Baku. 4 March. REPORT.AZ/ Processes observed in recent months, the global financial markets, approximately repeating the dynamics of events of 1997-1998. Due to the falling of oil prices the dollar rate rising, investors are waiting for the same increase of the discount rate of the Federal Reserve System (FRS) of USA. In such circumstances, it can be regarded as the beginning of a new economic crisis.
According to the analytical group of Report agency, economic slowdown, increased debt burden, a sound policy of devaluation to maintain competitiveness, exaggeration of financial risks and other processes more exacerbate existing problems.
The expected global economic crisis can be divided into three stages. In the first phase a negative consequence will feel stronger dollar stock exchanges. If we consider that 40% of the members of the S&P US companies are exporters, they will lose some revenue in international markets. Falling oil prices will cause a severe blow to oil production companies servicing the oil sector and the supplier. Profit, cash flow and asset values decline. Decline in profits and reduction in liquidity will lead to a drop in interest in the unification of the corporate sector and, as a result, will have a chilling effect on the positive trend in the stock market.
In the second phase there will be problems in the debt market. So, heavily indebted companies of the energy sector and developing countries face financial difficulties. Because investors and banks are in close connection with the oil and gas segment of the economy. If in 2005 the index high-yield corporate bonds USA (Barclays US Corporate High-Yield Bond Index) share of the energy sector exceeded 5%, then today this figure reached 15%. In the production of shale oil amount of debt is 3 times the operating profit. Many companies producing shale oil even at high oil prices experienced negative cash flows. They had to drill new wells and to maintain production at the expense of additional funds. As a result of increased rates of interest for funding becomes difficult, leading to the debt burden, the decline in production, capital flight and lower profits. In this regard, the company Petrobras (Brazil), Pemex (Mexico) and Gazprom (Russia) is the issuer of debt securities of developing countries, are in a dangerous situation.
In the third stage in developing countries will experience stagnation. Economic slowdown, the weighting of the debt burden and structural problems will cause revision of the rating of developing countries. Debt obligations of these countries by 75% in dollars. Falling oil prices and a decline in profits from the sale of raw materials will create problems in the management of debt and lead to monetary problems. Strengthening of the US dollar will be the cause of the weakening of the national currencies of these countries, and will lead to a reduction in foreign portfolio investments. As a result, increased interest rates on debts, and there will be an outflow of capital from these countries. With the completion of the monetary incentive program the Fed will continue to decline in the liquidity of the dollar. Monetary expansion in Europe, Japan and China will not be enough for the financial markets.
The high cost of oil has contributed to the financing of the budget at the expense of "petrodollars", covering the trade deficit and low interest rates around the world. With the fall of oil prices, investors will sell foreign assets to generate cash. In turn, this will reduce the amount of assets and higher interest rates around the world. Finally, weak economic growth, low inflation and political problems, especially in Europe, will cause the violation of stability in the securities market. Hazards caused by delayed increase in interest rates, lower liquidity, currency interventions and trade restrictions will gradually grow.