17 - 30, 2001
Eurozone faces subdued growth
The European Central Bank (ECB) has slashed its forecast for
eurozone economic growth this year and next.
But the bank stresses that even though estimates have been
revised downwards, a gradual recovery is expected during 2002 and 2003.
It blames the growing gloom on the sharp deterioration in
global economic growth. Japan and the US have both now officially entered a
The bank also defended its often criticised policy over
interest rates, but gave no indication as to its future course of action.
Economic growth forecasts for the year 2001 were reduced to a
range of 1.3% to 1.7%, sharply down from previous estimates of between 2.2% and
The latest EU data suggests that growth was at a virtual
standstill during July, August and September.
The revised estimates for the year 2002 suggest that growth
could be even more sluggish next year.
But the ECB says the full year figures hide the gradual
improvement that is expected to materialise as the year goes on.
"This projected annual average growth rate must not be
misinterpreted since they mask the expected recovery in the course of
2002," the bank said.
And ECB economists are betting on eurozone growth picking up
to between 2% and 3% in 2003.
Some critics of the ECB - including the international
financier George Soros - say the eurozone economy would be in better shape if
the bank had cut interest rates more sharply in order to stimulate growth.
The ECB has cut interest rates just four times this year,
while the US Federal Reserve has aggressively implemented 11 cuts and the Bank
of England seven.
The bank's latest forecasts show inflation at between 2.6%
and 2.8% for 2001. This is above the bank's target of a 2% ceiling.
Japan's investment earnings soar
The value of Japan's overseas earnings far outweighed the
value of its payments to other countries in October — even though the value of its exports fell.
The country's current account surplus rose 14% during the
month from the previous year, despite yet another fall in exports, official
The sales of Japanese goods to other countries have fallen
every month since April, despite the country's historically weak currency which
makes its exports cheaper abroad.
Economists blame the weaker world economy for a 26% fall in
the trade surplus, with imports falling 4.6% and exports falling 9% during the
But a rise in the financial returns from investments in
non-Japanese businesses, shares and bonds boosted the current account surplus,
the Finance Ministry said.
"The net receipt in income has become a big factor
recently, particularly income from portfolio investment," said Nikko
Salomon Smith Barney economist Tomoko Fujii.
Earnings from overseas earnings is rising because Japan's
investors are moving their money out of the country.
This is because the domestic stock market is in a dire state
and because zero per cent interest rates means the return on bond investment is
In October, Japan's investors reversed a trend seen in
September when they were selling foreign bonds and shares.
"For now, the net income from these foreign investments
is making up, just barely, for the fall in the trade surplus," Mr Fujii
The current account is the broadest measure of trade in
goods, services and other transactions, whereas the trade surplus only includes
Japan's economy shrunk both during the April to June and the
July to September quarters, government figures revealed last week.
US trade deficit shrinks
The global economic slowdown has led to a sharp drop in the
US trade deficit and a fall in import prices, new figures have shown.
The US current account deficit — the
broadest measure of foreign trade — fell to
$95bn (£66bn) in the July to September period, from $107.6bn in the previous
This was the smallest gap since the final quarter of 1999.
Other figures also showed that US import prices fell once
again last month, helped by a fall in petroleum prices.
Import prices dropped 1.6% in November, after a 2.4% decline
the previous month.
The decline in the current account deficit reflects the
turnaround in the fortunes of the US economy.
For the whole of 2000, the current account deficit hit a
record $444.7bn, and some analysts began to worry that the gap could become
China grants insurance licences
China has granted five new licences to foreign insurers
including, for the first time, a Japanese life insurer.
The new licences are part of the wider market access China
has accepted in exchange for membership of the World Trade Organisation, (WTO),
which it joined this week after 15 years of tough negotiations.
"We're glad to be the first Japan life insurer to be
given a licence in China," said Nippon Life Insurance spokesman Wu Mengfei.
Insurance licences proved one of the most controversial
issues in China's WTO accession talks, sparking a row between the United States
and European Union which threatened to derail the drafting of final accords.
The euro hits home in the UK
Three years ago UK companies were complaining about the
combined strain of preparing for both the euro and the year 2000.
New Year celebrations were a no-no for beleaguered IT staff,
as they first prepared for the introduction of the euro in January 1999 and then
Y2K a year later.
Now all those hours of overtime may have paid off.
Many of the systems adjustments in 1999 appear to have put UK
companies in a strong position for the launch of euro cash in January.
IMF praises Russian reforms
An International Monetary Fund mission in Moscow has praised
Russia's economic progress.
During its regular visit to Moscow, the IMF mission discussed
the possible Russian response to the deteriorating world's economic situation.
The mission was impressed with the way Russia has pushed
ahead with institutional reforms and said this would boost its ability to handle
potential economic problems in the future.
IMF says in a statement that Russia's "large external
current account and relatively comfortable level of foreign reserves" would
enable Russia to survive "the less favourable [global economic]
US retail sales plunge
US retail sales in November recorded their steepest ever
fall, the Commerce Department has said.
The 3.7% fall in retail sales, the largest since records
began in 1992, followed a record 6.4% rise in October.
It was a much larger decline than most economists had
predicted, with slumping car sales the key factor.
Central bank warns on telecoms debt
The Bank of England has cautioned commercial banks against
advancing more money to debt-laden telecommunications companies.
In its latest Financial Stability Review, a six-monthly
health check of the UK economy, the BoE casts doubt on the ability of some
telecoms firms to take on the extra debt needed to finance their new generation
"Several of the larger firms need substantial funds to
roll out 3 networks and products, and it may become more difficult to syndicate
the required borrowing widely," the review states.
According to BoE Executive Director Alastair Clark, European
telecoms firms need another $150m-$200m to finish developing their new
Sales growth jumps to 13-year high
High Street sales staged a comeback in the November
pre-Christmas shopping period, taking growth to its highest level for 13 years.
UK retail sales were 7.1% higher last month than in November
2000, the Office for National Statistics said.
The figure, the highest since May 1988, followed stagnation
in sales growth in October, when the affects of the terror attacks in the US
were blamed for keeping shoppers at home.
Australia unemployment falls
Australia's jobless rate fell sharply in November after a
large rise during the previous month.
The fall took analysts by surprise as the country's
unemployment rate fell back below 7%.
In October, the rate had risen to 7.1%. In November, 4,100
new jobs brought it down to 6.7%.
Enron to start $6bn sell-off
The bankrupt energy giant Enron has said it plans to raise
$6bn (£4.18bn) from selling some of the remnants of its business, an amount
equal to almost half its bank debts.
UK unemployment rises
The UK unemployment rate rose again in November, official
figures have shown. It was the first time since 1992 it increased in two
successive months. The number of Britons claiming unemployment benefit rose by
4,800 to 959,100 in November, the Office for National Statistics said.
Italian banks to return tax breaks
Italian banks have to pay back billions of dollars received
in tax breaks, following a European Commission ruling on Tuesday that the tax
breaks they received were illegal.
European Competition Commissioner Mario Monti found that the
tax breaks — introduced to encourage
consolidation in the Italian banking sector — violated
rules on state aid.
It is unclear how much the banks will have to pay back — some estimates are that it could be as much as $2.5bn.
According to others, the sum will be lower than that as Italy
suspended the tax breaks once the European Commission started its investigation.
Oil giants to sell petrol in China
China's state-owned oil companies will retain control BP is
spearheading a massive push by international oil giants into petrol retailing in
The UK energy group has entered into a joint venture with
China's second biggest state-owned oil firm, Sinopec, to set up a chain of 500
petrol stations in the New Year.
Bamako lit up by dam start
The enormous Manantali dam in southwestern Mali has finally
produced its very first megawatt of hydro-electricity, 13 years after it was
So far, only one of the five turbines has been installed, and
when that is turning, it lights up the capital, Bamako, some 300 kilometres to
Gloom increases at Japanese firms
A key survey of business confidence in Japan has found that
companies remain extremely pessimistic about their future prospects.
The latest Bank of Japan quarterly 'Tankan' survey, which
questions almost 9,000 firms of all sizes, found that business confidence
dropped again over the last three months and is trailing close to a 3-year low.
"The severe conditions continue but I cannot ease my
grip on reform," said Prime Minister Junichiro Koizumi, who is pledged to
austerity measures to limit state spending and force banks to foreclose on
Mitsubishi asks Australia for more cash
The Japanese car firm Mitsubishi has asked the Australian
government for a 140m Australian dollars (£50; $72m) grant to upgrade
production lines at its Adelaide plant, a company official said.
The Australian government had already promised Mitsubishi
cash aid worth 200m Australian dollars for the factory, which employs 3,000
people and supports many thousands more at local suppliers.
Without the additional grant, the plant could face closure.