Economic downturn to end in 2009

Ben Bernanke, head of the US central bank, has made an interesting announcement recently. He simply said that he expected the recession to come to an end in the year of 2009. Let’s quote what he told to CBS TV channel: “This decline will begin to moderate and we'll begin to see a levelling off.” 

Mr Bernanke also said that in order to solve the problem the governments had to act quicker than they had done last time. Their reaction was very slow and almost brought the world close to a financial meltdown. Even though BBC thinks that this in an unusual behaviour from Mr Bernanke, i.e. having an interview with a TV channel, but he said these were desperate times and he needed to make an announcement. 

What he told to CBS he had already told to the US Congress back in January. He firmly believes that only politics can stand in the way to make the world recover if there is no appropriate will to make a start. But are there any signs justifying all that Mr Bernanke claimed? Well, the Dow Jones index started to rise again and the economic bail-out seems to solve the problem of the mortgages, however, the US unemployment rate is still the highest since 1983. 

Source: http://news.bbc.co.uk/2/hi/business/7945385.stm

Japanese exports shrink

Japanese current account shows deficit after 13 years by reaching 1.8 billion dollars. It seems people do not want to buy Japanese cars anymore, not because of their quality, but because of the ongoing recession that has recently been compared to the Great Depression. 

A current account is an economic figure that is used to measure the balance between a country’s exports and imports. If the account has a positive balance, it means during a specific year there were more exports than imports, however, a negative balance indicates the opposite: more imports than exports. In the case of Japan the exports halved in the last couple of months, whereas imports only decreased by a third. 

Not only did car exports go down, but the recession also affected the semiconductor and electronic parts exports. As Michito Yamagami finance ministry official said: “We incurred the current account deficit due to a plunge in exports. Our exports to key regions, including the United States, Europe and Asia, were all down sharply due to the deteriorating global economy.” Hiroshi Watanabe economist also made comment on the current situation of the country: „Japan's export-driven economy is really engulfed by waves of the global economic crisis.” 

Source: http://news.bbc.co.uk/2/hi/business/7931806.stm

Europe worried about the fate of General Motors

The European Commission had an emergency meeting to discuss the matters of the automotive industry which had been severely hit by the recession and could cause the end of General Motors. They simply did not accept the way GM had reacted to the ongoing crisis and were in fear of being too late to set things right. 

But what do the figures show for General Motors? According to their auditors the company is in a desperate situation as it had a loss of approximately 31 billion dollars just last year and the situation for 2009 would be far from being rosy, either. GM’s shares have gone down with at least 15% so far. If the company goes bankrupt, it will cause job losses for 300,000 European citizens. So as not to let it happen the EU expects European governments to come up with a solution to give aid to GM so that the company will not run out of money by the end of this spring. Mainly those EU countries that have GM sites or GM-related plants within their borders are expected to react to this dire situation: Britain, Belgium, Poland, Germany, Spain and Sweden. 

What is definitely out of question is that General Motors will cut almost 50,000 jobs and will require at least 22 billion dollars to survive in the near future. So far the company has received a 13 billion dollar federal loan to fight the “worst vehicle sales market” in three decades. Auditors wrote in their annual report that "The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern.” The company’s sales decreased by 53% compared to last year’s figures. In its annual report GM says: „Our future is dependent on our ability to execute our viability plan. If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the US bankruptcy code.” 

Source: http://news.bbc.co.uk/2/hi/business/7927463.stm

ASEAN takes steps towards the restoration of economy

ASEAN is the abbreviation of the Association of the Southeast Asian Nations which is – according to the Wikipedia – is the economic organisation of 10 Southeast Asian countries. Its member states are Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Brunei, Cambodia, Laos and Myanmar. The bloc that seeks to become as significant union as the European Union was formed back in 1967. 

Leaders of the 10 member states sat down and had round-table discussions to evaluate current economic situation. Among the topics was the stimulation of economic activity, easier access to credit and, most importantly, avoiding trade protectionism. At the end of the summit held in Thailand they also expressed their idea of forming an economic community similar to EU by 2015. According to BBC correspondent Jonathan Head it will take more than six years for them to reach their goals, what is especially problematic because of the issue of human rights – Vietnam and Burma are not democratic countries. And even though the first charter of rules is ready, member states are not forced to adhere to them. 

The community whose vision is “One Vision, One Identity, One Community” has so far achieved some significant results. Free trade agreement exists between the member nations and its trading partners such as Australia and New Zealand. Human rights are also very important for the community, but understandably, during last conference more emphasis was on the ongoing economic downturn. 

Source: http://news.bbc.co.uk/2/hi/asia-pacific/7917323.stm

India’s economy slows down greatly

China and India are amongst the fastest-growing economies in the world; however, the recession reached their economy, as well. In their case the expected figures for the growth of GDP decreased greatly. Economists say that interest rates should be cut and the demand for export will be likely to decrease in the future. Even the primary sector, agriculture, will face a fall in its growth. 

But what exactly do the figures tell us? Well, the country’s stock exchange index, the so-called Sensex fell back by 2%. The Gross Domestic Product growth was almost 10% lower than that of the last year. Although predictions were made that the economy would see a 7% expansion, analysts and economists say that a modified analysis should be made considering the current circumstances. 

The main problem is that India’s economy is largely driven by domestic demand. As the demand is problematic and it is decreasing everywhere, it can only worsen the situation for India, too. Just because the governments try to create some stimulus towards the demand, it does not necessarily mean that it is going to be the solution to the problem. The chief economist of the Mumbai Bank of Baroda, Rupa Rege Nitsure, told BBC that the plans the governments had in mind had not restored the business confidence so far. More effective decisions must be made to see some progress. 

Source: http://news.bbc.co.uk/2/hi/business/7914123.stm

Botswanan diamond affected by recession

It seems that wherever we are and whichever industry we deal with, all of them will be affected by the ongoing global crisis sooner or later. This is exactly what has happened recently to Debswana, a company that produces diamond in Botswana. The firm, owned by the government and a company called De Beers, is about to shut down two of its mines as there is no adequate demand which would satisfy the firm’s supply. 

The closure of these two mines will affect approximately 600 hundred employees. The good news is that these employees, for whom redundancy is inevitable, will either be given another job at the company or be offered a very early, therefore voluntary, retirement. As De Beers said to BBC: "These actions are being taken to mitigate the effects of the global downturn by reducing production during 2009 to align with demand, conserving cash for the company, protecting employment and maintaining readiness for an eventual upturn in the market.” 

De Beers is considered as the “diamond giant” in the diamond industry since it is the world’s largest diamond producer in terms of value. However, in their statement they said that the production of Debswana fell by 4% last year as more and more people are cutting their spending on luxury products. It seems that the recession caught up with the “rich and famous”. 

Source: http://news.bbc.co.uk/2/hi/business/7906425.stm

Russia decreases budget of 2014 Winter Olympics

According to BBC Russia decided to decrease its budget for the 2014 Winter Olympics as it was necessary because of the economic downturn the country was suffering from. The country was among those who had been hit hard by the global crises. 

15% less money will be available to host the Winter Olympics as Deputy Prime Minister Dmitry Kozak said that it was possible to find a way to save more than 8 billion dollars on the upcoming project. The government wishes to save money on all the major construction projects that are to be completed in the near future. 

According to the Russian media companies had already been reluctant to invest into these projects even before the announcement of the Deputy Prime Minister. Tender deadlines had already been extended to fight the lack of interest of several companies. 

To begin the constructions lands need to be acquired, however, the owners of these real estates are not willing to give in as they do not find the prices offered by the government appropriate. 

In the battle of hosting the upcoming event the Austrians lost, yet, Salzburg said that if the city of Sochi is unable to fulfil the necessary requirements and meet deadlines then they are willing to carry out all the constructions required. 

Source: http://news.bbc.co.uk/2/hi/europe/7894644.stm

Germany hit by economic slowdown

Germany's economy shrank by 2.1% in the fourth quarter of 2008 compared to the previous quarter, its worst quarterly performance since 1990. 

This was the third consecutive quarterly drop in Europe's biggest economy, according to the initial data from the Federal Statistics Office. 

Year-on-year, it shrank by 1.6%, after growing by 1.4% in the third quarter. 

Companies have cut investment and exports have dropped as the world economy slows down.

The figures were worse than the 1.8% anticipated by analysts and many are gloomy about the prospects for 2009. 

"This shows things went downhill sharply at the end of the year," said Juergen Michels, an economist at Citigroup. 

"We'll likely head down again the first and second quarter." 

"This number makes it plain that we're in a very serious recession - the most serious since World War Two. It's no surprise that exports and investment have tumbled," said Dirk Schumacher at Goldman Sachs, adding that the rise in inventories did not bode well for the first quarter. 

The situation "can hardly get worse," said Carsten Brzeski at ING Financial Markets. 

"The German industrial production has run out of steam with companies working only off their backlogs. Foreign demand has plummeted over the last months," he added. 

Source: http://news.bbc.co.uk/2/hi/business/7887659.stm

Switzerland to make decision on free movement

In Switzerland people will go to the voting booths to make a decision on whether to allow EU citizens to enter the Swiss labour market in the future or not. 

As a result of a negative outcome (i.e. the majority of the voters say "no") of the vote it will be hard for non-Swiss workers to find a job in Switzerland and even crossing the Swiss borders would take more paperwork. 

Even though Switzerland is not part of the 27-nation bloc it was among those countries who introduced the free movement of labour. Since its introduction the number of people entered the Swiss labour market has reached one million. 

A not-favoured outcome can put Switzerland's relationship with the EU at risk as the Swiss have always been tied to the European economic and monetary union politically as well as economically. 

Swiss officials say it is a matter of life now. Cheap labour is always favoured, however, in the period of a recession they cannot allow to employ foreign workers as it can result in the loss of jobs for many Swiss citizens. 

They claim that low-paid workers did good when the country enjoyed an economic boom, but it was a long time ago. 

Brussels has already warned Switzerland about the poll. According to BBC the Swiss are very well aware of the fact that "one in every two Swiss francs is earned through trade with the EU, and one in every three Swiss jobs depends on that trade." 

Source: http://news.bbc.co.uk/2/hi/europe/7877218.stm

Ford to make 850 workers redundant

According to BBC car manufacturer Ford is also affected by the recession that started in the US more than a year ago. 

UK operations will soon have to be carried out with a staff that will consist of 850 fewer workers. As it was claimed the firm expects these redundancies to be met voluntarily. 

The problem is that Ford promised to increase the payments by 5.25%. Yet, as the GMB union stated, "they are going back on the agreement." 

Most of the redundancies will concern the plant in Southampton, while the rest will affect sites in the following regions: Basildon, Brentwood and Dunton, in Essex, Daventry in Northamptonshire, Halewood on Merseyside and Bridgend in south Wales. 

One can wonder whether the sudden change of Ford's decision will result in people's taking industrial action or not. 

According to Justin Bowden, GMB union officer, "Ford of Europe made a profit in excess of £1bn in 2008." 

That is why the workers expected to be paid more as this success can only be associated with the workers' contribution as well as the rate of inflation. Contribution or not, Ford does not seem to give in. 

Representatives of Ford said that only the "unprecedented" economic situation is to blame for this situation. As John Fleming, Ford of Europe chairman and chief executive, said: "As demand across the industry continues to fall, we are facing some immediate and major challenges." He thinks these decisions have to be made quickly as only those quick enough to make up their minds can survive the recession. 

Source: http://news.bbc.co.uk/2/hi/uk_news/england/hampshire/7870823.stm

Unemployment rate at its peak

The ongoing recession worsened the unemployment rate in the European Union, which was 8%, the highest in two years. More and more firms make a certain amount of their employees redundant and it is expected that they continue to give their workers a sack until the very end of 2010. 

It is interesting to see that while unemployment is perhaps the only issue that causes a significant threat to the nations of the EU, the other major economic issue, inflation, that usually accompanies unemployment, fell to 1.1%, the lowest in 10 years. 

Spain is affected by the recession the most in terms of unemployment, whose figure was more than 14%, while the Netherlands and Austria are the least (the figures were 2.7% and 3.9%, respectively). 

The central bank of the European Union, the so-called European Central Bank, is expected to cut the interest rates of the eurozone to give a boost to the economies and try to bring the inflation rate closer to the designated 2%. The decision on the cut will be made next week. 

Unemployment rate rose to 7.4% for the 27-nation bloc last December. 

Source: http://news.bbc.co.uk/2/hi/business/7860469.stm