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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.

12.03.2014 14:41 Brazil economic growth allays recession fears

Brazil avoided slipping into recession last year as the Latin American country leaned once again on its crumbling pillars of economic growth household consumption and government spending. The economy grew 0.7 per cent in the fourth quarter, above all analysts` estimates and in contrast to data from the central bank this month indicating Brazil may have entered a technical recession. However, economists cautioned against reading too much into the results. Fourth-quarter growth was based on a weak comparison of a 0.5 per cent contraction in the previous quarter and was helped by a 4.1 per cent rebound in volatile export figures that may be difficult to maintain. While the data showed a surprise expansion in investment of 0.3 per cent, there was little sign that the country is letting go of its exhausted, consumption-led model of growth, they said. Household consumption grew 0.7 per cent in the quarter, while government spending rose 0.8 per cent together, they account for about 84.5 per cent of the Brazilian economy. Last year the economy grew by 2,3 percent - much higher rate, than 1,0 percent in 2012. Investment rose 6.3 per cent in 2013 but made little impact on Brazil`s investment rate, which rose to 18.4 per cent from 18.2 per cent of GDP. It is one of the lowest in the region and needs to reach at least 20 per cent. Bureaucracy and inefficiency also mean that when investments are made it can still take a long time for the effects be felt throughout the economy.

07.03.2014 00:09 RPT-Fitch: Crisis to Weigh on Russia Economy

The crisis in the Ukraine has increased the risks to Russia`s already weakening economy presented by currency depreciation and capital flight, Fitch Ratings says. The situation is still highly unpredictable but Russia`s sovereign credit profile is robust and events so far do not have implications for the country`s `BBB` rating. Market reaction to Russia`s intervention in Crimea saw the rouble fall 2.2% to an all-time low against the US dollar on Monday, while the MICEX index of Russian shares fell 10.8% and yields on rouble sovereign debt rose sharply. The Central Bank of Russia (CBR) raised its key interest rate by 150bp to 7%, and intervened to support the rouble, selling USD11bn. Losses were partly recovered on Tuesday as tensions appeared to ease. Higher energy prices and a weaker rouble should provide a fillip to sovereign finances by boosting the local-currency value of oil and gas exports, which contribute around half of federal government revenue and current external receipts. This will keep the fiscal deficit within the target of 0.6% of GDP in the budget, making up for a shortfall in non-oil revenue. But the economic drag through lower business and consumer confidence and a loss of purchasing power will be more significant.

05.03.2014 23:04 Why Europe will balk at Russian sanctions

The deployment of Russian troops in Crimea has drawn condemnation from Washington and Europe, along with talk of potential sanctions if diplomacy fails. The United States has put trade and investment pact talks with Russia on hold, while Secretary of State John Kerry has talked about isolating Moscow through visa bans and freezing assets. But European leaders, who meet Thursday to discuss the crisis, have been more circumspect, instead emphasizing the need for diplomacy and international mediation. That`s hardly surprising when you consider the extent to which the economies of the European Union and Russia are intertwined. With the eurozone still emerging from its own crisis, European leaders will think long and hard about any measures that might put that recovery at risk. Russia is the EU`s third-biggest trading partner after the U.S. and China. Trade in goods totaled a record 336 billion euros ($462 billion) in 2012, more than 10 times the volume between Russia and the U.S. Add in exports of services, and the value of the Russia-EU relationship rises to $520 billion. Russia is the EU`s single-biggest supplier of energy. Oil and gas prices rose sharply Monday on fear of supply disruptions through Ukraine, which account for about half of Russian flows. EU exports, meanwhile, are largely made up of machinery and transport, chemicals, medicines and agricultural products. Nowhere is Europe`s reliance on Russian energy more acute than in Germany.


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