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Prospects Daily: Turkish lira surges to near three-month high against U.S. dollar, Eurozone annual inflation slows to a 52-month low, Turkey’s annual GDP growth in 2013Q4 beats expectations

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Financial Markets…Developing-country stocks advanced on Monday, heading for the longest streak of gains since July, as Russia and the U.S. sought a diplomatic solution to reduce tensions over Russia’s annexation of Ukraine’s Crimea region over the weekend. The benchmark MSCI Emerging Market Index gained 0.5%, trimming its quarterly loss to 1.3% in the first quarter of this year. Russia’s Micex stock index rose for a second day, but the gauge is still down 10% this year, heading for its steepest quarterly drop since 2011.

The Turkish lira surged to near three-month high against the dollar following a positive local election outcome over the weekend. Turkey’s currency jumped 1.9% to 2.1497 per dollar, the strongest level since January 2, and it was the best-performing developing-country currency on Monday. The lira has strengthened 11% since reaching a historic low of 2.39 on January 27. Meanwhile, Turkey’s benchmark stock index rose 0.6% to the highest level since December 25 and the country’s 5-year credit-default swaps slid 12 basis points (bps) to 220 bps, the lowest since December 19.

High Income Economies…Rising deflation concerns and hiking expectations for an interest rate reduction from the European Central Bank, flash estimates showed that Eurozone annual inflation fell from 0.7% (y/y) in February to 0.5% in March, which is a 52-month low. Prices of energy continued its downward trend, while all other components of the harmonized index of consumer prices increased in March from last year. Core inflation that excludes energy, food, alcohol and tobacco, eased to 0.8% from 1.0% in February. On a three-monthly annualized basis, the CPI fell 1.5% (3m/3m saar) in March, unchanged from February, while the core CPI decreased 3.0% following a 2.9% decline in February.

Dutch GDP rose by an upwardly revised 0.9% (q/q) in Q4 2013, following Q3’s 0.3% increase. The larger-than-expected increase was driven by higher-than-expected production and investment in the construction sector, and smaller-than-expected decreases in household spending and the government expenditure. On a quarterly annualized basis, GDP increased 3.7% (q/q saar) in Q4, after increasing 1.2% in Q3.

Developing Economies…Europe and Central Asia: Turkey’s economy expanded at the seasonally adjusted rate of 0.5% in the fourth quarter of 2013, compared with the revised 0.8% (q/q) expansion in the third quarter. Year-on-year, the economy advanced 4.4%, slightly up from a revised 4.3% (y/y) in the previous quarter, beating market expectations. For the full year of 2013, the economy grew 4.0%, rising from a revised 2.1% growth in 2012.

Sub-Saharan Africa: South Africa’s trade balance swung into surplus in February, after recording a large deficit in January, as exports expanded at a fast pace. Exports grew 7.9% (m/m) in February, boosted by sales of vehicles and transport equipment, machinery and electronics, chemical products and base metals, while exports of precious metals contracted. Meanwhile, imports fell sharply by 13.2% (m/m) on account of lower purchases of machinery, mineral and agricultural products. As a result, the trade balance recorded a surplus of ZAR 1.72bn, up from a deficit of ZAR 17bn in January.

Kenya’s annual headline inflation, measured by the consumer price index eased for the second consecutive month to 6.3% in March, following a 6.8% (y/y) increase in February, as prices of food, electricity and gas slowed, remaining within the central bank target of 5.0%+/-2% for 2014. Month-on-month, prices rose to 0.45% in March from 0.38% in February.

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