INTERNATIONAL

 

Mar 15 - 21 , 2004

 

1.INTERNATIONAL

2. PAKISTAN

3. GULF

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RECORD HIGH FOR US TRADE DEFICIT

The US trade deficit hit an all-time high of $43.1bn (24bn) in January, dashing hopes that the recent fall in the dollar would stimulate exports.
Meat and poultry exports were hit by outbreaks of mad cow disease and bird flu, contributing to a 1.2% slide in overall exports to $89bn. Imports stayed close to historic highs after a rise in imported oil prices. The politically sensitive trade deficit with China increased to $11.5bn, up from $9.9bn in December. "To me this is very worrisome.

 

 

 

 

The trade deficit is not improving. It is getting worse despite the dollar depreciation," said Wells Fargo Banks chief economist Sung Won Sohn. In recent months the dollar has fallen sharply against major currencies which, in theory, should benefit the US trade balance in two ways.

Firstly, it should make US exports cheaper and thus more competitive in overseas markets. Secondly, it should make imports more expensive, reducing demand for imported goods.

However, analysts noted there were some one-off factors behind the worse-then-expected figures. Imported oil prices during January were at their highest level since March 2003, which led to a 10% rise in the US's petroleum deficit.

Also, exports were hit by restrictions on meat exports following outbreaks of mad cow disease and bird flu. The trade deficit with China rose after imports from the country grew by 6.6%.

The US government has been placing pressure on China to revalue its currency against the dollar. The yuan is currently pegged at 8.28 yuan to the dollar, but US manufacturers have complained the currency is undervalued by as much as 40% giving Chinese exporters an unfair advantage

JAPANESE GROWTH AT 13-YEAR HIGH

Japan has unexpectedly cut its output estimate for the last three months of 2003, but economic growth remains at its fastest pace in 13 years.

Gross domestic product was up 6.4% year on year in the last quarter of 2003, a sharp cut from the earlier 7% estimate.

Analysts said the revision did nothing to dent the overall picture of a broad- based and vigorous recovery.

Most analysts had expected the GDP figure to be revised upwards, calculating that reports of stronger corporate investment should be starting to pay dividends.

In fact, the latest data showed that companies were running down their inventories, rather than investing in new equipment and materials.

Morgan Stanley economist Takehiro Sato said, however, that the inventory drawdown was a positive signal for the future, clearing the way for a fresh surge of corporate demand.

When companies start spending seriously once more, the current rapid pace of growth should accelerate, economists believe.

The key to sustaining the recovery, the Japanese authorities say, is to focus on exports.

These are the traditional bedrock of the modern Japanese economy, but have suffered in recent months from the weakness of the dollar.

But figures released separately showed that Japan's current-account surplus, the broadest measure of trade in goods and services, had more than doubled year on year in January to 1.1 trillion yen (5.4bn; $9.4bn).

Exports were up 11.3% on the same period of 2003, way outpacing modest import growth.

The Finance Ministry sold 20 trillion yen last year to prop up the dollar exchange rate, and has already spent 10 trillion this year.

FRANCE'S GROWTH TO TOP FORECASTS

France's budget minister Alain Lambert said he expects economic growth to top forecasts this year, helping boost tax revenue and narrow the budget deficit.

Speaking on local radio, Mr Lambert also promised that France would limit spending to bring the budget closer to European Union limits. France wants outgoings to be less than 3% of gross domestic product in 2005.

That may ease tensions in the EU, which last year had to suspend budget rules to avoid punishing France and Germany. Mr Lambert said that there is no doubt economic growth will be more than the 1.7% expected this year.

"The recovery is confirmed, it has started in France and Europe," he explained. "The return of growth is more marked in France than it is in Europe."

Earlier, France said its 2003 budget deficit was 4.1% of gross domestic product, more than the EU's 3% limit.

KOIZUMI AD ASKS FOR FOREIGN CASH

Japanese Prime Minister Junichiro Koizumi has launched a personal appeal for extra foreign investment. Mr Koizumi urges investors to back Japan in a television advertisement airing soon in Europe and the US.

"We have all you need for success, and we welcome your business. Why don't you join us?

Invest in Japan!" the prime minister says. The advertisement comes amid signs that the Japanese economy is on the mend after ten years of stagnation.

Recent figures showed that Japan grew at an annualised rate of 7% in the final quarter of 2003, while corporate profits and business sentiment are up sharply.

The improvement stems partly from Japan's policy of weakening the yen against the dollar and euro, which has triggered a surge in export demand.

UK TRADE DEFICIT HITS RECORD HIGH

Britain's trade deficit with the rest of the world hit a record high during January, official figures have shown.

The Office for National Statistics (ONS) said the deficit in goods and services reached 4.6bn, compared with a 3.1bn deficit in December.

Exports to the US fell sharply, which experts said could be due to the pound's strength against the dollar. Separate figures from the ONS showed manufacturing production rose by a weaker-than-expected 0.2% in January

 

 

The ONS figures showed the trade gap in goods alone was 5.6bn in January also a record high.

ARGENTINA SET FOR FRESH IMF CASH

Argentina has received the green light from the International Monetary Fund for fresh funding of $3.1bn (1.7bn).

It will be the latest disbursement under a $13.3bn rescue package agreed with the US-based lender last year.

It was made possible after Argentina met a 9 March deadline for repayment to the IMF of arrears totalling $3.15bn.

Argentina's president had threatened to default on the arrears unless the IMF cleared the way for a fresh disbursement from the $13.3bn package.

IMF acting managing director Anne Krueger said she was making recommendations to the IMF's executive board that would lead to disbursement of the funds.

GROWING US TRADE GAP HITS STOCKS

US stocks nosedived on Wednesday after the Commerce Department revealed the trade deficit hit an all time high of $43.1bn (24bn) in January.

The Dow Jones and Nasdaq closed down 1.5% on March 10, triggering a falls in Japanese stocks.

The record US trade deficit dashed that the recent fall in the dollar would stimulate exports. The politically sensitive trade deficit with China rose to $11.5bn in January, up from $9.9bn in December. The Dow Jones Industrial Average had lost all its 2004 gains when US stock markets closed on March 10, having dropped 160 points to 10,296.8 during the day. The hi-tech Nasdaq index slipped 31 points to 1,964.1.Tokyo's benchmark Nikkei index lost 1.2% to close at 11,297 on March 11.

REBOUND CURES HK'S BUDGET BLUES

Rapid economic growth is doing wonders for Hong Kong's public finances, Treasury Secretary Henry Tang has said in his 2004/05 budget speech.

Mr Tang forecast 2004 growth for the territory at 6%, almost double last year's rate.

The pick-up, based on mainland China's inexhaustible thirst for imports, has allowed Mr Tang to avoid tax increases.

Last year, a troubling fiscal position led many analysts to forecast a raft of tax rises in the territory.

CHINA SHIFTS ON PRIVATE PROPERTY

China's parliament, the National People's Congress (NPC), is discussing an amendment to the constitution guaranteeing legal protection for private property for the first time.

But the All China Federation of Industry and Commerce has said that while it welcomes the move, much more needs to be done to create a level playing field for private business.

US CARS PLAY CATCH-UP ON QUALITY

Asian carmakers are still streets ahead of their US rivals when it comes to reliability, new figures suggest.

A survey by Consumer Reports said that on average cars made by US firms had 18 faults per 100, against 12 per hundred for Asian marques.

But the US numbers are improving, Consumer Reports said, showing a reduction from 21 the previous year.

And for the first time in 25 years US models came in ahead of European ones, which had an average of 20 faults.

HUTCHISON CLEARS 3G DEBTS EARLY

Asian conglomerate Hutchison Whampoa has announced plans to clear debts at its third generation (3G) mobile phone operations in the UK ahead of schedule.

The Hong Kong-based group, which owns British mobile network '3', will repay bank loans of 1.5bn ($2.8bn).

 

 

VW CUTS JOBS AND WARNS ON PROFITS

Shares in Europe's largest carmaker Volkswagen have fallen sharply after the company warned of weak profits and immediate job losses.

"The operating profit for the first quarter of 2004 will be, to coin a phrase, miserable," said Volkswagen Group chairman Bernd Pischetsrieder.

VW's automotive division's workforce is to be cut by 3.5%, or 5,000 jobs.

IMF APPROVES LOAN

The International Monetary Fund has approved a $39m (21.4m) loan for the Democratic Republic of the Congo.

The money is part of the IMF's Poverty Reduction and Growth Facility, which has pledged aid worth about $858m.

CUSTOMS PACT

The presidents of Kenya, Uganda and Tanzania have signed a protocol to prepare the ground for a customs union.

Kenya's Mwai Kibaki, Uganda's Yoweri Museveni and Tanzania's Benjamin Mkapa signed the document in the northern Tanzanian town of Arusha.

REFORMERS STAY IN PUTIN CABINET

President Vladimir Putin has ditched his foreign minister but reappointed key reformers in a cabinet named days before Russia's presidential election.

Foreign Minister Igor Ivanov, a Yeltsin-era veteran, is replaced by UN ambassador Sergei Lavrov.

Mr Putin sacked his entire government two weeks ago to get rid of Yeltsin-era Prime Minister Mikhail Kasyanov.

The team will stay in place after vote, which Mr Putin is expected to win by a landslide.

CHINA VOWS TO KEEP CURRENCY PEG

Hopes in the US that China could make its currency stronger are doomed to disappointment, economic leaders warn.

The yuan is fixed at 8.28 to the US dollar, a low rate which many in the US say costs US jobs. But despite the US's feverish diplomacy and loud complaints, the peg is here to stay for "a long time to come", China's top foreign exchange official said.

The announcement follows a shift in economic policy to slow down growth and focus on helping the rural poor.

The low level of the yuan is widely believed to have contributed to a blistering 9.1% growth rate last year a rate which the government now fears is overheating and imbalancing the economy.

A new target of 7% for 2004 was set last week by Prime Minister Wen Jiabao, in the hope of avoiding a "boom and bust" cycle.

INDIAN INFLATION

India's inflation rate has soared to almost 6% this year, exceeding the government's annual target of 4.5%, officials say.

"The 4 to 4.5% forecast will be exceeded. But there is nothing to lose sleep over," senior finance ministry official Ashok Lahiri told reporters.

STRONG POUND CUTS FACTORY COSTS

The cost of raw materials used by UK manufacturers has fallen thanks to sterling's rise against the dollar.

The strong pound contributed to a 0.8% fall in input prices during February, government figures showed, by pushing down the cost of imports. The fall meant that input prices were down 1.8% on the same point last year. Manufacturers also managed to lift the prices of goods leaving their factories by 0.2% in February, giving an annual rise of 1.6%.

THAILAND'S ECONOMY GROWS BY 6.7%

Thailand's economy grew by 6.7% in 2003 the biggest surge since before the 1996/1997 Asian economic crisis according to new data. The National Economic and Social Development Board, an advisory body, said booming exports and a healthier world economy led to the growth. The bird flu crisis which killed 22 people in Vietnam and Thailand had a limited impact, it added. The government expects stronger growth of between 7 to 8% for 2004.

CENTRAL BANKS SET GOLD SALE LIMIT

Fifteen European central banks have agreed a cap on how much gold they can sell over the next five years. The deal commits the European Central Bank, and the banks of every European Union nation except the UK and Denmark, to sell only 500 tonnes a year. The agreement extends a 1999 deal till 2009, and may help keep prices high. Gold operates as a "safe haven" for investors in troubled times, and is particularly in demand at the moment in the face of a weak US dollar.