KT 3-4-2013_Layout 1 - Kuwait Times

MOSCOW: The Russian central bank kept
its main refinancing rate unchanged at
8.25 percent yesterday but appeared hint
at future rate cuts amid pressure from policymakers
for a action to boost economic
activity. The Bank Rossii appeared to leave
the door open for a cut in the future by
saying inflation, currently high at 7.2 percent,
should return to within its target
range in the second half of the year.
While keeping the benchmark rate
unchanged, it also snipped several more
minor rates by 25 basis points including
longer-term rates for liquidity operations
in a bid to push forward faltering activity.
The bank gave a downbeat assessment of
Russia’s economic growth prospects, saying
that recent data pointed towards a
continued slowing of growth and risks of a
further slowdown.
“The decision (to hold the headline
rate) has been taken against the background
of an estimation of the inflation
risks and the prospects for economic
BUSINESS
Russia CB keeps main interest rate unchanged
LONDON: Mervyn King, the Governor of the Bank of England, talks to an
employee of the Prudential Regulation Authority (PRA), during the opening
in central London yesterday. —AP
UK manufacturing
shrinks again,
mortgages fall
LONDON: Britain’s manufacturing activity
shrank for a second consecutive month in
March, a survey showed yesterday, leaving
the country’s more resilient services
sector as the best hope of avoiding a new
recession.
The Markit/CIPS manufacturing purchasing
managers’ index came in at 48.3, only
slightly above February’s surprisingly poor
reading of 47.9, and a touch weaker than
the consensus forecast.
The output component of the survey fell
in March at its fastest pace since October.
There were signs of weakness in the key
housing market too. While lending to
Britain’s consumers ticked up in February,
the number of mortgage approvals for
house purchases fell for a second month,
Bank of England data showed. Nonetheless,
the value of home-backed lending rose.
But there was better news from the
country’s largest business survey which
showed that export orders with British firms
rose strongly in the first three months of
2013 and confidence about the next 12
months picked up.The Markit PMI survey
suggests that manufacturing exerted an
even bigger drag on growth between
January and March than it did in the fourth
quarter of 2012, when it accounted for a
third of the economy’s 0.3 percent contraction.
“The onus is now on the far larger service
sector to prevent the UK from slipping
into a triple-dip recession,” said Rob
Dobson, senior economist at Markit.
Official GDP data for the first quarter
won’t be released until April 25 but the evidence
so far suggests a strong risk that
Britain will record a second consecutive
quarter of contraction - the technical definition
of recession. A third recession in less
than five years would be an embarrassment
for the government which is sticking to
tough austerity measures.
“All this still points to a very subdued
economy, which will keep the pressure on
the BoE to do more to offset the UK’s tight
fiscal stance,” said James Knightley, an economist
with ING, referring to Tuesday’s data.
“However, our central case remains for a nochange
decision this week.”
The Bank of England’s policymakers
meet today and tomorrow. More action,
possibly in the form of renewed government
bond-buying or quantitative easing
(QE), is only expected later this year.“We
don’t think that that is going to be sufficient
to push the (bank) into the sanctioning QE
as soon as this week,” said Philip Shaw, an
economist with Investec. “But nonetheless,
the committee can’t be altogether happy
with some of these indicators which have
shown the economy remaining in uncertain
mode.”
The Markit report blamed the poor performance
of manufacturing in March on
tough market conditions, subdued client
confidence and ongoing bad weather. New
orders from abroad contracted for the 15th
month running in March. The survey
blamed the fall on weak demand from
Europe and strong competition in US and
South Asian markets.
In further bad news for UK policymakers,
there were also signs that inflation pressures
were picking up. Output prices rose at
the fastest pace in three months while input
prices picked up sharply, driven by the
weakness of sterling and higher energy and
food costs.
Manufacturing accounts for around a
fifth of British economic output. Surveys of
the construction and service sectors for
March are due to be released today and
tomorrow respectively.
There have been signs that the services
sector is faring better than manufacturing.
It grew at its fastest pace in five months in
February, according to Markit and official
data showed it notched up its best performance
in January for five months. —Reuters
Yemen discusses aid with
IMF, eyes faster growth
DUBAI: The International Monetary Fund is discussing
fresh financial aid to Yemen with the government
of the impoverished country, a senior IMF
official said yesterday.
Masood Ahmed, director of the IMF’s Middle
East and Central Asia department, told reporters
that the talks focused on a new financial program
for Yemen. “We have a team that has been working
with authorities over the last couple of weeks and
they made good progress in those discussions,” he
said ahead of a meeting of Arab finance ministers
and central bank governors in Dubai. “We are
working with the authorities to see how we can
support Yemen over the coming years,” he added,
without saying when agreement on the aid might
be reached, or how much money might be
involved. The IMF resumed lending to Yemen in
April last year, approving the payment of a $93.7
million loan to help the country with its balance of
payments deficit, which had been worsened by a
year of political turmoil. Ibrahim Al-Nahari, Yemen’s
central bank sub-governor for foreign operations
and research, told Reuters that the new IMF facility
might be as large as $500 million. “We are at the
beginning stage (of the IMF talks). The program
will be an extended facility to the magnitude of
$450-500 million over three years.”
In an interview with Reuters late on Monday,
Yemen’s central bank governor said he was comfortable
with the current level of interest rates and
that he expected economic growth to accelerate
to about 7 percent this year. The central bank
slashed its main interest rate by 3 percentage
points to a three-year low of 15 percent in
February, helped by a sharp fall of inflation, in an
effort to support economic recovery in the volatile
Arab state. Asked whether he expected to cut
interest rates again in coming months, Governor
Mohammed Awad bin Hamam said: “Will see, wait
and see.” February’s rate cut was the first since
October, when the central bank began an easing
cycle. Yemen’s economy improved last year but
recovery remains fragile in the second-poorest
Arab state after Mauritania; a third of Yemen’s 25
million people live on less than $2 a day.
Hamam said he expected the Yemeni economy
to pick up speed this year after it grew 4.5 percent
in 2012; the non-oil sector expanded about 6 percent
last year. “I expect this year will be better,
maybe it will be 7 percent,” he said of economic
growth. That is more optimistic than the IMF’s latest
public forecast of 4 percent growth for Yemen.
The IMF said in January that Yemen’s central bank
had room to reduce interest rates gradually to support
growth, but warned that the political transition
after the overthrow of president Ali Abdullah
Saleh in February 2012, and security concerns -
particularly attacks on key oil and electricity facilities
- were risks to the economic outlook.
Inflation in Yemen dived to 5.8 percent in the
final quarter of 2012 from a peak of 25 percent in
October 2011. Hamam said the central bank’s foreign
currency reserves currently stood at $6 billion,
adding that he expected $2 billion worth of aid to
arrive this year from international donors. Last year
wealthy Gulf Arab states, Western governments
and other donors pledged $7.9 billion in aid over
several years to Yemen, but only a small fraction
has so far arrived. “Now, we are at the start and we
have not received that much. We are waiting for
the amount to be collected by the ministry of planning,”
Hamam said. —Reuters
growth,” the bank said.
“The Bank Rossii will continue to monitor
the inflation risks and the risks of economic
slowdown,” the bank said, adding
that its next monetary policy meeting was
scheduled for the first half of May.
The bank cut its three-month refinancing
rate to 6.75 percent from 7.00 percent
and for 12 months to 7.75 from 8.00 percent.
But crucially the rates for its most
widely-used one day and one week operations
were unchanged at 5.50 percent.
BRUSSELS: “Unacceptably” high
euro-zone unemployment ran at a
record 12 percent in February, official
data showed yesterday, with more
than 19 million people on the dole a
“tragedy” for Europe.
The figures and a weak manufacturing
sector report added to the
gloom after data earlier this year had
encouraged some hope the European
economy might finally have touched
bottom.
Analysts said the reports pointed
instead to worse to come, with the
jobless queues likely to grow as the
debt crisis continues to sap the economy.
“Such unacceptably high levels
of unemployment are a tragedy for
Europe,” said a spokeswoman for EU
Employment Commissioner Laszlo
Andor. “The EU has to mobilize all
available resources to create jobs ...
young people in particular need help,”
she said.
The Eurostat data agency said
unemployment in the 17-nation eurozone
at 12 percent was unchanged
from January when the figure was initially
given as 11.9 percent. In the full
27-member EU, unemployment in
February rose to 10.9 percent from
10.8 percent, with 26.34 million out of
work. Some 33,000 joined the jobless
queues in the euro-zone and 76,000 in
the EU over the month of February,
Eurostat said. Compared with a year
earlier, the increase was 1.78 million in
the euro-zone and 1.81 million in the
EU.
The highest unemployment rates
in February were in Spain with 26.3
percent and neighbor Portugal, on
17.5 percent. Greece was put at it 26.4
percent but this figure is for
December, the latest available. The
lowest rates were 4.8 percent in
Austria and 5.4 percent in Germany,
Europe’s biggest economy.
With youth unemployment a huge
cause of concern, Eurostat said the
jobless rate for under-25s ran at 23.9
percent in the euro-zone and 23.5 percent
in the EU. Among the countries
with the highest youth jobless levels,
Capital Economics said in a note to clients
that the language of the statement
reflected the extent to which Russia’s economic
policymakers were “in a bind” as
they sought to balance inflation worries
with concerns about sluggish growth.
But with inflation forecast to fall “interest
rates are likely to be lowered over the
coming months, and we are sticking to
our forecast for a total of 75 basis points of
cuts to key rates by the end of this year,”
Capital Economics said.
Spain was on 55.7 percent, followed
by Portugal on 38.2 percent and Italy
with 37.8 percent. Greece was the
highest with 58.4 percent but this was
also for December.
Howard Archer of IHS Global
Insight said the figures marked a “dis-
mal landmark” at 12 percent-already
very close to the official EU 2013 forecast
of 12.2 percent. Archer said
unemployment was now up for a consecutive
22nd month and even if the
report did show the jobless numbers
were not rising as fast as before, “an
overall turnaround in euro-zone labor
markets still looks some way off.”
The second quarter outlook is “far
from bright,” he said, and unemployment
could “very well near 12.5 percent
late in 2013 or early in 2014.”
Jennifer McKeown at Capital
Economics was equally downbeat.
The February data “is further confirmation
of the underlying weakness
of the economy,” Mckeown said.
Manufacturing data meanwhile
showed the slump deepening sharply
as even Germany was dragged down.
The Markit Eurozone Manufacturing
Purchasing Managers Index fell to 46.8
points in March, up from an initial estimate
of 46.6 but well short of the
already weak 47.9 posted in February.
The outcome left the closely followed
indicator at a three-month low
and below the 50-points boom-bust
line since August 2011. Germany at 49
points slipped to a two-month low
while “rates of decline gathered pace
in all the other nations ... with the
exception of France,” Markit said in a
statement.
WEDNESDAY, APRIL 3, 2013
The decision comes as the central bank
goes through a shake-up ahead of the
arrival of Kremlin economic advisor Elvira
Nabiullina in the summer as its new chief
to replace the long-serving incumbent
Sergei Ignatyev. While respected as an
economist who served as a capable economy
minister to 2012, Nabiullina is a close
ally of President Vladimir Putin and some
analysts have expressed concern that the
Kremlin will have a greater influence over
the central bank. —AFP
Record unemployment
clouds euro-zone hopes
Over 19 million people on the dole
France stood at 44 points, a threemonth
high, while Italy was on 44.5,
its lowest for seven months and Spain
on 44.2, a five-month low.
Manufacturing “looks likely to have
acted as a drag on the economy in the
first quarter, with an acceleration in
NOCOSIA: People queue up outside a Bank of Cyprus (BOC) branch in the centre of the capital
Nicosia yesterday. —AFP
LONDON: A man leaves a branch of Laiki Bank UK, a subsidiary of Cyprus
Popular Bank (Laiki Bank), in north London. —AFP
Laiki Bank UK branch
avoids Cypriot fallout
LONDON: Customers of the British unit of
failed bank Laiki will be protected from the
levy that was part of the euro-zone nation’s
bailout deal, the Bank of England announced
yesterday.
The announcement, made by the BoE’s
new finance watchdog the Prudential
Regulation Authority, means that Laiki Bank
UK customers will avoid any Cypriot levy on
their accounts and will be able to access their
accounts as normal. The BoE said in a statement
that about £270 million ($410 million,
320 million euros) in deposits from Laiki Bank
UK would be transferred to Bank of Cyprus
UK, and placed in the British government’s
compensation scheme that guarantees up to
£85,000 per saver.
Crisis-hit Cyprus was rescued with a 10billion-euro
($13-billion) EU-IMF bailout last
week. As part of the rescue deal, Laiki or
‘Popular Bank’ will shut and merge with Bank
of Cyprus. Depositors in Cyprus with more
than 100,000 euros in the two banks-the
island’s biggest — face losing a large chunk
of their money.
“Cyprus Popular Bank Public Co Ltd operating
in the UK under the trading name ‘Laiki
Bank UK’ has today reached an agreement
with Bank of Cyprus UK Ltd to transfer all
deposits to Bank of Cyprus UK, a UK subsidiary
fully regulated by the Prudential
Regulation Authority (PRA) and Financial
Conduct Authority,” the BoE said in a statement.
“The agreement does not affect access
to bank accounts and therefore all customers
who had an account with Laiki Bank UK will
be able to access funds as normal and do not
need to do anything.” The Cyprus crisis saw
capital controls imposed for the first time by
a euro-zone economy to prevent financial
meltdown. Under the bailout deal agreed in
Brussels last week, Cyprus must raise 5.8
billion euros to qualify for the full 10-billion-euro
loan from the “troika” of the
European Union, European Central Bank and
International Monetary Fund. —AFP
the rate of decline in March raising the
risk that the downturn may also intensify
in the second quarter,” Markit chief
economist Chris Williamson said in a
statement.
“The surveys paint a very disappointing
picture across the region,”
Williamson said.
The Cyprus debt bailout appeared
not to have had any impact so far, he
said, but “the concern is that the latest
chapter in the (euro-zone debt)
crisis will have hit demand further in
April.” —AFP
Greek CB sees delay
in recapitalization
ATHENS: Greece’s central banker has forecast that an
eagerly-awaited recapitalization of the country’s crisis-hit
leading banks could be delayed by a few weeks
to May.
“The recapitalization will be over in a few weeks,”
Bank of Greece governor George Provopoulos told
state television NET in a late Monday interview.
“According to the program, it will have to be completed
in April. I would say this date is slightly unrealistic,
there could be a delay of a few weeks... it could
go to the end of May,” Provopoulos said.
The recapitalization of Greek banks, who took a
major blow last year in helping the country reduce its
sovereign debt, is a condition for the continued
release of EU-IMF rescue loans for Greece’s crisis-hit
economy.
A sum of 50 billion euros out of the total EU-IMF
bailout fund of 240 billion euros has been earmarked
for this purpose. At least 10 percent of new capital
must come from private investors to keep the banks
from being effectively nationalized.
A key stumbling block to the process has been an
ongoing merger between Greece’s leading lender,
National Bank, and third-ranked Eurobank.
Provopoulos on Monday acknowledged the concern
of Greece’s so-called troika of creditors-the EU, IMF
and European Central Bank-that the new entity will
both dominate the market and will be tough to
recapitalize.
“(The creditors) do not like the creation of such a
major player with a market share of around 40 percent,”
Provopoulos said. “The troika says, and I can
also say, that there will be a greater difficulty in a
combined National Bank-Eurobank entity, with capital
needs in the order of 1.5 billion euros or slightly
higher, a very large sum under the current circumstances.
So there is a concern that if private investors
cannot be found, it will come under state control,” he
added.
Senior troika representatives are returning to
Athens this week to resume an audit of reforms that
was suspended last month.
Their report will determine whether Athens will
receive a loan disbursement of 2.8 billion euros pending
since March. Provopoulos noted that even if a
bank had to turn to the Hellenic financial stability
fund for help, “it’s not exactly state control.”
“In the Stability Fund there is ECB representation,
and the EU Commission, and the troika has oversight.
In no way would the troika want a major bank to
operate as a traditional (state) bank. I am also concerned
and would not want it to happen. I do not
think it will,” he said. —AFP