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09.04.2014 17:04 IMF cuts Russia growth forecast to 1.3 % over geopolitical risk

The International Monetary Fund has sharply downgraded the Russian growth forecast to 1.3 percent in 2014, as the crisis in Ukraine continues to rattle investors and send capital flowing out. Based on what has happened, growth in Russia is lower than what it would have otherwise been, Olivier Blanchard, the IMF Director of Research told reporters in Washington DC. Blancard warned of massive capital outflows and investor hesitation over the geopolitical events unfolding in Ukraine. The Ukraine crisis sparked a rapid outflow of capital, and by the end of March, $70 billion is estimated to have escaped. In all of 2013 $63 billion flowed out of the country, according to Deputy Economic Minister Andrey Klepach. Russia is the world`s fifth largest economy by purchasing power, and the growth forecast was cut 0.6 percent from the institution`s original 2 percent forecast. Growth in 2015 will be 2.3 percent according to the IMF`s April 2014 growth report. There are probably two main channels effecting Russia from an economic point of view. First is the investment climate, and the hesitation by investors on putting or leaving money in Russia, so one can except fairly substantial outflows, Blanchard said. Another reason for the downgrade is that the IMF expects Russia will have to hike interests rates which could spur further inflation. The Washington DC-based fund predicts inflation will slow to 5.8 percent but that price growth will continue to accelerate was the ruble weakens. The ruble has so far weakened 7.5 percent against the dollar in 2014.

09.04.2014 14:54 IMF: World economy is stronger but faces threats

The global economy is strengthening but faces threats from super-low inflation and outflows of capital from emerging economies, the International Monetary Fund warned. The lending organization expects the global economy to grow 3.6 percent this year and 3.9 percent in 2015, up from 3 percent last year. Those figures are just one-tenth of a percentage point below the IMF`s previous forecasts in January. The acceleration is being driven mostly by strong growth in advanced economies, including the United States and the United Kingdom, and a modest recovery in the 18 nations that use the euro currency. By contrast, developing nations, particularly Russia, Brazil and South Africa, are now expected to grow much more slowly than the IMF forecast three months ago. Russia`s economy will likely suffer as a result of its fight with the U.S. and Europe over the Ukraine. Others face high interest rates, which are intended to fight inflation but could slow growth. The IMF, in its World Economic Outlook report, sharply upgraded its growth forecasts for the U.K., Germany and Spain. It expects the eurozone to grow 1.2 percent in 2014 and 1.5 percent in 2015 after shrinking 0.5 percent last year. Both estimates are one-tenth of a percentage point higher than the IMF`s January forecasts. The IMF made no changes to its forecasts for U.S. growth, which it estimates at 2.8 percent this year and 3 percent in 2015. Japan, however, is forecast to expand just 1.4 percent next year, down from the IMF`s previous projection of 1.7 percent, and just 1 percent in 2015. Higher sales taxes are expected to weigh on growth. Growth in China, the world`s second-largest economy, is expected to continue its slowdown from its double-digit pace of a few years ago. That will have repercussions for many nations that export raw materials and parts to Chinese factories. China is projected to expand 7.5 percent in 2014 and 7.3 percent in 2015, down from 7.7 percent last year.

08.04.2014 21:55 Property prices in Dubai rise 33%, expected to rise further

Residential property prices in Dubai are expected to continue their upward trend over the remainder of 2014, but at a slower rate, a new report by Jones Lang LaSalle (JLL) said. The real estate investment and advisory firm said in its `Dubai Real Estate Market Overview Q1 2014` report that the emirate`s residential market maintained its momentum with average prices increasing 33 per cent year-on-year, with average rents improving 23 per cent. While the market remains shy of its 2008 peaks in most locations, prices in some areas have now reached peak levels, the report said, observing that activity in Dubai`s real estate investment market remained strong. The JLL report noted that Dubai`s real estate market commenced 2014 with optimism, driven by last year`s strong performance and continued economic growth. This optimism remains focused on the residential sector, which witnessed increased prices and rents across all areas, with rates growing faster in secondary locations. The retail, hotel and industrial segments continue to experience growth, while the office sector remains more selective. In its market overview, the real estate consultancy firm said that the Dubai economy is expected to sustain its growth momentum. According to the Department of Economic Development, the GDP of Dubai will grow 4.7 per cent in 2014. Tourism, trade, transportation and real estate are all witnessing strong performance and will continue to be the main drivers of the economy.

08.04.2014 14:48 Russia looks east as it seeks to rebalance trade interests

As Russia`s relations with Europe turn sour, Dmitry Kobylkin should be a worried man. The governor of Yamal-Nenets, a vast territory straddling the Arctic Circle, runs one of Russia`s most resource-rich regions but it is also one of the most dependent on Europe, where most of its abundant oil and gas is sold. But Mr Kobylkin smiles. China tells us: give us gas! he says. For them, it is important to have a partner who can supply gas for at least 200 years. We can do that. With its economy reeling from the geopolitical crisis sparked by its annexation of Crimea, Moscow is turning to Asia for help. The Asia-Pacific region is the centre of world economic growth, said economy minister Alexei Ulyukaev. We have not developed co-operation with these regions as actively as we would have liked. Russia`s trade with China, Japan and South Korea combined was $150bn last year three times less than with Europe. The three east Asian countries accounted for just $6.1bn of the $496bn foreign direct investment stock in Russia as of the end of 2012. Russian analysts say the country`s falling-out with the west will act as a catalyst to change that.

06.04.2014 17:24 Playing Russian Roulette With Sanctions and Oil Prices

Enacting sanctions against a country supplying 12% of the world`s oil sounds like a one-way ticket to a price spike. But that ignores Russia`s other role as an oil consumer. Over the past five years, Russia has accounted for 11% of the world`s growth in oil consumption. And sanctions look more likely to affect that than the supply side. Tighter sanctions could disrupt Russian oil exports if, say, they target its financial sector. Barring a full-scale invasion of Ukraine, though, the West is unlikely to contemplate cutting off banks in Russia. Oil demand would surely crumble. Over the past five years, producing 1 million rubles (about $27,800) of Russian GDP has required input of about 27 barrels of oil. All else being equal, economic growth of 1.1% would see oil demand expand by just 36,000 barrels a day, about one-third of the IEA`s forecast. Under the recession scenario, oil demand would shrink by 59,000 barrels a day, a swing of 163,000 from the IEA`s projection. These calculations don`t take account of other factors that could affect oil demand, but one thing is certain: Since at least 1993, Russian oil demand always has fallen when GDP has shrunk. With all these moving geopolitical parts, a one-way upward bet on oil looks decidedly simplistic.

02.04.2014 21:10 U.S. GDP Grew 2.6% In The Fourth Quarter 2013, Up From Last Estimate

Real people helped drive U.S. economic growth in the fourth quarter of last year. But the jury of economists is out on whether consumers will continue coming out. Data released by the Bureau of Economic Analysis shows that real GDP - which measures output produced in the United States - grew at an annual rate of 2.6% in the fourth quarter of 2013. The third - and final - estimate is up 20 basis points from the 2.4% second estimate BEA put out in February, but still below the 3.2% advance estimate released in January. The figure shows fourth quarter growth relative to the third quarter, when real GDP increased 4.1%. The improved estimate, BEA explained in a release, reflects larger than previously estimated personal consumption expenditures but a largely consistent economic picture. Consumption gains were partially offset by smaller than previously estimated private investment in inventories and intellectual property products. Averaged across the four quarters of last year real GDP added 1.9% in 2013 from 2012. Full year-over-year growth is compared to 2.8% in 2012.

31.03.2014 15:14 World Bank sees Russian capital flight, hit to GDP if Crimea crisis deepens

The Russian economy may contract markedly this year and the country could see record capital outflow of $150 billion if the crisis over Moscow`s annexation of Ukraine`s Crimea deepens, the World Bank warned. In the first estimate by a leading international institution of the likely economic damage from the Kremlin`s standoff with the West over Ukraine, the bank said Russia`s gross domestic product (GDP) might shrink by 1.8 percent in 2014. The forecast 1.8 percent contraction represents the World Bank`s high-risk scenario, but still assumes the international community will refrain from trade sanctions. In an alternative low-risk scenario, assuming only a short-lived impact from the Crimean crisis, the bank sees GDP growth of 1.1 percent this year, compared with the 2.2 percent it predicted in its last report in December. In its low-risk scenario, the World Bank expects Russia`s economic growth to inch up to 1.3 percent next year. The high-risk scenario envisages 2.1 percent growth, largely due to a low base this year.

26.03.2014 22:40 Colombia Surpasses Argentina As Latin America`s Third-Largest Economy Due To Inflation, Currency Changes, GDP Growth

Argentina, once the third-strongest economy in the western hemisphere, extended its decades-long decline by ceding the No. 3 spot among Latin American economies to Colombia later this year -- thanks to the second-weakest currency in the region, soaring inflation, weak economic growth and chronic political problems, Capital Economics said on Monday. Brazil and Mexico remain No. 1 and No 2, respectively. There are several reasons for the decline. The Colombian peso has remained relatively stable for the past year, with a current exchange rate of 1,990 pesos per $1. On the other hand, the Argentinean peso steadily dropped against the dollar all through last year, falling 20 percent to a current 7.9 pesos per $1. Another factor contributing to the rise of Colombia against Argentina is its low inflation, which averaged 2.19 percent last year and with predictions of a little more than 1 percent annually for 2014, Capital Economics said Monday. This is a far cry from the inflation drama Argentina has been dealing with: the government just recently admitted the real figures, which clock in at 3.5 percent monthly and more than 20 percent annually. Added to these two factors, the gross domestic product of Colombia is expected to be close to 5 percent this year but 3.6 percent for Argentina.

19.03.2014 16:35 Analysts slash China GDP forecasts

Investment banks slashed forecasts for China`s GDP growth after Beijing reported the biggest slowdown in investment for more than a decade and the slowest retail sales expansion for nine years. Confidence was further undermined by news that a well-known steel mill has failed to repay loans that came due last week. Ting Lu, China economist at Bank of America Merrill Lynch, said the bank was cutting its first quarter GDP growth forecast to 7.3 per cent from 8 per cent and the full year forecast to 7.2 per cent from 7.6 per cent previously. Nomura Securities revised down its first quarter forecast to 7.3 per cent from 7.5 per cent previously but kept its full year prediction at 7.4 per cent. UBS revised down its full year forecast to 7.5 per cent from 7.8 per cent previously. Barclays said it was revising downward its first quarter forecast to 7.3 per cent, but did not say what its previous projection had been. However, the bank is keeping its full year forecast at 7.2 per cent for the full year. Mizuho Securities said it was cutting its first quarter forecast to 7.2 per cent, but did not give a comparative number.

18.03.2014 20:22 India`s GDP Expanded 4.7% Last Quarter

India`s economic growth remained stuck below 5% for the seventh consecutive quarter last quarter as inflation and waning investor confidence continued to drag on Asia`s third-largest economy. The government said that gross domestic product during the October to December quarter rose 4.7% from a year earlier, compared with the 4.8% and 4.4% expansion in the preceding two quarters. A poll of 16 economists by The Wall Street Journal had predicted 4.9% growth. While some economists and executives are cautiously optimistic that India`s period of stagflation - during which it struggled with high inflation rates even as economic growth has been slowing - is coming to an end, many warn it could be years before India returns to the near 10% expansion rate it witnessed just a few years ago. The data showed output services such as financing, insurance and real estate grew 12.5% from a year earlier. Farm output also increased 3.6%. However, the manufacturing sector contracted 1.9%. Rising borrowing costs, overburdened infrastructure, bureaucratic red-tape and uncertainty over tax policies have spooked consumers and corporations, dragging down growth in the South Asian nation. The country`s pace of economic expansion halved to a decade-low of 4.5% in the fiscal year ended last March from about 9% until two years before that.


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