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 5. TRADE  6. GULF



April 29 - May 05, 2002


The world is set for a strong economic recovery next year, according to a leading international organisation.

The OECD, which represents the world's 30 richest countries, says that "confidence has returned more rapidly than expected" to the world's economies, especially in the United States, despite the 11 September terrorist attacks.

And it expects "growth momentum" to return, with overall economic growth among rich countries rising from 1.8% this year to 3% in 2003.

But the recovery will be strongest in the United States, where growth could reach 3.5% next year, weaker in Europe and especially weak in Japan, whose economy is still declining.

And it warns that rising oil prices, or a sharp rise in interest rates while consumers still have large debts, could still derail the recovery.

The OECD warns that there are still risks for policymakers, even in the United States, where the sharp cuts in interest rates and increases in government spending helped make the recession short-lived.

The "timing and speed" of the withdrawal of these stimulants to growth remain crucial. Interest rates should only be raised gradually, while the Federal budget should return to surplus to ensure "a more balanced distribution of risks."

And it projects that the US will have an even bigger trade deficit in 2003, which could put pressure on the dollar and lead to foreigners withdrawing investment in the US, especially if the stock market continues to fall.

And it warned that the growing trade gap could exacerbate protectionist pressures, as evidenced by the current trade war over steel imports.


The European economy is starting to recover, powered by returning confidence and surging trade, the EU has said.

According to the European Commission's spring economic forecasts, growth should start to accelerate in the second half of this year.

"Private consumption holds the key for the recovery gaining momentum," the Commission said, arguing that much spending will have been postponed in the wake of 11 September.

In the meantime, the Commission warned that unemployment the EU's main economic problem could rise.

Overall, the Commission now expects eurozone gross domestic product (GDP) growth to slow to 1.4% this year, less than half the average seen in the second half of the 1990s.

But growth should more than double to 2.9% in 2003.

This forecast is largely based on current predictions that global trade should grow by 7% in 2003, a far stronger performance than seemed likely late last year.

The combination of robust consumer spending and lively global trade will have the disadvantage of blocking progress in fighting inflation.

Eurozone inflation, although far from high at 2.2% annually, is the main factor behind Europe's relatively high interest rates.

The trickiest economic problem remains Germany, which has slipped to the bottom of the European growth league.

Unemployment has risen beyond the 4 million mark, contributing to a Europe-wide surge in joblessness.

The Commission now predicts that eurozone average unemployment will rise to 8.5% this year, before settling back towards 8.1% in 2003.

High unemployment, which is almost twice as severe in Europe as in the UK and United States, is the key issue in a number of pending election battles around the continent, including Germany and France.


The US has signed a trade agreement with a regional organisation of eight West African countries which it hopes will lead to greater commercial ties between the two sides.

Officials in Washington said the deal would help increase trade with the West African Economic Monetary Union (WAEMU) a group of countries who all use the west African CFA franc as their national currency.

That in turn, they said, would create jobs and investment and so act as a way of improving the lives of Africans.

Total two-way trade between the US and the WAEMU last year rose by 12% to more than $760m (524m).

But business executives in the US said there were still many barriers to growth and investment.


Japanese Prime Minister Junichiro Koizumi is attempting to burnish his image as a reformer with controversial proposals to deregulate the post office, long a pillar of support for his party.

He intends to introduce four bills to parliament on Friday that could eventually lead to privatisation of the post office.

Powerful members of Mr Koizumi's governing Liberal Democratic Party are deeply opposed to the changes.

Just one year after being swept to office on a wave of public euphoria, Mr Koizumi's political fortunes are at a low ebb.

His approval rating has fallen below 50%, and few now see him as the man to rescue Japan from its political and economic torpor.

His proposals to deregulate the post office are meant to send a signal that he has not given up on reform.


Now that the Budget is out of the way, the Chancellor can turn his full attention to the question of the UK's euro membership.

He has pledged to say by the middle of next year whether he believes that the UK meets the economic tests that he has set as a prerequisite for membership.

But many economists believe that the nature of Mr Brown's latest Budget, which is relying on faster economic growth as well as higher taxes to finance a big expansion of public spending, may be incompatible with a push towards early euro entry.

Following eurozone rules could limit the Chancellor's plans to boost public spending and lead to lower growth.

One reason that Mr Brown may be reluctant to join the euro is the relative performance of the Bank of England and the European Central Bank.


The city of Hong Kong has lost its long-held position as the best place to do business in Asia, according to a new global league table comparing economies around the world.

Instead the rival city of Singapore is now ranked higher in the annual survey complied by the business consultancy, the Economist Intelligence Unit (EIU).

The EIU cited concerns over Hong Kong's political environment, and worsening economic climate as reasons for downgrading it.

Hong Kong has dropped from fifth to eleventh place in the global league table, while Singapore has taken over as the highest ranked Asian economy in ninth place.

The results of this survey provide a rude shock for Hong Kong which has for many years been ranked as the best business location in Asia.


Bangladesh's Export Promotion Bureau has charted a plan for promoting the country's products in the world market, in a bid to give a much-needed fillip to sluggish external trade, according to official sources.

Amid a worldwide recession, the bureau will take part in eight international trade fairs in countries that include the U.S., Germany, Belgium, Japan and Malaysia, in the next fiscal year.

It will also hold nine single-country fairs in Saudi Arabia, South Africa, Spain, the UK and the U.S. The plans were approved at a meeting of the bureau's governing council headed by Commerce Minister Amir Khosru Mahmud Chowdhury.


Banks in Argentina are to open for five hours for limited operations on Friday for the first time this week.

They were closed after a series of court rulings allowed Argentines to withdraw their cash, leaving some banks very low on reserves.

But Congress has now passed a law making it more difficult for people to get their money.


Russia could seek to divide out the Caspian Sea's oil and gas riches in a series of bilateral deals if an overall settlement proves elusive, President Vladimir Putin has said.

His comments came a day after a presidential summit of the five littoral nations broke up without agreement on sharing Caspian resources.

On his way back to Moscow he also had talks in the Russian port city of Astrakhan, urging military exercises centring on the inland sea for the first time in a decade.


Unemployment in Japan has fallen to its lowest level in seven months, according to government figures.

The seasonally adjusted unemployment rate fell to 5.2% in March from 5.3% in both January and February and from a 50-year record of 5.5% in December, according to the Labor Force Statistics Office.


London, the FTSE 100 index of leading shares had dropped 1.7% to 5,128.2 by mid-morning, its lowest level since 1 March, though by 11.20 local time (1020 GMT) it had recovered slightly to stand at 5134.4.


DaimlerChrysler: The automotive giant unveiled a quarterly operating profit of 1bn euros (616m; $893m) or 3.1bn euros when adjusted for various one-off items compared with a 600m-euro loss in the same period of 2001.

Autonomy: The Cambridge-based firm said profits for the three months to March were $4.2m (2.9m), up from $2.7m (1.9m) the previous quarter.

AOL: Media giant AOL Time Warner has reported one of the highest quarterly losses in history, after making a record $54bn (37bn) write down. The firm announced it had lost $54.2bn in the first three months of the year.

AT&T: The company's losses ballooned to $975m (673m) from $192m a year earlier after sales fell 11% compared with a year earlier to $12.02bn.

Egg: Egg reported pre-tax profits of 4.1m for its core UK operations for the first three months of 2002, reversing losses of 37.2m in the same period a year ago and beating analysts' expectations for profits of 3m.


The Dow Jones index of leading US shares has clawed its way back after dipping below the key 10,000 mark for the first time in nearly two months.

The Dow fell 1% during the first hour of trading on Thursday to 9,930.51, dragged lower by disappointing company results.

Gold, seen as a safe haven during times of equity market volatility, traded at a two-year high of $308 an ounce as nervous shareholders looked for less risky investments.


The rate of economic growth in Japan fell 4.8% during the last three months of 2001 compared with a year earlier, according to revised gross domestic product (GDP) figures.

The revision, worse than the previous estimate of 4.5%, was due to weak investment by companies, sending a signal about continuing problems ahead for the country's economy.

Growth slowed 1.2% during the three months to December when compared with the previous quarter, the revised figures showed.

The figures confirmed that the recession hit economy shrunk from April to December, the worst nine month contraction suffered by Japan yet. GDP fell 0.5% from July to September, having fallen 1.2% during April to June.


Argentina's President Eduardo Duhalde has said that his country's only way out of its worst economic crisis is to live up to its international agreements and continue seeking help from the International Monetary Fund (IMF).

He was talking after signing what some are describing as a landmark agreement with the country's powerful provincial governors to undertake reforms demanded by the IMF to qualify for a bail out.


Gordon Brown was upbeat on the future of the UK economy as he testified to Parliament on his April Budget which raised taxes to fund improvements in the National Health Service.

He said he was confident that economic growth would be stronger than previously thought, sticking to his forecast of 3-3.5% growth next year.

Mr Brown told the Treasury select committee that the higher growth in 2003 would make it easier to raise taxes (such as National Insurance) without jeopardising the economic recovery.


The price of goods made in South Africa climbed sharply last year, as the rapid fall in the value of the rand meant businesses had to pay more for their materials.

The gain of 14.1% in the producer price index for the 12 months to March is the biggest one-year rise since January 1991, according to Statistics South Africa.

It raises the spectre of a further rise in interest rates, which the Reserve Bank of South Africa has already lifted by 2 full percentage points this year to 11.5%.


The Japanese car maker Nissan Motor has announced plans to hire 4,000 new workers by March 2003.

"This is part of our strategy to ensure stable growth and increased competitiveness," a spokesman said.