Apr 11, 2011


IMF says risks not expected to derail economic recovery

IMF logoThe IMF says the global economy will grow by 4.4% in 2011

Global Economy

The global economy remains firmly on a path to recovery but threats to growth remain, the International Monetary Fund (IMF) has said.
Among the challenges are rising oil prices, unrest in the Middle East, continued inflation in China and debt problems in Europe.
In a new forecast, the IMF says the global economy should grow by 4.4% in 2011, the same figure given in January.
But the IMF cut its UK growth forecast for 2011 to 1.7% from 2%.
It kept its prediction for UK economic growth in 2012 unchanged at 2.3%.
Meanwhile, it raised its forecast for Germany's GDP growth this year to 2.5% from 2.2%, and its forecast for 2012 rose slightly to 2.1%.
Oil supply risk
On the global economy the IMF said: "The recovery has solidified, but unemployment remains high."
In its World Economic Outlook report the IMF also said that growth was not strong enough to make a "major dent in high unemployment rates".
And it said that the major risk to growth came from further oil price rises because of supply disruption.
It said the eurozone economy was expected to grow by 1.6% in 2011 and 1.8% the following year, a 0.1 percentage point increase on its January forecast.
It painted a gloomy picture for Portugal's economy, saying it would stay in recession during 2012, with the unemployment rate expected to rise from its current 11.1% to 12.4% by 2012.
Greece and the Irish Republic also faced tricky financial readjustments, it said.
Meanwhile Spain, which has unveiled spending cuts to try to stave off any potential bail-out, will record growth of 0.8% this year and 1.6% in 2012, the IMF said.
'Boom' fears
Growth in the US was predicted to be 2.8%, down 0.2 percentage points from January, reflecting the effect of higher oil prices.
And the IMF warned about inflation building in Asia's fast-growing economies, cautioning that "boom-like dynamics" should not be allowed to get out of control.
The Washington-based body said if China were to suffer a slowdown - after a credit and property-fuelled boom - it would hurt the entire region.
"Such boom-bust dynamics are also a possibility in other emerging Asian economies," the IMF said.
'Overheating'
China, as well as Brazil and India, largely helped to offset the deep downturns in much of the western world between 2007 and 2009 after asset bubbles burst.
But the IMF said: "The challenge for many emerging and some developing economies is to ensure that present boom-like conditions do not develop into overheating over the coming year."
Turning its attention to Japan, the IMF said the effects of the devastating earthquake and tsunami would reduce economic growth only slightly in 2011.
It also said Japan, which has huge levels of government debt, should refocus on fixing public finances when rebuilding after the March disaster gets under way.

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India proposes telecom policy changes as scandals hit

Man talking on phoneIndia's current telecom policy has come under criticism in wake of recent scandals

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India's telecom minister, Kapil Sibal, has proposed a slew of changes to the country's telecom policy in an attempt to streamline the industry.
He said that merger and acquisition rules will be relaxed to allow consolidation in the sector.
Mr Sibal also indicated that as part of the new policy, the government will separate mobile licences from spectrum fees.
India's telecom sector was rocked by a spectrum allocation scandal last year.
The country's lawmakers are currently investigating whether telecom licenses were sold at cheaper prices in order to favour some companies.
An official audit claimed the government may have lost as much as $39bn (£24bn) in revenues.
The scandal has dented the image of the sector and also created huge political issues in the country.

“Start Quote

Merger and acquisition guidelines need to be liberal”
Kapil SibalIndia telecom minister
There have been discussions about making the licensing process and spectrum allocation more transparent.
The Telecom Regulatory Authority of India has also recommended that service providers should be charged a higher fee for use of 2G spectrum.
Crowded market
India is one of the world's fastest growing markets for mobile phone services.
There are currently 15 service operators in the country catering to nearly 800 million subscribers.
As the subscriber base continues to grow and companies look to consolidate, the telecoms minister said he was looking to relax rules in the sector.
"Merger and acquisition guidelines need to be liberal," Mr Sibal said.
Under the current rules, when two service providers merge their combined revenue - or subscriber base - cannot exceed 40% of the total in their region.
Mr Sibal also proposed that telecom licenses in the country should be renewed for a period of 10 years, compared with the 20-year renewal under current rules.
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Indian PM Manmohan Singh heads to China for talks

Manmohan Singh and Wen Jiabao in Delhi on 15 December 2010Wen Jiabao (right) and Manmohan Singh met in December 2010 in Delhi
India's Prime Minister Manmohan Singh is travelling to China, as the two countries look to boost economic ties.
In December, the two countries agreed to increase bilateral trade to $100bn (£66bn) by 2015, up from $60bn in 2010.
Mr Singh will also attend a summit in China that will include Brazil, Russia, India, China and South Africa.
China is India's largest trading partner. However, the two countries still share a very unbalanced trade relationship.
"India's import dependence on China has gone up significantly on critical items," said Samiran Chakraborty, regional head of research for India at Standard Chartered Bank.
"Whereas if you look at exports, India's primary export to China is only iron ore."
Mr Chakraborty says this issue could come up during the visit.
"One of the demands is to open up the Chinese markets to India. Otherwise the trade balance is very much in favour of China and working against India," he adds.
'Complimentary relationship'
When China's Prime Minister Wen Jiabao visited India in December, the two sides agreed to take measures to promote Indian exports in China, in an effort to reduce India's trade deficit.
About 400 business leaders came with Mr Wen to India and business deals worth $16bn were signed.
The two countries also agreed to expand co-operation in infrastructure, environment, information technology, telecommunications, and investment and finance.
Mr Chakraborty says it is in each sides interest to continue to deepen ties.
"If these two have to stay side by side sharing borders and trying to grow at high growth rates it has to be a complimentary relationship rather then a tense relationship," Mr Chakraborty said.
"Otherwise it will impact the investment climate in both countries".
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Tepco may face $23.6bn compensation claims - JP Morgan

Workers spray adhesive synthetic resin over the ground at the nuclear plantFukushima Daiichi nuclear plant is at the centre of Japan's nuclear crisis

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Tokyo Electric Power Company (Tepco) may face as much as 2 trillion yen ($23.6bn; £14.5bn) in compensation claims, according to JP Morgan.
The company has been grappling to contain the radiation leak crisis at its Fukushima Daiichi nuclear plant.
On Tuesday, Japan's Nuclear and Industrial Safety Agency raised the severity of the nuclear crisis at the plant to level 7.
Japan has evacuated people living within a 20km radius of the plant.
The power station was one of the worst hit by the earthquake and tsunami which engulfed much of Japan on 11 March.
As the company struggles to contain the nuclear crisis, its shares have taken a beating on the Tokyo stock exchange.
Tepco shares have lost more than 75% of their value since 11 March, in the process hitting all-time lows.
Investors have been worried about the impact of the current crisis on the company's profit and also about the billions of dollars it may have to pay in compensation costs.

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Japan: Nuclear crisis raised to Chernobyl level

COMMENTS (12)
File photo of the Fukushima Daiichi Nuclear Power Station taken on 24 March 2011The Fukushima Daiichi nuclear plant was crippled by last month's earthquake and tsunami

Japan quake

Japanese authorities have raised the severity rating of their nuclear crisis to the highest level, officials say.
The decision was taken because of radiation measured at the damaged Fukushima Daiichi power plant, NHK reported.
The highest level for nuclear accidents (seven) had previously only applied to the Chernobyl disaster in 1986.
Meanwhile a 6.3-magnitude earthquake on Tuesday prompted the plant's operator to evacuate its staff.
Tokyo Electric Power Co (Tepco) said it was checking the status of the plant after the quake, the second to hit in as many days.
The aftershocks come a month after a huge quake and tsunami hit Japan, leaving 13,219 people dead and 14,274 missing. More than 150,000 people have been made homeless.
Impact of leaks
An official from the Nuclear Safety Commission of Japan announced that the crisis level at the Fukushima Daiichi plant was being raised in a televised statement, adding that it was a preliminary assessment that was subject to confirmation by the International Atomic Energy Agency (IAEA).
The level seven signifies a "major accident" with "wider consequences" than the previous level, officials say.

Analysis

Rachel HarveyBBC News, Tokyo
On the face of it this reclassification from a level five incident to a level seven is an alarming jump.
But the change has not been made because things have suddenly got worse at the Fukushima plant. Rather, a full assessment of the available data now suggests that a higher rating is justified.
Although the Japanese incident now equates to Chernobyl on the international scale, the two accidents are different in a number of important ways. In Chernobyl it was the reactor core itself that exploded, releasing a huge amount of radioactive material in a very short space of time. Fukushima experienced a less critical hydrogen explosion.
The initial radiation leak amounted to about a 10th of that which escaped from Chernobyl. The major concern in Japan is that the nuclear plant has not yet been brought under control, and some radioactive material is still seeping out.
"We have upgraded the severity level to seven as the impact of radiation leaks has been widespread from the air, vegetables, tap water and the ocean," said Minoru Oogoda of Japan's Nuclear and Industrial Safety Agency (Nisa), the government's nuclear watchdog.
One official from Tepco said that radiation leaks had not stopped completely and could eventually exceed those at Chernobyl, Reuters news agency reported.
However, a nuclear safety agency spokesman told reporters the leaks were still small compared to those at the plant in Ukraine, then part of the Soviet Union.
"In terms of volume of radioactive materials released, our estimate shows it is about 10% of what was released by Chernobyl," he said.
The decision to raise the threat level was made after radiation of 10,000 terabequerels per hour had been estimated at the stricken plant for several hours.
That would classify the crisis at level seven on the International Nuclear and Radiological Event Scale (Ines).
It was not clear when that level had been reached. The level has subsequently dropped to less than one terabequerel an hour, reports said.
Evacuations extended
The severity level of Japan's nuclear crisis has so far been set at five, the same as that of the accident at Three Mile Island in the US in 1979.

World's worst nuclear incidents

  • Level 7: Chernobyl, Ukraine, 1986 - explosion and fire in operational reactor, fallout over thousands of square kilometres, possible 4,000 cancer cases
  • Level 7: Fukushima, 2011 - tsunami and possibly earthquake damage from seismic activity beyond plant design. Long-term effects unknown
  • Level 6: Kyshtym, Russia, 1957 - explosion in waste tank leading to hundreds of cancer cases, contamination over hundreds of square kilometres
  • Level 5: Windscale, UK, 1957 - fire in operating reactor, release of contamination in local area, possible 240 cancer cases
  • Level 5: Three Mile Island, US, 1979 - instrument fault leading to large-scale meltdown, severe damage to reactor core
Japan has also said it is extending the evacuation zone around the crippled nuclear plant because of radiation concerns.
The zone will be widened to encompass five communities beyond the existing 20-km (12-mile) radius, following new data about accumulated radiation levels, officials said.
Japan's nuclear commission said that according to preliminary results, the cumulative level of external radiation exceeded the yearly limit of 1 millisievert in areas extending more than 60km (36 miles) to the north-west of the plant and about 40km to the south-southwest.
On Monday, a 7.1-magnitude quake hit north-east Japan, leaving three people dead. It also triggered a brief tsunami warning, and forced workers to evacuate the Fukushima Daiichi plant.
Tuesday's quake rocked buildings in the capital, Tokyo.
There were no immediate reports of fresh damage, though Japan's Narita international airport temporarily closed its runways, and metro and train services were interrupted.
The cooling systems at the Fukushima Daiichi nuclear plant were damaged in last month's disaster and workers have been struggling to prevent several reactors from overheating.
Officials have warned it will be several months before the situation at the nuclear facility is brought fully under control.
Tepco said on Tuesday that a fire had broken out briefly at Reactor 4, before being extinguished.
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Renault's Pelata loses job in electric car secrets case

Patrick PelataMr Pelata had his resignation as chief operating officer accepted by Renault

Global Car Industry

Renault's chief operating officer Patrick Pelata has resigned, but will remain within the firm, following an industrial espionage scandal.
Three executives from the group's security service will leave the French car-maker, which is 15% state-owned.
Meanwhile, compensation will be paid to another three executives who were wrongly fired over the affair.
It comes after investigations into the theft of the electric car technology, which was first detected last August.
Another trio of top executives will be relieved of their duties while their fate is decided, Renault added.
Renault accepted Mr Pelata's resignation at an extraordinary board meeting on Monday to discuss the findings of an audit into the matter.
"The audits thus evidenced the chain of failings and dysfunctions within the company, particularly as regards the supervision and control of the group security department," a Renault statement said.
French embarassment
"It has proven very embarrassing," said David Leggett, the editor of Just-Auto.com, in an interview with BBC World Service.
Renault's electric model Fluence ZERenault and its partner Nissan have invested extensively in electric vehicle technology
"The allegations were made, they worked on whatever evidence they felt they had to work on internally, unfortunately for Renault's top management the allegations were ill-founded," he said.
Commenting on the cosy relationship between major corporations in France and the country's government, David Leggett told the BBC: "I think it does tell us a little bit about the way French corporate culture works and the role of the government."
He added: "We've had French Government ministers making public pronouncements about this whole issue and perhaps over stepping the mark just a little bit."
'Solid job'
Patrick Pelata joined Renault in 1984 and joined the management committee in 1998.
"Pelata as COO did a solid job of guiding Renault through the last few years," said Morgan Stanley analyst Stuart Pearson.
Car manufacturing is an important part of the French economy, and a major employer.
One of the biggest advantages that Western carmakers have is their advanced technology, which enables them to compete against cheaper labour costs outside Europe.
The carmaker, alongside its partner Nissan, has invested heavily in electric vehicle technology.
Both plan to launch a number of new electric vehicles over the next two years.

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