INTERNATIONAL

 

Nov 25 -Dec 01, 2002

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

WARNING ON WORLD ECONOMIC RECOVERY

A recovery in world economic growth could be delayed unless interest rates are cut further to boost confidence among consumers, businesses and stock markets, a report has warned.The message came in a report from the Organisation for Economic Co-operation and Development (OECD) the club of 30 of the world's richest countries.

 

"Forward looking indicators show that a solid recovery may be rather slow to materialise," the OECD said.

Economic growth across the world is predicted to remain weak well into next year, though by 2004 most regions should have recovered.

By then, the world economy should be growing at a rate of 4%, up from a predicted growth rate of 1.5% this year and 2.2% in 2003.

The US central bank, The Federal Reserve, which has already cut interest rates to their lowest level in 41 years, should be prepared to act again if need be, the OECD suggested.

In Japan, interest rates should remain close to zero.

While in the eurozone where "growth of output has remained very modest, with Germany and Italy particularly sluggish," interest rates should come down soon.

"In the euro area the main refinancing rate is assumed to be lowered by 0.5 percentage points over the coming months, and to start gradually moving up later in 2003," the OECD said.

The US is set to become one of the fastest growing economies among the world's rich countries, the OECD predicted.

By 2004, US economic growth should reach 3.6% compared with 2.7% in the eurozone and 0.9% in Japan.

The UK was expected to slightly lag growth in the eurozone with 2.5% growth in 2004.

MORE ASIAN REFORMS NEEDED, SAYS OECD

There is more trouble in store for Asia in the coming year, with only Australia escaping the ongoing drag of the world's feeble economic recovery, the Organisation for Economic Co-operation and Development has warned.

The Paris-based organisation's annual World Economic Outlook spelled out a number of pitfalls facing China, Japan, South Korea and other countries, and said that only a commitment to structural reform can turn them around.

The worst hit, as the OECD made clear in a separate report released, is Japan, where "anaemic" growth of less than 1% is the best that can be hoped for without a root-and-branch attempt to tackle bad debts and deflation.

But even China, long seen as the region's potential powerhouse, will see growth fall away from the 7%-plus it is achieving this year unless its weakly-regulated banking sector cleans up its act.

And South Korea, also a success story in relative terms through the tough times of the past couple of years, is in danger from spiralling home prices and double-digit pay claims.

Only two states in Asia Japan and South Korea are actually members of the 30-nation group.

But the report pointed out that the hard work put in by Singapore, Taiwan and Hong Kong since the disastrous Asian currency crash of 1997-8 put them ahead of their OECD member neighbours.

And in general, the report pointed to a dedication to the so-called "knowledge economy" lacking elsewhere.

South Korea, for instance, is now a world leader in internet access, and hopes to give every home broadband access by 2005.

Despite a drought afflicting the nation, growth of 3.5% this year and 3.75% in 2003 is plausible, it said.

GERMAN RECOVERY REMAINS FRAGILE

The German economy continued on a fairly flat growth path during the July to September quarter and analysts have predicted that growth will remain slow in the year ahead.

But recession fears were played down by economists, even though investment by German companies is still falling.

Strong spending by consumers helped the German economy expand by 0.3% during the quarter, up from 0.2% during the previous three month period, according to Federal Statistics Office data.

"On the whole the data show that growth had not accelerated," said Dresdner Kleinwort Wasserstein economist Rainer Guntermann.

JAPAN ANNOUNCES EXTRA SPENDING

The Japanese government has announced plans to inject more cash into the economy in order to fuel a recovery. The Cabinet has approved the government's plan to spend an extra 3 trillion yen (15.5bn; $24bn) to help lift Japan out of its economic crisis which has seen its stock market fall to a 19-year low.

The spending plan was quickly denounced by analysts as insufficient.

An extra 1.5 trillion yen spent on public works and a further 1.5 trillion yen spent to create jobs and help small firms should help Japan recover, the government hopes.

But reversing the shrinkage of Japan's economy and its falling prices would require much greater efforts, said Mr Shimamoto.

Japan's economy has been in slowdown since the early 1990s. Its banking sector is burdened by a mountain of bad debts which put a squeeze on credit for investment in the private sector.

UK BANK CHIEF WARNS ON HOUSE PRICES

The Bank of England has issued its starkest warning yet that the UK's housing market could be heading for collapse.

Mervyn King, the Bank's deputy governor, said that sustained house price growth at a time of global economic weakness could lead to a "large negative demand shock" later on.

"Beneath the surface of stability in the UK economy lies a remarkable imbalance between a buoyant consumer and housing sector on the one hand, and weak external demand on the other," Mr King said in a speech at the London School of Economics.

ANGER MOUNTS AS GERMAN TAXES RISE

The German Cabinet has approved a cocktail of spending cuts and tax rises, easing concerns in Brussels over state finances, but risking a further slide in public approval ratings.

The Cabinet backed measures that will introduce a capital gains tax of 15% on profits from personal share and property investment, raise levies on heating oil, and cut a subsidy for Germans building their own homes.

The package, which will be backed by a further 32.4bn euros in government borrowing in 2002 and 2003, is aimed at balancing the books as the continuing economic downturn hits tax revenues.

The level of the budget deficit, set to touch 3.8% of Germany's economic output this year, has earned the country condemnation by the European Commission.

ABDULLAH GUL TURKEY'S NEW PREMIER

Abdullah Gul, a strong advocate of Turkish European ambitions and close US ties, was installed as prime minister as his party announced sweeping plans for economic and social reform to meet EU standards.

Gul takes office with NATO member Turkey facing critical weeks. Its crisis-plagued economy is poised between recovery and relapse and it is pushing hard to win a date for European Union entry talks at an EU summit next month.

SUMMIT MARKS NEW RUSSIA-NATO CHAPTER

Nato leaders are entering of their summit in Prague, with attention turning to the alliance's relationship with Russia.

Russian Foreign Minister Igor Ivanov said Moscow's only concern about plans to enlarge Nato was that prospective members had not joined the treaty setting limits on conventional forces in Europe.

He called on Nato to confirm its new relationship with Moscow as equal partners.

Russia is playing down its objections to the alliance's eastward advance, in favour of greater co-operation in the fight against terrorism.

Nato asked Bulgaria, Romania, Estonia, Latvia, Lithuania, Slovakia and Slovenia to join in what will the alliance's biggest expansion in its history.

RICH AND POOR SEEK MEETING OF MINDS

Governments from countries both rich and poor are gathering in India for talks about curbing terror funding, boosting trade and relieving poverty.

The Group of 20 19 countries, as well as the European Union, the International Monetary Fund and the World Bank meet once every year to discuss the big economic questions of the day.

The wide-ranging agenda matches the disparate status of those represented at the meeting, from poverty-stricken Argentina to the wealthy US and from South Africa in the south to China in the north.

HK'S RICHEST WOMAN LOSES WILL BATTLE

A Hong Kong court has ruled that a will which helped make Nina Wang one of Asia's richest women was a forgery.

Ms Wang, known for her pigtails and exuberant dress-sense, will now have to hand back at least part of her $2.4bn fortune, to her father-in-law.

BROWN WARNS OF ECONOMIC SLOWDOWN

Brown said Britain cannot avoid the global slowdown. Britain will be hit by the sluggish global economy, Chancellor Gordon Brown has warned in an interview, in what is being seen as a sign that he will cut the Treasury's economic growth forecasts.

Mr Brown gave his assessment of the economy in an interview with the Financial Times newspaper ahead of next week's pre-Budget report.

"This great trading nation, which has built its success over a long time through its ability to export and trade, cannot be unaffected by a 13% fall in the growth rate for world trade between 2000 and 2001 and by the slow recovery of world trade since then," he said.

The FT said his remarks indicate the pre-Budget report will contain bad news, including a downward revision of economic growth and higher government borrowing.

NIGERIA BANKS ON $21 OIL PRICE

Nigeria's president Olusegun Obasanjo has unveiled Nigeria's 2003 draft budget, basing revenues on an average oil price of $21 a barrel.

The budget has been slimmed down by about 30% to 765bn naira ($6bn).

Mr Obasanjo has already said that parliament cannot afford the previous budget and is determined to prove to international creditors that the country will spend within its means.

Administrative costs will be reigned in by creating a smaller but more skilled and productive civil service, he said.

Africa's second largest economy is targeting real economic growth of 5% in 2003, and inflation of 9%.

ZIMBABWE SPLITS INTEREST RATE IN TWO

Zimbabwe's lopsided economy not only has two exchange rates - it is to have two interest rates as well.

The Reserve Bank announced that its main banking rate of 57.2% was being suspended immediately.

BRAZIL WARNED TO TREAD CAREFULLY OVER DEBT

Brazil's huge debt burden still threatens to spoil things for new president Luiz Inacio Lula da Silva, the Organisation for Economic Co-operation & Development has warned.

In its six-monthly World Economic Outlook, the 30-member Paris-based organisation said that the $260bn Brazil owes the rest of the world risks destabilising Latin America's largest economy.

FRENCH FARMERS STARVE SUPERMARKETS

Several thousand farmers have erected blockades outside food warehouses around France to demand a better deal from supermarkets that buy their foods.

They say the supermarkets are raising prices while paying farmers less and less.

The government, which could be facing its first key test since coming to power six months ago, has called emergency talks in Paris to resolve the row.

ECONOMIC WEAKNESS PERSISTS IN FRANCE

Economic growth of just 0.2% during the July to September quarter has dampened hopes of a quick recovery in France.

Lack of investment by companies curbed growth even though consumer spending remained strong, national statistics showed.

"These figures are worse than expected and prove that the French economy is deteriorating," said CCF economist Nicolas Claquin.

Economists had expected sharper growth of 0.3%.

US CALLS FOR REFORM IN INDIA

India must remove barriers to trade and make sure property rights are protected in order to attract more investment from abroad, according to a senior US official visiting the country.

US Treasury Secretary Paul O'Neill insisted India's economy would grow faster if the country would cut tariffs to encourage trade.

India, he said, is rated among the most restrictive countries in the world in terms of its trade and investment rules.

BRAZIL BOOSTS RATES TO FIGHT INFLATION

Brazil is to raise its interest rate by one percentage point less than a month after the presidential election, in the hope of moderating rising inflation.

The central bank in South America's biggest economy announced its decision the second such rise in two months after its Monetary Policy Committee (Copom) met for the first time since the poll.

The increase took the benchmark Selic interest rate to 22%.

UK SHOPPERS CARRY ON SPENDING

UK retail sales rose more quickly than expected last month, in a sign that the consumer spending boom is still going strong.

The Office for National Statistics (ONS) said that retail sales volumes rose by 0.8% in October from September, and were up by 6% compared with the same period one year earlier.

The annual growth rate was the strongest since April this year, comfortably outstripping analysts' forecasts of a 5% increase.