1 Russian economy shrinks first time in five years (Jill Treanor in The Guardian) The Russian economy has contracted for the first time in five years after falling oil prices and sanctions imposed by western governments began to take their toll. The prospects for the country’s economy are expected to remain weak after President Vladimir Putin’s government revealed that GDP in November was 0.5% lower than in the same month a year ago.
It is the first time since October 2009 that the Russian economy has shrunk and comes at a time when the rouble has been collapsing on foreign exchange markets after a near halving of the oil price since June. Manufacturing, construction, agriculture and service sectors all contracted in November, although energy, mining and the retail trade showed continued growth.
Economists are warning that Russia – one of the world’s biggest energy exporters – could be facing its first recession in five years. The central bank fears the economy could shrink by up to 4.8% next year if oil prices fail to recover from five-year lows.
The fail in the oil price comes at a time when western sanctions imposed over Russia’s backing for separatists in Ukraine are making it tough for the country’s banks to raise finance in the international money markets, leading to billions of dollars being withdrawn from the country.
Dmitry Polevoy, the chief economist for Russia and the Commonwealth of Independent States at ING Bank in Moscow, said things would get worse with oil prices at their current levels. The dependency on oil has led to a rout of the rouble on the foreign exchange markets, prompting an emergency rise in interest rates to 17% from 12.5% earlier this month.
2 ‘Uncertain times’ for oil industry (BBC) The oil and gas industry is set for a year of mergers and takeovers as a result of the plummeting oil price, a business consultancy has predicted. PwC said 2015 may bring the first hostile takeover in the sector in living memory.
It warned of “uncertain times” for the estimated 440,000 people employed in the UK’s oil and gas industry. The oil price has fallen from $115 a barrel in the middle of the year to about $60.
Drew Stevenson, PwC’s UK energy deals leader, said: “Oil prices remaining at the current level for a sustained period will light the touch-paper for mergers and acquisitions in 2015. PwC said the industry would be “increasingly cash-constrained” with new debt coming at a cost, and existing debt coming under increased scrutiny.
3 India’s Man of the Year (Rahul Singh in Khaleej Times) My choice of India’s personality for 2014 has been pretty easy:The 64-year-old Narendra Damodardas Modi. He dominated India for most of the year, right from the day the Bharatiya Janata Party (BJP) nominated him as its prime ministerial candidate earlier in the year, to the BJP’s stunning and overwhelming victory in that election, seven months ago.
Since then, he has continued to impose his distinctive stamp on the country, the BJP winning elections in State after State. Like him or not, It has been a remarkable performance for a man who was once cynically belittled by senior Congress leader Mani Shankar Aiyar as a mere chai-wala (tea-seller). Aiyar was absolutely right — Modi’s father was indeed the owner of a tea-stall near a railway station in Gujarat and Narendra began his working life selling and bringing cups of tea to customers.
“Look, even a chai-wala can aspire to be the Prime Minister,” Modi and his supporters would say during the election campaign. It was a telling statement that resonated loudly with the young generation, particularly the first-time voters.
Yet, there is much that Modi has still to live down. Though the courts may have cleared him, a question mark hangs over his role in the horrific 2002 Gujarat riots, in which over 1,000 people, mostly Muslims, died. His image as a polarising figure continues to linger. He has also somehow been unable to control some of his more rabid, Hindutva supporters.
Nevertheless, all said and done, Modi almost single-handedly led the BJP to a famous electoral victory in 2014. He has become the most powerful Prime Minister India has had since Indira Gandhi in the 1970s, with no serious rivals in his own party. An adoring nation virtually lies at his feet. He has pressed all the right buttons. Now, he has to deliver the goods.