The Lastest Macroeconomic News
21.04.2015 16:10 Why the Ruble Rally Has Run Its Course
A few months ago, it seemed like Russia was doomed. The West had just imposed sanctions, crude prices crashed, and the Ukrainian situation deteriorated. Because of all the concerns, capital left Russia en masse and the Russian ruble cratered, going from 35 rubles to the dollar to 80 rubles to the dollar. Today, the ruble is one of the best performing currencies in the world, having rallied 15% against the dollar year to-date. Because of the rally, Russia`s currency now trades at a respectable 53 rubles to the dollar. One big reason for the rally is that the Russian economy is doing better than expected. Despite the plunge in crude prices from August to December, the economy grew a surprise 0.4% in fourth-quarter 2014. Because crude prices have since stabilized, Russia`s GDP won`t shrink as much as expected in 2015, while many economists expect the Russian economy will expand in 2016. Another reason for the rally is that capital is flowing back into Russia. Because the ruble has done so well, bond managers feel that they have to buy the Russian bonds in their chase for performance. The ruble`s rise may soon end, however.
20.04.2015 17:16 G-20 Warns of Threats to Global Economic Recovery
The world`s top finance leaders warned that currency volatility, low inflation and high debt levels threaten to undermine an already uneven global economic recovery. In an official statement after two days of meetings, finance ministers and central bankers from the Group of 20 largest economies backed more easy-money policies in wealthy nations as critical accelerants for growth. “In many advanced economies, accommodative monetary policies are needed to anchor inflation expectations and support recovery,” the G-20 said. The G-20 affirmed its support for central-bank stimulus in Europe, Japan and the U.S. Officials are increasingly worried that the global economy could get stuck in a long period of anemic output, given a weak recovery in some rich countries and a slowdown in many of the largest emerging markets that have been key drivers of global growth.
19.04.2015 20:59 Five reasons to be upbeat on world`s economy
Gloom will be on plentiful display in Washington this week when finance ministers and central bankers from around the world gather for economic parleying. The International Monetary Fund, which hosts its spring meetings with the World Bank, has warned of prolonged lower growth that will keep debt high - and could pave the way for another global financial crisis. Christine Lagarde, the IMF managing director, who regularly uses these occasions to parade her worries, will once again be front and center as global Cassandra-in-chief. However, there are five good reasons why the doomsayers are overdoing it. 1) The U.S. is powering its way to recovery, with a generally favorable influence on the rest of the world. 2) The fall in oil prices is almost universally good news for the world economy. 3) News from emerging market economies - despite slower growth - is positive. 4) The firm dollar has been a boon for most countries. 5) Modest growth is resuming in Europe, still home to many of the world`s most technologically adept companies and much R&D brainpower.
19.04.2015 12:52 Russia`s Economy Steps Back from the Brink
It`s been fascinating to watch the Russian economy adjust to sharply lower oil prices. With a little help from the central bank, the country`s recession might not be as bad as previously thought. After an initial period in which the ruble plummeted and inflation surged -- with food prices up 15.4 percent from a year earlier in December -- the Russian central bank`s response is turning things around. A sharp increase in short-term interest rates, currently at 14 percent, has stabilized the ruble and might even be getting consumer prices under control. The episode has taken a toll on Russian living standards. In the first quarter of 2015, inflation-adjusted incomes were down 1.4 percent from a year earlier. Retail sales dropped 6.7 percent -- and individual stores, such as the M Video electronics chain, reported even steeper declines. Imports were particularly hard hit, thanks to the impaired buying power of the ruble: In January and February, they were down 37.9 percent from a year earlier. The government`s finances haven`t fared well, either. Standard and Poor`s predicted that Russia`s fiscal deficit will rise to 4.4 percent this year, higher than the 3.7 percent the government predicts. Still, there are signs that a cheaper ruble might be helping some Russian producers compete with imports. True, industrial production was down 14.6 percent in the first quarter from a year earlier, with the garment industry -- which depends heavily on imported inputs -- taking the steepest plunge. Yet Russian food production was up 3.5 percent, suggesting that import substitution might not be just President Vladimir Putin`s pipe dream.
18.04.2015 13:10 IMF and World Bank: India`s economic growth likely to outpace China in 2015
India`s economic growth clip this year and next will be better than previously assumed, overtaking China in 2015 to become the world`s fastest growing major economy and widening the gap further in 2016, the International Monetary Fund (IMF) and the World Bank have said in separate forecasts. Both IMF and World Bank see India`s growth rising to 7.5 per cent in 2015 from 7.2 per cent in the preceding year, but have different assessments for 2016. IMF, which last January forecast 2015 growth at 6.3 per cent and 2016 growth at 6.5 per cent, has penciled in 7.5 per cent growth next year while World Bank has the 2016 figure higher at 7.9 per cent. The bank had last January pegged the growth rates at 6.4 per cent this year and 7.0 percent in 2016. The numbers will be music to the government`s ears, especially because the Indian economy, while being spoken of in the same breath as China in terms of economic potential, has never managed to surpass its giant neighbor`s growth rate. Even with a higher growth rate, India`s $2-trillion GDP will remain much smaller compared with China`s $10-trillion economy. IMF has pegged China`s growth at 6.8 per cent in 2015 and 6.3 per cent next year while the world economy is forecast to show no material improvement, growing only 3.5 per cent compared with 3.4 per cent in 2014. World Bank sees China growing at 7 per cent in the next two years.
17.04.2015 10:52 IMF says currency shifts support global economic growth
Recent shifts in exchange rates should help the global economy, boosting Japan and Europe in particular, amid increasing divergence in the growth paths of the world`s major economies, the International Monetary Fund said. The Washington-based institution kept its global growth forecasts unchanged, with faster economic expansion in the euro zone and India expected to be offset by diminished prospects in other key emerging markets such as Russia and Brazil. But it cautioned that the economic recovery remains "moderate and uneven," beset by greater uncertainty and a host of risks, including geopolitical tensions and financial volatility. In its flagship World Economic Outlook, the IMF kept its forecast for global growth this year at 3.5 percent. For 2016, the IMF expects global gross domestic product to expand 3.8 percent, up from the 3.7 percent it forecast in January. The headline figures mask a growing split among major economies, in part due to the varying impacts of currency fluctuations and lower oil prices. The sharp rise of the dollar against the euro and yen is expected to be a major theme at the meeting of the world`s top economic policymakers in Washington later this week. The currency moves have exposed some emerging economies as well. The IMF said monetary policies are driving most of the currency movements, as the U.S. Federal Reserve prepares to raise rates while the European Central Bank and Bank of Japan maintain their monetary stimulus. The currency effects should boost global GDP, supporting demand in the still-troubled economies of the euro zone and Japan, the IMF said, raising its forecasts for both regions.
16.04.2015 17:14 IMF worsens Russian economic outlook, GDP to fall 3.8% in 2015
The International Monetary Fund (IMF) now expects Russian GDP to fall 3.8% in 2015, compared with the 3% drop it was expecting in January, the IMF said in its latest World Economic Outlook Update. The IMF estimates the economy grew 0.6% in 2014. It thinks Russian GDP might fall 1.1% in 2016. The previous forecast was for 1% decline. The fall of Ukraine`s real gross domestic product (GDP) is expected to slow from 6.8 percent in 2014 to 5.5 percent in 2015, and it should recover in 2016 when it will rise by 2 percent, according to the World Economic Outlook. CIS economies as a whole might fall 1.4% in 2015 - this is 2.9 pp below the IMF`s previous forecast - and grow 0.8% in 2016, which is 1.7 pp below the previous forecast. Not including Russia, the CIS economies might grow 2.4% in 2015 and 4.4% in 2016, compared with previous forecasts of 4% and 4.6%, respectively. IMF noted the outlook for advanced economies was "improving”, while growth in emerging markets and developing economies was projected to be lower, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries. The IMF left its forecast for the world economy, emerging markets and developed countries unchanged.
14.04.2015 14:50 Russia`s ruble: From down-and-out to darling
What a week it`s been for Russia`s ruble - the currency that was in crisis in December has hit new highs against the dollar and euro to become this year`s best performer in foreign exchange markets. The ruble soared as much as 2 percent against the dollar on Friday to around 50.30, it best level since December. In addition, it jumped as much as 2.5 percent against the euro to around 53.40 per euro, a high for the year. Analysts said that a stabilization in the price of oil—a key export for Russia—plus relative calm in Ukraine and a perception that Russia`s economic outlook is not as bleak as feared help explain the rebound. "It came as a surprise for everyone, oil is a little higher and the main factor, but doesn`t explain the full extent of the rebound," said Liza Ermolenko, emerging market economist at Capital Economics. "The economy has not collapsed as many people expected, so this may also be a reason for the ruble`s recovery," she added. Russia`s economy, weighed down by sanctions and weak oil prices, is slipping into recession, but there are some signs of light on the horizon further ahead. Earlier this week, ratings agency Standard and Poor` upgraded its prediction for Russian economic growth in 2016 to 1.9 percent, from a previous forecast of zero growth. Ermolenko and other analysts added that the speed of the currency`s recovery from a crisis in December, when it lost over 30 percent of its value in just two days, has been somewhat unexpected. A fifth day of gains has put the ruble up almost 12 percent against the dollar so far this year – making it the best performing emerging market currency, analysts said. It`s also well ahead of major currencies such as the euro and Japanese yen, which are weaker against a broadly robust dollar. The U.S. dollar index, which measures the greenback against its peers, is up about 9 percent this year.
13.04.2015 17:20 S&P sees Russian economy growing 1.9% in 2016
Credit rating agency Standard and Poor`s expects the Russian economy to turn to growth in 2016, adding 1.9 percent. This comes as a sharp revision to the previous negative outlook. S&P analysts expect economic recession of 2.7 percent for Russia in 2015, RBC reported on Monday. The agency`s previous report assumed a GDP growth of 0.5 percent in 2015 and zero growth in 2016. The main premise which has changed the S&P`s outlook for Russian economy was the assumption on the oil price movement, S&P analyst Irina Veliyeva told RBC, adding that the rating agency forecasts an average price of $55 a barrel for 2015 and $70 per barrel over the next three years. The forecasts for GDP growth and other key indicators have been revised as Russia`s economy is dependent on oil prices, Veliyeva said. Meanwhile, there has been a general tendency of improving economic forecasts for the Russian economy. Last week, US bank JPMorgan forecast Russia`s GDP for 2015 would improve from a 5 percent fall to 4 percent. Economists from Russia and the US agreed last month that the Russian economy had already recovered from the worst. Inflation in Russia remains high and hit 16.9 percent annualized in March and 7.4 percent since the beginning of the year, according to Rosstat data. The head of the Central Bank of Russia Elvira Nabiullina said she expected inflation to go down to nine percent by next March. “We think the scenario of reaching a mid-term target to reach four percent inflation by 2017 is realistic,” she said. The Russian ruble, which is a key indicator for the country`s economy, has been doing better than Brent crude. Oil has played a much less prominent role in the ruble`s exchange rate in the first three months of 2015. The US-based S&P`s forecasts are close to those from Russian authorities. The Russian Ministry of Economic Development expects a 2.3 percent GDP growth in 2016 and 2.5 percent growth in 2017/2018.The Central Bank`s forecasts are less optimistic – a 3.5–4 percent decline for 2015 and positive 1–1.6 percent in 2016. Nevertheless, the CBR expects growth of 5.5–6.3 percent in 2017.
07.04.2015 16:09 WSJ Survey: Economists See Dollar Strength, Global Weakness Restraining U.S. Growth
The surging dollar and a global slowdown are likely to restrain the U.S. economy through at least the first half of the year, according to The Wall Street Journal`s March survey of economic forecasters. Harsh winter weather is already slowing output in the current quarter. But even once that drag melts away, a wider trade gap will remain a headwind, the economists said. That could keep overall economic growth just below 3% in 2015. The panel of 63 economists,not all of whom answered every question,forecasts inflation-adjusted gross domestic product to clock in at a modest annual rate of 2.3% this quarter, little changed from the 2.2% pace of the fourth quarter of 2014. They expect much of the lost activity will be made up in the spring, allowing the economy to grow at a 3% pace in the second quarter. For the entire year, the economists think GDP will grow 2.9%. That would beat the 2.4% increase in 2014 and be fast enough to push the unemployment rate down to 5.1% by December from 5.5% in February, they said.
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