since 2007.
25.05.2015 11:29 Is Russia`s Economy Rebounding?
On May 15th, it was reported by the Federal Statistics Service that Russia`s GDP in the first quarter of 2015 had fallen by 1.9% from a year earlier. This follows year-on-year figures of a modest 0.4% GDP gain in last year`s final quarter and, prior to that, a 0.9% rise in Q3. Normally when an industrialised economy publishes such figures, one might conclude that recent times have been disastrous. However, Russia`s Q1 performance is a clear improvement on the predictions of many analysts. There is no disputing the fact that a 1.9% contraction in national output is of grave concern. The impact of Western sanctions, the dramatically lower price of oil compared to this time last year and weaker consumption levels resulting from significantly higher interest rates have all played a crucial part in Russia`s current woes. However, there does appear to be some cause to be optimistic, or at the very least less pessimistic about the current economic climate. If one looks back to the economic quagmire in which Russia found itself towards the end of last year, the situation today is an unequivocal improvement on what many were predicting at the time. By mid-December, the ruble was in freefall and Russia`s benchmark interest rate was hiked from 10.5% to 17% by the central bank in the space of one day. This triggered an almost immediate 10% drop in the currency`s value, followed by an additional 11% plunge the following day to all-time lows. To compound matters, sanctions resulting from Russia`s political crisis with Ukraine and the annexation of Crimea had been imposed by US-led Western powers, initially in March 2014 and then extended at later stages throughout the year. A liquidity crisis from an increasingly isolated Russia was widely expected, with many predicting several banking defaults, widespread capital flight and a severe curtailment of access to Russia`s traditional sources of finance. Today, the ruble is still approximately 30% weaker against the US dollar than at the same time last year. However, it has rebounded spectacularly in 2015 and is currently the best-performing currency of the year.
22.05.2015 12:23 Russia: economy in tatters, or business as usual?
Much has been said over the last six months about the collapse of the Russian economy as a result of sanctions and the falling oil price, on top of other negative factors such as bureaucracy and corruption, high inflation, inefficiencies in production, ageing infrastructure, a failure to innovate and diversify and capital flight. A slew of economic data point to a deep recession, and US President Barack Obama describes Russia`s economy as being in tatters. No one seems to be denying the long-term negative impact on the economy; even the government expects two tough years ahead, a prediction regarded as hopelessly optimistic by many economists. However, anecdotally at least, it doesn`t feel like a financial meltdown here in Russia. There are no Venezuela-style food queues, or queues for foreign hard currency. Shopping centres in Moscow are buzzing with people buying western imported goods, supermarkets remain fully stocked (although the steak is now Argentinian and not Australian), new cafés and other outlets are popping up everywhere and the usual temporary wooden terraces are being constructed on pavements outside restaurants to catch the summer tourist trade (these tourists being mostly Russians from other parts of the country, as has always been the case). Roads are still gridlocked, public transport still packed and the airports are overrun with Russian sun-seekers flying off to Florida, Rome, Turkey and Thailand, along with those travelling to other cities in Russia to reunite with relatives and loved ones. In business circles, deal activity and investment has slowed but continues, even among western companies operating in Russia for many years now, who will quietly admit to making far better returns here than in developed and saturated western markets or indeed some of the other emerging markets around the world. Some major corporates like Adidas have scaled-back, but few have pulled out altogether. Electrical goods retailer Eldorado has announced new plans for expansion and the likes of Nestlé, Burger King and Ikea have all reaffirmed their commitment to the Russian market. This picture is in total contrast to 2008/2009, when the global financial crisis hit Russia hard and deal activity all but stopped.
21.05.2015 11:32 Rouble strength poses challenge for Russia`s central bank
The rouble rose to its highest level against the dollar in nearly six months on higher oil prices, negating attempts by Russia`s central bank to stem currency strength. Oil`s bounceback has proved restorative to the energy-dependent economy and tensions over Ukraine have partially eased, helping the rouble to gain more than 45 per cent on the dollar since the end of January. After soaring to nearly Rbs80 to the dollar in mid-December as falling oil prices and economic sanctions tolled, Moscow embarked on a series of emergency measures such as interest rate raises and currency intervention, buying the rouble and selling US dollars. A weaker rouble has proved beneficial to some parts of Russia`s industrial sector, making exporters more competitive and increasing the likelihood of consumers and companies buying homegrown goods. Russia`s central bank last week said it would begin buying the dollar and other international currencies to replenish its dwindling foreign exchange reserves, a move interpreted by some currency strategists as an attempt to bear down on the rouble`s rise.
20.05.2015 22:16 IMF urges Russia to implement economic reforms
According to the International Monetary Fund, the Russian economy needs reforms, IMF managing director Min Zhu said. The IMF managing director made this statement during the conference on business conduct with BRICS held at the Russian embassy in USA. Zhu said they had certain recommendations for each BRICS country (Brazil, Russia, India, China, South-African Republic). “We urge Russia to facilitate the economic reforms,” Zhu said, pointing to the energy sector in particular. The Central Bank of Russia is taking effective steps to stabilize the national currency and the economic situation as a whole, according to the Deputy Managing Director of the International Monetary Fund (IMF) Min Zhu. “I think the Russian Central Bank is reacting adequately to the current situation,” the banker said at a conference on doing business with the BRICS countries in Washington on Monday, RIA Novosti reported. He also added that the CBR is "working well and gently". The Russian economy has improved significantly due to the prompt action of the Russian regulator, according to the IMF official. “We see that the Russian ruble has stabilized along with the country`s economy,” Min Zhu said. It is important to maintain good results in future, to maintain the flexibility of the exchange rate in line with market trends, the deputy head of the IMF said. "This will contribute to further stabilization of the Russian currency and the economy, and create a specific reserve for economic development in the long term."
19.05.2015 21:09 Indonesian GDP to surpass Russia, Australia by 2023
Indonesia, is set to become a trillion dollar economy as early as 2017, according to a CNBC report citing a forecast by US-based research firm IHS Global Insight. The outlook is based on the country`s current GDP growth rate of around 5.4 percent annually, with continued robustness over the next few years. IHS researchers are calculating that Indonesia, already Southeast Asia`s largest economy, will increase its nominal GDP from the current $888 billion, the 16th largest economy worldwide, according to 2014 data by the International Monetary Fund, to $1.17 trillion by 2017. This will place it in the same tier as China, Russia, Japan, India and South Korea. Further growth is projected to raise the Indonesian GDP to an estimated $2.1 trillion by 2023, surpassing the GDP of Russia and Australia. This would also push it past Spain, Mexico and Canada, given their slower growth rates. If this holds true, by 2028, Indonesia`s GDP will have exceeded the $3 trillion threshold, potentially surpassing Germany and the UK by 2030. Driving this GDP surge is the rapidly growing and readily consuming middle class, part of a total population of 255.5 million. Indonesia is the fourth most populous nation globally, behind China, India and the US. GDP per capita in Indonesia is expected to more than double to $8700 by 2025 from the current $3400.
18.05.2015 22:41 How durable is the China-Russia friendship?
This week`s joint naval exercise between Russia and China in the Black and Mediterranean Seas, along with President Xi Jinping`s visit to Moscow last week, highlight the growing ties between Eurasia`s two great powers. Though they share key economic interests and oppose what they claim to be a U.S.-dominated world order, the two nations` relationship over time promises to be uneven and tense. One crucial source of discord is that China is a rising power and Russia is not. Moscow may not be willing to accept a junior partnership with China, nor is China likely to treat Russia with the respect Moscow would assume as its right. There is no doubt, however, that Sino-Russian ties are growing. Trade between the two countries is about $100 billion a year (about one-tenth of Russia`s trade with the world, and one-fortieth of China`s). As part of China`s Silk Road initiative that Xi touted last week during his meeting with Russian President Vladimir Putin, China may invest in Russian infrastructure that could improve transport of Chinese goods across Russia to Europe and the Middle East. Moscow and Beijing have also agreed to pursue two huge projects that would bring Siberian gas to China, which would enable Beijing to supplant Europe as Russia`s largest natural-gas buyer. But there are uncertainties: The projects will be costly, China is driving a hard bargain as Russia loses gas-market share in Europe and China sees Russia as a risky investment. Moscow no longer expects that Chinese financing will replace Western capital markets, which Russia has less access to since sanctions were imposed because of Russian-supported armed intervention in Ukraine.
17.05.2015 15:03 Five Russian Actions Affecting Economy
Russia hasn`t been a happy place, economically, for some time, what with sanctions over Crimea, the falling price of oil and the cascading value of the ruble. While its own actions are to blame for a number of its woes, others such as oil prices are not something it can control, however much Vladimir Putin might want to. Of course, none of these problems exist in a vacuum, and Russia`s been taking action on various fronts in an effort to cope with sanctions or boost its unfortunate economy. Here`s a look at the top five, and what`s playing out or might as a result. 1. Ruble rumble. 2. Third cut in interest rates this year. 3. Food import ban likely to be extended. 4. IFC fund money pulled back. 5. Pension funds will finance infrastructure projects.
15.05.2015 15:50 Changing Course, Russia Will Sell Rubles Instead of Buying
The Russian economy is sliding into a recession. Consumers are retreating. Corporate profits are suffering. But the ruble is having a strangely successful year. Since January, the ruble has been the best performer of any currency, up 21 percent. The ruble has risen so robustly that the central bank on Thursday reversed a long-running policy of propping it up. Under a new plan, the central bank will buy foreign currencies to replenish its reserves, a move that will effectively weaken the ruble. It represents a stark turnabout. Last year, the central bank spent billions defending the currency, which sank to a post-Soviet low as Russia was hit with the dual blow of sanctions over the Ukraine crisis and the weakness in oil prices. The ruble was the second-worst-performing currency in 2014, just behind the Ukrainian hryvnia. The underlying economic prospects for the country have not changed. Russia is headed into a deep recession, and Western trade and financial sanctions are still biting into consumer confidence. But the markets, at least, are finding a glimmer of hope.
14.05.2015 14:22 Russia`s Economy to Contract Again in 2016, EBRD Says
Russia`s economy will endure a second year of contraction in 2016, while its downturn will take a greater toll than previously estimated on countries in Eastern Europe and Central Asia with which it has close trade and financial links, the European Bank for Reconstruction and Development said. By contrast, the bank said the launch of a quantitative-easing program by the European Central Bank has lifted growth prospects in those countries in Central and Southeastern Europe that have close trade and financial links with the Eurozone. Lower oil prices, sanctions and weakening investor confidence will push the Russian economy into a deep contraction this year, the EBRD said, although it now expects output to fall by 4.5%, having forecast a decline of 4.8% in January. However, in its first forecasts for 2016, it sees the economy contracting again, by 1.8%. For both years, its forecasts are more gloomy than those of the government, which projects growth of between 1.5% and 2.5% in 2016. While Russia`s economic contraction may not be quite as severe as expected at the start of the year, the EBRD now sees it having a more damaging impact on neighboring countries.
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