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Prospects Daily: Ukraine’s hryvnia tumbles, U.K. economy expands 0.7% in Q4, Mexico posts record trade deficit

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Financial Markets… Ukraine’s hryvnia tumbled against the dollar on Wednesday as the country’s central bank scaled back support for the currency amid shrinking foreign reserves and growing withdrawals from banks. The hryvnia depreciated as much as 4% to a record low of 10 per dollar, with Ukraine’s turmoil spreading to Russian financial markets where the ruble weakened to five-year lows and bank stocks slumped. With mounting political uncertainty, Ukraine’s 5-year sovereign credit-default swaps spreads jumped 76 basis points and the country’s dollar bonds due in 2017 have erased over half the gains made in a strong rally on Monday that followed a collapse of previous government.

High Income Economies…With consumers expressing concerns about the short-term outlook for business conditions, jobs, and earnings, the Conference Board U.S. consumer confidence index fell to 78.1 in February from a downwardly revised 79.4 in January. While consumers' appraisal of current conditions improved for the fourth straight month, a larger share of consumers expecting business conditions to improve over the next six months dropped and those anticipating business conditions to worsen rose. Consumers were also more pessimistic about the outlook for the labor market.

The British economy grew as estimated in Q4 2013, while the full year 2013 growth came in weaker than initial calculations. GDP expanded 0.7% (q/q sa) matching initial estimates, following Q3’s 0.8% increase. For whole year 2013, GDP growth was revised down marginally to 1.8% from 1.9%. Output of the agriculture, forestry & fishing industries fell by 0.1% (q/q), on top of the 2.7% decrease seen in Q3. Total production increased by 0.5% while the service sector grew by 0.8%.

The GDP of Hong Kong SAR, China increased 1.1% (q/q sa) in Q4 2013, following a 0.7% increase in Q3. For the whole of 2013, GDP increased 2.9% over the prior year. Both private consumption and government consumption gained 3.2% (y/y) in Q4, while gross domestic fixed capital formation grew by 5.3%. At the same time, merchandise exports saw a 5.8% increase while imports increased by 6.5%.

Developing Economies…Europe and Central Asia: Hungary’s unemployment decreased for the third consecutive month to 8.9% in January, the lowest rate in four years, from 9.1% in December 2013. Hungary’s unemployment rate was at its lowest in January 2009, when it stood at 8.4%. Year-on-year, the number of unemployed fell by 94,000 in January to 393,000 and the number of employed persons increased by 175,000 to 4.03 million. Youth unemployment edged up slightly to 24.2% from 24.1% in December.

Latin America and the Caribbean: Mexico’s trade balance deteriorated in January, moving into a deficit of US$3.2bn, the highest on record, after posting a surplus for two consecutive months in November and December 2013. Driving the deficit, exports fell 1.0% (y/y) as oil exports contracted 15.8%, offsetting a 2% increase in non-oil exports. Month-on-month, exports decreased 15.8%. Imports rose moderately, by 0.3% (y/y).

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