The Lastest Macroeconomic News
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.
13.05.2015 17:16 Volatile Oil Market May Hurt Global Economy
The dramatic fall in oil prices since last summer has been a boon for global consumers taking advantage of cheaper fuel and lower utility bills. But the price rout has increased the volatility of the crude market, which could end up hurting the global economy, a new report warns. Volatile energy prices can lead to delays in business investment and slower job growth, according to the report co-authored by Nicholas Stern, former U.K. Treasury official and a prominent climate economist. The "Oil Prices and the New Climate Economy" report was published by the Global Commission on the Economy and Climate, an international initiative led by the former president of Mexico, Felipe Calderon, to analyze the benefits and costs of acting on climate change. The report urges policy makers to support renewable energy, which offers falling prices and low volatility. Renewable energy sources, like solar and wind power, have little or no operating cost after being installed, the report says which means projects can effectively lock in the cost of energy for 20 years or more. It adds that the price of installing renewables continues to fall, making such sources of energy increasingly cost-competitive. Oil prices fell by half in the second half of last year on the back of ample supply and tepid demand. While oil has recovered in recent months and is up 40% since its lows earlier this year, some experts predict a possible double-dip in prices as the world continues to face a massive oil glut. The report also warns that current low oil prices will extend the world`s addiction to fossil fuels, which is resulting in climate change. The report says that the period of cheap oil should instead be seized on as an opportunity by governments to reduce that dependency and reform fossil fuel subsidies.
12.05.2015 15:45 European Commission Projects Russian GDP Growth to Fall by 3.5 percent in 2015
Russia`s real gross domestic product (GDP) growth rate is projected to slow down by 3.5 percent in 2015 and regain some 0.2 percent in 2016, the European Commission`s (EC) spring 2015 Economic Forecast has shown. The economic situation in Russia is expected to stabilize in 2016 "based on the technical assumption of sanctions expiring in July 2015 and also given the slight rebound in oil prices," according to EC estimates. The Eurocommission also revised Russia`s 2014 GDP growth by one-tenth of a percentage point to 0.5 percent. In April, Russian Economic Development Minister Alexei Ulyukayev said the economic slump could worsen in the second quarter of 2015 and show signs of improvement only in the final months of the year. Russia`s Finance Minister Anton Siluanov said earlier that the recession had passed its peak. In spring 2015, the Russian national currency began to strengthen against the dollar and the Euro. Falling oil prices and Western sanctions imposed on Moscow over its alleged role in the Ukrainian crisis were listed in the Forecast as reasons behind the weakening of Russia`s economy in 2015. The United States, the European Union and their allies handed down sanctions targeting Russia`s banking, energy and defense sectors throughout 2014 following Crimea`s reunification with Russia last March and Ukraine`s internal conflict that erupted the following month. In response to the restrictive measures, Moscow introduced a year-long ban on certain food imports from the countries that had imposed sanctions last August.
11.05.2015 18:07 Russian GDP decline gathers pace
Newly-published information indicates that in March 2015 the volume of Russia`s GDP decreased year-on-year by 3.4 percent, the Russian business newspaper RBK Daily has reported. The data from the Ministry of Economic Development, released in early May, shows that in comparison with February 2015 the pace of the economy`s year-on-year shrinkage was almost three times less, at 1.2 percent. "The acceleration of Russia`s GDP fall in March is related to the high level of inflation pressure and expensive credit, which is having a negative effect on the dynamics of the country`s economy," says Alexei Kozlov, chief analyst at UFS IC. The forecast for inflation in 2015 is 11.9 percent, while the Central Bank`s key rate, which private banks use as a reference point, was 12.5 percent at the beginning of May. According to the information from the Ministry of Economic Development, the fall of real salaries is also continuing to accelerate. After a 7.4-percent reduction in February they dropped by another 9.3 percent in March. Meanwhile, the volume of work in the construction sector fell by 6.7 percent in March, which is the worst result since July 2014, says the ministry`s monitoring report. The ministry had earlier made slight improvements to its economic outlook for 2015, forecasting the economy to shrink by 2.8 percent instead of the previously predicted 3-percent fall in GDP.
08.05.2015 17:28 Russian Inflation Ends Eight-Month Climb After Ruble Rebound
Russian inflation decelerated for the first time since July as the central bank moves to draw a line under the country`s worst currency crisis since 1998 with measures to revive economic growth. Consumer prices rose 16.4 percent from a year earlier in April, compared with 16.9 percent in March, the Federal Statistics Service in Moscow said in a statement on Wednesday. The median estimate of 21 economists surveyed by Bloomberg was 16.7 percent. Prices gained 0.5 percent in the month. The dropoff in inflation vindicates a turn by authorities to focus on an economy entering its first recession in six years after a crash in oil prices and sanctions imposed over the conflict in Ukraine. The Bank of Russia has taken advantage of slowing price growth and the ruble`s best performance among currencies globally to roll back December`s emergency increase in interest rates with three cuts in 2015. “It now looks like inflation has passed its peak,” Liza Ermolenko, an analyst at London-based Capital Economics Ltd., said by e-mail. "The effects of last year`s fall in the ruble have started to ease, which should continue to put downward pressure on inflation over the coming months."
07.05.2015 12:25 Economic Crisis Slows Putin`s Plans to Modernize Russian Military
Russia`s economic crisis is forcing President Vladimir Putin to quietly scale back plans to build an “indomitable” military, even as Moscow readies one of the largest-ever displays of its might on Red Square this weekend. When Mr. Putin promised to spend more than 20 trillion rubles to modernize the military in late 2010—some $650 billion at the time—some senior officials questioned whether Moscow could afford it. Now left with fewer petrodollars and grappling with Western sanctions, the Kremlin is being forced to cut spending and delay other defense plans. The modernization project was aimed at replacing 70% of Russia`s armaments, much of which dates back to the Soviet era, with hundreds of modern tanks, guns, submarines and fighter jets. In turn, Russian military spending doubled between 2007 and 2013. Little information is publicly available about the defense expenditures, and where the cuts will fall isn`t clear. But even Mr. Putin has acknowledged that the dates for the modernization plan may need to be shifted.
06.05.2015 16:24 Global economy in stutter mode
The world economy`s growth prospects for the current year seemed somewhat dented on Monday, with China`s manufacturing growth suffering the steepest drop in a year in April and the sector`s expansion easing from the March level in both the euro zone and India. The latest data also revealed that the US` manufacturing industry that came off the relatively robust levels six months ago was yet to rebound. At a time when India`s export-oriented industries have been hit hard by weak global demand (exports contracted for the fourth straight month in March and posted a 67-month-low growth of -21.0%), the headline HSBC India Purchasing Managers` Index for the country for April released on Monday compounded policymaker`s worries as it fell to 51.3, down from 52.1 in March, on weak domestic orders. Although last week`s US Federal Reserve decision, guided by lower-than-expected first-quarter growth, is interpreted to show its lack of intent to raise borrowings costs until next year (something that could help emerging market economies), India`s own economic data barely reflect any sharp pick-up in aggregate demand. Even as the government, ostensibly laying emphasis on project implementation, is anxious to see investment activity decisively picking up, recent incremental data haven`t given it any comfort.
05.05.2015 11:56 Economic Growth And Russia`s Currency
Economic growth in Russia continues to fall as exports and consumer spending decline. Investors, however, continue to buy the ruble as current economic weakness is priced in. In March, the economic growth figure came in at an annual pace of -3.4% contraction, down from the previous month`s reading of -2.3%, while also exceeding estimates for -2.0%. The economic growth measure is a monthly leading indicator reported by the Ministry of Economic Development. Since peaking at over 5% annual growth in 2012, economic activity has fallen sharply lower. Declining exports have been one of the largest weights on economic growth. In March, the export figure came in at an annual pace of -11.29% contraction, down from the previous month`s reading of -7.94%. After reaching over 30% annual growth in late 2011, exports have fallen significantly lower, to current levels. Export revenue to Russia has fallen in recent months as energy prices declined, alongside weaker demand from the global economy. Moreover, a steep decline in the country`s currency last year pushed price measures higher. In March, the inflation figure came in at an annual pace of 16.9%, up from the previous month`s reading of 16.7%, while also exceeding estimates for 16.8%. After starting 2014 at close to 6% annual growth, inflation measures have nearly tripled, seen below. Food and beverage costs are a large reason for elevated consumer prices.
04.05.2015 17:24 Russian Economy May Be Stumbling Back To Its Feet
The Bank of Russia has cut interest rates for the third time so far this year, reinforcing forecasts by some government ministers that the country`s economic woes are beginning to stabilize. The central bank cut its key rate on April 30 to 12.5 percent, a reduction of 1.5 points, and said it would reduce it further - perhaps at its next board meeting on June 15 - as inflation cools down. The reason in part is to keep the ruble from rising too quickly in value, which would make Russian exports - notably oil and gas – more expensive on the world market. The ruble has been on a rollercoaster ride in the past several months because of the plunging price of oil and Western sanctions imposed on Moscow for its involvement in the crisis in neighboring Ukraine. The currency hit a record low against the US dollar in December, but was up by 13 percent compared with the dollar just before the Bank of Russia acted. This year began with an emergency rise in the key interest rate in January to help shore up the ruble. That evidently worked, and the central bank quickly lowered the rates in January and March to help cool off the quickly rebounding ruble.
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