INTERNATIONAL

 

April 28 -May 04, 2003 

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

GLOBAL ECONOMY 'ON THE MEND'

The early end to the Gulf War has helped to reduce the risk of global recession, according to a leading economic think-tank.
The Organisation for Economic Co-operation and Development, whose members include most industrialised countries, said the global economy would probably expand by 1.9% this year. And it predicted 3% growth in 2004 in a more settled economic climate. But chief economist Jean-Philippe Cotis warned of serious 

 

 

 

risks ahead. "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 before.

NEW 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.

The Paris-based 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.

WORLD 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.

 

 

US PRAISE 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.

FED WOE 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 immediate picture.

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 any recovery.

HONG KONG 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 year.

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 businesses.

Hong Kong is struggling to contain the outbreak of SARS which has killed 105 people in the territory and infected more than 1,400.

US 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.

ZIMBABWE 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.

NIGERIA 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 Zone (JDZ).

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 zone.

 

 

NISSAN'S 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.

ABN AMRO FINED 900,000

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".

AMAZON 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.

BIG LOSSES SPARK SONY REVAMP

Electronics and 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.

BURMA SCRAPS RICE PRICE CONTROLS

Burma's military 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.

PENTAGON 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 fuss "unusual".

"Now the war is over I'm sure it will calm down," said Peter Neri, Keimfarben's managing director.

"These attitudes are restricted to a few individual Americans and not the country as a whole."

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 war.

GERMAN 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 Wiederaufbau.

The venture will hold a fund worth up to 50bn euros (35bn; $54bn), reports have said in investment-grade loans.

'I WILL 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.

 

 

BANK MEMBERS WANTED RATE CUT

Two members of the Bank of England's interest-rate committee argued for a reduction at their last meeting.

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 seven disagreed.

4M 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 organisation VisitBritain.

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 years.