The overall direct cost should not exceed $100bn, the
government reckons, but analysts have warned that a prolonged conflict
or occuption of Iraq could easily end up costing far more.
Combined with the effect of tax cuts, the CBO warned
that war spending could turn an $891bn cumulative budget surplus for
2004-2013 into a deficit of $1.82 trillion.
Only two years ago in 2001, the CBO was suggesting a
10-year surplus of as much as $5.6 trillion.
The CBO's estimates, needless to say, diverge wildly
from those of the White House itself.
The Office of Management and Budget — the
President's own number-crunchers — sees a first-year deficit of
$307bn, $31bn or 9% less than that predicted by the CBO.
That still exceeds the $290bn record deficit run up
in 1990 when the current incumbent's father was President.
And the OMB's own ten-year projection is only $80bn
less than the CBO's forecast.
Republicans insist that the $1.5 trillion tax cut
they are planning, on top of the one passed on a bipartisan basis
earlier in the current administration, will kickstart the economy and
reinvigorate the tax take.
CHINA'S FACTORIES ENJOY RAPID GROWTH
China has announced record growth in industrial
production, up 17.5% in January and February this year compared to the
same two months of 2002.
Analysts say the figure is the highest since the
But with fast-growing exports a vital ingredient in
China's economic performance, a possible war in Iraq could cast a shadow
over the country's growth prospects.
China's vast industrial machine is churning out
mobile phones, television sets, computers and cars at a phenomenal rate.
And whatever doubts there may be about the quality of
China's economic data, the country's economic growth is the envy of just
about everywhere else in the world, reaching 8% last year.
This year Beijing has predicted slower growth,
possibly down to 7%.
The uncertain economic outlook as a possible war
looms, is an important unknown.
The incomes of urban Chinese are increasing rapidly.
But the country's domestic market is still too small
to absorb the roaring growth in industrial output.
If the country's main export markets such as the
United States are plunged into gloom over the next few months, the
Chinese economy could be slowed down.
On the bright side, that might help to ease some of
the international pressure on Beijing to revalue its currency and stop
cheap exports flooding other countries' markets.
But it could also make it harder to create the
millions of jobs China needs to absorb laid off state sector workers and
farmers seeking to escape rural poverty.
SOUTH AFRICAN TOURISM BOOMS
South Africa is the fastest growing tourist
destination in the world, the country's tourism ministry has claimed.
The number of overseas arrivals to South Africa rose
by 1.8 million — or 20% — last year, the ministry said.
This growth defied continuing fears among key
European and American customers of longhaul travel, and bad press over
South African crime statistics.
The head of South African Tourism, Cheryl Carolus,
said that hosting the Cricket World Cup had boosted the sector, and
helped showcase some areas less well known than the holiday hotspots of
Johannesburg, Cape Town and Durban.
The 2002, the United Nations World Summit on
Sustainable Development in Johannesburg also helped promote South Africa
as a destination.
BOOST FOR UK MANUFACTURING
A strong performance from the computer industry has
helped to boost the manufacturing sector in the UK.
The latest government figures show that manufacturing
output rose by 0.3% over the month in January.
Although output is still 0.3% lower than a year ago,
this is the smallest fall for about two years.
The figures are stronger than expected but analysts
say it is too soon to suggest that a recession has been avoided.
Key export markets in the US and Europe are still
weak, and demand from consumers at home has shown signs of falling.
ITALY POSTS ROBUST GROWTH FIGURE
Italy has bucked the slowdown trend which has seen
most EU countries report decreasing economic growth.
The Italian economy grew by 0.4% in the last three
months of 2002, compared with 0.3% expansion the quarter before,
official statistics have confirmed.
The rise in output came as the three larger European
economies - Germany, France and the UK — reported slowing activity.
The German economy came to a standstill over the
Greece saw its economy contract by 0.3%, after
enjoying 1.3% expansion in the July to September period.
Italy's official statistics agency, Istat, credited
the rise in the country's economic output to healthy spending on fixed
But many observers have doubted Italy will be able to
maintain strong growth.
ERDOGAN NAMED AS TURKISH PM
Turkey's ruling party leader Recep Tayyip Erdogan has
been named as prime minister last week, after winning a by-election
clearing the way for a fresh vote on US troop deployment.
The president asked him to form a government after
the resignation of Abdullah Gul, who had held the post since the Justice
and Development (AK) Party swept to victory last November.
Mr Erdogan's arrival in the top job is expected to
lead to a fresh parliamentary vote on whether to allow the deployment of
tens of thousands of US troops in any war against Iraq.
The deployment was narrowly defeated in parliament on
Once Mr Erdogan has formed his new cabinet, a second
parliamentary vote can be expected in the coming days.
The deployment is crucial to US war plans, opening
the option of a northern front against Iraq.
CYPRUS PEACE PROCESS COLLAPSES
Marathon peace talks to pave the way for the
reunification of Cyprus have collapsed last week, heralding the end of
the UN's peace mission there.
UN Secretary General Kofi Annan held talks in a final
attempt to reach a deal ahead of a UN deadline.
But he admitted defeat after 15 hours of talks. Even
an offer to extend the deadline failed, when Turkish Cypriot leader Rauf
Denktash said there was no immediate prospect of further discussions.
AMERICAN OUT OF S&P 500
With war perhaps only days away, the outlook for the
US airline industry darkened still further as the parent of American
Airlines, AMR Corp, was ejected from one of the US's key stock market
Standard & Poor's, which runs the S&P 500
index of 500 leading US firms, said it will drop AMR after the stock's
90% plunge in the past year.
US FIRMS VIE TO REBUILD IRAQ
Five companies have been invited to bid for contracts
to put Iraq's infrastructure back together after a decade of sanctions
and the expected US-led war.
Among the five is a subsidiary of Halliburton, the
oil and construction giant run by US Vice President Dick Cheney for five
years till 2000.
The US Agency for International Development (USAID)
told the newsmen that the five were part of a "limited selection
process" intended to speed up contracting given the "urgent
nature or the unique nature of the work".
IMF HEAD CAUTIOUSLY OPTIMISTIC
The head of the International Monetary Fund has said
the global economy will grow faster than last year.
Horst Koehler, managing director of the IMF, said
last week the global economy this year would exceed last year's 3%
But he also said rich nations may have to cut
interest rates to speed up a recovery.
Although economic growth this year would outperform
last year's, it would still be below the 3.7% global growth rate the IMF
forecast last September.
"The world is facing great uncertainty at
present", Mr Koehler told an audience at the Bank of Spain in
SOUTH KOREAN FIRM ADMITS $1.2BN ACCOUNTS ERROR
A probe into one of South Korea's top five business
groups has uncovered $1.2bn (£750m) in accounting irregularities.
SK Global, part of the SK Group empire, hide 1.18
trillion won of bank obligations, and understated its net loss by
122.6bn won, said prosecutors, indicting boss Chey Tae-won and nine
Prosecutors' findings, based on 2001 accounts, were
confirmed by SK Global, whose shares plunged by 15% after the
prosecutors' report was released.
"We are notifying [investors] that the discovery
of 1.5 trillion won in accounting irregularities by prosecutors is
true," the firm said.
TOKYO SHARES SET NEW 20-YEAR LOW
Japanese shares have set a new 20-year low, as
government promises of intervention failed to steady the nerves of
investors worried about war against Iraq.
The benchmark Nikkei share index lost 2.2% to close
below 8,000 points for the first time in more than two decades last
The fall came despite a further government
reassurances that was poised to prop up shares.
"Depending on the developments in the stock
market, we may have to take effective countermeasures without
delay," government spokesman Yasuo Fukuda said.
STRONG EURO HITS VW PROFITS
Shares in Volkswagen, Europe's biggest car maker,
have fallen sharply after it warned of lower profits this year.
The German car giant blamed weak consumer demand and
the strength of the euro for the warning that 2003 operating profits
would fall short of last year's 4.76bn euros ($5.24bn; £3.3bn)
"Given present exchange rates ... and in the
event that the market situation in Western Europe and the US does not
improve, we will not be able to match the 2002 operating profit,"
chief executive Bernd Pischetsrieder said last week.
EAST AFRICA PLANS CABLE LINK
Telecom executives from East Africa have been meeting
to discuss the possibility of connecting countries in the region by an
undersea fibre optic cable.
At present African states pay about $400m (£250m) a
year to have international calls to other African countries routed via
"Africa has better connection to Europe and
America than within the continent," Telkom Kenya managing director
Augustine Cheserem told the meeting in Nairobi last week.
GE PENSION FUND LOSES $5BN
The world's second most valuable company lost more
than $5bn in 2002 as the stock market meltdown hammered its pension
The loss at General Electric Corp is almost double
the $2.88bn recorded the year before, and amounts to more than a third
of the company's overall $15.1bn profits.
RECORD LOSS FOR DEUTSCHE TELEKOM
Deutsche Telekom, Germany's dominant telephone
company, has reported Europe's biggest ever annual corporate loss.
For 2002 the company posted a net loss of 24.6bn
euros (£16.9bn; $27.1bn) but reported that business had improved in the
KENYA NEEDS $800M OF AID
Kenya's Finance Minister David Mwiraria has said he
needs more than $800m of aid to fund this year's budget after state
coffers were left almost bankrupt by the former government of Daniel
The National Rainbow Coalition, led by Mwai Kibaki,
swept into power in elections at the end of last year promising to
change the way Kenya is run.
SERVICE SECTOR CONFIDENCE SLUMP
Britain's once-buoyant service sector has been hit by
a collapse in business confidence, according to a CBI survey.
Hotels and restaurants were worst affected, with
confidence at its lowest since the September 11 terror attacks.
Fears over a war in Iraq and a fall in consumer
confidence led to an unexpected drop in the volume and the value of
business in the three months to the end of February.
WAR DRUMS SINK WALL STREET
The war-drums drove US shares deep into the doldrums
last week, as the spotlight fell on worries about the fragile state of
the debt-laden US economy.
At the close, the Dow Jones industrial average was
2.2% or 171.85 points lower at 7,568.18. The broader S&P 500 index
dropped 2.6% or 21.41 points to 807.48, while the technology-heavy
Nasdaq Composite fell 2.1% or 26.92 points to 1,278.37.