Turkey GDP growth disappoints, Calderon to tackle Pemex funding, Medvedev stays loyal to Putin, Ecuador starts oil sector shake-up, Saudi budget boosts equities
Turkey looks set to further lower interest rates after recording disappointing third quarter GDP growth of 1.5% year-on-year. This brings nine-month growth to 3.8%, a long way shy of the government’s 5% target for 2007. Analysts believe that the lower-than-expected growth rate, coupled with a sharp fall in agricultural output, will prompt Turkey’s monetary policy committee to cut interest rates by 25 bps when it meets on Thursday. A more substantial cut of the 16.75% borrowing rate lending rate is likely to be ruled out as the consumer price index rose 1.95% in November, bumping up annual inflation to 8.4%
Mexico’s ruling National Action Party (PAN) could propose a radical plan to open up its state-run energy sector to partnerships with private firms when Congress reconvenes in February. PAN officials told reporters yesterday they were in favour of pushing through reforms that would allow beleaguered state monopoly Pemex to team up with foreign firms to explore new oil reserves, especially in the Gulf of Mexico. Pemex’s output has been consistently declining over the last 12 months and experts estimate it has just nine years worth of confirmed reserves left. However, constitutional constraints and strong opposition from the Institutional Revolutionary Party (PRI) are likely to rule out any complete removal of limits on foreign investment. (For more analysis on the future financing of Pemex, please click here).
Vladimir Putin’s favoured successor has vowed to appoint the Russian leader as his prime minister if he assumes the presidency after the March elections. Dmitry Medvedev, who is currently first deputy prime minister and chairman of state-owned gas giant Gazprom, said that Russia needs to “ensure the continuity of the course of the past eight years” in a speech on state television today. The 42-year-old lawyer is the favourite to take the Russian presidency and has the backing of four pro-Kremlin parties, including Putin’s United Russia, which won a landslide majority in the parliamentary elections earlier this month. Medvedev has been a key player in economic and social development plans over the last two years and previously served as presidential chief of staff from 2003 to 2005.
Ecuador has started talks with private oil companies to restructure contracts, in a bid to increase the government’s share in their export revenues. President Rafael Correa wants to pay companies for extracting the oil rather than granting them a proportion of final profits. Foreign firms including Brazil’s Petrobas, France’s Perenco and China’s Andes Petroleum initiated the negotiations after claiming the government’s plan to increase state royalties over a nominal oil price from 50% to 99% would inhibit their operations. Oil minister Galo Chiriboga told reporters yesterday: “It is possible to reach a timely agreement but if it is not possible, then the state will apply the regulations it can in this respect.” (For an interview with Ecuador’s finance minister Fausto Ortiz, please click here).
Saudi Arabia has unveiled its budget for 2008, which sets out a forecast surplus of almost 11 billion dollars. The actual surplus is likely to be substantially larger, due to very conservative oil price forecasts – the estimated outturn for 2007 is a surplus of almost $48 billion, compared with a forecast $5.3 billion. The Saudi stock market rallied sharply, by around 5%, when the plan was announced, encouraged by the significant projected rise in government spending, to a record $109 billion. These expenditures include around $44 billion in major development projects, which should stimulate major sectors on the Saudi stock exchange, such as construction and cement. (For an interview with Saudi Arabia’s finance minister Ibrahim al-Assaf, please click here).