Amid
the direction of the global economy which is still uncertain because there is
no certainty from the fed about interest rate hike, coupled with the Chinese
economy which is increasingly pressured, the Organization for Economic
Cooperation and development (OECD) reported that the growth rate of Gross
Domestic Product (GDP) of the member states is only by 0.4% (q o q) in Q1-2015.
The Growth rate was slower that the
previous quarter which is recorded at 0.5 (q o q). Although when viewed on an
annual basis, the GDP rate of OECD member countries remain unchanged, which is
2% (y o y) during the quarter.
On a quarterly basis, the United
Kingdom and the United States ate two countries that recorded the highest GDP
growth rate among seven other major countries where each recorded a growth of
0.7% (q o q).
According to survey of the Bank of
England (BOE) on market participants, most of them are expecting the BOE to
raise rates within the next 12 months. Even, the BOE saw that the expectation
of market participants this time was the strongest in the last four years. As
is known, the interest rate set buy the BOE has not changed from its lowest
level, namely 0.5%.
Related to the rate of inflation, UK
inflation expectations is seen to subside to level 2.0%, down from the one in
May at 2.2%. Meanwhile, inflation expectation for the next two five years does
not change where it is recorded at 2.3% and 2.8%.
So far, BOE is still reluctant to
raise interest rates in the term because it is too early to conclude about
economic events that are happening abroad, primarily the economic slowdown in
China that so far has contributed to substantial losses on the British economy.
Related to this, the Bank of England signaled that it would raise interest
rates in 2016.
Strengthening of Pound Exchange rate
up to now is one of the factors that cause BOE to maintain low interest rates,
although the rate of economic recovery looks solid.
For the Government economy, this
country in Q2 has successfully recorded a GDP growth higher than the previous
quarter, which is 0.4% (q o q) from 0.3% (q o q). Germany is a country that has
a significant influence on the economic uncertainty. Although it had fallen,
apparently toward the remainder of 2015, Germany has tried again6tt to show its
strength as a developed country.
Germany’s gradual economic recovery is
reflected in the data its export and import and import activities in July 2015
which has recorded faster growth rate of Germany’s imports & exports had a
positive impact on the successfully booked a higher increase than the previous
month.
Germany statistic agency reported
that consumer price inflation rate is still stable where in August is 0.2% (y o
y), the same as the recorded in August 2014. Likewise, if viewed on a monthly
basis, Germany’s consumer price inflation in August is still stable which in
July is recorded at 0.2%.
Meanwhile, the rate of Japan’s GDP,
the third largest countries in the world, recorded a contraction of – 0.4 % (q
o q). France’s GDP growth was also stagnant, while Italy’s GDP slowed in Q2 and
only at 0.2% (q o q) from 0.3% (q o q) in the previous quart.
In the UE, GDP growth remained
stable, recorded at 0.4% (q o q) in Q2, while in the euro area slowed down a
bit at only 0.3% ( q o q) from 0.4% (q o
q) in the previous quarter.
In line whit the slowdown in GDP
growth among OECD members, previously OECD has lowered its forecast for global
economic growth prospects. OECD considered that the place of global growth is
projected to strengthen through 2015 and 2016, but is still relatively below
the Growth before the crisis, where the GDP rate of the global economy in 2015
will reportedly grow by 3.1%, down from the projections released in March at 4%
Meanwhile, growth forecast in 2016
is cut from 4.3% to only 3.8%. According to the OECD, the global economy will
strengthen gradually towards pre-crisis levels by the end of 2016. The
organization consisting of 34 developed countries also cut its forecast of US
economic growth for the period of 2015 – 2016 from 3.16 and 3% to 2% and 2.8%.
According to the organization based
in Paris, the strengthening of the US dollar exchange rate and the winter
season have caused disturbance. Besides the US, the Chinese economy is also
expected to grow more slowly with growth rates of 6.8% and 6.7% in 2015 and
2016.
As for the Euro zone, the OECD does not change
its projections, and even raised the 2016 growth forecast to 2.1% thanks to oil
prices, the weakness of the euro exchange rate and the improvement in financial
conditional and the stimulus from the government.
The OECD believed that economic
recovery from the global financial crisis 2018 was still weak. The Adverse
effect of the weak recovery is the slow growth in developing countries, job
uncertainty, and rising inequalities everywhere.
OECD considers that the decrease in
private investment and government spending have blocked recovery. Many large
companies are now delaying construction of new facilities or reducing spending
on technology development, equipment, and services due to its financial
condition. Meanwhile, governments in many countries are also reducing
expenditures for infrastructure development in the framework of fiscal
consolidation.
Economic activities in the future
that are based on inflation available until the end of July also showed
weakness in Canada, Russia, and Brazil. So far, the OECD indicators continue to
show that India will be a major exception to an economic growth that tends to
advance beyond China.
OECD also sees that China’s main
indicators decrease again in July to 97.6 from 97.9. With a threshold of 100.0,
the figures below 100.0 are a signal of economic slowdown. OECD composite
leading indicators for its 34 members are also below 100.0 in July from 100.0
in June.
While, economic growth in South
Africa, Rusia and Brazil in the second also fell. However, the OECD indicators
show that the economy in the Euro zone will avoid further contraction in the
reminder of 2015. Now, the OECD member countries continue to examine measures
to be taken by China as the second largest economic power in the world.
Previously, China has aggressively
loosened its economic policy by devaluating Yuan currency, lowering benchmark
interest rate to 4.6%, loosening the ratio of minimum reserve requirement (GWM)
in the banking sector as well as continuing to pour a large fiscal stimulus to
boost its economic vitality.
China’s economic slowdown is
increasingly visible, at least from data of the central bank of China (P B o C)
which recorded that bank lending to the real sector declined in August from its
highest level in the last six years.
With these consideration, PBoC
revised the rules on the minimum reserve requirement (GWM) ratio of banks in
that country in order for the banks to set aside more reserves of money into
the real sector in the form of lending. PBoC allow the daily Statutory Reserves
that have been defined.
The decision was made by PBoC given
the number of loans disbursed by banks in China in August in only CNY 809.6
billion, lower than the one recorded in July, at CNY 1.48 trillion.
The price of crude oil continues to
weaken by more than 2% after Goldman Sachs Germany’s Commerzbank cut its forecast
for crude oil prices this year due fears of oversupply as a result of the
slowdown of the Chinese economy.
Goldman Sachs lowered its forecast
for 20160for US crude oil prices to USD 45 from USD 57 per barrel. While, the
price of Brent oil in 2016 is at USD 49.50, down from the previous forecast at
USD 62 per barrel.
According to Goldman Sachs, the
global oil market is experiencing oversupply and expected that it will last
until 2016. The investment bank from the United States claimed that crude oil
prices could fall to the lowest position at USD 20 per barrel.
Commerzbank Germany also lowered its
forecast of global crude oil prices and said that the Brent oil will possible
be traded at USD 55 at the end of this year before it increased again to USD 65
per barrel at the end of 2016.
From the description above, the
effects of the world economic slowdown, particularly the OECD countries, will
also hit Indonesia. Therefore, the government and financial authorities in
Indonesia must be able to identify these issues carefully to formulate a
comprehensive economic policy package which is counter cynical in anticipation
of the worse. (E)
Business New - September 23, 2015
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