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