INIERNATIONAL ECONOMy! 57
TIIE GUARDIAN, Monday, Main, 2011
German economic growth IiI<ely to drop by mid-year, finance ministry says '1"\lE pace of Germany's 1. economic growth will probably slow by mid-year after jumping 1.5 per cent in the first quarter, the Finance Ministry said in its monthly report. The Munich-based lfo institute's German business confidence index sank for a second consecutive month in April, reflecting concern over energy prices. At the
same time, growing domestic industrial orders suggest that the impact of oir and gas costs may be limited, the ministry said. Economic growth "may be somewh at slower during the rest of the year," t he ministry said. While business confidence has declined , "it remains at a high level" and unemployment, at a 19-year low las t
month, will continue to profit from growing domestic demand, the ministry said. The German economy, Europe's biggest, may grow more than th ree per cent for a second year as i~ sustains a "robust" recovery, the International Monetary Fund said on May 17_ Germany's Economy Ministry sees growth of 2.6
per cent this year. Tax revenue for the federal and states lumped 8.9 per cent in the first quarter compared with last year, led by sales tax, the ministry said. Federal tax revenue rose 11.2 per cent over the same period. Federal and state tax revenue in April/rew 3.4 per cent compare with a year ago,ltsa,d.
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Food inflation in India accelerating as farmers' costs, oil increase r::oOD-PRlCE inflation in rlndia, Asia's third-largest eco nomy, may accelerate in the second half as farmers are paying 20 per cent more to grow crops, according to the commission that helps set minimum farm-product prices. . "The cost of production is going up very fast," Ashok Gulati, '. chairman of the Commission . for Agricultura l Costs and Prices, said in a telephone interview from New Delhi Friday. "The labour cost has gone up dra matically in the past one year and energy costs are also going up." A pi ckup in food prices would add to inflationary pressures in India, where the central bank has raised interest rates nine times since mid-March 2010. The commission, which recommends the rates at which the government buys crops from fanners to prevent distress sales in the open market, will include an average 20 percent gain in production costs this year, Gulati said.
"If the government announces higher minimum-support prices of crops, they put up'ward pressure on prices, said Madan SabnaVls, chief economist at Mumbai-based CARE Ratings, which grades the creditworthiness of Indian companies. "The benchmark prices in the market go up." Inflation in India has been above 8 per cent for 16 months, with the wholesaleprice index increasing 8.66 per cent in April. Farm-product wholesa le prices rose 7.47 per cent in the week to May 7 from a year earlier, the trade ministry said yesterday. Reserve Bank of India Governor Duvvuri Subbarao said on May 18 that inflation needs to be curbed to boost economic growth _ Global food costs gained to a record in February after grains, meat and cooking oils surged, according to a United Nations' gauge. Crude oil in New York has rallied 46 per cent over the pas t 12 months , trading Saturday at $98.98 per barI
reI. To protect the poorest, India's cenual government sets minimum prices of crops to assure farmers' inco mes, and sells subsidised grains and oils_ The government may announce this year's minimum prices of monsoon-sown crops; which include rice, lentils and corn - in the next 10 days, Gulati said. "When prices of input costs rise, farmers need to be compensated adequately," said Krishan Bir Chaudhary, president of the Society of Indian Farmers. "Once you remove the policy of fIXing the minimum price, the market rates of grains will immediately come down as farmers will be exploited." Food-price inflation at present is being driven by costlier fruits, vegetables, milk, animal products and eggs, Gulati said. The cost of farm products can be lowered by increasing farmers' productivity with good-quality seeds and irrigation, he said. "Inflation is high and we need to bring it down,"
Reserve Bank Governor Subbarao told reporters on May 18. Inflation will stay at an "elevated level" until September, the central bank said on May3, noting"persistently high food prices are likely' to exert sustained upward pressure on wages." India's economy may grow 8.2 per cent in 2011 from 10.4 per cent last year, the International Monetary Fund said on April 28. The economy may grow as much as 9.25 per cent, the finance ministry said in February. Monsoon-sown crops are planted from next month, with harvesting starting in October. The yearly weather panern, which acco unts for more than 70 per cent on India's rainfall, may reach Ke rala oli May 31, the weather bureau said on May 13. "We are not out of the woods as yet as far as food inflation is concerned," the commission's Gulati said . "We try to assure farmers a 20 to 30 per cent increase over the cost of production," he said.
Africa's best equity gains may be outside South Africa, Old Mutual says UB-SAHARAN Africa S stocks m ay gain more tha n equities of South Africa, which has more moderate economic growth, according to Old Mutual Global Index Trackers, a n asset-management affiliate of Old Mutual Pic. South Africa's growth potential is limited by its 25 per cent unemployme nt rate, said Tendai Chief Musikavanhu , Executive Officer of Old Mutual Global Index Trackers. South Africa's high jobless rate "naturally dilutes any, growth you can get, ' Boston-based 'Musikavanhu, a South African who manages $6 billion of assets, said in a phone interview. "That's the South Africa story, moderate growth when it should be explosive. It's stable, it's predictable and it's sophisticated on a relative basis." Economic growth of an
annualised 4.4 per cent in the fourth quarter wasn't sufficient to create jobs for school-Ieavers seeking employment for the first time. The jobless rate rose to 25 per cent in the first quarter from 24 per cent at that end Of201O. The S&P Pan-Africa ex-South Africa Capped 20 per cent Net TRlndex has risen 16 per cent since january 2009 and trades at 10.2 times the average earnings of its 172 member companies, according to data compiled by Bloomberg. The MSCI South Africa (MXZA) Index has advanced 40 per cent in the same period and trades at a price-to- earnings ratio of 16.5 times. International The Monetary Fund estimates sub-Saharan Africa's economy will expand 5.5 per cent this year and 5.9 per cent in 2012, and that seven of the world's 10 fastest- growing
economies in the next five years will come from the region. South Africa's central bank cut its 2011 economic growth forecast to 3.6 per cent from 3_7 per cent and left its estimate for 2012 at 3.9 per cent, Governor Gill Marcus said May 12. Africa is benefiting from "a huge infrastructural boom," Musikavanhu said_ "You've got the uprooting of corruption, the whole commodity boom. The financial sector boom is ¥uite interesting." The FTSE '[SE Africa All Share Index fe r 0.4 per cent to 31,794.13 by the 5 p.m. close in johannesburg. The Nigerian Stock Exchange AllShare Index gained 0.3 per cent to 25,790.64 by the 230 p.m. close in Lagos, according to a statement on the bourse's website. Kenya's All-Share Index fell 0.5 per cent to 753 9 at the 3 p.m. close in Nairobi, the lowest level since April 29.
The number of families in the entire continent of Africa with incomes of more than $20,000 a year exceeds India's, according to a report by McKinsey & Co. published a year ago. McKinsey said sub-Saharan Africa had a population of 1 billion in 2009. India has 1.2 billion people, Bloomberg data show. Africa's gross domestic product excluding the effects of inflation expanded by 4.9 per cent a year from 2000 through 2008, more than twice the pace of the 1980s and 1990s, McKinsey said. Sales of state assets contributed to a boom in foreign direct investment in Africa to $62 billion in 2008 from $9 billion in 2000, McKinsey said. Nigeria sold more than 116 state-owned businesses to investors between 1999 and 2006, it sa id.
IMF board approves $36.8 billion loan to Portugal '1"\lE International Monetary 1. Fund has approved a 26 billion-€uro ($36.8 billion) loan to Portugal as part of a joint bailout with the European Union in the latest effort to stem the region's sovereign debt crisis_ The Washington-based institution will make 6.1 billion euros available immediately, the fund said in an e-mailed statement_The IMF followed European officials, who on May 16 endorsed the 78-bil-
lion (SUO billion) joint package. "The Portuguese authorities have put forward a programme that is economically well-balanced and has growth and job creation at its center; Acting Managing Director John Lipsky said in the emailed statement. "It addresses the fundamental problem in Portugal -low growth -with a policy mix based on restoring competitiveness through structural reforms, ensuring
a balanced fiscal consolidation path, and stabilizing the financial sector." The backing for Portugal comes less than two days after the resignation of Dominique Strauss-Kahn as managing director, who was indicted yesterday in New York on charges including anempted rape. French Finance Minister Christine Lagarde emerged as the leading contender to replace him, with officials including Angela Merkel
arguing that a European is needed for the job because of the region's debt woes. The loan to Portugal has a duration of three years, the IMF said. "The financing package is designed to allow Portugal some breathing space from borrowing in the markets while it demonstrates implementation of the policy steps needed to get the economy back on track," the IMF said in the statement.
German FedraJ finance ministryin Berlin.
Renaissance plans more Africa investments n ENAlSSANCE Group, the l'Russian emerging-markets group of investment companies, plans to make more investments in Africa as the value of its assets in the world's poorest continent climbs to more than $1 billion , Chief Executive Officer Stephen jenning's said. "We'll invest several more billions in the coming years," he said in a telephone interview from Lagos, Nigeria's commercial capital, where Renaissance organised an Africa investment conference. 'The continent will deliver the fa stest growth in the world, faster than Asia has ever done." The International Monetary Fund estimates sub-Saharan Africa's economy will expand 5.5 per cent this year and 5.9 per cent in 2012, and that seven of the world's 10 fastest- growing economies in the next five years will be in the region. By 2015, 221 million African consumers will advance from destitution to basic-needs status, making from $1,000 to $5,000 a year, according to a McKinsey &Co. analysis of data from IHS Global Insight, a subsidiary of Englewood, Colorado-based data provider IHSlnc. "We responded to the facts at
a time a lot of people were blinded liy history and prejudice," jennings said of his group's decision to Stalt operations in Africa in 2006. "At the '-, time we came the fiscal situation, had improved across the continent" Renaissance is extending its investments in the continent to several areas, including realestate and infrastructure projects, said Clifford Sacks, the chief executive officer for Africa. These will include "urban renewal" projects similar to Tatu City, a $5 billion residential complex near Kenya's capital, Nairobi, that was funded by tl,e investment group and houses 62,000 people. "The reason we are doing this is that not many banks can do it," Sacks said. "It's a long-term, capital-intensive business." Renaissance has six operational offices and more than 120 people in Africa. The quality of African assets is increasingly attracting investors from Asia. Sacks said. Renaissance recently advised an Asian investor to put $750 million in a formerly stateowned steel mill in Zimbabwe. Asian investors are "comfortable with the African risk, which is becoming bener understood," he said.
Foxconn Technology investigates explOSion, fire at Chengdu plant in China t::OXCONN Technology Grou~, rmaker of Apple Inc. (AAPL) s iPhones and iPads, is investigating th~· cause of an explosion and fire at its plant in southwest China's Sichuan province that killed two people and injured 16. "We have begun investigation for the unfortunate inddent," Edmund Ding, a company spokesman said by phone. "We will brief the public as soon as we have new findings." The blast on Foxconn's Chengdu campus occurred at about 7 p.m. local time Friday. and the fire was extinguished late last night, Ding said. He declined to say what products the factory makes or estimate financiaf loss related to theacddent Terry Gou, chairman of Taiwan-based Foxconn; has been shifting production to Chengdu ana other interior dties in China such as Wuhan and Chongqing, where labor is about one- third cheaper than in the counoy's south. The $2
billion laptop plant where the explosion took place opened in October, Xinhua reported Friday. The affected plant makes Apple's iPad2 tablet computers, the Economic Observer said on its webSite, citing unidentified company workers. Gou is flying to Chengdu, the Beijing-based newspaper said, citing unidentified company employees. "We are working closely with Foxconn at this point to understand what caused this tenible event," Steve Dowling. a spokesman for Cupertino, Califomia-basedApple,said in a phone interview. "We are deeply saddened by the tragedy." Dowling declined to comment on any possible supply disruptions, refening questions to Foxconn. Police in Chengdu said they concluded preliminarily that the explosion, in ·a polishing workshop, was not intentionally caused, China News Service said.
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