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03.04.2015 17:07 World Bank sees protracted recession in Russia

Russia faces a protracted recession as the impact of Western sanctions lingers and oil prices stay low, the World Bank said in a report. In its baseline scenario, the bank expected Russia`s gross domestic product to contract by 3.8 percent in 2015 and a further 0.3 percent in 2016, describing medium-term growth prospects as dim. The World Bank`s lead economist for Russia, Birgit Hansl, said "adjustment to the new oil price reality and the sanctions environment" was a key policy challenge. "If we look more into the medium term, the main challenge for Russia is the continued dearth in investment," she said, presenting the report. The bank`s latest forecasts are more pessimistic than those made in December, when it expected the economy to shrink by 0.7 percent this year and grow by 0.3 percent in 2016. The new baseline forecasts assume that the oil price will recover only marginally over the next two years, averaging $53 per barrel in 2015 and $57 per barrel in 2016, reflecting ample global supplies and moderate demand. Under a more optimistic scenario, with oil averaging $65.5 per barrel in 2015 and $68.7 per barrel in 2016, the economy would contract by 2.9 percent this year and grow by only 0.1 percent in 2016, the World Bank said. Its latest forecasts assume that sanctions imposed against Russia because of its role in the Ukraine conflict would stay in place in 2015 and 2016.

02.04.2015 17:34 Russian Economy Unexpectedly Expanded 0.4% in Fourth Quarter

Russia`s economy unexpectedly grew in the fourth quarter before the full effect of the country`s currency crisis took hold. Gross domestic product expanded 0.4 percent from a year earlier after a revised 0.9 percent gain in the previous three months, the Federal Statistics Service in Moscow said on Wednesday, citing a preliminary estimate. That was above the median estimate for zero growth by 11 economists in a Bloomberg survey. Full-year GDP rose 0.6 percent in 2014, the service said, confirming its first assessment in January. The economy of the world`s largest energy exporter was grinding to a halt before an almost 50 percent crash in oil prices and the ruble`s worst crisis since 1998 brought Russia to the brink of a recession. Sanctions imposed by the U.S. and the European Union over the conflict in Ukraine cut off access to international markets and stoked capital outflows, forcing authorities to respond with spending cutbacks and an emergency increase in the benchmark interest rate in December. The economy is gradually entering a recession, said Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow. It`s difficult to say when a reversal will happen. I expect that it may happen in the course of the coming three to six months. A one-time burst of consumer demand in late 2014 may have supported growth, according to Tikhomirov.

31.03.2015 11:36 Economic Growth Cools As US GDP Expands 2.2%, Below Forecasts in Fourth Quarter Of 2014

U.S. gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 2.2 percent in the last three months of 2014, the Commerce Department said in its third and final estimate. The final revision missed economists` expectations for 2.4 percent annual growth, according to analysts polled by Thomson Reuters. The downward revision comes after economic growth smashed expectations in the third quarter after GDP grew 5 percent. Meanwhile, U.S. GDP increased 4.6 percent in the second quarter, after decreasing 2.1 percent in the first. The slowdown in growth comes as the U.S. Federal Reserve downgraded its GDP forecasts for this year. Annual U.S. gross domestic product in 2015 is expected to grow 2.3 percent to 2.7 percent, down sharply from the central bank`s estimate of 2.6 percent to 3 percent in December, the FOMC said in its economic projections following the central bank`s meeting last week. Economists expect first quarter growth to slow this year, driven by harsh winter weather and a downturn in U.S. business investment. Consumer spending, which accounts for nearly two-thirds of U.S. economic activity, fell in January despite a precipitous drop in gasoline prices across America. Spending declined 0.2 percent in January after falling 0.3 percent in December, the Commerce Department said earlier this month.

30.03.2015 15:49 China GDP growth to slow to 7.2% in 2015

The Asian Development Bank expected China`s economic growth may moderate to 7.2 percent this year and 7 percent in 2016 as the government targets slower rate and continues its program of structural reforms, the Manila-based bank said in a report. "China is likely to retain its position as the biggest contributor to the world`s economic growth in both 2015 and 2016," the bank said in its latest flagship annual economic publication Asian Development Outlook 2015. The projection was higher than the official growth target of around 7 percent set by the central government earlier this month at the annual session of the National People`s Congress. The bank said China`s economy could continue to deliver solid growth as long as the government makes steady progress on its reform agenda to elevate productivity. "There are natural forces for growth moderation such as a shrinking working-age population and rising labor costs," said ADB Chief Economist Shang-Jin Wei. "Deepening financial sector reform, such as reducing the dominance of state-owned banks and liberalizing interest rates while preserving financial stability, is key element of the needed reform package." China`s gross domestic product expanded 7.4 percent from a year earlier in 2014, with production growth slowdown in all sectors except agriculture.

28.03.2015 12:24 Russian Inflation: Worse Than Almost Everywhere In Eastern Europe

Rosstat released a surprisingly large batch of statistics the other day. There was a lot of useful information, but the most interesting and pertinent was a comparison of Russian inflation since December of last year with inflation in a wide range of other economies. It`s not exactly shocking, or at least it shouldn`t be, but no matter what criteria you use Russia`s performance was terrible. Over the course of the past several months, the only country in Europe, and one of a small handful of countries anywhere in the world, in which consumer prices grew more quickly was Ukraine. Even countries that have traditionally been monetary basket cases, like Kyrgyzstan, have current levels of inflation that are substantially below Russia`s. All across Europe, there are massive disinflationary pressures. Largely influenced by a collapse in the price of oil, consumer prices fell not only in the fully developed Western markets, but even in post-communist transition countries like Poland.

27.03.2015 12:14 Russia`s economy in 2015 - more resilience than expected

How is Russia`s economy doing right now? Pretty clearly, the answer is not very well. 2014 was the first year since Putin came to power in which, due to a combination of spiking inflation, plummeting oil prices and flat-lining growth, the average real disposable income actually shrank. The economy still managed to eke out 0.6% overall growth, but no one, not even the Kremlin, could dispute the blackening outlook and the general sense of malaise. There is a universal consensus that 2015 will be worse. But exactly how much worse? Here the answer is not at all clear. Anders Aslund was a particularly high profile member of what can be called the "disaster caucus", the people who think that Russia`s economy is headed for implosion. He predicted that 2015 would see a recession that would lop off somewhere between 8% and 10% of total output, substantially worse than the crisis year of 2009. Needless to say, Aslund`s forecasts seems unduly pessimistic. Yes the current mood is grim, but it`s nothing like the blind panic which was gripping the world financial system in the aftermath of the collapse of Lehman Brothers. In contrast, Russia`s current crisis has been a slow-motion one. Things haven`t happened all at once, it`s been a slow drop of bad news over the course of a year. Market participants are all too aware of what is likely to happen. That will likely make resolution of the crisis more difficult (it seems a virtual certainty that the current recession will be more protracted than 2009`s) but it also means that panicked uncertainty, which was a hallmark of 2009, is absent. Outside of the Russian finance ministry, which predicts a modest recession in 2015 and a return to 2-2.5% growth as soon as 2016, other estimates broadly expect a contraction of somewhere between 4% and 6%. The latter figure is the position of market economists and credit ratings firms, while the slightly more optimistic figure is the product of the Central Bank of Russia (which estimates that the economy will shrink by 0.7% over the first quarter of this year).

26.03.2015 14:34 Russian economy revives despite sanctions

The Russian economy has seen a notable rebound with businesses recovering despite a year of contraction caused by Western sanctions. Fluctuations in the domestic currency have narrowed, which brought investors back into the market. Global investors appear to be optimistic about the future of Russian corporations, as the country`s economic performance provides evidence to recovery, says Bloomberg analyst Matthew Winkler in his article. Those who invested in ruble-denominated government securities this year have already made a profit equivalent to seven percent in dollar terms, while those who invested in government bonds of other developing countries lost more than one percent from January, he says. The holders of corporate bonds gained even more with a 7.3 percent return in 2015, which leads the index for emerging market corporate bonds compiled by Bloomberg. The 50 Russian stocks in the MICEX are up 11.9 percent this year, which is better than any North American market, and that, according to analysts, shows confidence is starting to return. Russian companies were more profitable measured by their Ebitda margins (earnings before taxes, depreciation and amortization) than the rest of the global MSCI Emerging Market Index. Around 78 percent of enterprises represented in the MICEX index showed a greater increase in sales than their counterparts around the world. For instance, Novatek OAO, a $22.8 billion independent producer of natural gas in western Siberia, saw its sales increase 19.5 percent, compared with 0.76 percent from the sector globally. Oil major Rosneft with a capitalization of $41 billion and production in western Siberia, Sakhalin, the North Caucasus and the Arctic, reported an 18.26 percent annual sales growth, while its international competitors having shown an increase in revenue of just 0.76 percent. However, the pace of economic recovery strongly depends on investment demand, according to Russian Finance Minister Anton Siluanov. The finance ministry estimates the country`s GDP will fall by roughly three percent in 2015.

25.03.2015 15:34 Why Russia`s Economic Slump Has Been Good For London

One year ago, the U.S. and Europe started imposing sanctions against Russia to punish it for seizing part of Ukraine. At the time, many British analysts feared the sanctions would hurt London, because of England`s close economic ties to Russia. A year later, with Russia`s economy in recession, London is thriving. And this may not be despite the crisis in Russia; London may be doing well partly because of Moscow`s economic turmoil. "There is a paradox, if you like, that the worse the ruble gets, the worse the Moscow market looks, the more attractive London appears," says Yolande Barnes, director of world research at Savills, a real estate company. "The attraction for Russians, therefore, is the underlying stability, transparency and ease of doing business" in the U.K. But in March 2014, hand-wringing as the sanctions took effect was widespread. "The true cost of sanctions, if Russia is hit hard, could hurt the U.K. much more than people think," said analyst Joshua Raymond on the British financial news website Cityindex. "These sanctions are possible, but they`re going to hurt us more than they hurt them," an analyst named Ruben Lee told the BBC`s Today program. Those assessments were pretty typical of the news coverage at the time. Now, the ruble has lost about half its value from a year ago. And in London? "The U.K. saw its fastest growth since the financial crisis last year, and we think that momentum is going to be more or less maintained in 2015," says economist Scott Corfe of the Centre for Economics and Business Research. "Unemployment has been falling rapidly," Corfe says. "So I think overall it`s a pretty positive picture for the U.K."

24.03.2015 14:14 OECD Raises Economic Growth Forecasts on Lower Oil Prices

The outlook for the world economy has improved in the early months of 2015 as a result of lower oil prices and the provision of additional stimulus by several central banks, the Organization for Economic Cooperation and Development said. But the Paris-based research body warned an over-reliance on monetary policy to support growth holds dangers for the stability of the financial system, including excessive risk taking and borrowing, and foreign-exchange rates that don`t reflect underlying economic circumstances. The OECD said the U.S. dollar`s appreciation against other major currencies is contributing to low inflation in the world`s largest economy and could weaken growth by damping exports. It therefore expects the U.S. Federal Reserve to delay its first rise in interest rates, which many economists have been expecting to take place in June, until there are signs that Europe`s economies are strengthening, and the euro is set to appreciate. The question about when the Fed is going to move off of zero depends a lot on whether Europe rebounds, said Catherine Mann, the OECD`s chief economist, in an interview with The Wall Street Journal. In the first update to its projections in 2015, the OECD said it now expects the economies for which it provides forecasts - which account for 70% of global output - to grow by 4% this year and 4.3% next. In November, it forecast growth rates of 3.9% and 4.1% for those years.

23.03.2015 13:18 Global GDP growth forecasts for 2015 downgraded Fitch

Fitch Ratings on Tuesday cut its global GDP growth forecasts for this year, as emerging market economies will slow more than expected, dragging down the overall pace of growth. According to the rating agency`s quarterly Global Economic Outlook, world GDP will expand 2.7% this year, down by 0.2 percentage points when compared to the previous forecast, released in December. Still, growth will be faster than the 2.5% seen last year. As for 2016, the prediction remained intact, anticipating a 3.0% upturn. It forecasts the Emerging markets` GDP growth, which peaked at 6.9% in 2010, to slow to 3.6% in 2015, before edging up to 4.2% in 2016. The agency said that China`s gradual slowdown is "structural" as reforms take effect, but left its growth forecasts unchanged at 6.8% in 2015 and 6.5% in 2016. India is the only BRIC nation in which growth will accelerate - to 8% in 2015 and 8.3% in 2016 - however, based on updated national accounts data. For the US economy, Fitch maintained its forecast of robust GDP growth of 3.1% in 2015 and 3% in 2016. Shifting focus to Europe, the agency upwardly revised its growth estimates for both 2015 and 2016 by 0.3 and 0.2 percentage points to 1.4% and 1.7%, respectively. Nevertheless, growth will remain modest, it warned. Among other nations, Japan is forecast to return to above-trend growth of 1.3% in 2015 and 1.5% in 2016, supported by currency depreciation and higher real wages after an unexpectedly weak 2014. Growth will remain robust in the UK, as GDP is forecast to grow by 2.5% in 2015 and 2.3% in 2016 following 2.6% in 2014.


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