INTERNATIONAL

 

Dec 28 - Jan 05, 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

JUBILEE EFFECT BOOSTS UK ECONOMY

The UK economy grew faster than expected in the three months to September, according to official figures.
The Office for National Statistics (ONS) said gross domestic product (GDP) rose by 0.9% in the three month period, against expectations of 0.8%.

 

The surge is the biggest in almost three years, boosted by a rise in construction output and a rebound in activity after June's lull.

But economists said the figures gave the Bank of England no impetus to change interest rates, which have remained static at 4% for the past 13 months.

The 0.9% growth was a marked improvement on the 0.6% rise seen in the previous three-month period, from April to June and was an increase of 2.1% on the same period last year.

But the ONS said the figures were affected by the Jubilee celebrations in June which depressed activity in manufacturing, retail, business and financial services because of bank holidays.

"Without the effect of the Jubilee, the data would not have shown an acceleration but a deceleration in growth," said the ONS.

Growth in household spending also grew more slowly, showing a rise of 0.8% in the three months to September compared with growth of 1.2% in the previous period.

The slower spending figures were compounded by a fall in business investment, which dropped 9.8% when compared with the same period last year.

However, savings figures were likely to cheer economists who have been warning about the UK's rising debt levels.

The saving ratio rose from 5% to 5.6% in the period. Simon Rubinsohn, an economist at Gerrard, said this "seemed to demonstrate a rather greater prudence than some of the borrowing figures have implied".

ITALY MEETS 2003 BUDGET DEADLINE

Italy's conservative government has passed the 2003 budget, which includes a controversial package of tax amnesties, billions of euros of tax cuts and privatisations.

The budget aims to lower Italy's high deficit, but has been criticized for letting off tax cheats and making over-optimistic economic forecasts.

The upper house of parliament had already approved the bill after an all-night session in which one deputy threw his mobile phone at another.

The budget includes 7.5bn euros (5bn; $7.5bn) in corporate and personal income tax cuts, which the government hopes will boost economic growth.

To offset the lower revenues, the budget includes 8bn euros in spending cuts, a tax amnesty expected to raise about 8bn euros through fines, and privatisations to bring in 4bn euros.

The lower house of parliament voted 298 to 110 in favour of the 2003 budget bill, after more than three months of parliamentary debates.

The EU's head of monetary affairs, Pedro Solbes, has criticised the budget for depending too heavily on one-off measures and has warned that forecasts for next year are "imprudent".

In October, the International Monetary Fund said the tax amnesties would undermine the government's power to collect taxes in the future.

Under the amnesty, tax cheats and those with overdue television licence fees, car registrations and rubbish removal taxes, can settle accounts by paying a one-off fine.

The budget also forecasts a deficit of 1.5% of gross domestic product, but economists question whether that can be achieved.

WAR RISK UNSETTLES EUROPEAN INVESTORS

European investors lost heart in December as the risk of war in Iraq added to fears about the state of the global economy, a new survey suggests.

The UBS index of investor optimism, prepared by Swiss bank UBS and Gallup, sank to its lowest level since the monthly report began in October 2001.

The survey questioned investors in France, Germany, Italy, Spain and the UK, and 58% said they were pessimistic about economic growth over the next 12 months.

Worse still, 45% of those questioned said they thought it was either very, or somewhat, likely that Europe would get stuck in a prolonged stagnation similar to Japan's.

EURO ZONE "AT RISK OF RECESSION"

The eurozone economy is stagnating, and may fall into recession in the new year, according to a press report.

Economists at leading investment banks believe growth in the euro area slowed to a standstill during the final three months of 2002, and will contract early next year, the Business newspaper reported.

Weak consumer spending, sluggish industrial production, and faltering business confidence are to blame.

"The euro area is experiencing a mini-recession this cold winter, with no growth at all in the last quarter of 2002 and a dip into negative territory in the first quarter of 2003," Morgan Stanley economist Eric Chaney told the Business.

"We cannot even exclude an outright recession, two or three consecutive quarters of negative GDP growth."

GLOBAL TENSION 'IS HURTING GROWTH'

The United States economy is showing tentative signs of recovery, the central banker of the world's largest economy has said.

Any significant fall in global political tensions would boost investment and spur growth, said

US Federal Reserve chairman Alan Greenspan in a speech to the Economic Club of New York.

In recent months, fears of a Middle East war have led to volatile stock markets and oil prices. Mr Greenspan did not specifically mention Iraq, which is being investigated by United Nations inspectors checking for illicit weapons of mass destruction.

The US central bank has cut interest rates 12 times since the start of 2001 to bolster consumer spending and keep down borrowing costs for industry.

VENEZUELA BEGINS IMPORTING OIL

Venezuela has begun importing oil as an opposition-led strike to force the resignation of President Hugo Chavez leads to further oil and food shortages.

The announcement from the world's fifth largest oil exporter came as striking executives of Venezuela's state oil firm, PDVSA, voted to continue the strike which began on 2 December.

Several opposition rallies were taking place as mediators scheduled more talks to end the crisis.

Thousands of protesters demonstrated in the streets of Caracas and at the PDVSA headquarters.

CHINA CRACKS DOWN ON CYBER CAFES

China has closed more than 3,000 internet cafes, in what the government says is part of a national workplace safety campaign.

The official Chinese news agency said the closures were a safety measure prompted by the deaths in June of 25 people in a fire at an internet cafe in Beijing.

TURKISH LEADER'S PM HOPES REVIVED

The Turkish parliament has passed amendments to the country's constitution that would allow the leader of the governing party, Recep Tayyip Erdogan, to sit in parliament.

The amendments have already been vetoed once by the Turkish President, Ahmet Necdet Sezer.

Mr Erdogan was barred from parliament because of a conviction for inciting religious hatred.

FAKE GOODS FLOOD RUSSIA

The Russian Interior Ministry has announced that up to 90% of all goods sold on the Russian consumer market are fake.

This includes goods as varied as household appliances, cosmetics, food, clothing and medicines.

The news will be of serious concern to international companies, but it is unlikely to surprise most Russians.

ZIMBABWE RUNS SHORT OF BANKNOTES

After years shortages of fuel and basic commodities, Zimbabwean's now face a lack of banknotes, the state-run Herald newspaper has reported. The paper said queues outside banks and cash machines were now as common-place as at petrol stations and supermarkets.

HOUSE PRICES

UK house prices rose by just 0.1% in December, the lowest rise in more than a year, according to figures.

Property web site Hometrack suggested the slowdown had been driven by falling prices in London and the south east of England, but said the price boom was continuing elsewhere in the country.

CHRISTMAS SALES 'UNSPECTACULAR'

British retail sales edged higher in the run-up to Christmas, but did not grow as fast as some shopkeepers had hoped, according to a press report.

Preliminary figures compiled by the British Retail Consortium and accountancy firm KPMG show that sales for the first two weeks of December were 3-4% up on the same period last year, the Sunday Times reported.

NIGERIA AVOIDS DIRTY MONEY SANCTIONS

The world's leading rich and industrialised countries have decided not to impose sanctions against Nigeria after it passed new money laundering laws.

The Nigerian legislation "significantly enhances the scope of Nigeria's 1995 anti money laundering law," the Organisation for Economic Cooperation and Development (OECD) said.

But it warned that "deficiencies" remained and called for "special attention" to be given to financial transactions in Nigeria.

MICROSOFT ORDERED TO CARRY JAVA

A US judge has ordered software giant Microsoft to include Sun Microsystem's Java programming language in its widely-used Windows operating system. The order is to remain in force pending the final outcome of a lawsuit brought by Sun Microsystems against Microsoft.

VIVENDI RAISES 3BN EUROS TO CUT DEBT

The Heavily indebted French-American media giant Vivendi Universal has raised a further 3bn euros (1.9bn; $3.1bn) by selling off parts of the business.

BRAZIL AND CANADA SET TO END JET ROW

A six-year fight between Brazil and Canada over state subsidies to each country's aviation industry looks set to be settled after a World Trade Organisation ruling in Brazil's favour.

The ruling allows Brazil to impose $248m (156m) in "retaliatory sanctions" on Canada for illegal subsidies to three small airlines to get them to buy planes from Quebec-based Bombardier.

GOLD SURGE AIDS SOUTH AFRICAN MINERS

South Africa's gold producers are benefiting from soaring prices for the precious metal. Fears that the US could strike Iraq as early as January are driving up the price of gold to levels not seen for six years.

JAPAN GETS NEW FINANCIAL DIPLOMAT

Less than a month after US President George W Bush ditched his top economic team, Japan is following suit in the hope of warding off the rise of the yen.

The leadership of the finance ministry's international division the job usually termed "Japan's financial diplomat" is passing to Zembei Mizoguchi from Haruhiko Kuroda. Initially there is expected to be little shift in policy.

CHINA WEB PORTALS ON THE RISE

Shares in three China-directed web portals are climbing high on the US NASDAQ market, thanks to forecasts that all three could soon turn a profit.

NetEase.com, Sina.com and Sohu.com all ended Monday up more than 7% to levels not seen since late 2000.

Admittedly, none are anywhere near the heights scaled by dot.com stocks before the bubble burst early that same year.

SINGAPORE INFLATION CREEPS UPWARD

Prices have risen in Singapore for the first time in five months, in a welcome sign that the island state could avert the threat of deflation.

According to the Department of Statistics, increases in the cost of food, clothing and housing meant the main consumer price index rose 0.2% in November, the first upwards move since June.

US HOLIDAY SPENDING STALLS

US consumers and businesses have kept a close watch on their cash in the run up to Christmas, with three separate reports showing flat or falling sales.

Orders for durable goods - costly items intended to last three years or more - fell unexpectedly in November the commerce department said.

JAPAN REVEALS BUDGET PLANS

Japan's finance ministry has unveiled a draft budget which increases spending for the first time in two years.

However, the finance minister said belt-tightening cuts to public works spending would take place and that spending was "under control". The budget envisages record government borrowing on the international bond market.