The Lastest Macroeconomic News
15.11.2014 13:10 Russia`s high inflation rate may be even worse than first meets the eye
Russia`s inflation rate has risen to a four-year high and is likely to remain high until spring 2015, according to a report by Russia`s Central Bank published on Nov. 10. Russia`s economy began showing signs of decline approximately two years ago, but in recent months this decline has been progressing far more rapidly, indicating a drastic drop. Rising inflation is one major component of this. It deserves a closer look. The latest official figures show a hike in inflation to 8.3 percent after Russian President Vladimir Putin banned various food items from the West in August 2014, in response to Western sanctions. Inflation is an aggregate summary of the change in prices of goods and services over time. As high as Russia`s inflation rate is, a deeper look shows that the situation is even worse. A look at individual key sectors is more alarming.
13.11.2014 13:15 Ukraine`s GDP to Drop by 7%: Ukraine`s National Bank
Ukraine`s GDP will drop by 7 percent, over the first nine months of 2014 the GDP has already dropped by 3.5 percent, the head of the National Bank of Ukraine Valeriya Gontareva said. "Our forecasts have improved significantly, there are no official statistics, but today we can say that since the beginning of the year , over the first nine months GDP fell by 3.5 percent, the statistics may even improve ... as of today, we have improved our forecast to a 7 percent drop," Gontareva said at a news conference. Gontareva has also noted that, according to the National Bank`s previous forecast, a nine percent drop was expected by the end of 2014. Torn by internal conflict in its southeastern regions, Ukraine is experiencing a severe economic crisis. The Ukrainian government and international institutions had previously forecasted a 5-7 percent decrease in Ukraine`s GDP in 2014. The country`s National Bank has estimated that inflation in 2014 will reach 17 percent. In April, the International Monetary Fund approved a two-year $17 billion loan to Ukraine, $4.6 billion of which has already been disbursed.
07.11.2014 20:59 Russia`s Economy Is Stuck in the Past
Karl Marx taught that economics were the base on which ideology, politics and morality all rested. President of Russia and his inner circle read Marx at school and were once members of the Communist Party. Yet, seemingly irrationally, Russia has traded economic prosperity for a chunk of a neighbor`s territory and the dubious honor of stomping on the world stage in the guise of an international pariah. But oil nations are often a mess politically: National leaders use petrodollars to bribe their populations and then harness the undercurrent of anger to stoke an "us against them" mentality, under cover of which they and their buddies pilfer the national wealth. This is the system that prevails in Nigeria, Venezuela and Russia. The only difference is that Russia has a stockpile of nuclear weapons, which has allowed Putin and his inner circle to act out Russia`s national resentments with relative impunity. Meanwhile, technology is gradually shaping commodity markets. Agriculture is now less dependent on the vagaries of weather, as technology, including biotech, has boosted yields across the board. The oil market is also increasing influenced by energy-saving engineering, green tech and new, highly efficient production techniques. In oil production, we`re now witnessing a shift of profits away from exporting nations to owners of advanced technology. It is a natural economic process, but it is bound to leave countries that can`t innovate — including Putin`s Russia — sulking on the dust heap of history.
03.11.2014 13:42 Russia growth up to 1.1% in September from zero
Russia`s GDP growth accelerated to 1.1 percent last month which marked an economic revival from the flat growth last year, the Ministry of Economic Development has said. In month-to-month terms, Russia`s GDP grew 0.4 percent in September, marking a turnaround from the decline a month earlier, Oleg Zasov, head of the Macroeconomic Forecasting Department of the Russian Ministry of Economic Development, said. The optimistic figures come at a time when the Russian economy is being hit by falling oil prices and a cheapening ruble. Between January and September Russia`s GDP increased 0.8 percent, in the third quarter it grew by 0.7 percent, Aleksey Vedev, deputy head of Russia’s Ministry for Economic Development, told TASS. "The results of the third quarter are satisfying,” he said, “Given the fact that there was a high base in the fourth quarter of 2013, the forecast growth of 0.5 percent seems to be an achievable goal. And with optimistic circumstances it may be even higher," he concluded. On a less positive note, real disposable income and investment in Russia fell, as the ruble kept on losing value against the US Dollar. Projections for the capital outflow this year remain at $100 billion. "The planned revision of the forecast is appointed for December 1, now we are making preliminary calculations and collecting data. Our forecast still remains the same,” Vedev said. Talking about oil prices, Vedev expects a price of $90-110 per barrel in 2015-2017.
02.11.2014 12:44 U.S. Economy The Envy Of the World
In the United States, the story of the economy is a good news, bad news affair. Jobs are coming back, but millions of people are reluctantly accepting part-time work. Investors are accumulating wealth, but income levels are hardly growing. But globally, the trajectory of America`s economy is spurring a different reaction: envy. On the heels of a steady six-month jobs expansion, the United States has reemerged as the star of - and perhaps the locomotive for - an otherwise slumping global economy. In the latest reminder of how America is outpacing much of the developed world, the government said Thursday that the nation`s gross domestic product - the size of its economy - grew at an annualized rate of 3.5 percent between July and September. That figure came as fears grow that Europe is sliding into its third recession since 2008. And although the United Kingdom is faring well, too, economists predict that by 2015, the United States will be the rich world`s standout economy. “GDP growth of 3.5 percent?” said Jay Bryson, a global economist at Wells Fargo. “If you said that to a European right now, they`d start to cry tears of joy.”
01.11.2014 21:06 Russian Ruble Falls Despite Rate Rise
Not even a larger-than-expected rise in interest rates by Russia`s central bank could provide respite for the battered ruble on Friday, with the currency falling further against the dollar. The Bank of Russia surprised markets by raising interest rates by 1.5 percentage points, the largest hike since March, in an effort to provide support for the ruble and address rising consumer inflation. The ruble has hit record lows almost every day in October amid concerns about Russia`s economy. “This was a major move. This looked like what I call a financial-stability rate hike, with the intended goal of defending the ruble," said Benoit Anne, strategist at Societe Generale. However, after initially rising 1% against the U.S. dollar in response to the rate rise, the ruble soon fell back to trade just off 43 at 12:40 GMT, weaker than just before the announcement, suggesting that the weakness of the currency is rooted deep in the market. A euro was worth about 54 rubles, the weakest point for the currency on the day. Some analysts suggested that while the rate rise - which resulted in the key rate moving to 9.5% from 8% - together with a gas deal between Russia and Ukraine, could contribute toward stabilizing the ruble, more was needed. "To have a rally we need to see oil prices going up, or a significant improvement in the geopolitical backdrop," said Sebastien Barbe, head of emerging market strategy at Credit Agricole. "It`s a difficult balancing act for the central bank between stabilizing the economy and avoiding recession. When your economy is barely growing, interest rates at 9.5% look very odd," he added. "This decision is purely negative for Russian economic growth prospects. However, the central bank hints that it might be a short-term tightening, until situation with ruble becomes better," said Oleg Kouzmin, economist at Renaissance Capital.
30.10.2014 12:17 Russian Defense Budget to Hit Record $81 Billion in 2015
Russia`s national defense budget for next year will reach a record 3.3 trillion rubles ($81 billion), or 4.2 percent of the country`s GDP, the head of the State Duma`s defense committee, Admiral Vladimir Komoyedov, was quoted as saying by the Interfax news agency. The 2015 budget represents an 812 billion ruble ($20 billion) increase over this year, and portends a larger defense budget over the next several years. Russia`s GDP this year is forecast at just over $2 trillion, according to the World Bank, and Russia`s Finance Ministry expects it to grow by a mere 1 percent in 2015, state news agency TASS reported. According to Komoyedov, the Duma plans to spend 3.1 trillion rubles ($76 billion), or 3.7 percent of GDP, on defense in 2016 and 3.23 trillion ($79 billion), or 3.6 percent of GDP, in 2017. "These parameters are significantly higher than in 2014, when the proportion of GDP was 3.4 percent," Komoyedov was quoted as saying by Interfax. Last year, defense expenditures made up 3.2 percent of GDP, and were a mere 3 percent in 2012. With the exception of the United States, which spent 3.8 percent of its GDP on defense in 2013, most of the world`s countries spend less than 3 percent of their GDP on their militaries, according to World Bank data. In general, U.S. defense expenditures measured in percentage of GDP have been falling sine 2010, when spending reached 4.7 percent of GDP. However, World Bank data paints an even more drastic picture of Russia`s recent defense spending than Komoyedov did. Last year the World Bank said Russia`s defense budget was already 4.2 percent of its GDP.
27.10.2014 17:42 Financial Times: new G7, including Russia, emerges
The International Monetary Fund released its latest World Economic Outlook. A striking new finding emerges: the seven largest emerging markets are now bigger, in gross domestic product terms, than the long established G7 group of industrialized nations, when measured at purchasing power parity (PPP), the British daily said. A hypothetical new G7, comprising the BRICs Brazil, Russia, India and China and three of the so-called MINT economies Mexico, Indonesia and Turkey - has a combined GDP of $37.8 tn (at purchasing power parity) compared to $34,5 tn for the old G7 Canada, France, Germany, Italy, Japan, the UK and the US. The new attempts to measure GDP also confirm that, in PPP terms, China is now the world`s largest economy, overtaking the US (as revealed by the FT in April). At market exchange rates, the US economy is worth $17, 4 tn and the Chinese $10.4 tn. With an adjustment for relative prices, China`s economy moves up to first place, with a GDP of $17.6 tn. Russia is the sixth among the new top 10, ahead of France and the UK. "The new estimates point to a dramatically changed world: half of the twenty largest economies are now emerging markets and half are from the established rich world," the Financial Times said.
26.10.2014 12:44 Is Russia Heading for a New 1998 Crisis?
Not since the financial crisis of August 1998 has Russia faced the very real possibility of a currency crisis that could seriously threaten the fundamental stability of the country`s economic and political system. Though the ruble`s loss of 20 percent of its value this year falls well short of the 70 percent collapse in 1998 and is even lower — in relative terms — than the 30 percent decline experienced in 2008, there are key parallels between the 1998 crisis and the crisis developing in Russia today. Both Russia`s leaders and citizens would do well to remember the lessons of August 1998 as they face the coming storm. First, the country`s economic trajectory was put in a tailspin once again, with Russians` real wages falling to their lowest level in the post-Soviet era. Russia`s economy would recover only with the rebound in oil prices during the ensuing decade. There is no guarantee that Russia can count on such fortune today, and the full economic costs of Russia`s current confrontation with the West remain to be seen. However they tally, they will be steep. Second, the 1998 crisis was a watershed moment in Russia`s political development. The people of Russia, beaten down by years of economic trauma and failed reforms, were ready by 1998 for anyone but Yeltsin. Russians demanded anyone who could restore order and stability to Russia`s economic and political system; Russians demanded the anti-Yeltsin. August 1998 set the stage for the rise of Vladimir Putin, the anti-Yeltsin. Should the vicious cycle of economic crisis grip Russia once again, we can only imagine what kind of "anti-Putin" could rise from the ruins.
25.10.2014 15:53 Russia`s Economy Stalls Amid Western Sanctions, Oil Price Drop
Russia`s economy - battered by Western sanctions and falling prices for oil, its main export - stalled in September even as inflation hit the highest levels in months, data showed. The outlook appears dim, because officials said the surge in inflation is likely to force the central bank to further increase interest rates in the coming months. The inflation was fueled in part by Moscow`s move in August to ban food imports from Western countries that had imposed sanctions on Russia. The ruble, meanwhile, has slipped to record lows against the dollar and euro in recent weeks amid concerns about geopolitical tensions and falling oil prices. The currency drop has also contributed to inflation by boosting prices for imported goods. The State Statistics Service reported that consumer price inflation reached an annual rate of 8.3% in the third week of October, the highest level this year, driven by a rise in food prices. The central bank has intervened heavily this month to slow the ruble`s slide. The Finance Ministry announced it would soon begin offering foreign-currency deposits to banks in an effort to ease a shortage of dollars and euros on the market. Economy Minister Alexei Ulyukaev said GDP growth in the first nine months of this year was 0.7%, unchanged from the rate reported for the first eight months of the year, Russian news agencies reported Wednesday. That result would keep Russia`s economy on track for its weakest performance since the recession of 2009. Though Mr. Ulyukaev didn`t provide monthly figures, the latest result suggests that the economy stagnated or even contracted in September from the month before. In September 2013, GDP contracted 0.1% from the previous month. The government`s forecast calls for growth of 0.5% this year, down from 1.3% in 2013, but many economists expect the 2014 result to be weaker.
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