bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Saturday 27.05.2017 | Name days: Loreta, Dzidra, Gunita, Dzidris

Economist: this year’s global economic growth will remain weak

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU«In parallel to reduction of growth predictions, certain risk factors have lost their strength since the beginning of the year. For example, oil prices and the stock market have recovered since the previous decline. Central banks have either become more stimulating or have put off the normalization of their policy,» – comments SEB Bank macroeconomic expert Dainis Gaspuitis.

According to him, concerns about China have reduced slightly as well. Nevertheless, global economic growth will remain anaemic and weak. GDP growth in 35 OECD member states will likely reach 1.9%, which is lower in comparison with last year (2.1%). GDP growth may reach 2.3% in 2017. Downward pointing risks dominate the near future perspective even though they have somewhat reduced. Political risks in USA (presidential elections) and the European Union (Brexit and Greek debt), as well as elections in Spain, France and Germany, China’s economic situation, global debt level, as well as limited economic policy manoeuvring options are factors that create serious concerns in the long-term perspective.

«Lengthy stagnation, which provides for slow growth, low interest rates and inflation, is becoming more expressed. The leaning towards savings and investments is becoming more expressed in the world, which puts pressure on actual interest rates. The interest rate situation is more likely to adapt to the situation, rather than create it. The role of fiscal policy will likely grow, because the potential of monetary policy tools continues to deplete and the effect continues to become weaker. The question is whether or not political leaders will be able to take the initiative. Market economy’s dependence on political decisions has increased over the years of lasting financial and economic deregulation. The influence of central banks on loan accessibility has sharply increased, which means clear risks for ineffective division of resources. The established monetary policy has only contributed to the increase of inequality. The negative interest rate policy is taking on a political dimension because it is being interpreted as a secret welfare tax. Borders between central banks and politics have become more conditional, which raises the question about the independence of central banks,» – explains Gaspuitis.

Japan, Germany, the United Kingdom and Sweden to some extent are countries whose restrictions on the labour market have not been beneficial for wage rise lately. Politicians and central banks of many countries have announced that it would best to secure a more rapid increase of wages. Minimum wage rise in USA and the UK, for example, is a sign of loss of trust in the market’s ability to create balance. Looking ahead, it should be said that there are still signs that the US labour market could soon begin increasing wages more actively. Inflation is expected to remain low because of the growing competition between globalization and digitization processes and forming surplus of production output. The price of Brent crude oil could rise to USD 45-50 within the next two years, which will help reduce deflation risks. Inflation has not gone anywhere. It remains hard for central banks to reach their inflation goals. In spite of concerns about the effectiveness of the monetary policy, multiple central banks will continue their stimulating programmes. Due to the expressed low inflation in Eurozone and Japan, the European Central Bank maintains the possibility of expanding asset procurement volumes. Japan’s Central Bank retains the possibility of reducing its main interest rate from the current -0.10% to -0.30%, the expert says.

«The slowdown of China’s growth remains within the acceptable range, allowing the country to avoid a rough landing. Beijing’s use of fiscal and monetary policy softens production output and housing surplus, as well as the negative influence of state and private companies’ debt level. China’s domestic economy has a good potential of becoming the main economic engine in the future. GDP growth is expected to reach 6.5% in 2016 and 6.3% in 2017. Economic development in other BRIC countries will be varied. Although India will grow by 7.5%, Russia and Brazil will remain in recession due to structural problems, low oil price and political problems. Decline of USA’s economic growth does not reflect any fundamental difficulties. Households can expect further improvements of the economic situation related to the labour market, income and welfare. In addition to slightly higher oil prices, the situation will stabilize somewhat in industry. Economic growth will recover in the second half of the year. With that, USA’s growth will reach only 1.9% in 2016 and 2.5% in 2017,» – adds the economist.

«Eurozone’s economic accomplishment has been relatively stable as of late. In 2016, Eurozone’s economy returned to the GDP level that was noted before the Lehman Brothers collapse in 2008. Eurozone has the potential to grow above its potential, which is 1%. As a result, Eurozone’s GDP will grow 1.7% in 2016 and 1.8% in 2017. But Eurozone is a monetary union with imbalanced growth and major problems of political nature. Germany is facing growing criticisms from the International Monetary Fund, USA and even other Eurozone member states for its surplus of EUR 290 billion (8% of GDP) and too cautious economic policy. The banking sector, especially in South Europe, is pressured with excessive debt level, unsafe loans and low interest rates. All this delays growth. Populism is on a rise in multiple countries, which only increases tension,» – said Gaspuitis.

Estonia’s, Latvia’s and Lithuania’s perspectives are good. Nevertheless, risks remain. Private consumption is an important factor for economic growth. It only benefits from a powerful labour market. The expected wage rise will provide higher purchasing power to households. Unfortunately, wage rise also threatens competitiveness. Inflation will remain low. Finances of the public sector remain balanced, which provides governments a degree of freedom for situations of economic decline. GDP growth in Latvia is expected to be 2.7% in 2016 and 3.5% in 2017. Lithuania and Estonia are expected to grow 2.8% and 2% this year and 3.2% and 2.4% the next, according to the bank’s expert.

Ref: 102.109.109.7952


Leave a reply

Municipal elections 2017: what do people say?

With municipal elections gradually coming close, BNN offers a compilation of opinions provided by experts from different industries. Short answers consist of thoughts about specific municipalities that affect respondents directly, and municipal administrations in general – what people expect from officials and what changes they expect from elections.

Trade of natural gas to legal clients in Latvia commences

Trade of natural gas to legal clients in Latvia has commenced. Latvenergo’s Elektrum product offers fixed-price contracts for 12-month supply period. The first gas supply contracts have been signed with clients in Latvia, the company reports.

Murniece: the biggest strength of Latvia’s parliament is public involvement

The biggest strength of Latvia’s parliament is the involvement of the public in resolution efforts of matters associated with child and women’s rights, the rights of disabled people, as well as security, tax policy and the European Union, says Saeima speaker Inara Murniece.

Corruption on decline in Lithuania, yet still remains troublesome

To wrap up the findings of a new corruption research ordered by the Special Investigation Service, an institution dealing with financial crimes in Lithuania, the situation is largely improving, yet not as fast as the service wishes.

Ventspils signs agreement with Chinese-Belarusian industrial park Great Stone

Vetnspils Freeport Authority and Ventspils High Technology Park signed an agreement yesterday with Chinese-Belarusian industrial park Great Stone, which is the largest infrastructure development project in Belarus, as reported by the freeport’s representatives.

Resignation filed by arrested Tallinn Deputy Mayor

The Deputy Mayor of the Estonian capital has stepped down from office after being arrested as part of a criminal case into violations of procedural restrictions of Tallinn procurement tenders.

Residents: situation in Latvia is developing in a wrong manner

54% of residents believe the situation in Latvia is currently developing in a wrong manner. A similar situation is noted in relation to the evaluation of the government’s work. 75% of respondents are critical about the government’s work. Only 17% of respondents are positive about the government’s work, according to results of Baltic International Bank Latvian Barometer.

Finance Minister: we have to be ready for flexibility in the reform plan

Currently we have to progress forward with the intended tax reform and prepare for a degree of flexibility, says Latvian Finance Minister Dana Reizniece-Ozola.

Zarins: unlike healthcare workers, Latvia’s roads are crumbling silently

Saeima deputy Ivars Zarins has submitted a proposal that offers restoring State Roads Fund and providing it with funding of 80% of excise tax for oil products. It is also proposed to divert income from vehicle operation tax and road use fee.

Price of oil slides 5%, though exporters decide to uphold production restrictions

Oil price has dropped by around five percent, even though oil-exporting countries have decided to maintain production limits until spring 2018.

Experts: role of free trade agreements to increase – especially with Asia

Latvian businessmen are already sufficiently active in several Asian markets. Their experience shows – these markets have great potential, according to representatives of the European Parliament’s Information Bureau.

Trump steps up pressure on NATO’s «indebted»

All NATO member states should pay their fair share of military expenses, has stated U.S. President Donald Trump in a meeting of NATO member states in Brussels.

Sunday expected to be summer-like hot in Latvia

This Sunday is expected to be summer-like hot, whereas the week after will be cold and rainy, as reported by Environment, Geology and Meteorology Centre.

Pensioner guide: old people are isolated from society in Latvia

«In my experience with social care, I was surprised by the dominating belief that the only thing old people need is elementary care – some food, a wash and a walk outside. Psychology of old people is something completely alien to people in Latvia,» says initiator of Pensioners Guide in Latvia Nelli Skadina.

SEB: reimbursements paid to nearly 340 loan clients over the past five years

In five years since the signing of the first loan payment insurance contract, reimbursements have been paid to nearly 240 SEB Bank clients who took loans and experienced unexpected difficulties after.

Number of tourists to Riga up 7% in 2017

In the first three months of 2017, a total of 263.5 thousand people were serviced in Riga’s hotels and tourist accommodations. 221.3 thousand of those tourists were foreign guests. Compared with the same period of last year, the number of tourists has grown 7%.

Estonian capital’s Deputy Mayor arrested over waste management dealings

The Deputy Mayor of Tallinn, Arvo Sarapuu, accused of deliberately violating procedural restrictions an especially large scale as part of a criminal case, has been arrested by the Estonian Internal Security Service.

Saeima ratifies convention on restriction for the use of mercury

On Thursday, 25 May, Latvia’s Saeima ratified Minamata Convention on Mercury. The objective of the convention is protecting people and the environment against anthropogenic emissions and leaks of mercury.

Europe experienced foreign investment records last year

Last year, Europe attracted a record large volume of foreign investments with 5,845 new direct investment projects, which is 15% more than the year before, according to results of EY European Attractiveness Survey.

Electric car charging network expands in Latvia to promote «greener thinking»

The once long-away dream of having cars that run on alternative fuel is now a reality – a special infrastructure network keeps expanding in Latvia to make electric cars more popular, says Motors Latvia BMW Group manager Ivars Norvelis.

Estonian Minister steps down after questioning NATO membership

Estonian Minister of Public Affairs Mihhail Korb has stated he resigns from office after saying he is not in favour of NATO membership.

Construction of a fish freezer commences at Ventspils Freeport

Construction work has commenced in Ventspils industrial territory on Talsu Street 200. Latvian National Fisheries Producers' Organisation plans to build a fish freezer facility there, as reported by Ventspils Freeport.

EC: there is a risk tax reform will increase inequality

There is a risk that Latvian government’s proposed tax reform will increase income inequality in the country instead of lowering it, said head of European Commission’s office in Latvia Inna Steinbuka.

Electronic monitoring of convicts will help have nearly EUR 500,000 for Latvia

Latvian State Probation Service believes electronic monitoring of convicts proved itself. This system has helped save nearly EUR 500,000 for the state budget since 2015.

Grandson of Stalin, who dropped Soviet tyrant’s surname, has died

Russian theatre director Alexander Burdonsky, the grandson of the leader of Soviet Communist mass repressions, Josef Stalin, has died at the age of 75.