Jan-28 - Feb-03, 2002
US budget surplus gone
The huge US government budget surplus — which one year ago
was estimated at $5.6 trillion over 10 years — is set to disappear as the
effects of the economic slowdown and the Bush administration tax cuts take
New estimates by the Congressional Budget Office (CBO) show
that most of the projected surplus will not now materialise.
The new estimate suggests that the total surplus will only be
$1.6 trillion — and nearly all of that will be a surplus that the social
security trust funds are obliged to build up to meet future obligations.
The CBO says that slower growth will shave $1 trillion off
its estimates of a budget surplus in the next decade, while increased spending
commitments will add more than $500bn.
And debt interest payments are forecast to increase by
But the biggest contribution to the declining surplus are the
tax cuts, which amount to $1.3 trillion.
In all, the CBO says that Congressional actions have made up
60% ($2.6 trillion) of the revisions.
And it points out that in the next two years, the overall
Federal budget is now expected to go into deficit for the first time in four
years a dramatic turnaround from projected surpluses of more than $300bn made
earlier in the year.
As budget hearings opened, Democrats attacked the Bush
administration's handling of the economy.
"The president told us and told the American people that
we could have it all," said the budget panel chairman, Senator Kent Conrad.
"He was wrong by a country mile."
Meanwhile, the Bush administration is expected to propose
next month a Federal budget that runs an even bigger deficit of nearly $100bn to
cover the costs of the war against terrorism.
UK braced for gloomy numbers
The latest set of UK economic data on Friday morning is
expected to shatter the perception that the UK is immune to the global economic
The gross domestic product (GDP) figures for the last three
months of 2001 will reveal a sharply slowing economy as UK manufacturing reels
from the loss of export markets in the US and elsewhere.
Leading economists, including the National Institute for
Economic and Social Research, a think tank, say that the UK economy probably
stagnated in the aftermath of 11 September.
The news will be a further headache for the government, and
will pile pressure on the Bank of England to cut the cost of borrowing yet
Economists at City firm Capital Economics said: "There
is even a chance they will show the economy shrinking for the first time in a
Even if the figures from the Office for National Statistics
show the UK has avoided this, there will be widespread dismay at the dramatic
turnaround in the economy's fortunes.
GDP figures for the previous quarter, covering July to
September, showed the economy growing at an annual rate of 2.2%.
This was only marginally below what the Treasury considers
the to be UK's long-term trend rate.
Manufacturing has been in the doldrums for over a year.
This week the Confederation of British Industry warned that a
further 50,000 metal-bashing jobs could go in the first few months of this year.
And there are signs that the service sector, which now
accounts for nearly 80% of the economy, is also slowing fast.
Only the construction industry continues to power ahead.
Fed chief: US is on the mend
The US economy seems finally to be climbing out of recession,
Federal Reserve chairman Alan Greenspan has said.
Mr Greenspan's comments, made in testimony to the US Senate's
Budget Committee, were more upbeat than those in a speech in San Francisco on 11
Then, Mr Greenspan had warned that "significant
risks" continued to threaten recovery in the short term.
There was no reference to the risk this time, a decision
which some observers are taking as a hint that the Fed's next meeting — taking
place next week — could leave interest rates where they are after 11 cuts in
Mr Greenspan again said there had been a "significant
cyclical adjustment" last year, and noted the added pressure placed on the
economy in the aftermath of 11 September.
Scots economy 'at a standstill'
The Scottish economy is growing much more slowly than the
rest of the UK, according to an official study.
The Scottish Economic Report, issued by the Scottish
Executive, says that the economy is at a virtual standstill.
And a separate government study has suggested that Scotland
has been more dramatically affected by the events of 11 September than the rest
The Scottish Economic Report says the country's economy is
growing at just 0.3% year-on-year.
This compares to a figure of 2.5% for the UK as a whole.
Manufacturing, which accounted for 23% of Scottish national
output, fell by 4.8% — compared to a UK-wide rise increase of 0.6%.
One of the few bright spots is the financial services
industry, which is still growing at nearly 10%.
Japan suffers export slump
Demand for imports has soared as exports plunged Japan's
trade surplus, a key indicator of its economic health, shrank by more than
one-third in 2001 to its lowest level in 18 years.
The news, which represents the 18th consecutive monthly fall
in the surplus, underlines the weakness of Japan's key export industries.
Concern over falling Japanese exports recently persuaded the
government to move towards a weak-yen policy, which has seen the currency fall
to three-year lows against the US dollar.
If the current weak yen persists, as many economists predict,
the trade surplus should start to widen again this year.
By the end of last year, the total trade surplus stood at 6.6
trillion yen (£34.5bn; $49bn), with exports down 5.1% to 49 trillion yen and
imports up 3.6% to a record high of 42.4 trillion yen.
Bank chiefs unanimous on rate freeze
Bank of England gurus in charge of setting interest rates
voted unanimously in favour of a rate freeze this month.
All nine members of the Bank's monetary policy committee (MPC)
voted in favour of keeping the base rate at 4.0%, minutes of their January
meeting have revealed.
Speculation had grown in the run up to the meeting that some
committee members might urge a rate rise to stop consumer spending getting out
But on Wednesday the CBI called for another quarter-point cut
in rates after its latest survey of manufacturing firms showed both orders and
Last year, the Bank cut UK interest rates seven times, the
last reduction coming in November, as it tried to prevent the economy from
falling into recession.
Ericsson: Ericsson, the world's second-biggest mobile
phone maker, has reported a heavy annual loss, but said that strong sales of new
technologies promised to drag it back into profit soon. The firm made a net loss
of 21bn kronor (£1.4bn; $2bn) in 2001.
Kodak: Kodak reported a net loss of $206m for the
October-December quarter, compared with a net profit of $194m in the same period
a year before.
McDonald: McDonald's reported net earnings of $271.9m for
the fourth quarter, down from $452m in the same period the previous year.
ExxonMobil: The company said profits from October to
December 2001 fell to $2.88bn, from $5.12bn a year earlier.
Boeing: The Chicago-based company said it earned $722m in
the fourth quarter of last year but was taking a charge of $622m "primarily
related to September 11 impacts on commercial airplanes".
Merrill Lynch: The firm reported a loss of $1.26bn, or
$1.51 per share, for the October to December quarter and a restructuring charge
Johnson & Johnson: Worldwide sales climbed 15% to
$8.4bn during the last three months of the year, bringing the full year sales
growth to 11%. Net income excluding special charges jumped 23% to $1.2bn during
the last three months of the year.
Blair on attack over public sector
Prime Minister Tony Blair is to give a keynote speech
defending public service workers, amid a bitter running row over the state of
Mr Blair will accuse his opponents in the Conservative Party
of trying to denigrate everything about public services, and will champion
workers' rights to be defended from attacks they regard as unjustified.
Uganda begins power project
Uganda has started construction of a $550m (£386m) dam on
the river Nile, which it hopes will boost the country's electricity generation
Uganda's President Yoweri Museveni launched the construction
of the Bujagali hydroelectric power project, which is 80 kilometres east of the
country's capital Kampala.
Donors pledge $4bn for Afghans
World leaders on Monday pledged nearly four billion dollars
at an international conference to help pull Afghanistan out of its dark years of
rubble, famine and misery.
Interim Afghan leader Hamid Karzai, seeking to rebuild his
country from scratch after two decades of war, issued an emotional appeal for
help to delegates from 60 other countries.
"I'm here as the citizen of a country that has had
nothing but disasters, war, brutality and deprivation for so many years,"
he said at the start of the two-day gathering, attended also by US Secretary of
State Colin Powell and UN Secretary General Kofi Annan.
Pakistan pledged 100 million dollars over five years and
Saudi Arabia, one of the co-chairs of the meeting alongside Japan, the US and EU,
pledged 220 million dollars over three years. Iran promised 560 million dollars
over five years
Taiwan names new money ministers
Taiwanese President Chen Shui-bian has appointed a new
economics minister and finance minister as part of a cabinet reshuffle aimed at
rescuing it from its worst economic slump ever.
Airline executive Christine Tsung, 53, has been named
economics minister, and Lee Yung-san, the chairman of the International
Commercial Bank of China — one of Taiwan's top 10 banks was appointed finance
South Africa loan row rumbles on
The development of the microlending industry in South Africa,
where 60% of the population is without a bank account, remains under the
spotlight a week after a profit warning from one of the country's largest banks.
Microlending refers to small unsecured loans made at high
interest rates to people who don't have assets to guarantee repayment.
Former EU chief urges UK euro drive
Tim Sebastian Former European Commission vice president Sir
Leon Brittan has warned that a refusal to join the euro could damage the UK's
long term economic position.
Speaking in an interview Sir Leon said he believed the UK
should conquer its cold feet and adopt the euro for the sake of the country's
Turkmenistan hopes for oil bonanza
Very few people from the West have ever visited Turkmenistan,
fewer still will know much about it. Yet this small country, situated between
Iran, Afghanistan and Russia, is actually very significant, at least
potentially. It has huge reserves of gas and oil.
Turkmenistan, a former Soviet republic, became independent in
October 1991. The capital is Ashgabad, which nestles in semi desert just north
of the Kopet Dag mountains which form the border with Iran.
Turkmenistan though is its natural resources — especially
oil and gas. Indeed it is thought that it has the fourth largest gas reserves in