19 - 25, 2001
UK economy to recover in 2003
The UK economy is unlikely to see a recession according to
the Bank of England.
But the economy is set to slow next year as the effects of
the global slowdown take hold, the Bank said in its latest quarterly inflation
The Bank also predicted that inflation is set to stay below
its target level, and said there are signs that the UK labour market "may
Earlier on Wednesday new unemployment figures had shown the
number of people claiming benefits had increased.
Presenting the latest report, the Bank's deputy governor
Mervyn King said the chances of a recession were slim.
"The probability of a recession is still very small. I
hesitate to put a number on it but if I had to it would be about one in
10," he said.
The Bank's report does forecast slower growth for the UK
economy next year.
But the recent interest rate cuts should help offset some of
the impact, and the Bank says growth should begin to pick up again in 2003.
But the Bank warns that the risk still remains that the
"slowdown in the international economy may be deeper or more
prolonged" than expected.
The Bank said there were signs that the labour market may be
about to take a turn for the worse.
And only an hour earlier, the latest government figures had
shown the number of people out of work and claiming benefit rose last month.
This trend is expected to continue as more companies cut
jobs, and other firms put a halt on recruitment.
The Bank noted that the strength of consumer spending has
helped maintain growth in the UK economy, but this could also be about to turn.
Argentina announces debt swap
Argentina has set the date for a daring attempt to slash its
$60bn (£42bn) domestic debt and avoid defaulting on foreign loans.
The country's central bank wants to swap the 10-year bonds
creditors currently hold for 13-year loans with more manageable rates of
interest, to be backed by a new tax on financial transactions.
Banks are being asked to sign up between 19 and 23 November,
while the dates for retail creditors are from 19 to 30 November.
Under the swap scheme, $60bn worth of locally held 10-year
bonds will be extended by three years and earn lower rates of return than
before. The aim is to free up breathing space for Argentina to find a way to
avoid defaulting on $72bn of international debt.
Its hands have been tied by a four-year recession, and
exacerbated by the global economic slowdown.
The swap deal finally became possible — if still risky —
after provincial governors from the opposition Peronist party agreed to sign an
Their agreement was vital, not only for the swap deal, but if
Argentina is to have any hope of getting a $3bn loan from the International
Monetary Fund (IMF).
The sticking point was cuts in the amount of income the
central government gives to the provinces each month.
"This is fundamental for Argentina finding a way out of
all this," said Marcelo Tain, director of Argentine Brokerage SBS.
But some ratings agencies have warned that since local
institutions have no choice in the swap, the whole plan is a default in fact if
not in name.
And the IMF said it is not ready to free up any more money
until Argentina could give it more information — and until it managed to
achieve a better relationship with its creditors.
IMF sees global slowdown
The world economy is heading for a sharp slowdown thanks to
decelerating US economic growth, according to the International Monetary Fund (IMF).
In the wake of the 11 September attacks on the US, the IMF
said it had to downgrade the more rosy expectations it announced a month ago.
Then, it said US growth would be 2.2% in 2002, while the
global economy would expand about 3.5%.
But the IMF has had to change its mind.
Now, the world is forecast to grow at just 2.4%, according to
the IMF managing director Horst Koehler speaking at a news conference in
Washington DC ahead of the IMF meeting in Ottawa this weekend.
The technical definition of a recession is growth lower than
2.5%, even though for some countries, including the UK for most of the last 20
years, average growth has been even lower than that.
Turkey close to new loan
Turks may soon have economic news to celebrate The head of
the International Monetary Fund (IMF) has said he would recommend a new loan for
Turkey, as efforts continue to prop up the country's tottering economy.
If the IMF loan is agreed, it will represent the third time
that Turkey has been bailed out this year.
IMF managing director Horst Koehler said after an informal
board meeting that Turkey's performance under its existing $19bn loan was
"very strong", but that he would push for rapid pay-out of the next
$3bn instalment, as well as the negotiation of a new standby loan.
Turkey is suffering a budget shortfall of $10bn, largely as a
result of its dramatically slowing economy, which has worsened sharply since 11
The Turkish economy is predicted to contract by 8% this year.
US rejects e-tax plan
The Senate worries that e-taxes will prove bureaucratic. The
US Senate has given final congressional approval to a bill that extends for two
years a ban on internet-related taxes.
The bill, which renews a now-expired three-year tax
prohibition, will now be approved by President George W Bush.
In a boost to the struggling online sector, senators rejected
an amendment that could have led to future collection of state-level taxes on
internet sales and internet access.
The amendment followed an agreement among 20 states to
collect online taxes on each others' behalf, but was defeated by a narrow
majority on a procedural motion.
Opponents of the amendment argued that more study was needed
before a system was put in place that could allow one state to impose a direct
tax on residents of another, something that runs counter to the principles of US
Brown's £36bn global poverty plan
A £36bn fund should be set up to wage war on global poverty,
Chancellor Gordon Brown is set to say on Friday.
If adopted the proposal would effectively double development
aid to meet ambitious UN targets aimed at raising the standard of living in the
developing world by 2015.
Mr Brown will urge "a global campaign against poverty
and a campaign for social justice" in a speech to be delivered in New York.
The chancellor is expected to urge the US, Canada and Japan
to follow the example of the EU by opening up their markets to developing
But he will argue that military products should be excluded
as part of an attempt to diminish what is effectively a subsidy to the arms
The plan involves creating an international development trust
fund which would be paid into by a combination of developed countries, donors
and international institutions.
Dell: Dell is standing by its previous forecasts. Dell
Computer made a profit of $429m (£300m) in the three months from August to
October, well down on the $674m it made in the same period last year.
Lufthansa: Lufthansa's sales rose, but profits fell
sharply. Germany's flag carrier Lufthansa has reported a 90% fall in net profits
during the first nine months of 2001 despite a 14% rise in sales. Operating
profits fell 63.5% during the first nine months of this year to 290m euros from
794m euros during the same period last year.
Bayer: Bayer's third-quarter operating profit before
exceptional costs dropped 90.7% to 66m euros ($58.20m), while sales fell 5.9% to
China set for $22bn water project
China is ready to start work next year on a $22bn irrigation
project to transfer water from the south of the country to the drought-ridden
The ambitious plan will divert water from China's longest
river, the Yangtze, to three rivers in the north, the Yellow, Huai and Hai,
whose basins are running dry.
Hundreds of Chinese cities suffer from water shortages,
leading in some cases to factories having to close early or coal mines being
unable to process coal.
Balfour abandons Turkish dam project
The project could affect 60,000 people, reports say Balfour
Beatty, the British construction firm hired to build the controversial Ilisu dam
in Turkey, has pulled out of the project.
Balfour was the main contractor on the $1.5bn dam, which
aimed to form a reservoir on the upper River Tigris in the largely Kurdish
south-east of the country.
The departure of Balfour, together with Impregilo of Italy,
its civil engineering partner, throws the Ilisu dam's future into doubt.
Yahoo signs 'landmark' deal
Yahoo is not yet cashing in on its well-known name Internet
giant Yahoo has accelerated its drive away from dependence on advertising, by
signing a deal with telecoms firm SBC Communications to develop a co-branded
Record rise in US retail sales
Sales of cars like the Hyundai Santa Fe have boomed US retail
sales rose a record 7.1% in October, drawn by favourable financing and heavy
discounting that spurred car sales.
The jump in sales came after consumers cut back on their
spending in September following the attacks on the US, pushing sales down by
2.2%, according to the Commerce Department.
Consumers spending accounts for two-thirds of all economic
activity in the US.
The data follows the latest US interest rate cut last week to
2%, the lowest level in 40 years, and a fall in US economic output, or GDP, to
0.4% in the three months from July to September.
Back to rising unemployment
UK unemployment is climbing again after nearly a decade, as
the global economic slowdown bites.
Figures released on Wednesday show the number of people out
of work and claiming benefit increased by 4,300 in October to 951,000.
Tourists shy away from Europe
Erkki Liikanen says the slump will be
"short-lived". The number of Japanese and US tourists visiting the
EU's fifteen member states has fallen by 30% since the 11 September attacks,
according to a new European Commissio study.
The drop in visits by US and Japanese tourists, who spend
more than visitors from any other country, will have a disproportionate impact
on the European tourism industry, the Commission warned.
Britons hold £540m in eurozone cash
Euro notes will be introduced in January About £540m of
eurozone currency is lying around in UK households according to a new survey.
But only half the population realise that they will not be
able to spend this cash in shops on the continent after February next year.
The survey, which was carried out for Barclays Bank, found
that each household has an average of about £35-worth of eurozone currencies
knocking about their homes.
The money is usually left over scraps from holidays or
business trips abroad.
Russia's recovery in the spotlight
Penza lies between Moscow and the Volga River cities Russia's
economy is buoyant, its industry seemingly booming and the financial crisis of
1998 almost forgotten. But is the recovery solid? James Schofield visited the
industrial region of Penza to investigate.
After a decade of catastrophic decline much of Russia's
dilapidated industry has creaked back into life since the financial crisis of
1998, when the government defaulted on domestic debt and the entire banking
Shares rise on fall of Kabul
Major stock markets on both sides of the Atlantic closed
higher on Tuesday on news that Afghan opposition forces have taken the country's
Wall Street's leading indexes rallied from the outset, giving
an extra boost to gains in London, Frankfurt and Paris.
In New York, the Nasdaq and Dow Jones built on their early
gains to close almost 3% higher at 1892 in the case of the tech-heavy Nasdaq,
and up 2% at 9,750 for the Dow.
The FTSE 100 index of blue chip stocks closed the day 2.5%
higher at 5277.
WTO members split over textile trade
The World Trade Organization ministers were struggling to
clinch agreements on agriculture, textiles and environmental issues in what
looked set to be difficult all-night negotiations on an agenda for new global
As deal-making entered its last crucial hours, there was a
danger the talks could flounder because of a hardline US position on textiles
and the EU's refusal to agree on a phase out of farm subsidies.
The WTO's 142 members appeared to be focusing on protecting
domestic farm and industrial interests despite appeals for flexibility from WTO
director general Mike Moore.
The United States was standing firm against such concessions,
with Portugal, Greece and Italy also insistent that their domestic textile
sectors should not be "sacrificed" at the WTO. But other nations in
the EU said they were ready to consider Indian and Pakistani demands as part of
an overall package.
Developing countries also voiced fears that EU calls for
negotiations on environmental issues could spur green protectionism on Western
China gets WTO membership
China won admission to the World Trade Organization (WTO), on
Saturday, securing an historic, unanimous approval from WTO countries after 15
years of tortuous negotiations.
The chairman of the WTO conference, Qatari Economy Minister
Youssef Hussain Kamal, banged a gavel to officially mark the WTO endorsement of