INTERNATIONAL

 

May 19 - 25 , 2003 

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

JAPANESE ECONOMY 'AT A STANDSTILL'

The Japanese economy struggled to make headway in the first three months of the year and economists are predicting more gloom ahead.The world's second largest economy reported flat Gross Domestic Product (GDP) to March 2003 and has been teetering towards reverse since then.

 

 

 

"The economy is on the brink of recession," said Jesper Koll, chief economist at Merrill Lynch Japan Securities.

Other analysts predicted the government would now have to take action to prevent the country's year-long recovery from slipping further and to fight deflation.

GDP showed zero growth in the three month period to March after four straight quarters of solid, but slowing, rises.

Exports, which account for 11% of Japan's GDP, took the biggest hit, largely due to poor motor exports to the US.

But analysts warned the current SARS (Severe Acute Respiratory Syndrome) epidemic could hit exports again in the current three month period to June.

"Exports will likely fall further, pressured by a decline to Asia due to SARS," said Soichi Okuda, senior economist at Aozora bank.

Consumer spending, which remained positive to March, is also expected to slide in coming months.

"There has been some tax increase in April which could affect consumption....and incomes are falling," said Marshall Gittler, senior currency strategist at Deutsche Bank.

A 3.5% drop from a year ago in the GDP deflator the broadest measure of deflation is another headache.

The government's economist minister Heizo Takenaka said the figures showed the government needed to push harder to get prices rising again.

GERMANY ON BRINK OF RECESSION

The German economy shrank slightly during the first three months of the year, pushing Europe's largest economy yet again to the brink of recession.

Weak exports were mainly to blame for the economy's poor performance, according to the Federal Statistics Office.

The total value of goods and services produced in Germany fell by 0.2% between January and March. This follows a "minus 0%" growth in the last quarter of 2002.

A recession is usually defined as two consecutive quarters of negative growth.

The figures are worse than expected, with most analysts having forecast a poor but at least positive growth rate of 0.1%.

However, compared to the same period a year earlier, the German economy grew by 0.5%.

The state of the economy has pushed unemployment in Germany well above the 4 million mark and hurt the electoral fortunes of Chancellor Gerhard Schroeder's Social Democrats.

Mr Schroeder hopes that a package of wide-ranging structural reforms can kick-start the economy, but both union and business leaders are putting up fierce resistance against measures that would hurt their constituencies.

 

 

Figures from the Statistics Office show that there is still a long way to go.

Official data show that Germany's economy now provides nearly half a million fewer people with work than it did a year ago.

Germany has flirted with recession before, narrowly avoiding it a year ago by rounding up a very small negative number to read as zero growth.

The German economy makes up about a third of the economy of the 12-country eurozone.

UK ECONOMIC GROWTH 'TO PICK UP'

The recent fall in the pound will lead to faster economic growth later this year but house price rises will grind to a halt, the Bank of England has said.

In its quarterly inflation report, the Bank said the cheaper pound would stimulate the economy as UK goods become more competitive abroad.

There was also a warning that house price growth could slow more quickly than expected and grind to a complete halt within a year.

Inflation is forecast to rise slightly from its current level of 3% in the short term before falling back below its target level of 2.5% early next year.

The Bank has raised its central growth forecast for next year to about 2.5% by the end of 2004.

US SENATE BACKS BUSH'S TAX PLAN

The US Senate has approved a scaled-down $350bn tax cut package designed to revive the American economy.

The package included a key element of President George W Bush's economic strategy to eliminate dividend taxes on stocks.

Though the cuts were less than half the amount originally sought by Mr Bush, correspondents say the Senate vote will please the White House as it gears up for the president's re-election bid.

Mr Bush sees the revival of the stock market as crucial to bolstering the economy as more than half the population owns stocks.

But the bill approved in the Senate by 51 votes to 49 still has to be worked out with the House of Representatives.

The lower house already approved a $550bn tax cut in a parallel bill, in effect rejecting Mr Bush's proposal to eliminate dividend taxes.

JAPAN MULLS STOCK SUPPORT PLAN

The trillions of yen squirreled away in Japan's postal savings system should be used to help prop up the stock market, a government panel believes.

Japan's economy remains in the doldrums after 10 years of deflation, despite recent figures released indicating that bankruptcies are slowing.

The panel of economic advisers now says the postal savings system, long a haven for Japanese savers and the repository for 360 trillion yen ($3 trillion; 2 trillion), should bolster efforts already under way to underpin the ailing stock market.

But critics said the plan was little more than a short-term palliative, and would do little to contribute to genuine reform.

The panel's recommendation is for the savings system to invest in the government's stock purchase corporation by buying the corporation's bonds.

US TRADE DEFICIT WIDENS

The US trade deficit widened to a near-record high in March as the weaker dollar inflated the cost of imported goods, according to official figures.

The value of goods imported into the US outstripped the value of the country's exports by $43.5bn (27bn), up from $40.5bn in February, and the second highest monthly total on record, the US Commerce Department said. The increase reflected the rising dollar cost of imports as the US currency weakened, and a surge in the price of imported oil during the run-up to the war in Iraq.

The dollar has lost about 12% of its value against the euro since the beginning of the year, and has also fallen steeply against the pound.

The greenback's decline reflects doubts over the strength of the US economy, and speculation that the US government's traditional commitment to a strong dollar may be wavering.

US AND FINLAND 'MOST COMPETITIVE'

The United States and Finland are the two most competitive economies in the world, according to a leading Swiss business school.

The US topped the International Institute for Management Development's (IMD) league table for the eighth year running, despite damage to its core IT and financial sectors.

 

 

VIRGIN BLUE

Richard Branson's Australian budget airline, Virgin Blue, has beaten the worldwide travel slump and seen its pre-tax profits triple. During the past financial year ending in March, Virgin Blue managed to make a pre-tax profit of 158m Australian dollars ($102m, 63m), up from A$47m a year earlier and well above its A$100m target.

DEUTSCHE TELEKOM

During January to March Deutsche Telekom made a profit of 850m euros ($975m, 602m).

BANGLADESH SEEKS $2BN IN AID

Bangladesh's government will head for a meeting with its international donors hoping to double the aid it receives to fight poverty.

In an interview with the Reuters, Finance Minister Saifur Rahman said he was seeking an extra $2bn (1.2bn; 1.7bn euros) on top of the $1.5bn in aid and import subsidies Bangladesh currently receives every year.

To get the extra cash, the government is for the first time submitting to the World Bank-chaired meeting a Poverty Reduction Strategy Plan, aiming to halve the ranks of the poor by 2015.

UK'S EURO DECISION DAY NAMED

The announcement on whether the UK should join the euro will be made in the House of Commons on June 9, Downing Street has said.

The news came after the BBC learned that Gordon Brown and Tony Blair have agreed the UK is not yet ready to join the euro but remain split on whether to rule out a euro ote before the next election.

UK JOBLESS

UK unemployment fell during the first three months of the year despite weak economic growth, official figures have shown.

Data from the Office for National Statistics (ONS) showed that UK unemployment fell by 6,000 to 1.5 million between January and March, giving a jobless rate of 5.1%.

SOUTH KOREAN STRIKE HITS ECONOMY

South Korea's government has warned the strike at its southern port of Pusan has cost the country $450m (279m) in lost or delayed exports so far.

The Ministry of Commerce, Industry and Energy said the port was now running at 47% of capacity, up 15% after the government deployed military staff to help move goods.

But companies including Samsung electronics, the world's biggest maker of computer memory chips, have warned they are suffering major losses because of the strike.

 

 

US LAUNCHES GM TRADE WAR

Washington has brought a complaint against the European Union for refusing to allow the sale of genetically modified (GM) food or crops, escalating trade tensions between the world's two biggest economic blocs.

The United States and twelve other agricultural exporting nations want the EU to repeal its five-year moratorium on GM foods, or face trade sanctions under World Trade Organisation (WTO) rules.

US Trade Representative Robert Zoellick said that the US had run out of patience after years of EU procrastination on the issue.

SONY

Sony Computer Entertainment (SEC) has surprised industry watchers by announcing it will launch a portable game console at the end of 2004.

UK HOUSE PRICES

Britain's house prices could rise by 10% this year despite recent market gloom, according to one of the industry bodies.

SARS PROMPTS KOREAN RATE CUT

South Korea has cut its main interest rate for the first time in almost a year, because of fears that the economy is being hurt by the SARS virus and the threat of nuclear weapons in North Korea.

The cut in the rate to 4% from 4.25% was in line with most analysts' expectations.

The Bank of Korea, the country's central bank, said it hoped the move would help keep economic growth above 4%, the level it believes is the minimum to keep job creation going.

BANGLADESH COULD IMPORT TEA

Tea exports from Bangladesh are falling because there is so much demand for tea at home.

Officials say that this could turn the world's fifth largest tea exporter into a tea importer.

"Internal consumption is rising by 3.5% annually against nearly 1% rise in production," SAHM Tauhid, chairman of the Bangladesh Tea Board (BTB), told foreign news agency.

 

 

UK INDUSTRY OUTPUT FALLS

Britain's hard-pressed manufacturers registered a further sharp drop in output in March.

The 0.2% fall was double the figure predicted by analysts and represented the sector's worst performance since October 2002.

Overall industrial output has fallen by 1% over the past year.

The figures will add to pressure on the Bank of England to cut interest rates.

Fears that such a move would fuel inflation have been eased by separate figures released on Monday showing a fall in wholesale prices.

UK PLC 'NEEDS SKILLS UPGRADE'

British workers and managers must learn new skills if the economy is to close the productivity gap with other industrialised nations, according to a new report.

US BACKS OFF FROM 'STRONG DOLLAR'

US Treasury Secretary John Snow has broken with the long tradition of backing a strong dollar, hinting that the boost to exports from a weaker greenback is a welcome change.

SARS 'COULD COST ASIA $28BN'

The SARS virus could cost Asia $28bn (17bn) in lost economic output, a major lender to the region has warned.

The Asian Development Bank (ADB) calculated the likely effect of the disease under different epidemic scenarios, and forecast losses totalling up to $20bn in the four most vulnerable economies China, Hong Kong, South Korea and Taiwan. In the case of Hong Kong, the ADB predicted the SARS could knock four percentage points off economic growth this year taking it down more or less to zero.

 

 

EU WELCOMES LITHUANIA VOTE

European Union officials have welcomed Lithuania's resounding Yes vote for EU membership in a two-day referendum.

European Commission president Romano Prodi gave his "sincere and heartfelt congratulations", after unofficial results suggested 91% of Lithuanians supported the move.