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Wednesday, 01 October 14
FITCH: GLOBAL ECONOMY FACES MULTI-SPEED RECOVERY, MULTIPLE RISKS
 Fitch Ratings says in its latest Global Economic Outlook (GEO) that global growth will pick up in 2015 and 2016, but risks are weighted to the downside. The contribution of major advanced economies (MAEs) to global expansion will gradually increase, while growth will remain subdued in emerging markets (EMs) after the cyclical trough this year. Fitch’s latest forecasts for world GDP growth (weighted at market exchange rates) are 2.6% in 2014, accelerating to 3% in 2015 and 3.1% 2016.
The 2014 and 2015 forecasts are both 0.1pp lower than in the June GEO. The downward revisions, similar to previous quarters, are mainly due to emerging markets. For the US economy Fitch maintains its forecast of robust GDP growth of 3.1% in 2015 and 3% in 2016, up from 2.2% in 2014. The economy rebounded strongly in 2Q14 after a temporary setback in 1Q14. Private consumption growth is underpinned by improving household income, wealth and confidence.
Investment should be supported by high corporate cash piles and profitability, low financing costs, rising confidence and capacity utilisation. Monetary policy remains highly accommodative and the drag from fiscal consolidation is significantly smaller than it was in 2013. We forecast eurozone GDP growth of 0.9% in 2014, followed by 1.3% in 2015 and 1.5% in 2016, slightly weaker than in the June GEO. Output stagnated in 2Q14 following four quarters of insipid growth, due primarily to a sharp slowdown in Germany.
Over the forecast horizon growth will be supported by the US and UK recoveries, euro depreciation, ECB policy loosening and an easing in the pace of fiscal consolidation. However, faltering recent outturns suggest deleveraging and structural constraints remain formidable headwinds, eroding potential benefits from improving external conditions or policy stimulus. High unemployment will persist and remain above 11% until 2016. Fitch’s base case is for eurozone inflation to be low at 0.5% in 2014, 1% in 2015 and 1.3% in 2016, but for protracted deflation to be avoided. However, current low inflation, weak demand, a decline in market inflation expectations, policy challenges and the potential for self-reinforcing dynamics make deflation a meaningful and rising risk.
We forecast EM growth to slow sharply from 4.7% in 2013 to 4% in 2014, before recovering somewhat in 2015-16. Looming US monetary policy tightening, geo-political tensions and lower commodity prices pose downside risks. Brazil is now in recession and Russia close to it. Fitch expects both to see only a subdued recovery in 2015 and 2016, underperforming most MAEs over the forecast period.
Fitch expects China’s GDP growth to moderate to 7.2% in 2014, 6.8% in 2015 and 6.5% in 2016 as it gradually rebalances while seeking to contain leverage. India will be the only BRIC country where growth picks up in 2014 to 5.6% and accelerates further to 6.5% in 2015 and 2016, owing to an expected improvement in the business environment.
The underlying momentum of the Japanese economy is uncertain after sharper-than-expected contraction in 2Q14. We have revised down GDP growth to 1.4% in 2014, from 1.6% previously, and are maintaining our forecast of 1.3% for 2015 and 2016. Higher wage growth is central to Japan’s prospects of achieving sustainably higher real and nominal GDP growth. Growth in the UK has been strong and broad-based. Fitch is maintaining its forecast that growth will slow from 3% in 2014 to 2.5% in 2015 and 2.3% in 2016, as it moves to its medium-term potential rate of 2%-2.25%.
The base case is that nominal wage growth will pick up as the labour market slack is absorbed and the currently weak productivity growth will improve, in line with previous cyclical recoveries. The coming quarters will see increasing divergence of monetary conditions in MAEs after six years of synchronised, ultra-loose monetary stance.
Fitch expects the Fed and Bank of England to start gradually tightening policy over the next few quarters. Meanwhile, the ECB announced further easing measures at its September meeting and the Bank of Japan is continuing with its qualitative and quantitative easing strategy. The ECB and Bank of Japan are likely to keep interest rates unchanged until at least 2016. This GEO edition’s alternative scenario explores the global impact of a US interest rate shock. In this scenario the Federal Funds rate increases to 5% and the ten-year US yield reaches 6% by end-2016, triggered by an initial inflation shock as the economy runs out of spare capacity much sooner than policy makers and the markets currently expect.
Furthermore volatility spikes in global financial markets and leads to a 150 bps increase in global risk premium. Growth slows sharply in the US from mid-2015 and the economy stagnates in 2016. According to the simulation results the impact on MAEs is limited and stems mainly from lower US demand. Nevertheless the shock raises the risk of a new recession in the eurozone as the baseline recovery is so weak. In many EMs, central banks tighten monetary conditions due to the higher risk premium and inflation, despite the economic slowdown. Russia and Brazil would remain close to recession in 2015 and 2016, while India would slow sharply and China would be the least affected among the BRICs.
Source: Fitch Ratings
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Friday, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
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Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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- Planning Commission, India
- Salva Resources Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Bhatia International Limited - India
- The State Trading Corporation of India Ltd
- Australian Commodity Traders Exchange
- Gujarat Mineral Development Corp Ltd - India
- Parry Sugars Refinery, India
- Aboitiz Power Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Siam City Cement - Thailand
- Posco Energy - South Korea
- Madhucon Powers Ltd - India
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- Chettinad Cement Corporation Ltd - India
- Oldendorff Carriers - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Generating Authority of Thailand
- Xindia Steels Limited - India
- Agrawal Coal Company - India
- Coal and Oil Company - UAE
- Holcim Trading Pte Ltd - Singapore
- Latin American Coal - Colombia
- Videocon Industries ltd - India
- Metalloyd Limited - United Kingdom
- Bharathi Cement Corporation - India
- Kapuas Tunggal Persada - Indonesia
- Dalmia Cement Bharat India
- Cement Manufacturers Association - India
- Sojitz Corporation - Japan
- IHS Mccloskey Coal Group - USA
- Bangladesh Power Developement Board
- Savvy Resources Ltd - HongKong
- Coastal Gujarat Power Limited - India
- Toyota Tsusho Corporation, Japan
- Wilmar Investment Holdings
- Jindal Steel & Power Ltd - India
- Formosa Plastics Group - Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- Parliament of New Zealand
- Edison Trading Spa - Italy
- Vijayanagar Sugar Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Energy Link Ltd, New Zealand
- Binh Thuan Hamico - Vietnam
- Trasteel International SA, Italy
- Carbofer General Trading SA - India
- Singapore Mercantile Exchange
- Indian Oil Corporation Limited
- Banpu Public Company Limited - Thailand
- Gujarat Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Minerals Council of Australia
- Petron Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Indonesian Coal Mining Association
- ASAPP Information Group - India
- Meralco Power Generation, Philippines
- Electricity Authority, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Tata Chemicals Ltd - India
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- SMG Consultants - Indonesia
- Port Waratah Coal Services - Australia
- Pipit Mutiara Jaya. PT, Indonesia
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- Semirara Mining Corp, Philippines
- Lanco Infratech Ltd - India
- Central Electricity Authority - India
- Mercator Lines Limited - India
- Heidelberg Cement - Germany
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- The Treasury - Australian Government
- Kideco Jaya Agung - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Orica Mining Services - Indonesia
- European Bulk Services B.V. - Netherlands
- Renaissance Capital - South Africa
- Riau Bara Harum - Indonesia
- Medco Energi Mining Internasional
- Deloitte Consulting - India
- Kalimantan Lumbung Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Ministry of Finance - Indonesia
- Australian Coal Association
- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- Sindya Power Generating Company Private Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- SMC Global Power, Philippines
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- Petrochimia International Co. Ltd.- Taiwan
- Therma Luzon, Inc, Philippines
- Kobexindo Tractors - Indoneisa
- CNBM International Corporation - China
- Karaikal Port Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Power Finance Corporation Ltd., India
- McConnell Dowell - Australia
- Mercuria Energy - Indonesia
- Grasim Industreis Ltd - India
- White Energy Company Limited
- Mjunction Services Limited - India
- Pendopo Energi Batubara - Indonesia
- Manunggal Multi Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- India Bulls Power Limited - India
- Tamil Nadu electricity Board
- Miang Besar Coal Terminal - Indonesia
- Anglo American - United Kingdom
- Neyveli Lignite Corporation Ltd, - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jaiprakash Power Ventures ltd
- Thiess Contractors Indonesia
- Georgia Ports Authority, United States
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- Ministry of Mines - Canada
- LBH Netherlands Bv - Netherlands
- Indian Energy Exchange, India
- Maharashtra Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- Thai Mozambique Logistica
- Merrill Lynch Commodities Europe
- Samtan Co., Ltd - South Korea
- Economic Council, Georgia
- Standard Chartered Bank - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Aditya Birla Group - India
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
- Makarim & Taira - Indonesia
- PNOC Exploration Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Intertek Mineral Services - Indonesia
- Straits Asia Resources Limited - Singapore
- Global Coal Blending Company Limited - Australia
- Asmin Koalindo Tuhup - Indonesia
- Indika Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Uttam Galva Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- Bukit Makmur.PT - Indonesia
- Eastern Energy - Thailand
- MS Steel International - UAE
- Sinarmas Energy and Mining - Indonesia
- Global Green Power PLC Corporation, Philippines
- Sical Logistics Limited - India
- Larsen & Toubro Limited - India
- Central Java Power - Indonesia
- Commonwealth Bank - Australia
- Bulk Trading Sa - Switzerland
- The University of Queensland
- OPG Power Generation Pvt Ltd - India
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement PLC, Thailand
- Meenaskhi Energy Private Limited - India
- Independent Power Producers Association of India
- Rashtriya Ispat Nigam Limited - India
- GAC Shipping (India) Pvt Ltd
- Baramulti Group, Indonesia
- Essar Steel Hazira Ltd - India
- Attock Cement Pakistan Limited
- TeaM Sual Corporation - Philippines
- Vedanta Resources Plc - India
- Sree Jayajothi Cements Limited - India
- Global Business Power Corporation, Philippines
- Ministry of Transport, Egypt
- Bukit Baiduri Energy - Indonesia
- Altura Mining Limited, Indonesia
- PowerSource Philippines DevCo
- Indogreen Group - Indonesia
- Kartika Selabumi Mining - Indonesia
- London Commodity Brokers - England
- Antam Resourcindo - Indonesia
- Rio Tinto Coal - Australia
- CIMB Investment Bank - Malaysia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Goldman Sachs - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Star Paper Mills Limited - India
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- SN Aboitiz Power Inc, Philippines
- VISA Power Limited - India
- San Jose City I Power Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- New Zealand Coal & Carbon
- Kohat Cement Company Ltd. - Pakistan
- Romanian Commodities Exchange
- Borneo Indobara - Indonesia
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