* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download 2. I D E nternational
Survey
Document related concepts
Washington Consensus wikipedia , lookup
Economic growth wikipedia , lookup
Currency war wikipedia , lookup
Currency War of 2009–11 wikipedia , lookup
Great Recession in Europe wikipedia , lookup
Monetary policy wikipedia , lookup
Interest rate wikipedia , lookup
International monetary systems wikipedia , lookup
Fear of floating wikipedia , lookup
Transition economy wikipedia , lookup
Transformation in economics wikipedia , lookup
Transcript
Central Bank of the Republic of Turkey 2. International Economic Developments The global economic slowdown that started in the first quarter of 2014 continued in the remainder of the year. Although this slowdown, which dominated the whole year, was driven by both advanced and emerging economies, the divergences of growth performances persisted across countries. Among advanced economies, the US economy continued to grow robustly whereas the EU remained weak in spite of a slight recovery in the final quarter. The ongoing recession in Japan put further downward pressure on global growth. On the emerging economies front, the slowdown persisted across key economies in the fourth quarter, with Russia nearing the zero mark for annual growth and most Eastern European economies tackling a sluggish economic activity amid weak EU demand and developments in Russia. Leading indicators for the first quarter of 2015 signal a very limited improvement for global economic activity. Having fallen since mid-2014, commodity prices dropped further in the first quarter of 2015, by 5 percent quarter-on-quarter. This decline was largely attributed to tumbling oil prices driven by recordhigh supplies, and partly to lower agricultural prices amid an inventory and production rise. Thus, inflation rates remained low across major advanced economies and those with weak economic activity faced deflation. Among emerging economies, falling commodity prices exerted a downward pressure on inflation but the depreciation of local currencies placed a strong upward pressure, driving the emerging market inflation rate higher. In view of low inflation rates and weak economic activity, the majority of advanced economies still faces historically low interest rates and continues to use unconventional monetary policy tools to maintain a loose monetary policy. However, diverging growth performances lead to different monetary policy outlooks in the forthcoming period. In this sense, the Fed has already started to normalize its policy by signaling its willingness to start rate hikes soon, while the ECB has employed more aggressive monetary easing. Further, many European countries with strong economic ties with the EU lowered their policy rates. Yet, due to the Fed’s possible rate hike, the central banks of some emerging economies that witnessed capital outflows –mostly from stock markets– and currency depreciations raised their policy rates in the first quarter. In addition to this divergence in global monetary policies, the slowing economic activity across emerging economies adds to the downside risks for volatile capital flows. 2.1. Global Growth The slowdown in global economic growth in the first nine months of 2014 continued through the fourth quarter (Chart 2.1.1). On the advanced economies side, despite the pick-up in the US and Euro Area growth, Japan’s ongoing recession has been a key driver of global economic slowdown in the final quarter of 2014. Across emerging economies, the worst quarter-on-quarter growth performance was seen in the Eastern Europe, largely due to the accelerating slowdown in the Russian economy. In this period, the growth in Asia and Latin America followed a more favorable track compared to the previous quarter, yet Brazil’s contracting economy caused Latin American growth to remain sluggish (Chart 2.1.2). Inflation Report 2015-II 11 Central Bank of the Republic of Turkey Chart 2.1.1. Chart 2.1.2. Global Growth Rates* Regional Growth Rates* (Annual Percent Change) (Annual Percent Change) Emerging Economies Advanced Economies Global GDP 9 9 6 Latin America Asia Eastern Europe 12 12 9 9 6 6 3 3 0 0 -3 -3 -6 -6 6 3 3 0 0 -3 -3 -9 -6 12341234123412341234123412341234 2007 2008 2009 2010 2011 2012 2013 2014 -6 -9 23 4123 412 341 234 1234 123 412 34 2008 * Weighted by each country’s share in global GDP. Source: Bloomberg, CBRT. 2009 2010 2011 2012 2013 2014 * Weighted by each country’s share in regional GDP. Source: Bloomberg, CBRT. Global PMI data for the first quarter of 2015 remained unchanged from the previous quarter (Chart 2.1.3). The Euro Area manufacturing PMI recorded a notable increase in this period, which creates an expectation that the favorable Euro Area growth will continue more vigorously in the first quarter of 2015. The ongoing fall in unemployment during the first two months of the year and the positive outlook suggested by the PMI for employment and new orders add to this expectation. The first-quarter uptrend notwithstanding, the US manufacturing PMI was quite close to the quarter-ago average on a quarterly basis, suggesting that the first-quarter US growth is likely to be comparable to the fourth quarter. The Japanese manufacturing PMI, on the other hand, shows that the recession continued into the first quarter (Chart 2.1.4). On the emerging economies front, the manufacturing PMIs, particularly those of China and Russia, declined considerably in the first quarter. Thus, economic growth is expected to slow further in emerging economies over the first quarter of 2015. In sum, the global economic slowdown will probably persist in the first quarter of 2015 largely due to the decelerating growth in emerging economies and the pace of global growth may dip even below the previous quarter. Japan stands out as the leading country among advanced economies to pull global growth down in this period, while China, Brazil and Russia on the emerging economies front are also expected to decelerate global growth. Chart 2.1.3. Chart 2.1.4. Markit Global PMI Manufacturing Industry PMI Euro Area USA Japan Services 60 60 Manufacturing 55 60 60 55 55 50 50 45 45 40 40 55 0315 1114 0714 0314 1113 0713 0313 1112 0712 0312 1111 0711 0311 1110 0315 1114 0714 0314 1113 0713 0313 1112 0712 0312 1111 0711 0311 1110 0710 45 0310 45 0710 50 0310 50 Source: Markit. 12 Inflation Report 2015-II Central Bank of the Republic of Turkey The end-2015 global growth forecasts were revised down by 0.3 points from the previous reporting period in April’s Consensus Forecasts. Across advanced economies, growth forecasts were revised upward for the UK, and especially for the Euro Area, and downwards for the US and Japan. On the emerging economies side, compared to the previous report projections, growth forecasts for end2015 were revised upward for Asia-Pacific and downward for Eastern Europe, albeit slightly, and Latin America, more notably (Table 2.1.1). In comparison with the January Inflation Report, growth forecasts for end-2016 were revised slightly upward for advanced economies, while the most significant change across emerging economies was the downward revision for Latin America. Accordingly, the exportweighted global production index, updated in line with April forecasts, points to a slower annual global growth than stated in the January Inflation Report (Chart 2.1.5). Thus, Turkey’s weak external demand outlook is likely to continue into 2015. Table 2.1.1. Growth Forecasts for end-2015 and end-2016 (Annual Percent Change) January World Advanced Economies USA Euro Area Germany France Italy Spain Greece Japan UK Emerging Economies Asia-Pacific China India Latin America Brazil Eastern Europe Russia April 2015 3.0 2016 3.2 2015 2.7 2016 3.2 3.2 1.1 1.4 0.9 0.4 2.0 1.8 1.2 2.6 2.8 1.6 1.8 1.3 1.0 2.1 2.3 1.5 2.4 2.9 1.5 1.9 1.1 0.6 2.5 0.7 1.0 2.6 2.8 1.8 2.0 1.6 1.2 2.4 2.0 1.7 2.5 6.0 7.0 6.3 1.3 0.4 -0.2 -4.1 6.0 6.9 6.7 2.7 1.9 2.1 0.3 6.1 6.9 7.7 0.5 -1.1 -0.4 -4.0 6.1 6.8 8.0 2.1 1.2 2.0 0.2 Source: Consensus Forecasts. Chart 2.1.5. Export-Weighted Global Production Index* (Annual Percent Change) 6 6 January 2015 Forecast at 1.95 4 4 2 2 0 0 April 2015 Forecast at 1.90 -2 -2 -4 -4 -6 -6 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 2008 2009 2010 2011 2012 2013 2014 2015 * Weighted by each country’s share in Turkey’s exports. Source: Bloomberg, CBRT. Inflation Report 2015-II 13 Central Bank of the Republic of Turkey 2.2. Commodity Prices and Global Inflation The headline commodity price index posted a quarter-on-quarter decline by 5.1 percent in the first quarter of 2015. In this period, the price index for precious metals was the only one rising, by 0.7 percent, while price indices for all other commodities fell due to excess supply and weak demand. Prices of energy and industrial metals decreased by 4.1 and 5 percent, respectively, whereas the agricultural price index plunged by 9 percent because of high supply and production (Chart 2.2.1). Chart 2.2.1. Chart 2.2.2. S&P Goldman Sachs Commodity Prices Crude Oil (Brent) Prices* (January 2010=100) (USD/bbl) Headline Industrial Metals Agriculture Energy Precious Metals Futures (23 January) Futures (27 April) 80 80 60 60 60 60 40 40 40 40 120 0716 0116 0715 0115 0714 0114 0713 Spot 0113 0413 0113 0415 80 0115 80 1014 100 0714 100 0414 100 0114 100 1013 120 0713 120 120 * 27 April 27 and 23 January denote the arithmetical average of the prices quoted at futures contracts during 1-27 April and 1-23 January, respectively. Source: Bloomberg. Oil prices have been fluctuating since the crude oil price slump in the fourth quarter of 2014. The ample supply hinted by the surprise jump in US crude oil inventories weighs on prices whereas geopolitical risks pose an upside risk to them. As of the first half of April, oil prices were slightly higher than in the previous reporting period, but amid the narrowing spread between futures and spot prices, the December 2015 contracts for crude oil, which were traded at 64.5 USD at end-January, changed barely in April (Chart 2.2.2). In addition, the Iran framework deal strengthened expectations of an oil supply glut in the second half of 2015. This might compensate for the anticipated correction in the US shale oil output, hinting at a longer-than-expected supply-driven downward pressure on oil prices. Amid falling energy prices, the consumer price inflation dropped dramatically across advanced economies in the first quarter, while core inflation remained virtually unchanged. On the other hand, emerging economies were not affected similarly by decreasing energy prices as the upward pressure generated by the depreciations of their currencies was more profound. The CPI and core inflation rates remained on the rise across emerging economies, particularly in Russia and Latin America, during the first quarter (Charts 2.2.3 and 2.2.4). 14 Inflation Report 2015-II Central Bank of the Republic of Turkey Chart 2.2.3. CPI Inflation in Advanced and Emerging Economies (Annual Percent Change) Chart 2.2.4. Core Inflation in Advanced and Emerging Economies (Annual Percent Change) Emerging Economies 10 10 Emerging Economies 6 6 Advanced Economies Advanced Economies 0315 0914 0314 0315 Source: Bloomberg, CBRT. 0913 0 0313 0 0912 -2 0312 -2 0911 1 0311 1 0910 0 0310 0 0909 2 0309 2 0908 2 0914 2 0314 3 0913 3 0313 4 0912 4 0312 4 0911 4 0311 6 0910 6 0310 5 0909 5 0309 8 0908 8 Source: Bloomberg, DataStream, CBRT. Global inflation forecasts for end-2015 were revised substantially downwards for advanced economies and Asia-Pacific compared to the previous reporting period. The impact of falling energy prices on inflation has largely been reflected on expectations by the massive downward revisions in the previous and current reporting periods, and thus, downside risks to inflation expectations for advanced economies have subsided. However, expectations might dip a little lower for Asia-Pacific due to low inflation rates in China and Japan. Meanwhile, end-year inflation forecasts for both 2015 and 2016 might be revised upward for Latin America and Eastern Europe (Table 2.2.1). The deteriorated expectations across commodity-exporting Latin American countries may be a result of the Chinese slowdown, yet the upcoming inflation outlook for these countries and Eastern Europe will be determined by the Fed’s monetary tightening. Table 2.2.1. Inflation Forecasts for end-2015 and end-2016 (Annual Percent Change) January World Advanced Economies USA Euro Area Germany France Italy Spain Greece Japan UK Emerging Economies Asia-Pacific China India Latin America Brazil* Eastern Europe Russia April 2015 2.6 2016 3.1 2015 2.5 2016 3.0 0.7 0.1 0.7 0.3 0.2 -0.3 -0.6 0.9 1.2 2.2 1.2 1.6 1.2 0.7 1 0.6 1.8 1.2 0.1 0.1 0.4 0.1 0.1 -0.5 -1.3 0.4 0.7 2.2 1.2 1.6 1.1 0.8 1.2 0.5 1.6 1.0 2.5 1.8 5.9 12.3 6.4 7.1 10.8 2.8 2.2 5.8 10.6 5.6 5.3 6.4 2.0 1.4 5.4 14.6 7.9 8.5 13.0 2.6 2.0 5.6 11.9 5.6 5.8 7.2 * December to December. Source: Consensus Forecasts. 2.3. Financial Conditions, Risk Indicators and Capital Flows In the first quarter of the year, despite ongoing divergence in global economic activity and continued slowdown across emerging economies, the waning concerns over the Euro Area and US Inflation Report 2015-II 15 Central Bank of the Republic of Turkey recovery and the delay in the Fed’s expected rate hike had a positive impact on the global risk appetite (Chart 2.3.1). The fed fund futures show that the timing of the expected policy rate hike has been postponed (Chart 2.3.2). Chart 2.3.1. Chart 2.3.2. Global Risk Appetite Fed Funds Futures (Percent) 24 April Credit Suisse Risk Appetite Index 23 January 1.0 1.0 0.5 0.5 0.0 0.0 0318 1.5 1017 1.5 0517 45 2.0 1216 -8 2.0 0716 40 2.5 0115 -6 0714 35 0114 -4 0713 30 0113 -2 0712 25 0112 0 0711 20 0111 2 0710 15 0110 4 2.5 0216 10 0915 6 0415 VIX (inverted, right axis) Maturity Source: Bloomberg, Credit Suisse. Source: Bloomberg. With the favorable global risk appetite, global stock markets were broadly on the rise in the first quarter. Stock markets of the emerging economies performed much better than those in advanced economies (Chart 2.3.3). Yet, among emerging economies, Latin American stock markets diverged negatively from the rest. Nevertheless, this poor performance of Latin American stock markets did not spill over into bond yields, but the favorable risk appetite brought bond yields across all emerging economies down in the first quarter (Chart 5.1.1). Chart 2.3.3. Chart 2.3.4. Global Stock Markets Weekly Portfolio Flows to Emerging Economies (USD, 2007=100) (Billion USD) MSCI - Emerging Economies Source: Bloomberg. 0315 0115 -15 1114 -15 0914 -10 0714 -10 0514 -5 0314 -5 0114 0 1113 80 0 0913 80 10 5 0713 90 Bond Funds 5 0513 90 0115 100 0714 100 0114 110 0713 110 0113 120 0712 130 120 0112 130 0711 140 0111 140 0710 150 0110 150 Equity Funds 10 0313 160 MSCI - Advanced Economies 0113 160 Source: EPFR. In the first quarter of the year, emerging economies experienced capital outflows, especially in January and March (Chart 2.3.4). Despite the favorable global risk appetite during this period, the appreciating US dollar and the deteriorated growth expectations for emerging economies were the key drivers of these outflows. The US dollar appreciation both exacerbated the debt burden of emerging economies and lessened the USD yields on local bonds, causing emerging economies to become less attractive to international investors. 16 Inflation Report 2015-II Central Bank of the Republic of Turkey Although the delay in expectations about the timing of the Fed’s first policy rate hike seems to support capital inflows to emerging economies in the upcoming period, the strong US dollar, the weak emerging market growth outlook and growth performance of the Euro Area and the US add to the downside risks to these inflows over the forthcoming period. However, future FOMC decisions and global energy price developments are likely to play a major role in shaping the global risk appetite and the direction of portfolio flows. 2.4. Global Monetary Policy With the more pronounced slowdown in both advanced and emerging economies, the global monetary policy appears to have been looser in the first quarter, except for the recovering US economy and some emerging economies facing current account problems. On the advanced economies front, this loosening was largely attributed to the ECB’s quantitative easing implemented since mid-2014 amid deflationary risks and to the absence of inflationary pressures from commodity prices. Accordingly, during January-April 2015, the Sveridge Riksbank cut short-term rates by 25 basis points into a negative territory, while the Bank of Canada, the Central Bank of Korea, and the Reserve Bank of Australia lowered rates by 25 basis points each, and the Bank of Israel opted for a rate cut of 15 basis points (Chart 2.4.1). On the emerging economies side, after hiking the policy rate by 750 basis points in the final quarter of 2014, the Central Bank of Russia took 300 basis points back by two rate cuts in the first quarter. Moreover, during January-April 2015, the CBRT and the National Bank of Romania cut policy rates by 75 basis points each; the National Bank of Poland lowered its policy rate by 50 basis points; the Central Reserve Bank of Peru, the Bank of Thailand and Bank Indonesia delivered a rate cut of 25 basis points each, and the Magyar Nemzeti Bank reduced its policy rate by 30 basis points. In Asia-Pacific, the People’s Bank of China cut its policy rate by 25 basis points in March, whereas the Reserve Bank of India lowered its rate by a total of 50 basis points in January and March. Meanwhile, unlike all other central banks, Banco Central do Brasil hiked its policy rates twice by 50 basis points each (Chart 2.4.2). Chart 2.4.1. Chart 2.4.2. Policy Rate Changes in Advanced Economies from Jan. 2014 to Apr. 2015* (Basis Points) Policy Rate Changes in Emerging Economies from Jan. 2014 to Apr. 2015* (Basis Points) Canada -100 Czech Rep. -100 Euro Area -75 Norway -75 Australia -50 Korea -50 Sweden -25 600 600 350 350 100 100 -150 -150 -400 -400 Mexico 0 850 Romania 0 -25 850 Turkey 25 1100 South Africa 25 2014 1100 Russia 50 Jan'15 Hungary 50 Feb'15 Indonesia 75 Poland 75 Mar'15 Colombia 100 Israel Apr'15 2014 Peru Jan'15 Thailand Feb'15 Chile Mar'15 Brazil Apr'15 100 * As of 28 April 2015. Source: Bloomberg, CBRT. Inflation Report 2015-II 17 Central Bank of the Republic of Turkey At its first FOMC meeting in 2015, the Fed reiterated that it would remain patient about hiking rates, which was interpreted as an almost unchanged policy stance. However, long-term interest rates soared after the meeting due to the positive data regarding economic activity. At the mid-March meeting, the Fed removed the word “patient” yet revised the end-2015 policy rate forecasts of FOMC members down and clearly stated that an April hike was unlikely. Additionally, the Fed emphasized that the rate hike would be dependent on further improvement in the labor market and on inflation moving back toward 2 percent over the medium term. Following this statement, long-term interest rates fell. Hence, having been on the rise since the first tapering hint in May 2013 until early 2014, long-term interest rates followed a downward path, despite some fluctuations, thanks to the vanished uncertainty due to the Fed’s transparent communication policy and the gradual termination of the asset purchases (Chart 2.4.3). As for the Euro Area, the ECB’s easing policies appear to have alleviated deflationary concerns and improved the growth performance as of the first quarter. The monetary policy stance in advanced economies is expected to remain nearly unchanged in the next period. Chart 2.4.3. Yields on 10-year US Treasury Bonds (Percent) 3.2 3.2 FOMC Meeting (28 January) 3.0 3.0 2.8 2.8 2.6 2.6 2.4 2.4 2.2 2.2 2.0 2.0 1.8 1.8 1.6 1.6 FOMC Meeting (18 March) 4/2/2015 2/2/2015 3/2/2015 1/2/2015 11/2/2014 12/2/2014 9/2/2014 10/2/2014 8/2/2014 6/2/2014 7/2/2014 4/2/2014 5/2/2014 2/2/2014 3/2/2014 1/2/2014 11/2/2013 12/2/2013 9/2/2013 10/2/2013 8/2/2013 6/2/2013 7/2/2013 4/2/2013 5/2/2013 2/2/2013 3/2/2013 1.4 1/2/2013 1.4 Source: Bloomberg. 18 Inflation Report 2015-II