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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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Wednesday, 13 August 14
WEEKLY MARKET INSIGHT - KONSTANTINOS KONTOMICHIS SNP BROKER
Being at the peak of the holiday season, August is, as usual, the quietest month in terms of snp transactions, yet it is also a time very critical ...
Wednesday, 13 August 14
WHAT DOES PROJECT CARGO REALLY MEAN TO INSURERS?
KNOWLEDGE TO ELEVATE
Richard Kamppari-Baker, claims manager of FP Marine Risks, explains the challenges of project cargo risk assessment from ...
Wednesday, 13 August 14
INDONESIAN COAL PRICE REFERENCE FALL AGAIN CLOSE TO 57 MONTHS LOWS
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia revised down the coal bench mark price in August. HBA for the month of A ...
Monday, 11 August 14
LARGEST CHINESE TRADE SURPLUS EVER RECORDED IN JULY - BIMCO
China recorded a trade surplus of USD 47.3 billion in July 2014. The record high surplus came on the back of very strong export growth while import ...
Monday, 11 August 14
INDONESIAN THERMAL COAL SWAPS SEEING SOME POSITIVE TREND
COALspot.com: Indonesian coal swaps for average September 2014 increased US$ 0.20 (+0.36%) day on day and US$ 1.30 (+2.41%) per mt week on week. Th ...
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- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- Vizag Seaport Private Limited - India
- Simpson Spence & Young - Indonesia
- Makarim & Taira - Indonesia
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- Mjunction Services Limited - India
- OPG Power Generation Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Georgia Ports Authority, United States
- London Commodity Brokers - England
- Xindia Steels Limited - India
- The State Trading Corporation of India Ltd
- Petron Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- Aboitiz Power Corporation - Philippines
- Central Java Power - Indonesia
- Star Paper Mills Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- Chettinad Cement Corporation Ltd - India
- Samtan Co., Ltd - South Korea
- Bharathi Cement Corporation - India
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Banpu Public Company Limited - Thailand
- Cigading International Bulk Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- New Zealand Coal & Carbon
- Commonwealth Bank - Australia
- Medco Energi Mining Internasional
- ASAPP Information Group - India
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Mintek Dendrill Indonesia
- Vedanta Resources Plc - India
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kumho Petrochemical, South Korea
- Standard Chartered Bank - UAE
- San Jose City I Power Corp, Philippines
- Mercator Lines Limited - India
- Indian Energy Exchange, India
- Goldman Sachs - Singapore
- Aditya Birla Group - India
- SN Aboitiz Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Power Finance Corporation Ltd., India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Madhucon Powers Ltd - India
- Karaikal Port Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Ministry of Mines - Canada
- Energy Development Corp, Philippines
- Sojitz Corporation - Japan
- Singapore Mercantile Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- Antam Resourcindo - Indonesia
- Wilmar Investment Holdings
- Binh Thuan Hamico - Vietnam
- ICICI Bank Limited - India
- Indogreen Group - Indonesia
- Bulk Trading Sa - Switzerland
- Jorong Barutama Greston.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kapuas Tunggal Persada - Indonesia
- CIMB Investment Bank - Malaysia
- Metalloyd Limited - United Kingdom
- Riau Bara Harum - Indonesia
- Essar Steel Hazira Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- South Luzon Thermal Energy Corporation
- Parliament of New Zealand
- Australian Coal Association
- Kartika Selabumi Mining - Indonesia
- Ambuja Cements Ltd - India
- Indika Energy - Indonesia
- Global Business Power Corporation, Philippines
- Siam City Cement - Thailand
- Meenaskhi Energy Private Limited - India
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- Manunggal Multi Energi - Indonesia
- Bhushan Steel Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Kobexindo Tractors - Indoneisa
- Carbofer General Trading SA - India
- Videocon Industries ltd - India
- Baramulti Group, Indonesia
- McConnell Dowell - Australia
- Merrill Lynch Commodities Europe
- Edison Trading Spa - Italy
- Sarangani Energy Corporation, Philippines
- Chamber of Mines of South Africa
- Eastern Energy - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Globalindo Alam Lestari - Indonesia
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Coalindo Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- Pendopo Energi Batubara - Indonesia
- PNOC Exploration Corporation - Philippines
- Thai Mozambique Logistica
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- PTC India Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Sindya Power Generating Company Private Ltd
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- Economic Council, Georgia
- Maheswari Brothers Coal Limited - India
- Miang Besar Coal Terminal - Indonesia
- Wood Mackenzie - Singapore
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- Independent Power Producers Association of India
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Mercuria Energy - Indonesia
- Marubeni Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
- Bangladesh Power Developement Board
- Grasim Industreis Ltd - India
- Salva Resources Pvt Ltd - India
- White Energy Company Limited
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Savvy Resources Ltd - HongKong
- Eastern Coal Council - USA
- Siam City Cement PLC, Thailand
- CNBM International Corporation - China
- Intertek Mineral Services - Indonesia
- Interocean Group of Companies - India
- Indonesian Coal Mining Association
- Planning Commission, India
- Ministry of Transport, Egypt
- Australian Commodity Traders Exchange
- International Coal Ventures Pvt Ltd - India
- Sakthi Sugars Limited - India
- Posco Energy - South Korea
- GAC Shipping (India) Pvt Ltd
- Latin American Coal - Colombia
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Coal and Oil Company - UAE
- Cement Manufacturers Association - India
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- MS Steel International - UAE
- Electricity Generating Authority of Thailand
- Barasentosa Lestari - Indonesia
- Africa Commodities Group - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- GN Power Mariveles Coal Plant, Philippines
- Oldendorff Carriers - Singapore
- PowerSource Philippines DevCo
- Sical Logistics Limited - India
- VISA Power Limited - India
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- TeaM Sual Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Global Green Power PLC Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Electricity Authority, New Zealand
- Central Electricity Authority - India
- Krishnapatnam Port Company Ltd. - India
- Bukit Makmur.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- Meralco Power Generation, Philippines
- Gujarat Sidhee Cement - India
- Trasteel International SA, Italy
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