Macroeconomic News

09.12.2014 14:41 Ukraine`s economy: Worse to come Nina Kulikova hid in her bathtub and cried when the war neared her home this summer in Sloviansk, a city in eastern Ukraine. A shell hit a neighbouring stairwell, shattering her windows and punching a crater in the middle of her apartment block. No one has come to rebuild 4 Bulvarnaya Street. Ms Kulikova has nowhere to go. Meanwhile, the prices of food, medicine and utilities have all spiked. Her husband collects bottles and cartons for recycling to make ends meet. A year of revolution and war has taken a grim toll on Ukraine`s economy. GDP could fall by 10% this year. The currency, the hryvnia, has plunged nearly 50% against the dollar in 2014. Inflation has hit 19%; at the beginning of the year, prices were stable. The central bank raised rates this week, for the third time this year, to 14%. Consumer spending rose by 5% in the second quarter compared to the year before, but that probably reflects panic buying; it is likely to slump soon too. In April the IMF co-ordinated a bail-out to which it pledged to contribute $17 billion over two years.

A coalition of Western countries provided smaller amounts. So far about $7 billion has been dispersed. But Ukraine needs more than temporary financing, and the conditions attached may be exacerbating its woes. 02.12.2014 23:08 Russia Sees Economy in Recession Next Year Russia`s Economy Ministry warned that the country will slip into recession next year and the ruble will remain weak, in the government`s strongest admission yet of the depth of the damage wrought by the drop in oil prices and Western sanctions. While many private and foreign economists have been warning of a contraction for weeks, the government had stuck to its forecasts that Russia would eke out slow growth next year. However, the sharp drop in oil prices - which knocked the ruble to a record low of 54 rubles to the dollar on Tuesday - has dashed remaining hopes. The Economy Ministry said it sees the economy shrinking by 0.8% in 2015 compared with earlier expectations for recovery in economic growth to 1.2% from around 0.5% this year.

A month ago, the central bank called for zero growth next year. A contraction in GDP next year would be the first time the Russian economy has shrunk since 2009. The Economy Ministry lowered an average 2015 oil price forecast to $80 per barrel from $100 per barrel. Such a revision is expected to keep an average ruble rate in 2015 at 49 per dollar compared with earlier expectation of 37.7. The real effective ruble rate is expected to weaken by 13.5% next year.

The Finance Ministry said that the Economy Ministry is exaggerating downside risks to the ruble. Finance Minister Anton Siluanov said the dollar would be trading below 45 rubles next year if oil prices average $80 per barrel. 30.11.2014 00:25 Ruble hits fresh lows against dollar after OPEC decision The Russian ruble dropped to a new all-time low against the U. S. dollar on Friday while other oil-related currencies also got crushed a day after the Organization of the Petroleum Exporting Countries did nothing to alleviate an oil glut. Russia`s currency USDRUB, +2.30% on Friday traded at 49.965 against the greenback, its weakest level ever. The dollar bought 48.795 rubles late Thursday. The ruble`s fresh descent came as the U. S. dollar enjoyed another round of broad gains against currencies from oil-producing countries including Norway and Canada. Oil futures plunged, with the January Nymex contract CLF5, -10.45% dropping more than 10% to end at $66.15 a barrel. 22.11.2014 18:50 Russia`s economy minister sees inflation rising above 9 percent Russian inflation will exceed forecasts to reach 9 percent by year end and rise further in early 2015 because of the rouble`s weakness, Economy Minister Alexei Ulyukayev told radio Ekho Moskvy. The rouble has weakened some 30 percent versus the dollar this year, as Western sanctions over the Ukraine crisis have made it harder for banks and companies to refinance foreign currency debts and as tumbling oil prices have hurt government revenue.

"Inflation for 2014 would be much higher than any forecasts, that`s because it depends on (rouble) devaluation," Ulyukayev said. Last week, the Russian central bank increased its inflation forecast for this year to 8.2-8.4 percent from 7.5 percent. For 2015, it saw inflation abating to 6.2-6.4 percent -- still higher than previous 4.5-5.0 percent estimates. "By the end of the first quarter (of 2015) inflation will stand by around 3.5 (percentage points) higher than we expected. And we expected it at 6 percent... By the end of this year it will reach 9 percent," the minister said. 20.11.2014 13:30 Five reasons Russia may face worse times Things in Russia are going from bad to worse.

A double whammy of falling oil prices and sanctions imposed over Ukraine has led to rampant inflation, a plunging currency, a stagnant economy and a loss of confidence among foreign investors. The Russian central bank said it expected no growth in 2015, and little improvement the following year, confirming what many economists and external officials have been saying for months. Here are five reasons the country could face even tougher times: 1. Banks squeezed. 2. Budget hole. 3. Sanctions. 4. Inflation. 5. Putin in denial.

17.11.2014 19:13 The collapse of Ukraine`s economy The economy of Ukraine is a mess. By year`s end it will have shrunk by 10%. The east of the country, where the conflict with pro-Russian separatists has raged, has seen billions of dollars` worth of damage. Also Ukrainian commerce is throttled by Russian sanctions and cutting off gas supplies. The West, despite big promises of help, has been woeful in its response.

Unless there is a change of course soon, Ukraine`s economy could collapse. The West`s main tool for helping Ukraine has been the International Monetary Fund (IMF). In April the fund agreed to lend Kiev $17 billion over two years, in return for an austere budget and reforms to curb corruption. Other donors pledged smaller amounts. This money, $27 billion in total, was deemed enough to avoid default and boost growth. So far Ukraine has received about $7 billion, enough to stave off an immediate debt crisis, but not enough to rebuild an economy that has been hit far harder than anyone expected six months ago. The decline in GDP is twice as big as the IMF forecast in April. Consumers face ever higher fuel bills, private capital is fleeing and the currency is plunging. The hryvnia, which hit a new nadir of 16 to the dollar this week, has lost half its value this year. Back in August the IMF calculated that under an "adverse scenario", Ukraine would need an extra $19 billion of funds in 2015.

It is already worse than that. 16.11.2014 15:55 Russian GDP Growth Slows Less Than Forecast on Harvest Russia`s economy slowed less than forecast by analysts in the third quarter as an improved harvest cushioned the impact of tumbling oil prices and U. S. and European sanctions over the crisis in Ukraine. Gross domestic product grew 0.7 percent from a year earlier after expanding 0.8 percent in the previous three months, the Federal Statistics Service in Moscow said, citing a preliminary estimate. That was above the median forecast for 0.3 percent by 21 analysts in a Bloomberg survey. The economy of the world`s biggest energy exporter decelerated for a third quarter, deepening its worst slowdown since a 2009 contraction. The Bank of Russia said this week that growth may be zero next year as the economy succumbs to sanctions imposed over Ukraine, while the plummeting ruble stokes inflation and lower oil prices erode export revenue.

President Vladimir Putin said last month that Russia may reap a record grain harvest this year. The crop may have bolstered the GDP figure for the third quarter, which was also helped by industrial output, according to Evgeny Nadorshin, chief economist at AFK Sistema. In September, agricultural production jumped more than 17 percent on an annual basis, according to UralSib Capital. 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 [2014], 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.