INTERNATIONAL

 

Jan 31 - Feb 06, 2005

 

1.INTERNATIONAL

2. PAKISTAN

3. GULF

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US BUDGET DEFICIT TO REACH $427BN

The US budget deficit is set to reach a record $427bn (229bn) in 2005, the White House has predicted.
But officials said the administration would meet its pledge to cut the deficit in half over five years, partly by controlling public spending.
The forecast takes account of an extra $80bn the White House is seeking from Congress to fund military operations.
It comes as a non-partisan watchdog said the 2005 deficit, not including military costs, would be $368bn.

 

 

The Congressional Budget Office (CBO) had previously forecast a $348bn shortfall in the 2005 fiscal year.

The US budget deficit hit $412bn in the 12 months to 30 September 2004, after reaching $377bn in the previous fiscal year.

Republicans have blamed the size of the deficit on slow economic conditions after the 11 September attacks and ongoing military operations in Iraq and Afghanistan.

The Democrats, meanwhile, have accused the president of excluding Iraq-related costs from previous budgets to meet the aim of reducing the deficit, a charge which the administration denies.

In recent months, the dollar has weakened amid market jitters about the size of the budget and trade deficits.

In November, the gap between US exports and imports widened to more than $60bn, a record figure.

The CBO says it envisages a further "orderly" decline in the greenback over the next two years as the twin deficit drives dollar investors away.

But it notes the declines will help exporters and boost US economic growth.

UK ECONOMY ENDS 2004 WITH A SPURT

The UK economy grew by an estimated 3.1% in 2004 after accelerating in the last quarter of the year, says the Office for National Statistics (ONS).

The figure is in line with Treasury and Bank of England forecasts.

The ONS says gross domestic product (GDP) rose by a strong 0.7% in the three months to 31 December, compared with 0.5% in the previous quarter.

The rise came despite a further decline in production output and the worst Christmas for retailers in decades.

The annual figure marked out the best year since 2000, and was also well ahead of the 2.2% recorded in 2003.

Growth in the final three months of 2004 marked the 50th consecutive quarter of expansion.

"On the basis of the latest information the UK has entered 2005 on course to continue its record period of growth," said Paul Boateng, chief secretary to the Treasury in a statement.

The ONS said the services sector, which accounts for nearly three-quarters of the UK economy, grew 1.0% in the quarter.

The strong services figure was welcomed by analysts, given lacklustre retail sales in December and across the Christmas holiday period.

"The fact that other services components are doing so well suggests to me that we are back to trend (growth) and I am not particularly concerned about any further slowdown," said Ross Walker, UK economist at RBS Financial Markets.

However, output in the production sector contracted 0.5%, the second quarterly fall in row and a state of affairs that some economists classify as a recession.

BLAIR LAUNCHES APPEAL FOR AFRICA

Africa's poverty is "a scar on the conscience of the world", UK Prime Minister Tony Blair has told the World Economic Forum in Davos, Switzerland.

He criticized global leaders for neglecting Africa, saying there would be an outcry if another part of the world was to suffer similar problems.

He appealed for more aid for Africa and said the UK would fund nearly one sixth of a World Health Organization appeal.

Tackling the spread of HIV has already emerged as a central theme of the week.

Mr Blair was flanked by pop singer Bono and Microsoft founder Bill Gates, the world's richest man, who earlier in the week gave $750m (400m) to a global programme to vaccinate children against deadly diseases.

He launched his appeal for Africa by stressing the need to tackle diseases that cripple poor countries economically.

CHINA NOW TOP TRADER WITH JAPAN

China overtook the US to become Japan's biggest trading partner in 2004, according to numbers released by Japan's Finance Ministry.

China accounted for 20.1% of Japan's trade in 2004, compared with 18.6% for the US. In 2003, the US was ahead with 20.5% and China came second with 19.2%.

The change highlights China's growing importance as an economic powerhouse.

In 2004, Japan's imports from and exports to China (and Hong Kong) added up to 22,201bn yen ($214.6bn).

This is the highest figure for Japanese trade with China since records began in 1947. It compares with 20,479.5bn yen in trade with the US.

Trade with the US during 2004 was hurt by one-off factors, including a 13-month ban on US beef imports following the discovery of a cow infected with mad cow disease (BSE) in the US.

INDONESIA 'DECLINES DEBT FREEZE'

Indonesia no longer needs the debt freeze offered by the Paris Club group of creditors, Economics Minister Aburizal Bakrie has reportedly said.

Indonesia, which originally accepted the debt moratorium offer, owes the Paris Club about $48bn (25.5bn).

Mr Bakrie told the Bisnis Indonesia newspaper that a $1.7bn donors' aid package meant that the debt moratorium was unnecessary.

This aid comes on top of a previously-pledged $3.4bn package.

 

 

Most of this 'normal aid' would be used to finance the country's budget deficit.

The Indonesian Economics Minister explained that the money $1.2bn in grants and $500m in soft loans was for the rebuilding of Aceh province, which was badly hit by the tsunami of 26 December.

EU 'TOO SLOW' ON ECONOMIC REFORMS

Most EU countries have failed to put in place policies aimed at making Europe the world's most competitive economy by the end of the decade, a report says.

The study, undertaken by the European Commission, sought to assess how far the EU has moved towards meeting its economic targets.

In 2000, EU leaders at a summit in Lisbon pledged the European economy would outstrip that of the US by 2010.

Their economic targets became known as the Lisbon Agenda.

But the Commission report says that, in most EU countries, the pace of economic reform has been too slow, and fulfilling the Lisbon ambitions will be difficult if not impossible.

Only the UK, Finland, Belgium, Denmark, Ireland and the Netherlands have actually followed up policy recommendations.

CHINA CONTINUES BREAKNECK GROWTH

China's economy has expanded by a breakneck 9.5% during 2004, faster than predicted and well above 2003's 9.1%.

The news may mean more limits on investment and lending as Beijing tries to take the economy off the boil.

China has sucked in raw materials and energy to feed its expansion, which could have knock-on effects on the rest of the world if it overheats.

But officials pointed out that industrial growth had slowed, with services providing much of the impetus.

Growth in industrial output the main target of government efforts to impose curbs on credit and investments was 11.5% in 2004, down from 17% the previous year.

MICROSOFT PROFITS DOUBLED

Microsoft, the world's largest maker of computer software, has reported a doubling of quarterly profits.

It said that earnings were boosted by demand for personal computers that run its Windows operating system and its X-box video game console. Net profit was $3.46bn (1.8bn) in the three months to 31 December, compared with $1.55bn from a year earlier. Sales were $10.82bn.

P&G TO ACQUIRE GILLETTE FOR $57BN

Procter & Gamble, the firm behind the Wella and Clairol haircare brands, said it is to buy grooming firm Gillette for $57bn (30.2bn). The deal will be paid for mainly in P&G shares, and will create the world's largest stable of consumer brands, the firms said.

LATAMS REJECT EU'S BANANA TARIFF

Latin American banana producers have rejected EU plans to charge a 230 euro ($300; 159.6) tariff for each tonne of bananas exported to the EU.

Under the European Union (EU) proposal, Latin American countries will no longer be limited by quotas but will pay higher duties from January 2006.

Currently, Latin American countries' exports are limited but the duty per tonne is never more than 75 euros. Latin American banana producers fear the new rule will increase poverty.

The new EU tariff will benefit banana exporters from former African, Caribbean and Pacific (ACP) colonies, whose comparatively smaller producers struggle to compete with much-larger Latin producers.

NOKIA BOOSTED BY CHRISTMAS DEMAND

The world's biggest mobile phone maker, Nokia, reported a smaller-than-expected drop in quarterly earnings on the back of strong demand over Christmas. Fourth-quarter pre-tax profits were 1.46bn euros (1bn; $1.9bn), compared with 1.73bn euros in 2003.

VIOXX DRUG BAN HITS MERCK PROFITS

Profits at US pharmaceutical giant Merck fell 21%, after the firm was forced to withdraw its Vioxx painkiller last year.

Sales of the drug were halted amid safety fears on 30 September, causing a dip in fourth-quarter profits to $1.1bn (0.59bn), from $1.4bn a year ago. The firm also added $604m pre-tax to its reserves for Vioxx litigation.

EUROPE ASKS ASIA FOR EURO HELP

European leaders say Asian states must let their currencies rise against the US dollar to ease pressure on the euro.

The European single currency has shot up to successive all-time highs against the dollar over the past few months.

Tacit approval from the White House for the weaker greenback, which could help counteract huge deficits, has helped trigger the move.

But now Europe says the euro has had enough, and Asia must now share some of the burden.

China is seen as the main culprit, with exports soaring up 35% in 2004 partly on the back of a currency pegged to the dollar.

BROWN 'NEEDS 11BN TAX INCREASE'

Chancellor Gordon Brown will have to raise taxes by 11bn to pay for his spending plans, a think tank has said.

The Institute for Fiscal Studies (IFS) said Gordon Brown would need to raise taxes to get public finances onto the track predicted in last year's Budget.

It also suggested the government may narrowly miss its "golden rule" to borrow only for investment if the current economic cycle ends in 2005/06. A Treasury spokesman said government spending plans were "fully affordable".

BRAZIL JOBLESS RATE HITS NEW LOW

Brazil's unemployment rate fell to its lowest level in three years in December, according to the government.

The Brazilian Institute for Geography and Statistics (IBGE) said it fell to 9.6% in December from 10.6% in November and 10.9% in December 2003.

IBGE also said that average monthly salaries grew 1.9% in December 2004 from December 2003. However, average monthly wages fell 1.8% in December to 895.4 reais ($332; 179.3) from November.

GATES PLEDGES $750M INFANT VACCINATION

The foundation run by Microsoft magnate Bill Gates has announced it is dedicating $750m (400m) to a worldwide infant vaccination programme. Mr Gates said the donation would help save millions of children's lives.

CENTRAL BANKS 'SHUNNING DOLLAR'

Many of the world's central banks are starting to look to the euro to fill their currency reserves instead of the dollar, a survey suggests.

The poll carried out by Central Banking Publications found 39 nations of the 65 surveyed raising their euro holdings, with 29 cutting back on the US dollar.

The dollar's sharp fall in the face of huge deficits could be one cause of the switch, the report says. The survey was sponsored by the UK's Royal Bank of Scotland.

WORLD BANK CALLS FOR AFRICA AID

Aid to Africa needs to increase by at least 60% if poverty is to be cut, the World Bank said.

World Bank regional vice president Gobin Nankani said that financial help to Africa has remained flat, despite pledges by donors to increase it.

Aid flow to Africa reached 16bn euros ($20.7bn; 11.1bn) in 2002, but dropped to 15bn euros in 2003.

FEW SIGNS OF HOPE FOR UK FINANCES

Gordon Brown's golden rule of balancing the public finances may still be broken after the latest borrowing figures proved contradictory, analysts say.

According to the government's preferred measurement, net monthly public sector borrowing was down to 5.2bn in December, from 7.5bn a year earlier.

 

 

Yet under another indicator, calculated differently, the cash borrowing in fact soared by 1.6bn to 14.7bn last month.

Borrowing in the first nine months of the financial year totalled 37.1bn. This is 1.2bn higher than the same stage in 2003.