"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
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%
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
"On the whole the data show that growth had not
accelerated," said Dresdner Kleinwort Wasserstein economist Rainer
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
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
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
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
"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,"
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
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
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
The increase took the benchmark Selic interest rate
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%