Feb-04 - Feb-10, 2002
Britain to escape recession
The UK should avoid a major economic slowdown this year,
according to a leading think tank.
The National Institute for Social and Economic Research (NIESR)
has forecast that the UK economy will grow by 2.1% in 2002, compared to just
1.4% in the eurozone and 1.2% in the United States.
But it predicts a more widespread economic recovery by 2003,
when the US economy will grow by 3.7% and the eurozone by 2.6% — the same rate
as the UK.
The Japanese economy remains weak, with output expected to
fall by 0.8% this year — the second year in a row of negative growth.
The reason for the better performance of the UK economy is
higher government spending, as well as strong consumer spending boosted by lower
interest rates, according to the NIESR.
Nearly half of the increased output in 2002 is expected to be
accounted for by increased government consumption — in contrast to most other
industrial countries, which are cutting back on public spending due to budget
The think tank argues the government has scope to increase
spending in the next few years.
They say that under the government's fiscal rules, it has
accumulated a surplus of £50bn over the past five years which could be set
against any future spending increases, even if it meant a temporary deficit.
Martin Weale, NIESR's director, told the BBC that he was
worried that the Chancellor would choose to disregard this surplus.
The Treasury rules say that the budget, or current spending,
should balance over the economic cycle.
But if the Treasury chose to count the current slowdown as
the end of an economic cycle, then that surplus could no longer be used.
US economy shows unexpected strength
The US economy grew 0.2% in the last three months of 2001,
official data has shown. The figure defied most economists' expectation that the
world's largest economy would contract by up to 1%.
Wall Street analysts attributed the unexpected strength of
the economy's performance to higher government spending and enthusiastic
consumer take-up of zero percent financing deals offered by carmakers.
They also pointed to the rapid depletion of stocks in
factories and warehouses while companies tightened their belts to weather the
downturn. Firms had now reached the point where they needed to buy new goods and
produce more, thus fuelling the recovery.
The data for the last quarter of 2001 contrasted with the
slump suffered between July and September, when the US economy shrank 1.3%.
A second consecutive quarter of contraction would have
satisfied the common technical definition of a recession.
However, the figures are just the "first cut" of
the raw data for October to December, and are based mainly on reports from
The previous set of GDP figures was revised downwards several
times, and the US economy still faces the threat of a technical fall into
Looking at a wider set of economic measures an official panel
of senior economists, the National Bureau of Economic Research, declared last
November that the US entered a recession in March 2001. On Wall Street the
figures were greeted with relief.
US keeps interest rates unchanged
The US central bank, the Federal Reserve, has left interest
rates unchanged at 1.75%, saying signs for an economic recovery were
The decision — widely anticipated by Wall Street — was
prompted by a slew of positive economic data suggesting that the US economy was
recovering quickly from a slump in the second half of 2002.
The Federal Reserve said "signs that weakness in demand
is abating and economic activity is beginning to firm have become more
Any expectations of a further rate cut had been quashed by
Federal Reserve chairman Alan Greenspan in an upbeat speech last Friday, in
which he pointed to signs that the economy was improving.
EU raps Berlin and Lisbon on budgets
The European Commission has voted to issue a formal warning
to Germany and Portugal over the size of their budget deficits.
The European Union's executive body voted to uphold rules
that EU nations must not overstep a maximum allowable deficit of three per cent.
The Commission has never before voted in favour of formal
warnings. Its recommendation must now be considered by a meeting of EU finance
ministers on 12 February.
Neither Germany nor Portugal has yet breached the 3% deficit
limit but both are at risk of doing so this year, prompting the commissioner for
monetary affairs, Pedro Solbes, to ask for the warning.
East Europe rate cuts promise boost
Poland, the region's biggest economy, cut its rates on 30
January, by a whopping point-and-a-half to 10%.
Last week, neighbouring Hungary and the Czech Republic did
the same thing, taking rates in every major economy to post-communist record
While most people see cutting rates as a way of giving the
economy a temporary jolt, for Eastern Europe, it is changing their whole way of
The higher they were, the faster they have fallen.
Poland, the region's keenest cutter, has seen interest rates
halve in the past 12 months, to just 10% this week.
That takes Polish rates just a point above Hungary's, but
still way over those in the Czech Republic, where earlier, deeper cuts have
taken them down to 3.5%.
Lithuania economy posts strong growth
Lithuania enjoyed healthy economic growth last year, its
strongest performance since 1997.
According to the preliminary calculations of the National
Statistics department, the economy grew 5.7% in 2001, boosted by industry,
construction and trade in the last three months of the year.
The fourth quarter growth was 7.9% on an annualised basis,
compared to 3.9% a year ago.
"We see a gradual improvement of domestic demand (and)
the export sector despite cooling European markets. These are the main factors
why we saw very good development through 2001," said Veikko Maripuu, head
of research at Suprema.
The government predicts a slower growth of 4.0% in 2002, caused by an
economic downturn in European Union, the main Lithuanian trade partner and
Donors' team in talks
A team of the World Bank and International Monetary Fund
experts began talks with Afghan officials on Monday on ways to help revive the
country's shattered economy.
Buoyed by pledges of $4.5 billion in aid made at a donor's
conference in Tokyo last week, Afghanistan's interim government is hoping a
massive cash injection will kick-start the economy and provide an alternative to
the years of conflict the country has endured. But the World Bank and IMF
officials say it is important that money spent on reconstruction is not
squandered, and they want to closely manage development projects and
Crossair launches new airline
The Swiss Government and private investors have pumped in 2.7
billion Swiss franks to launch a new brand airline, Swiss, to be operational
from April 1, 2002, officials of Crossair, Swiss Air's European arm, announced.
Argentines queue for dollars
Thousands of Argentines have been queuing outside banks and
money changers trying to buy US dollars ahead of what they expect will be plans
to devalue the national currency.
The government is due to release its new emergency economic
strategy on Saturday, and many people believe that devaluation is inevitable.
Alcatel: The French telecoms equipment maker Alcatel
posted a record loss of 4.96bn euros ($4.2bn; £3bn) for 2001, thought by
analysts to be the biggest ever reported in France.
AngloGold: Although gold production was almost 4% less,
headline earnings rose 13% to $286m (£202m) during 2001 compared to the
AOL Time Warner: AOL Time Warner, the US media giant, has
reported a $1.8bn net loss for the fourth quarter of 2001. It compared with a
$1.1bn net loss in the same period a year earlier.
H&M: Hennes & Mauritz has reported a 43% surge in
pretax profits for the 12 months to the end of November 2001. Pretax profits
were 5.7bn Swedish kronor ($538m), beating analysts' expectations of 5.4bn
Northern Rock: The company said on Wednesday that full
year pre-tax profits for 2001 rose by 18% to £295.2m, while total lending
soared by 39% to £8.9bn.
Share prices continue slide
The UK's main share index fell back further towards the 5,000
level on Wednesday, after a big drop in US shares the previous day hit
By the close the FTSE 100 index of leading shares was down
42.1 points at 5089.3.
On Tuesday the FTSE fell 92.2 points — its biggest drop
since early December — while in the US the main Dow Jones index slumped 2.5%
On Wall Street on Wednesday the Dow made a cautious start,
and by early afternoon it was down 9.55 points at 9608.69.
Infineon looks at Hynix tie-up
The long saga of consolidation in the chip industry has been
further muddied by news that German chipmaker Infineon is talking to South
Korea's Hynix about a possible tie-up.
Hynix, badly hobbled by $6bn in debt, has for months been in
on-again, off-again discussions with Micron, the US company and world number two
in the memory chip market.
Reprots suggest the two are deadlocked over a price, with
Micron offering around $3bn and Hynix' creditors hoping for something closer to
IMF tells Argentina to cut spending
The International Monetary Fund (IMF) has returned to
Argentina to discuss the framework of a new financial aid package for
cash-starved government in Buenos Aires.
The IMF officials are expected to urge the government to make
spending cuts a cornerstone of its economic recovery plan.
Bush promises to defeat recession
George W Bush has laid out an economic agenda in his State of
the Union speech that promotes economic security.
Invoking American determination to surmount its national
security worries as well as its economic pains, Mr Bush said: "We have
clear priorities and we must act at home with the same purpose and resolve we
have shown overseas."
"The way out of this recession, the way to create jobs,
is to grow the economy by encouraging investment in factories and equipment and
by speeding up tax relief so people have more money to spend," Mr Bush said
in calling on Congress to pass an economic stimulus package.
"We will prevail in the war, and we will defeat this
Africa infrastructure fund grows
A new fund to sponsor African development projects has raised
$305m, according to the main bank responsible for seeking pledges.
The Emerging Africa Infrastructure Fund (EAIF) is targeting
commitments of $405m altogether, said Jacko Maree, chief executive of
Johannesburg-based Standard Bank.
EAIF forms one tranche of attempts to raise $64bn annually
for African development which has been dubbed a new Marshall Plan for Africa.
African leaders will be vigorously promoting the wider plan
at the World Economic Forum of government leaders, central bankers and other
international figureheads in New York over the next six days.
Oldest mine is set to close
Britain's oldest coal mine is to close with the loss of 500
jobs, it has been announced.
Mining operations at the Prince of Wales colliery in
Pontefract, West Yorkshire, will be phased out over the next eight months.
A fleet of fighters is sold for a euro
Polish air forces have got a real bargain - they have
purchased 23 Soviet-made light tactical fighters MiG29 Fulcrum for just one