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Showing posts from February, 2019

Euro Zone Economics

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Flash estimates revealed that the Eurozone economy remained stuck in a low gear in the fourth quarter. Growth was unchanged from Q3’s pace, which had marked the slowest expansion in over four years. While a detailed breakdown of the drivers is not yet available, soft domestic dynamics likely hobbled the economy amid a downturn in the industrial sector and deteriorating confidence. Available data for this year tells a similar story. Economic sentiment dropped to an over two-year low in January, and the manufacturing PMI fell into contractionary territory in February for the first time since June 2013. A high degree of uncertainty also continues to plague the growth environment. A confidential report by the U.S. Commerce Department released in February is expected to have cleared the way for President Donald Trump to levy tariffs on EU automobiles if a favorable trade agreement is not struck. Meanwhile, the Brexit deadline inches ever closer without a clear plan for the UK’s exit. • A …

Global Economics Update

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REAL SECTOR | Global economic growth moderates in Q4 as uncertainty heightens Global economic growth continued to cool in the fourth quarter of 2018, with aggregated growth hitting the lowest mark in two years. The global economy expanded 3.0% in the fourth quarter over the same period in the previous year according to an estimate produced by FocusEconomics. The print was a notch below the 3.1% expansion forecast in the previous month and Q3’s 3.1% increase. Looking at the economic performance of G7 economies, Q4’s slowdown was mostly led by a sharp deceleration in the Euroarea, which expanded at the weakest pace in over four years in annual terms. Although a detailed GDP breakdown is still missing for the common-bloc, available data suggests that a downturn in the industrial sector and deteriorating economic confidence likely hit domestic demand, while a cooling global economy could have led to a deterioration in the external sector. In Japan, economic growth rebounded in seasonally…

U.S. Sanctions Set To Exacerbate Economic Issues In Crisis-stricken Venezuela

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Growth projected to regain some steam in Q4; crisis-stricken Venezuela groans under oil sanctions Latin America’s bumpy economic recovery is expected to have had a better quarter at the end of 2018, after growth slumped in the third quarter. FocusEconomics estimates that GDP increased 1.7% year-on-year in Q4, above Q3’s 1.5%. Despite the modest uptick, growth remains weak in the Latin American economy, which had a disappointing 2018 overall. Weaker global trade, a noisy election cycle, shifting sentiment for emerging-market assets and one-off shocks in major players caused the recovery to flounder last year. Preliminary data for Mexico revealed that growth lost steam in the fourth quarter. Plunging industrial activity on the back of contractions in the construction and mining sectors dented economic activity, while retail trade figures were more positive. Official GDP figures for the rest of the region’s economies are still outstanding, although FocusEconomics analysts estimate that …

Saudi Arabia: More Deterioration

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While the economy appears to have ended 2018 on a solid footing, prospects for this year are quickly deteriorating. This is predominantly the consequence of oil production cuts agreed in December among OPEC+ countries, which will drag on GDP growth this year. That said, the oil production caps have started to boost oil prices, which should shore up government revenues somewhat. Moreover, the economy remains constrained by the government’s Saudization policy, which intends to boost the number of jobs for Saudis in the private sector by imposing labor restrictions on foreigners. According to analysts, the amount of expat jobs in the country—especially in the retail sector—declined by around 1.5 million people in the 2017–2018 period; the unemployment rate among Saudis in the same period has nevertheless remained virtually unchanged, hovering around 13%.

Despite greater fiscal support, the economic recovery is likely to lose some steam this year as an uncertain global oil outlook, oil p…

Venezuela: Outlook Worsens

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Facing fierce criticism at home and abroad, President Nicolás Maduro was sworn in to serve a new six-year term on 10 January after being reelected in the May 2018 presidential election that was widely condemned as illegitimate. This comes against a dire economic backdrop as the economy remains in crisis with no end in sight. Oil prices slumped after hitting four-year highs in October, which, coupled with faltering oil production—down nearly a third from January 2018 to 1.1 million bpd in November 2018 according to secondary sources—have undoubtedly put a strain on crucial export earnings and government revenues. On a brighter note, in a bid to revamp output, two major oil deals between the state-run oil firm, PDVSA, and U.S.-based Erepla and France’s Maurel & Prom were announced in early-January. Erepla is set to invest up to USD 500 million in three oilfields, while Maurel & Prom would invest USD 400 million for a 40% stake in the Petroregional del Lago joint venture.
The ne…