"Worries about oil prices, anxiety in the face of war, fear of
terrorism and epidemics, loss of confidence in international governance
— the list of so-called geopolitical and psychological factors is
long," he wrote in his preface to the report.
Breaking down its
predictions, the OECD said European growth depended on the European
Central Bank's willingness to slice half a point off interest rates
"the sooner the better".
It said growth would stay
at just 1% this year, a sharp slide from its predictions of 1.8% just
six months ago.
"Since we published
our previous OECD Economic Outlook ...economies in the euro zone have
undershot an already modest forecast by a high margin," the report
said, blaming slow structural reform and high budget deficits as well as
rising oil prices and the uncertainty caused by the war in Iraq.
In contrast, the OECD
said the US would remain the star performer among industrialised
economies, growing at 2.5% this year after a 2.4% expansion the year
DOUBTS OVER UK ECONOMY
The OECD has become the
latest body to say the UK economy is likely to grow more slowly than
Chancellor Gordon Brown has predicted.
Growth should reach 2.1%
this year and rise to 2.6% in 2004, the Organisation for Economic
Co-operation and Development said.
But that growth
prediction for next year is well below Mr Brown's forecast of between 3%
and 3.5% announced in the Budget two weeks ago.
However, the UK won
praise from the OECD for showing "greater resilience in weathering
the downturn than any other major European economy".
The OECD's forecast of
2.6% growth next year is still more optimistic than the 2.3% average
prediction by independent forecasters.
organisation said growth would pick up thanks to rising government
spending and higher exports, helped by a fall in the value of the pound.
And it said the
deterioration in the government's finances was no immediate cause for
concern as debt levels are so low.
The main risk to UK
growth was seen as coming from a sharp fall in consumption which has
been the main driver of the economy and has countered the weakness of
the manufacturing sector.
The OECD warned that the
Bank of England's surprise interest rate cut in February risked fuelling
the house price boom and increasing the chances of a subsequent crash.
"A fall in the level
of house prices, which in relation to average earnings are close to the
peak reached in the late 1980s, could lead to a sharp retrenchment of
consumers' expenditure," it said.
The OECD said inflation
was likely to rise above the 3% level over the next few months, but
would fall back towards the 2.5% target rate in 2004.
BANK WARNS OF SARS EFFECT
The deadly SARS virus and
the aftermath of the war in Iraq are likely to knock almost one-sixth
off economic growth in Asia this year, the World Bank has warned.
The World Trade
Organisation voiced similar fears, saying that growth in trade would
remain below par this year after having shrunk in 2001.
SARS has killed more than
250 people and almost 5,000 cases have been reported. There were
"great uncertainties" about its impact, the Bank said and cut
its prediction for expansion in East Asia this year to 5% from 5.8%.
"Growth could very
well be significantly lower or possibly higher than this," the Bank
said in a report issued last week.
But it was hoping that
the short conflict in Iraq and the fall in oil prices might counteract
the general sluggishness of the world economy, pushing growth back up to
5.7% in 2004.
FOR BRAZIL'S REFORMS
US Treasury Secretary
John Snow has heaped praise on the economic policies of Brazil's new
left-wing president, Luiz Inacio Lula da Silva, during a two-day visit
to the country.
Before meeting Brazil's
president, he said that the country would not face problems because of
its stance against the war in Iraq.
Six months ago the
prospect of a former left-wing union boss winning the presidency of
South America's largest country sent international investors scurrying
and set off alarm bells in Washington.
AT 'LACKLUSTRE' ECONOMY
Worries over the Iraqi
war kept the US economy "lacklustre" during March and April,
the Federal Reserve has said.
The Fed's periodic
anecdotal survey of the country's economic mood found that the US was
still a long way from the sort of confidence needed for robust growth.
But it also warned that
any forecasts would be highly uncertain in the present climate.
And a number of
short-term or technical factors — notably this year's late Easter
holiday, and atrocious weather on the US east coast — complicated the
With consumer spending
accounting for about two-thirds of US economic activity, the question of
how much the war would affect consumer behaviour is seen as crucial to
UNVEILS AID PACKAGE
Hong Kong's government
has unveiled a huge package of financial aid to counter the impact of
the deadly SARS virus, which is expected to sap economic growth this
Chief executive Tung
Chee-hwa announced measures worth HK$11.8bn ($1.5bn;£950m).
The package includes tax
rebates, lower rent for shops and reduced water and sewage charges for
Hong Kong is struggling
to contain the outbreak of SARS which has killed 105 people in the
territory and infected more than 1,400.
WATCHDOG TO POLICE FOREIGN FIRMS
Non-US auditors as well
as US ones face registering with the new watchdog set up to fight
corporate fraud, despite vigorous protest.
The Public Company
Accounting and Oversight Board, established by Congress in the wake of
scandals such as Enron, WorldCom and Global Crossing, said all any firm
wishing to do business in the US has to register by April 26, 2004.
UK TO AID
IRAQ DU REMOVAL
The UK Government says it
will help to clean up depleted uranium (DU) ammunition in Iraq. The US
has said it has no plans to remove DU debris, despite international
recommendations for its retrieval. There is widespread controversy over
the use of DU, which some veterans believe has made them ill.
One UK adviser on DU
welcomed the British announcement as evidence of a fresh approach. A
spokeswoman for the UK Ministry of Defence (MoD) told BBC News Online:
"Legally, we have no obligation to clean up the remains of the DU
we used. It's the responsibility of the new regime in Baghdad.
FEARS WEAK TOBACCO CROP
Zimbabwe's annual tobacco
auctions, the country's key currency earner, have opened with
predictions of a poor crop, possibly the smallest since independence.
Only a portion of the
world's largest tobacco auction floors were stacked with tobacco bales
and the usual opening ceremony was dropped.
INVITES BIDS FOR OFFSHORE OIL
Nigeria and the island
state of Sao Tome and Principe have invited tenders for oil exploration
in offshore fields between the two nations.
Both countries have
invited energy companies to tender for the right to prospect for oil, or
gas, in nine offshore blocks in the area known as the Joint Development
The JDZ in the Gulf of
Guinea was formed after the two states failed to agree on the
demarcation of their borders in 2001.
The Joint Development
Authority is charged with managing the development of oil wells in the
REVIVAL GAINS PACE
Nissan looks set to hang
onto its top spot as Japan's most profitable carmaker. The firm reported
a 51% rise in operating profit and has forecast more growth ahead,
thanks to new product launches in the US.
The UK share trading arm
of Dutch bank ABN Amro has been fined £900,000 for "market
misconduct and serious compliance failures".
It is one of the largest
fines ever meted out by the Financial Services Authority (FSA). The
regulator said ABN Amro traders had "accepted improper instructions
whose apparent purpose was to push the closing market price of certain
shares to a higher level than would otherwise have been the case".
TRIMS ITS LOSSES
Amazon, the world's
largest internet retailer, has narrowed its losses in the first quarter.
The web seller of music, books and merchandise reported a net loss of
$10m, down from a $23m net loss in the same period a year before.
LOSSES SPARK SONY REVAMP
entertainment giant Sony is embarking on a multi-billion dollar
three-year revamp after shocking investors by announcing heavy losses.
The company, creator of
the PlayStation and maker of last year's hit film Spider-Man, said it
lost 111bn yen in the first three months of 2003, almost 20 times the
loss for the same period last year.
SCRAPS RICE PRICE CONTROLS
government has announced a radical liberalisation of the country's rice
market. It plans to scrap its control of rice prices later this year,
according to reports in the government-controlled media. For more than
40 years the government has bought more than 10% of the country's rice
production at well below the market price.
REVIEWS GERMAN CONTRACT
The Pentagon, the
headquarters of the US military, is reviewing a contract with a US
company selling a German product, because of the country's objections to
the war on Iraq.
A spokesman for the
German company Keimfarben, whose product has been used on the White
House and at Arlington Cemetery, told BBC News Online they found the
"Now the war is over
I'm sure it will calm down," said Peter Neri, Keimfarben's managing
"These attitudes are
restricted to a few individual Americans and not the country as a
On February 5, US Defense
Secretary Donald Rumsfeld lumped Germany together with Cuba and Libya as
countries that would not "do anything" to help fight the Iraq
BANKS POOL THEIR LOANS
Germany's five biggest
banks have confirmed plans to pool their loans in an attempt to tidy up
their battered balance sheets.
In an unusual deal,
Deutsche Bank, HypoVereinsbank, Dresdner Bank, Commerzbank and DZ Bank
are forming a joint venture with state-owned Kreditanstalt fuer
The venture will hold a
fund — worth up to 50bn euros (£35bn; $54bn), reports have said —
in investment-grade loans.
STAY ON' SAYS GREENSPAN
Alan Greenspan has said
he will accept another term as chairman of the Federal Reserve, in a
statement that may put an end to speculation about one of the most
important jobs in global finance.
Mr Greenspan, who is
recovering from a successful operation on an enlarged prostate, was
responding to President George W Bush, who on Tuesday recommended the
Fed chairman stay on.
Mr Greenspan's fourth
four-year term comes to an end in mid-2004, and there had been mounting
speculation that he would be shunted aside by the Bush administration.
MEMBERS WANTED RATE CUT
Two members of the Bank
of England's interest-rate committee argued for a reduction at their
Newly released minutes
show that Marian Bell and Christopher Allsopp were worried about the
continuing weakness of the world economy.
The slowdown in house
prices and lower consumer spending were also concerns.
The two committee members
thought interest rates should be cut from 3.75% to 3.5% but the other
CAMPAIGN TO BOOST TOURISM
A multi-million pound
advertising campaign to persuade people to holiday in England is being
launched last week.
St George's day was
picked to begin the £4m campaign, headed by the new tourism
Tourism minister Kim
Howells, who helped launch the campaign, said he thought it was a good
time to promote holidays nearer home.
The campaign, entitled
Enjoy England, will include a television advert for the first time in 10