The Lastest Macroeconomic News
19.06.2015 12:34 Can Russia`s economic forum revive its fortunes?
International business leaders will be assembling in St. Petersburg in Russia for the country`s annual economic forum this week amid hopes that the country can still rebuild its investment outlook and relationship with the rest of the world. The three-day St. Petersburg International Economic Forum (SPIEF) started on June 18 and came at a difficult time for Russia. The country remains largely isolated on a political and economic level due to international sanctions on the country, imposed for Russia`s perceived role in the pro-Russian uprising in Ukraine, which it denies. Making matters worse in Ukraine, there has been an escalation of violence lately between pro-Russian rebels and the country`s armed forces, threatening a fragile official ceasefire, called the Minsk agreements, and potentially earning Moscow an extension of sanctions until the end of the year. Russia`s economy has been on a roller-coaster ride since the conflict erupted in spring 2014 with its currency and stocks hit hard by declining oil prices, capital outflows and soaring inflation. There are signs that the rate of inflation is slowing and the ruble has recovered some strength to trade around 55 to the dollar (from lows of around 70 in February) – factors which could buoy investor sentiment towards Russia.
17.06.2015 14:17 Why the G-7 Warning of More Sanctions Won`t Worry Russia
The world`s leading Western economic powers warned of fresh sanctions against Russia at the G-7 summit. Led by U.S President Barack Obama, they are a weak attempt at stopping Russia`s incursion into Eastern Ukraine and the escalation of violence there. Despite having the desired effect of hurting the Russian economy, discord in the West and Russia`s continued access to the global financial system means they lack bite. Western sanctions were first imposed on Russia following its annexation of Crimea in March 2014. The initial diplomatic measures (visa bans and asset freezes) were soon followed by more direct financial restrictions. Western financial institutions are not allowed to lend to Russian counterparts on a midterm to long-term basis, effectively isolating Russia from Western capital markets. The Sanctions Rationale. The rationale behind the choice of economic instruments to pressure the Kremlin has been based on a straightforward assumption. The Russian economy - critically dependent on oil and gas revenues (which together comprise about 72–75 percent of the country`s exports) - is unable to withstand the economic pressures of low oil prices and financial draught. The internal economic crisis in Russia, in turn, is calculated to generate two effects. First, it will prove too costly for the Kremlin to continue military involvement in Ukraine. Second, falling incomes and rising inflation will also weaken popular support for Putin and his rule and may bring about a change of policy (or leadership) in Moscow.
16.06.2015 12:10 Russia: Time to invest despite sanctions threat?
Despite the potential for more international sanctions on Russia, some investors and market analysts have argued there is value to be found in the country – but only for those prepared to handle the volatility. Sanctions on Russia, which were imposed by the West after the country`s annexation of Crimea and role in the conflict in east Ukraine last year, could soon be extended, U.S. Treasury Secretary Jack Lew said. It comes as a ceasefire between the two countries -- known as the Minsk agreement -- looks shaky, with an uptick in violence in the region over recent weeks between the Ukraine military and pro-Russian rebels. Should sanctions be extended further, Russia`s economy could be in for a repeat of 2014`s rollercoaster ride, when its currency and stocks were hit hard by declining oil prices, capital outflows and soaring inflation. Despite this uncertainty, however, some market participants argued there were "bargains" in Russia. "There is significant opportunity here. The one thing with Russia is that it generally goes from being the worst (performing) stock market to the first stock market in a very rapid rate," Simon Fentham-Fletcher, chief information officer of Freedom Asset Management, told CNBC Europe`s "Squawk Box". His company specializes in investment in emerging markets, such as Russia. Certain sectors – such as retail and real estate – were thriving, Fentham-Fletcher said, speaking from Moscow.
15.06.2015 15:10 Russia`s Top 3 Obstacles to Economic Growth
The Russian economy has its fair share of problems, as the government knows all too well. But as the country slides into a deep recession this year, is the state focusing on the right ones? This question came to the fore last week when the government published a document on its website listing the three "main challenges" it sees to Russia`s socio-economic development. With the economy expected to contract by up to 5 percent this year and relations with the West at a post-Cold War low, the question of how the government chooses to pursue economic growth — and whether it succeeds — has rarely been so urgent. "This whole crisis has greatly exposed the need for more urgent action on attracting investment and creating diversification," said Chris Weafer, a senior partner with Moscow-based investment consultancy Macro Advisory. Here are the top three challenges to Russian socio-economic development, as listed in the government`s revised guidelines for action through 2018: 1. Cheaper Oil, Gas and Metals. 2. Geopolitical Tensions. 3. Not Enough Workers.
11.06.2015 15:17 World Bank slashes growth forecast for emerging economies
The World Bank has cut its forecasts for growth across emerging economies this year, warning that they face a double whammy from rising US interest rates and lower commodity prices. “Developing countries were an engine of global growth following the financial crisis, but now they face a more difficult economic environment,” said the bank`s president, Jim Yong Kim, as the anti-poverty body published its twice-yearly Global Economic Prospects document. Growth in emerging economies is expected to be 4.4% in 2015, down from the 4.8% the World Bank was expecting in December. The World Bank`s senior economist, Franziska Ohnsorge, explained that while the crash in the global oil prices since last year has hit government revenues and undermined growth in exporting countries, it has so far not provided the expected boost to oil importers. Some of the largest downgrades are for oil-exporting countries, including Nigeria, Angola and Brazil, with South America`s largest economy expected to contract by 1.3% this year. However, the document reserved some praise for India, describing the country as a "shining star" for tackling its economic problems.
08.06.2015 20:45 Slow Chinese economy impact global
China`s economy had deteriorated recently but the weakness is likely to be more persistent than in the United States, Forsyth Barr broker Peter Young says. Credit had exploded since 2009 and officials were anxious to curb the boom before it became too large to control, he said. Tighter credit conditions had exposed China`s overcapacity, especially in certain sectors such as construction and heavy industry, prompting a sharp downturn in investment. ”Given investment accounts for around 50% of GDP, this adjustment almost certainly has further to run. The authorities have resorted to targeted and small-scale macro stimulus as they endeavor to steer the economy along a new path.” On some measures, China accounted for about 15% of global economic growth as measured by gross domestic product (GDP) and was similar in size to the United States. That meant a slowdown in China would have a significant impact on the rest of the world, including the direct impact of lower global aggregate growth but also through indirect impacts on supply-chain economies (other Asian countries), capital goods producers (Europe and the US) and commodity exporters, such as New Zealand and Australia, Mr. Young said.
04.06.2015 19:00 Russian Inflation Slows More Than Forecast in Boost for Easing
Russian inflation decelerated for a second month, setting the stage for the central bank to ease monetary policy further after the ruble`s crisis last year. Consumer prices rose 15.8 percent from a year earlier in May, compared with 16.4 percent in April, the Federal Statistics Service in Moscow said in a statement. The median estimate of 23 economists surveyed by Bloomberg was 15.9 percent. Prices gained 0.4 percent in the month, the smallest increase since August 2014. The continued slowdown means the central bank can focus on lowering borrowing costs as the economy enters its first recession in six years. The Bank of Russia has cut its benchmark interest rate three times to 12.5 percent after an emergency increase to 17 percent in December as oil prices stabilized and the ruble rebounded. Inflation may slow to 12 percent by year-end, according to the central bank. “If there are no new considerable external shocks, inflation will continue to slow down in accordance with our forecasts,” Bank of Russia Governor Elvira Nabiullina said at a banking conference in St. Petersburg on Thursday. Price growth has started to ease “quickly” in recent months after a jump early in the year caused by the ruble`s weakening, she said. The central bank, whose medium-term inflation target is 4 percent in the medium term, will update its forecasts by the next rate meeting on June 15, according to Nabiullina.
03.06.2015 18:13 Russia`s Economy Contracts 4.2% but Outlook Improves
Russia`s economic contraction deepened in April as its key drivers deteriorated, but the country`s outlook has improved as oil prices have climbed higher, data showed. The economy ministry said gross domestic product contracted by 4.2% in April, compared with a year earlier, after shrinking by 2.7% in March. In the first four months of the year, the economy contracted by 2.4%, said the ministry. The data contrast with recent remarks by government officials, who have said the worst of the economic contraction was over. However, Alexei Kudrin, Russia`s former finance minister, warned late last week that the economy`s contraction was set to intensify in the second quarter. In April, Russia`s economy was dragged into contraction by a drop in manufacturing, mining, construction, retail sales and household incomes, as well as falling capital investment. The data showed that a drop in foreign trade, both in imports and exports, also put pressure on the economy, battered by Western sanctions and a rapid drop in oil prices. However, oil prices have partially recovered in recent months, paving the way for Russia`s economic recovery. The World Bank said Monday it sees the economy shrinking by 2.7% this year before growing by 0.7% next year and by 2.5% in 2017. In April, the World Bank had expected Russia`s economy to contract by 3.8% this year and by 0.3% next year.
01.06.2015 23:52 Russian manufacturing PMI falls to four-month low in May
Russian manufacturing activity shrank to a four-month low in May, the HSBC purchasing managers` index (PMI) showed on Monday, adding to evidence that the economy remains weak. The index`s headline reading fell to 47.6 from 48.9 in the previous month, slipping further below the 50.0 mark that separates expansion from contraction. "The stuttering nature of Russia`s manufacturing sector continued in May, with a rather disappointing set of survey data. Output, new orders and employment were all down since the previous survey," said Paul Smith, senior economist at Markit. The weaker PMI follows data for April which has served as a reminder of the drag on Russia`s economy from low oil prices and Western sanctions linked to the Ukraine crisis. However, inflation is now on a downward trend after currency weakness drove it to a 13-year high earlier in the year, and the latest PMI survey showed rapidly falling output and input prices for manufacturers. "The ongoing trend towards price level stabilisation suggests the macroeconomic environment is showing some sign of improvement," Markit`s Smith said. "This could, in time, help the manufacturing economy regain some lost ground over the coming months."
29.05.2015 15:17 Russian Inflation Slides Below 16% for First Time in Months
Year-on-year price inflation in Russia slipped below 16 percent for the first time since February, a news report said Wednesday, as the strengthening of the ruble soothes blistering price rises. Prices rose 0.1 percent in the week ending Monday, May 25th, a report by state statistics service Rosstat said. This brought year-on-year inflation to 15.8-15.9 percent for the week, down from 16.1 percent the previous week, the Interfax news agency calculated. Year-on-year inflation in Russia climbed from 15 percent in January to a high of 16.9 percent in March, according to Rosstat, as the devaluation of the ruble drove up the cost of imported products and components. Inflation first became an urgent issue during the second half of last year when food prices jumped after Russia banned some food imports from countries with sanctions against Moscow over its role in the Ukraine crisis. Price rises were then propelled higher by the devaluation of the ruble, which fell more than 40 percent against the U.S. dollar last year on the back of a steep fall in the price of oil - Russia`s main export - and Western sanctions. Now the ruble is in recovery, having risen more than 30 percent against the dollar since the beginning of February. This is good news for inflation too: The Economic Development Ministry in April lowered its inflation forecast for the year from 12.2 percent to 11.9 percent.