World Economic Hot News

"US Creates Task Force to Target Unfair Trade Practices"

2012-02-29T14:14:00.001+07:00

US President Barack Obama has created a new trade task force to investigate and crack down on unfair practices by American trading partners.

The move comes amid concerns that unfair trading practices, especially by China, were harming US businesses. Policymakers have accused Beijing of keeping its currency artificially low in a bid to help China's exporters. The International Trade Enforcement Center will aim to ensure US businesses have "a level playing field."

"Robust monitoring and enforcement of US rights under international trade agreements, and enforcement of domestic trade laws, are crucial to expanding exports," the executive order signed by President Obama said.

Growing tensions

Trade relations between the US and China have been under strain in recent years. While the US economy has slowed, China has witnessed robust growth powered by the success of its manufacturing and export sectors.

However, US policymakers and businesses have accused China of giving an unfair advantage to its exporters by keeping the yuan's value low, a move which makes Chinese goods cheaper to foreign buyers. At the same time, some sectors such as the solar panel industry have argued that Chinese manufacturers have benefited from government subsidies which helps them keep their costs low.

President Obama said the US was working to ensure that its partners abide by international trade rules. He said the new unit will "bring the full resources of the federal government to bear to investigate and counter unfair trade practices around the world, including by countries like China."

( Source : http://www.bbc.co.uk/news/business-17200621 )

“Japanese Auto Parts Firms to Pay US Anti-Trust Fine”

2012-01-31T18:43:00.000+07:00

Japan's Yazaki Corporation and Denso Corporation have agreed to plead guilty and pay fines for fixing prices of parts supplied to US manufacturers.

Yazaki will pay $470m (£300m), the second-largest antitrust fine in US history, while Denso has agreed to pay $78m. The two auto part makers have been accused of fixing prices for as long as ten years.

Four Yazaki executives will also serve up to two years in a US prison. "Our investigation is still active and ongoing," said Sharis Pozen of the Department of Justice's Antitrust Division.

'Pernicious cartel'

Yazaki and Denso are among the world's largest auto part suppliers. Any conspiracy to fix prices of parts by such major players is likely to have an impact on the overall cost of manufacturing the vehicles and also affect the selling price.

The Justice department's Ms Pozen said the consumers were financially hurt and authorities were working to ensure that such instances do not happen in the future.

"Criminal antitrust enforcement remains a top priority and the Antitrust Division will continue to work with the FBI and our law enforcement counterparts to root out this kind of pernicious cartel conduct," she said.

The Justice department did not give details of which US manufacturers were affected and how much extra they had to pay.

Yazaki said that it was fully cooperating with the US authorities and had also launched an internal probe into the matter.

"In order to prevent any recurrence, the company has intensified its various efforts including conducting thorough internal investigations, reviewing internal rules, conducting regular educational programs and monitoring activities," the firm said in a statement.

( Source : http://www.bbc.co.uk/news/business-16803876 )

"Unemployment Set to Rise in 2012, Suggests CIPD"

2011-12-28T11:43:00.000+07:00

UK unemployment is set to keep rising to 2.85m in 2012 and peak in 2013, says a report by the Chartered Institute of Personnel and Development (CIPD).

The think tank, which specialises in employment, warns the private sector will fail to offset the 120,000 job losses in the public sector in 2012. But is does not detect signs of widespread new redundancies in the private sector.

A government spokeswoman said the labour market was stabilising. Government measures should also stop the numbers of young and long-term jobless getting worse, the CIPD says.

"As long as there is a relatively benign outcome to the eurozone crisis we expect the 2012 jobs recession to be milder than that suffered in 2008-9," said John Philpott, chief economic adviser at the CIPD.

"But unemployment in the coming year will be rising from a much higher starting point, so the UK jobs market in 2012 will be weaker than at any time since the recession of the early 1990s."

In response, a spokeswoman for the Department for Work and Pensions said: "There has obviously been an unwelcome increase in unemployment since the summer but the latest unemployment figures show some signs that the labour market is stabilising.

"The number of people in employment is higher than last month's published figure and the number of unemployed people is steadying." She added that "the increase in those claiming Jobseeker's Allowance has slowed and our welfare reforms are having a positive impact with overall benefit claimant numbers falling by around 40,000 in the last 18 months."

However, shadow work and pensions minister Ian Austin said it was "crystal clear that this government is failing to get people off benefits and into work".

"With unemployment continuing to rise, the benefits bill is going up too - and that's making the deficit harder to bring down."

Record joblessness

The forecast is more downbeat than estimates published by the Office for Budget Responsibility (OBR) in November. The OBR, which was set up by the government to provide independent assessments of the UK economy, expects unemployment to peak at 8.7% of the total workforce in the final quarter of 2012. The CIPD believes the unemployment rate will hit 8.8% in 2012.

Official figures showed that the UK unemployment hit its highest level since 1994 in the three months to October, when it rose by 128,000 to 2.64 million.

The Office for National Statistics (ONS) said the jobless rate for the three months to October was 8.3%, up from 7.9% in the same period last year. Youth unemployment rose to 1.027 million, the highest since records began in 1992.

( Source : http://www.bbc.co.uk/news/business-16342072 )

"UK Alone as EU Agrees Fiscal Deal"

2011-12-11T12:15:00.000+07:00

European leaders say 26 out of 27 EU member states have backed a tax and budget pact to tackle the eurozone debt crisis.

Only the UK has said it will not join. Prime Minister David Cameron said he had to protect key British interests, including its financial markets. The 17 countries that use the euro have all agreed to the deal.

Nine other countries have said they will sign up, some pending consultations with their parliaments. Hungary originally said it would also remain outside the deal but has now changed its stance.

'Stable euro'

The UK effectively used its veto to block an attempt, led by the French and Germans, to get all 27 EU states to support changes to the union's treaties.

Instead, eurozone members and others will adopt an accord with penalties for breaking deficit rules. It will be backed by a treaty between governments, not an EU treaty. "In fact, 26 leaders are in favour of joining this effort. They recognise the euro is a common good," said European Council President Herman Van Rompuy. Mr Cameron said he had done "the right thing" by not signing up to the deal, as it was not in Britain's interests.

"We were offered a treaty that didn't have proper safeguards for Britain, and I decided it was not right to sign that treaty," he told the BBC. "We're still in the single market. That is the best safeguard of keeping markets open," he said. German Chancellor Angela Merkel said the UK was the only country to have expressed reservations, but that Mr Cameron had recognised that a stable euro was in Britain's interest.

Of the nine other EU countries outside the euro, Hungary, the Czech Republic and Sweden have said they must consult their parliaments. Six others - including Denmark, Poland and Latvia - have agreed to join the new deal. However, some countries - such as the Republic of Ireland, which is in the eurozone - have a constitutional requirement to hold a referendum on any major transfer of powers to the EU.

The Irish Minister for European Affairs, Lucinda Creighton, told the Reuters news agency the probability of a referendum was "50-50 and we will be looking at the detail over the next couple of weeks". EU leaders aim to have the pact - known as a "fiscal compact" - ready to take effect by March.

Its main provisions include:

· a cap of 0.5% of GDP on countries' annual structural deficits

· "automatic consequences" for countries whose public deficit exceeds 3% of GDP

· the tighter rules to be enshrined in countries' constitutions

· the EU's permanent bailout facility, the European Stability Mechanism (ESM), to be accelerated and brought into force in July 2012

· the adequacy of 500bn-euro (£427bn; $666bn) limit for the ESM to be reassessed

· eurozone and other EU countries to provide up to 200bn euros to the International Monetary Fund (IMF) to help debt-stricken eurozone members.

The BBC's Europe editor Gavin Hewitt, in Brussels, says the new pact will be quicker to set up than a change to the treaty but it may prove less rigorous. But, he says, Europe has taken a big step towards closer integration, with binding rules over tax and spending, and sanctions against countries that overspend.

Nearly 10 hours of talks could not produce an agreement involving all member states. French President Nicolas Sarkozy said the sticking point had been Mr Cameron's insistence on a protocol allowing London to opt-out on proposed change on financial services.

"We could not accept this," he said. IMF chief Christine Lagarde welcomed the deal as "a really good step in the right direction".

But the announcement from Brussels failed to lift the markets, which are still hoping for more intervention by the European Central Bank (ECB), and European stocks traded slightly down on Friday.

( Source : http://www.bbc.co.uk/news/world-europe-16115373 )

"Australia's Economy Expands 2.5%, Led by Mining"

2011-12-07T12:29:00.001+07:00

Australia's economy grew more than expected in the third quarter, driven by building and mining activity.

Gross domestic product (GDP) rose 2.5% in the three months till the end of September from the same period a year earlier, the statistical bureau said. Analysts expected a gain of 2.1%, and the Australian dollar rose slightly on the news. Despite the stronger growth, there are fears about coming quarters with a slowdown expected in Europe and China.

Grim outlook?

The weaker outlook is what prompted the Reserve Bank of Australia on Tuesday to cut interest rates by 25 basis points, to spur domestic demand. It was the second rate cut in as many months. "It seems likely to us that by the next [RBA] meeting, the outlook for global growth will be worse," said Rob Henderson, head of market economics at NAB. "We expect the next inflation outcome, due in late January, to be another low reading."

Resource boom

Despite the concerns, some analysts say Australia's economy seems better placed to weather the global economic problems than many others. "We see solid growth right through next year, which is diametrically opposite to what most of the developed world can look forward to," said Brian Redican from Macquarie.

Wednesday's data showed that compared to the April to June period growth in the quarter was at 1%. That is higher than growth rates in the US and most of Europe.

The continuing health of the resource industry is one of the main contributors, as miners expanded output to meet the needs of China and India. Business spending added 2.1 percentage points to GDP growth. Engineering construction rose 31% in the quarter.

Household consumption grew 1.2%, the data showed, adding 0.7 percentage points to GDP.

( Source : http://www.bbc.co.uk/news/business-16063331 )

"Italy Forced to Pay Record Interest Rates at Auction"

2011-11-27T14:35:00.000+07:00

Italy has been forced to pay record interest rates in a 10bn euro ($13bn; £9bn) auction of treasury bills.

The rate of interest for the new debts due to be repaid in six months was 6.504%, compared with 3.535% in the last comparable sale on 26 October. The rate for two-year borrowing was 7.814%, up from 4.628% last time.

The Bank of Italy stressed that demand for the bonds had been high, with demand for the debts outstripping supply by 50%. But the European Economic and Monetary Affairs Commissioner Olli Rehn dismissed the idea that the eurozone crisis could lead to a break up of the single currency.

"It is clear that the leaders of the euro area have underlined very firmly that they will do whatever it takes to ensure that the future of the euro is solid and stable," he said. "Italy is a founding member state of the European Union and a founding member of the euro and a central part of the euro and it will remain so in the future."

The FTSE MIB in Milan dropped 1% following the auction, to take it down 1.9% on the day. However, at Friday's close, the FTSE ended up 0.7%, the French CAC-40 up 1.2% and Germany's Dax up 1.1%. The Italian government's implied cost of borrowing, based on the price at which its debts are traded on financial markets, has risen steadily over the last few weeks to levels seen as unsustainable in the long-term.

However, it is only when the government raises new money at debt auctions, such as those held on Friday, that it is forced to actually pay the higher rates on its debts. Italy plans to sell another 8bn euros at an auction on Tuesday.

'Slow disintegration'

Having met Germany's Angela Merkel and France's Nicolas Sarkozy on Thursday, Italian Prime Minister Mario Monti will be meeting EU Economic and Monetary Affairs Commissioner Olli Rehn on Friday. Mr Monti told his French and German counterparts that he aims to balance the budget in 2013. Mr Rehn is expected to seek further reforms to stabilise Italy's public finances and put the economy back on track, with the European Commission believing that more austerity measures will be needed if the budget is to be balanced.

The economic affairs commissioner has made some stark predictions about the importance of the coming weeks. "Ahead lies either the slow disintegration of the euro area or a significant strengthening of the monetary union," Mr Rehn told journalists on Thursday.

He told Italian legislators on Friday that it was important to convince Germany of the need to issue eurobonds - common eurozone debts backed by all 17 member states. "If I put it nicely, I would say there is a variety of views and there is quite some opposition as regards eurobonds," he said.

( Source : http://www.bbc.co.uk/news/business-15888752 )

“Extra Euro Crisis Summit Called”

2011-10-21T08:44:00.001+07:00

EU leaders are to hold another summit by Wednesday, because they will not be able to agree a rescue plan for the euro on Sunday.

French President Nicolas Sarkozy and German Chancellor Angela Merkel said a crisis strategy would be discussed on Sunday and adopted at the next meeting. EU leaders need to agree a second bailout for Greece, how to recapitalise banks and a stronger bailout fund. President Sarkozy also called for talks with the private sector.

The private sector talks would be "to find an agreement allowing to strengthen the sustainability" of Greek debt. Previous disagreements between France and Germany about the bailout plans have centred on how much the private sector would have to contribute to any package.

A spokesman for Chancellor Merkel said the leaders agreed that a "comprehensive, ambitious" answer to the crisis was needed. The spokesman also said that the advantage of the additional summit would be that it would give the German parliament time to approve any changes to the bailout fund.

Chancellor Merkel had been due to address the Bundestag on Friday, but that has now been postponed.

President Sarkozy and Chancellor Merkel have also said they plan to meet on Saturday in the hope of making progress, ahead of the heads of government meeting on Sunday in Brussels.

Sunday's summit had already been delayed from 17-18 October because more time was needed to finalise a plan. The French and German leaders spoke on the phone on Thursday.

"We have made enormous progress but not enough to take final decisions on Friday," Chancellor Merkel's spokesman said. "In certain areas, we have reached agreement, in others, we are on the right track."

European shares fell on Thursday amid concern about whether enough progress would be made at the weekend summit.

( source : http://www.bbc.co.uk/news/business-15393260 )

"Apple Full Year Profits Rise 85%"

2011-10-19T09:26:00.000+07:00

The world's biggest technology company Apple has reported full year results, showing net profit for the year to 25 September at $25.9bn (£16.5bn), up 85% from the previous year.

Even that was not enough to satisfy Wall Street, with the shares falling nearly 5% in after-hours trading. There was some disappointment with the fourth quarter of the year, when no major new products were released.

It is the first set of results since the death of co-founder Steve Jobs. In the fourth quarter of the year, Apple sold 17.1 million iPhones, which was a 21% increase on the same period last year, and 11.1 million iPads, which was a 166% increase.

But analysts had been expecting iPhone sales of 20 million in the quarter. Apple said sales were hurt in September by customers waiting for the new version, the iPhone 4S, which was released on 14 October.

It sold four million of the new models in the first three days after launch. "The numbers came in weak. They need to set records every time they report to keep up the momentum," said Colin Gillis, analyst at BGC Partners.

Apple sold 4.9 million Mac computers in the quarter - up 27% over the same period last year.

"The numbers are actually quite good. The reason why the stock is off - I think some of the analysts got carried away," said Shaw Wu, analyst at Sterne Agee.

( source : http://www.bbc.co.uk/news/business-15360697 )

"China's Economic Growth Slows to 9.1% in Third Quarter"

2011-10-18T19:16:00.001+07:00

China's economic expansion slowed during the third quarter of the year as government measures to control inflation hurt growth.

China's economy grew by 9.1% in the three months to the end of September from a year earlier, down from 9.5% in the previous quarter. The data comes amid fears that a slowdown in the US and Europe's debt crisis may also hurt China's growth.

China is the world's second-largest economy.

"The national economy generally carried good development state and kept moving towards the expected direction of macroeconomic control," the National Bureau of Statistics said in a statement.

Tightening measures

China has witnessed robust growth in past few years. But the rapid expansion has come at a price. Consumer price inflation in the country has been above the central bank's target and there have been concerns of the formation of asset bubbles.

Chinese authorities have been targeting the country's inflation rate and the surge in property prices by tightening credit markets. The central bank has increased interest rates five times in the past year and has also raised the reserve ratio requirement for banks regularly, thus reducing the amount of money they can lend.

Analysts said that while the measures have helped to contain price growth, they have curbed growth.

"We are seeing a broad slowdown through the year," said Alistair Thornton, China analyst at IHS Global Insight. "The tightening measures they have put in place over the last year have had an impact, and growth has slowed as a consequence," said Mr Thornton.

Growth concerns

Data released on Tuesday showed that factory output in China grew by 18% in September from a year earlier. Though the figure was higher than the previous month, analysts said that China's export-led growth may slowdown further in the coming months.

There have been concerns that the debt crisis in Europe may hurt growth in the region and dent consumer demand.

That is likely to have a big impact on China's export sector as the European Union is the world's biggest purchaser of Chinese goods, with the market worth about $380bn (£241bn) in 2010.

These fears were fanned further after data out last week showed that China's annual rate of export growth weakened to 17.1% in September, down from 24.5% the previous month. Analysts said that developments in Europe are likely to have a big impact on China's economy.

"The trajectory of the Chinese economy in the next 18 months will be wholly reliant on the trajectory of European growth," said Mr Thornton from IHS. "If things don't quite go to plan in Europe, then we could be faced with a similar situation to 2008-2009."

Domestic boost

While there are concerns that a slowdown in external demand may hurt growth, some analysts said growing domestic demand may help China offset any such falls. China's economic growth has seen the rise of a more affluent middle class with higher disposable incomes, which is likely to boost demand.

At the same time, China has been trying to boost demand at home in a bid to rebalance its economy. Warren Hogan, chief economist of ANZ Bank told the BBC's Asia Business Report that domestic consumption was playing a key role in China's growth.

"Gross domestic product (GDP) figures today should send a message to the broader community that the Chinese economy is largely a domestic economy," he said. "Most of this growth is coming from domestic investment and consumption," he added.

( source : http://www.bbc.co.uk/news/business-15331523 )

"G20 Ministers Meeting to Discuss Eurozone Debt Crisis"

2011-10-17T07:38:00.000+07:00

Finance ministers from the G20 group of nations are meeting in Paris to continue efforts to find a solution to the debt crisis in the eurozone.

While Greece remains the central focus, fears remain that the crisis could spread to other highly indebted eurozone countries such as Spain and Italy, and exposed European banks. Greece needs its next bailout loan next month to avoid defaulting on its debt. Spain was hit by a further credit rating cut on Thursday.

Standard & Poor's reduced Spain's long term rating by one notch, citing weak growth and high levels of private-sector debt. It came a week after fellow credit rating agency Fitch also cut Spain's rating.

On Thursday, Fitch also downgraded the creditworthiness of UK banks Lloyds and RBS, and also Switzerland's UBS.

Funding issues

The euro rose as high as $1.3828 against the dollar in Friday trading, on optimism about the meeting of G20 finance ministers.

However, analysts caution that any major decisions on tackling the eurozone debt crisis will not be announced until the meeting of European Union (EU) leaders on 23 October. These are expected to include an agreement on increasing the funding and powers of the European Financial Stability Facility (EFSF), the fund set up to help national governments in financial difficulty.

The European Commission President, Jose-Manuel Barroso, said on Friday that any decisions taken on banks or on the eurozone's EFSF rescue fund at that meeting should take effect immediately. Mr Barroso said: "Any decision should be enforced immediately, concerning the strengthening of the EFSF or concerning increased guarantees for our banks."

Warning

Measures to protect European banks with high levels of exposure to eurozone national debt are also expected to be decided by EU leaders. Prior to the meeting, South Africa's Finance Minister Pravin Gordhan warned that International Monetary Fund (IMF) and EU resources may be "inadequate" if the eurozone debt crisis worsened.

US Treasury Secretary Timothy Geithner disagreed, saying that both the IMF and EU already had sufficient funds. He said: "As we look at the world today, the IMF has very substantial, uncommitted, available financial resources. "Of course, Europe as a whole has resources available to help with the financial problems. "The problems that they are facing there in Europe are complicated to solve, but well within the resources that Europe has."

Mr Geithner also said the G20 was looking for a "clear commitment" from Europe to deal with the debt crisis. He told CNBC television from Paris: "What you need is the clear commitment by the governments, that they will do what is necessary to hold this together and put as much resources behind this as is necessary."

He said Europe "is clearly moving" to deal with the crisis. Mr Geithner is expected to make a fresh call at the G20 meeting for China to allow its currency, the yuan, to trade freely.

Washington has long accused Beijing of keeping the yuan undervalued to make Chinese exports artificially competitive.

Greek focus

Athens is now likely to get its next loan instalment in November after inspectors from the EU, International Monetary Fund (IMF) and European Central Bank said they had reached agreement with the Greek government on further austerity measures in the country.

The representatives from the so-called troika had been in Athens to check on whether the Greek government was carrying out sufficient spending cuts and tax raising measures. Greece's next 8bn euros ($11bn; £7bn) payment of EU and IMF funds has been delayed since the troika inspectors called off earlier inspections in Athens at the start of September.

However, inspections resumed after the Greek government pledged further austerity moves, despite widespread protests. Protests against spending cuts are also continuing in Spain.

( source : http://www.bbc.co.uk/news/business-15302908 )

"EU Summit 'will be Decisive' on Eurozone Crisis"

2011-10-16T11:31:00.000+07:00

A European Union summit later this month will agree "decisive" measures to tackle the eurozone debt crisis, the French finance minister has said.

The summit would give "clear answers", said Francois Baroin at the end of talks between ministers from the G20 group of nations in Paris. He said central banks "would continue to supply banks with liquidity". The G20 statement also said ministers were "committed that the IMF must have adequate resources". The G20 meeting came amid continuing fears about the EU's debt-related problems spreading.

The US has expressed particular concern about the threat to its economy. US President Barack Obama and German Chancellor Angela Merkel spoke by phone on Friday to discuss the crisis.

The head of the International Monetary Fund (IMF) Christine Lagarde said emerging economies - whose growth helped support the world economy during the global crisis - are starting to be affected by weaknesses in the advanced economies. "The main thing is that the situation has got worse rather than having improved over the last three weeks," she said.

"We heard a lot from the emerging markets that they are very concerned about the risk of contagion," Mrs Lagarde said.

'Contagion'

Details of the rescue plan discussed in Paris include a bigger write-down than previously expected of Greek debt, a much more powerful European bailout fund and a re-capitalisation of weaker banks to arm them against inevitable losses.

The plan needs to be finalised by next weekend's EU summit in Brussels.

The BBC's Gavin Hewitt says all eyes now turn to whether the leaders of France and Germany will provide the summit with convincing detail.

"They clearly have more work to do, on both the strategy and the details," US Treasury Secretary Timothy Geithner said.

The G20 ministers said they welcomed the measures "to increase the capacity and the flexibility of the EFSF [European Financial Stability Facility]".

The statement added: "We look forward to further work to maximise the impact of the EFSF in order to avoid contagion, and to the outcome of the European Council on October 23 to decisively address the current challenges through a comprehensive plan."

The EFSF has been used to fund bailout packages for Ireland and Portugal but there have been fears it will not be able to cope if it is needed to rescue larger economies such as Spain and Italy, both of which have had their credit ratings downgraded in recent weeks.

Another area under discussion in Paris has been whether to strengthen the IMF.

Developing countries want to boost it, but the US in particular has been reluctant, wanting instead for the eurozone to take stronger action.

Athens is now likely to get its next loan instalment - totalling 8bn euros ($11bn; £7bn) - in November after inspectors from the EU, International Monetary Fund (IMF) and European Central Bank said they had reached agreement with the Greek government on further austerity measures in the country.

The representatives from the so-called troika had been in Athens to check on whether the Greek government was carrying out sufficient spending cuts and tax raising measures.

( source : http://www.bbc.co.uk/news/business-15319026 )

“Singapore Cuts Growth Forecast Amid Global Uncertainty”

2011-10-14T20:30:00.000+07:00

Singapore has cut its growth forecast for 2011 amid concerns that the global economic recovery may be faltering.

The government said it expected the economy to grow by 5% this year, down from an earlier projection of between 5% to 6%. The cut comes amid fears that a slowdown in the US and Europe's debt crisis may hurt global growth.

The Monetary Authority of Singapore warned growth may slow even further next year. "With the weak external environment likely to persist, the Singapore economy will expand more slowly in 2012 and growth could be below its potential rate of 3-5%," it said in a statement.

Avoiding recession

Singapore's Ministry of Trade and Industry also released preliminery growth figures for the months of July to September.

According to the latest data, the country's economy grew 1.3% during the period from the previous three months. This was after it had contracted by 6.3% in the previous quarter. The expansion helped it avoid a technical recession, a term used when the economy contracts for two successive quarters.

Compared to the same period last year, the economy grew by 5.9%. However, analysts warned that despite the growth, things may get tougher in the coming months.

"Even if the economy managed to avert a recession in the third quarter, the risk of falling into the red in the fourth quarter cannot be ruled out," DBS bank said in a report.

( source http://www.bbc.co.uk/news/business-15302386 )

"China's Inflation Rate Eases Further in September"

2011-10-14T11:56:00.001+07:00

Inflation in China eased slightly in September but high prices, especially for food, remain a concern for the country's population.

Consumer prices rose 6.1% last month, compared with the same month last year, the National Bureau of Statistics said. That is down from 6.2% in August and from 6.5% in July, a three-year high. The government had put policy tightening on hold as the eurozone and US debt crises threatened global growth.

Previously though, Chinese authorities had introduced a slew of measures to cool prices, lifting interest rates five times, and bank reserve requirements nine times since 2010.

Downward trend?

Some analysts said Friday's slight dip reinforced views that inflation is on a downward trend. "This confirms that inflation peaked in July," said Chi Sun, an economist with Nomura in Hong Kong.

"Policy will be on hold. We think inflation will slow down gradually in the coming months."

On Thursday, the International Monetary Fund (IMF) warned that inflation in some Asian countries is still too high. But it added that consumer prices could ease after peaking this year.

However, other market watchers said it was too soon to say that inflation was no longer a worry.

"The slowdown in [the] consumer price index last month is not drastic enough to reduce inflationary expectations, and it is still too early to confirm an easing trend in price pressures," said Qiao Yongyuan, from CEMB in Shanghai.

Food setback

Nonetheless, the high price of food continues to cause concern. The food component of inflation rose 13.4% in September from the same month last year, the data on Friday showed. That is unchanged from the level in August. The government has implemented measures, such as increasing supply, to bring down the price of pork, vegetables and other basic foods.

However, those efforts suffered a set back when summer storms destroyed crops.

( source : http://www.bbc.co.uk/news/business-15302091 )

“IMF Cuts Growth Forecast for Asia”

2011-10-13T21:21:00.000+07:00

The International Monetary Fund (IMF) has cut its growth forecasts for Asia over worries about eurozone debt and new fears for the US economy.

The IMF said risks for Asia were "decidedly tilted to the downside" because of these concerns over its two major export zones. It said gross domestic product (GDP) growth across Asia would average 6.3% in 2011, and 6.7% in 2012.

In April, it had predicted close to 7% growth in both years. The body warned about a risk of capital outflows from the region, and the possibility that oversees investors may reverse the large positions they have built in Asian markets since 2009. In addition, inflation is still high in a number of Asian countries, the IMF said.

But it believes consumer prices could ease after peaking this year, as food and energy prices "gradually moderate". The IMF also said that Asian policymakers were faced with "a delicate balancing act".

"They need to guard against risks to growth but also limit the adverse impact of prolonged easy financial conditions on inflation," it noted.

( source : http://www.bbc.co.uk/news/business-15285447 )

“US Senate Passes Bill to Pressure China on Yuan”

2011-10-12T14:31:00.000+07:00

The US Senate has voted through a bill which aims to punish China for keeping its currency artificially undervalued. Some lawmakers argue that the value of the Chinese yuan gives goods from the country an unfair advantage and costs American jobs.

The legislation passed the Democrat-led Senate 63-35, putting it through to the House of Representatives. China's foreign ministry reacted by opposing the bill, saying it "obstructs China-US economic relations and trade".

Imposing tariffs

US Lawmakers said the vote was a signal that it is time to confront China over its trade policies.

"There are always people who don't want to stand up to China and I think they are, frankly, undercutting our ability to stop the haemorrhaging in our manufacturing jobs," said Democrat Ohio Senator Sherrod Brown. The bill is designed to put pressure on countries the US says are keeping their currencies deliberately undervalued. If passed into law, it would allow Washington to impose so-called "countervailing duty" tariffs on imports that it sees as unfairly state-subsidised.

Most analysts say the Chinese yuan is undervalued against the US dollar by 25%-30%, with some US lawmakers putting the difference up to 40%. There has been some appreciation of the yuan in the past year, but not enough to appease critics.

Damaging relations?

Recent comments in the Chinese media have shown fierce opposition to the bill, saying the trade imbalance between the two countries is a result of US economic policies and not the exchange rate.

"China calls on the US to discard protectionism, stop politicising economic issues and take concrete action to create an enabling environment for the development of bilateral economic relations and trade," said Ma Zhaoxu, a spokesperson for the foreign ministry, in a statement on Wednesday.

The Chinese foreign ministry also urged the Obama administration not to support the bill. Many in the US are also worried that action against China would damage US-China relations. House Speaker John Boehner has said it would be "dangerous" for Congress to get involved with a foreign country's exchange rate. This sentiment puts the fate of the bill in question.

Secretary of State Hillary Clinton said to Reuters news agency: "I don't know whether this bill in the form that its passing the Senate will ever end up as a piece of legislation coming from the Congress".

"But it does reflect a great deal of frustration on the part of the American people."

( source : http://www.bbc.co.uk/news/business-15269123 )

"Chinese Bank Shares Rise after Beijing ups Stake"

2011-10-11T21:29:00.000+07:00

Shares in China's big banks have moved higher, after the country's sovereign wealth fund announced it was increasing its stake in them. Central Huijin, the domestic arm of China Investment Corporation, bought shares in four major banks on Monday, said the official Xinhua news agency. The share purchase is the first since the global financial crisis in 2008.

Analysts said the move was aimed at boosting investor confidence shaken by foreign markets and domestic policy. Shares in Agricultural Bank of China surged more than 12% on Hong Kong's main index, while Industrial and Commercial Bank of China rose 7% in early trade.

Growth concerns

"They're showing confidence in the banks, and support from the central government," said Victor Wang from Macquarie Securities.

Chinese banks shares have fallen 30% in recent months, according to the Financial Times. Although Chinese growth continues to show strength, analysts say investors are concerned about the eurozone debt crisis and a slowdown in the US economy. Inflation is also a concern, currently near its highest level in three years.

Continuing support

The four Chinese lenders later gave details of the move by Central Huijin. Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank Corporation and Bank of China said 39.1 million, 14.6 million, 7.4 million and 3.5 million of their Shanghai-listed shares were bought on Monday. That only amounts to a small increase in the stake held by Central Huijin in the banks, which is already the largest shareholder in the country's big lenders.

It also said in a statement to the Hong Kong Stock Exchange that it would continue to increase its holdings in the four banks over the next year.

( source : http://www.bbc.co.uk/news/business-15251828 )

" Eurozone crisis: Merkel and Sarkozy 'agree key changes' "

2011-10-10T08:51:00.000+07:00

The German and French leaders will propose "important changes" to the way the eurozone operates after talks on controlling the bloc's debt crisis. Chancellor Angela Merkel and President Nicolas Sarkozy said the aim was closer and more binding economic and financial cooperation between eurozone countries.The leaders said they would give further details by the end of October.

The nations were "determined to do the necessary to ensure... recapitalisation of Europe's banks", Mrs Merkel added. Germany and France have differed over how to recapitalise Europe's banks, said by some to require between 100bn (£86bn; $134bn) and 200bn euros to withstand the sovereign debt crisis.

Paris is believed to want to use the eurozone's bailout fund - the European Financial Stability Facility (EFSF) - to recapitalise its own banks, while Berlin is insisting the fund should be used as a last resort. But speaking after the talks in Berlin, Mr Sarkozy said it was "not the moment" to go into the agreement's details but said that the Franco-German accord was "total".

Mr Sarkozy told reporters: "We are very conscious that France and Germany have a particular responsibility to stabilise the euro. We need to deliver a response that is sustainable and comprehensive." The leaders suggested that their package of proposals would include a plan for recapitalising European banks, accelerating economic co-ordination in the eurozone and dealing with Greece's debt problems. Chancellor Merkel has insisted that the 17-18 October summit of European leaders in Brussels must send a clear signal on the issues in a bid to restore market confidence.

Other topics on the leaders' agenda were thought to have been the Franco-Belgian bank Dexia, Europe's first bank to fall victim to the debt crisis. Earlier on Sunday, the governments of France, Belgium and Luxembourg said they had agreed a plan to rescue the bank.

"The proposed solution, which is the result of intensive consultations between all involved parties, will be submitted to the Dexia board, whose responsibility it is to approve the plan," a joint statement said. The board was meeting on Sunday afternoon.

Greek bailout

Meanwhile, talks are continuing over the latest bailout tranche for Greece, which could run out of cash as soon as mid-November. The European Commission, the European Central Bank and the IMF are currently deciding whether to release about 8bn euros to help the Greek government pay its bills.

This is money from the original 110bn euro bailout agreed last summer. Another 109bn euro bailout package was also agreed by European leaders in July, but this has yet to be ratified.

Despite efforts by leaders to contain the crisis, there is little evidence that its end is nearing, analysts say. "There is a high risk that this crisis further escalates and broadens," German finance minister Wolfgang Schaeuble said.

On Friday, the international ratings agency Fitch downgraded the sovereign credit ratings of Italy and Spain, and another agency, Moody's, downgraded 12 banks in the UK and nine in Portugal. Plans to expand the EFSF, and give it greater powers, were also agreed in July and have been ratified by most national parliaments. Slovakia will vote on the proposals this week. However, these plans are now seen as inadequate and leaders have said they hope to announce new measures at a G20 meeting in Cannes at the beginning of November.

( source : http://www.bbc.co.uk/news/world-europe-15226953 )

"Embattled Dexia Bank in Line to be Bailed Out"

2011-10-10T08:44:00.000+07:00

France, Belgium and Luxembourg have approved a plan to secure the future of the troubled bank Dexia, following fears it could go bankrupt.

Details were not released, but reports said the bank will be broken up and partly nationalised.

The plan came after French and German leaders agreed that Europe's crisis-hit banks need to be recapitalised. Dexia asked for help for the second time in three years after a liquidity squeeze sent its shares tumbling. The situation with Dexia is the latest warning sign over the health of Europe's lenders. It has a global credit risk exposure of around $700bn (£449.5bn), twice the gross domestic product of Greece. It is thought the plan will lead to the bank's Belgian retail unit and its French municipal finance operations coming under state control.

Belgium's Prime Minister, Yves Leterme, said: "The three governments have agreed to put a proposal to the board which fits completely with the goals of the Belgian government, which means to take over Dexia Bank Belgium, secure it and turn it into a very safe bank."The burden of bailing out Dexia led to a warning from the ratings agency Moody's that it could cut its rating on Belgium's government bonds.

( source : http://www.bbc.co.uk/news/business-15235915 )

"South Korea Inflation at Three-year High on Food Price Jump"

2011-09-01T13:22:00.001+07:00

South Korea's inflation rate hit a three-year high in August as higher food costs continued to put pressure on consumer prices.

Prices in August rose by 5.3% from a year earlier, latest data showed, up from a 4.7% increase in July.

This is the eighth successive month that inflation has remained above the central bank's target of 4%.

However, analysts said that despite the surge in prices, the central bank may not raise interest rates immediately.

"Although inflation was high in August, external uncertainties such as a US economic slowdown and European debt problems remain," said Park Sang-Hyun of Hi Investment & Securities.

"It will therefore be tough for the Bank Of Korea to raise interest rates this month." he added.

'Additional burden'

The jump in consumer prices has come despite measures by the central bank to rein in price growth.

The Bank of Korea has raised interest rates three times this year in a bid to control rising consumer prices.

To make matters worse for the central bank, data out on Wednesday showed that factory output in Korea fell 0.4% in July, from a year ago.

Meanwhile, authorities have also had to juggle between looking to boost domestic demand while trying to control the surging household debt in the country.

While the authorities have said that fighting rising prices is one of their top priorities, analysts said the combination of these other factors had limited the central bank's options.

"The recent tightening of loan regulations by the government has already put an additional burden on the domestic economy," said Suh Dae-Il of Daewoo securities.

"It is unlikely that the Bank of Korea will exercise monetary policy at the risk of further slowdown."

( Source : http://www.bbc.co.uk/news/business-14742575 )

"Where Are Most Secure Bank in the World?"

2011-08-29T04:26:00.000+07:00

NEW YORK - The latest survey of Global Finance launched 50 safest banksaround the world. Like the site disitat Forbes, Sunday (28/08/2011), almost halfof the list are in Europe, including two in Spain and two in Italy.

The list includes five American banks which BNY Mellon (NYSE: BK),JPMorgan (NYSE: JPM), Wells Fargo (NYSE: WFC), U.S. Bancorp (NYSE:USB), and CoBank. The rest, scattered all over the world, mostly in Australia,Singapore, Middle East, Japan, and China.

Actually, the top ten safest banks in the world are in Europe. If so, why doinvestors actually dispose of the shares of European banks and other relatedstocks around the world? Is this the fault of investors who launched the agencyor agencies the data?

The answer, both. As it happens generally when the crisis, investors in the stock market overreact. On the other hand, the three agencies which rating agencyStandard & Poor's (S & P), Moody's and Fitch, in general, are responsible fortheir negligence to enter the housing crisis on the wider margins.

"Gold Price Drops Sharply on US Economy Hopes"

2011-08-25T08:02:00.000+07:00

The price of gold plunged by 5.6% on Wednesday to close at $1,757.30 an ounce in New York, a drop of $104 on Tuesday's finish.

During a volatile week for the precious metal, its price has fallen since topping $1,900 an ounce during trading overnight in Asia on Tuesday.

Analysts put the falls down to profit-taking and hope of new measures in the US to try to bolster its recovery.

Gold is perceived as a safe investment in times of uncertainty.

Its price rose steadily this month during a tumultuous period on the markets caused by fears about the global recovery and euro debt crisis.

Some predict that Federal Reserve chief Ben Bernanke will signal a new round of quantitative easing to try to kick start the US' sluggish economy when he speaks at a gathering of central bankers on Friday.

But that explanation, cited as a potential reason for the sharp fall on Wednesday, was also given on Tuesday when gold rose to a record price of $1,913 an ounce.

According to this line of thinking, investors assume that quantitative easing, in which the central bank injects new money into the economy, could depress the value of the dollar, making gold a more attractive investment.

European stock markets also rose, with London's FTSE ending 1.5% higher, the Cac 40 in Paris up 1.8% and Frankfurt's Dax closing up 2.7%.

Stronger-than-expected US durable goods data, a leading economic indicator, could also have helped shares. The latest figures showed that companies ordered more big ticket items such as cars and planes in July.

( source : http://www.bbc.co.uk/news/business-14656210)

"Brokers and Economic Transition"

2011-08-24T10:49:00.000+07:00

MUHAMMAD Nazaruddin. This name is known to the public not only because of allegations of corruption that befell the giant-scale private self and his wife, Sri Wahyuni Neneng, or the drama of pursuit up to Cartagena, Colombia, but also because he could speak about the involvement of a number of prominent politicians in the activities of bribery and misappropriation of funds public.

There is a curiosity that was aroused because of the fishing possibilities Nazaruddin disclosure of all names the parties involved in major corruption cases, even members of the Democratic Party, which incidentally is the ruling party in this country. Awesomeness cases revealed by the statement of the Chairman Nazaruddin Corruption Eradication Commission (KPK) Busyro Muqoddas.

Nazaruddin Busyro states involved at least 31 cases of alleged corruption and almost all of these cases are in various ministry projects financed negara.Nilai project budget is estimated at more than Rp 6 trillion. Regardless of what will next happen in Nazaruddin when the process of investigation and trial took place later, there is a gaping unrest in society.

With the capture Nazaruddin, an alleged network that systematically undermine the state budget through parliament again as if not groundless. Unrest caused by corruption is being expanded in a number of countries in the hemisphere dunia.Ketika boosted the economy to grow taller, there was also the seeds of corruption grew thick.

Funds are disbursed funds for the construction of easily exploited for personal gain and other interests that are far from the original intention. India and Vietnam, including two state of rapid economic growth which is also being diresahkan by corruption scandals.

Returning to the case of Indonesia, I am reminded of a book written by Timothy Frye entitled Brokers and Bureaucrats (2003) published by the University of Michigan. Frye combing the reason why in countries like Russia have a strong role of the broker once in the economic and political practices.

In 1992 when reforms stalled market economy in Russia, the economic stabilization package is not running for months, the rate of inflation reached 30-40 percent per month, and the privatization of state companies has just begun, but the relationship the president and Parliament deteriorated, there was a currency trade is facilitated brokers.

The power brokers gathered to form The Moscow Exchange, a sort of stock market run by the broker on a small scale, with a capital of less than USD30.000. They trade with each other to make a living while getting rid of dilapidated company.

Meanwhile, the brokers also play a role in commodity trading in Rusia.Para broker selects prospective buyers and sellers, find a "mate" suitable and if the trade happens, they get a commission from the buyer and seller.

   Is a fairness in Russia that the brokerage is also "sell" protection (including armed protection) for the needy, including when it occurred sengketa.Intinya that the system of economic management in Russia shows how weak the state role in providing certainty for economic actors.

   As a result, interested parties need each other to exploit the situation to make profits through the role as a broker. What's interesting is that the earlier Frye analysis in a process of economic reform, there is a consequence of uncertainty, even for those who are usually easily obtain allocations of power.

   They is then moved to find certainty in his way sendiri.Dalam world corruption, it is the principle of "for-for". If a person takes so many dollars from the flow of funds passing in front of him, those who saw the incident and facilitate it to happen to get a portion of the funds taken.

   If not, it will be opened as a cheating scandal in the public eye. In the transition phase of economic reforms, as well as undertaken since the collapse of Indonesia's New Order regime in 1998, the uncertainty of the results was tightened neck. Some employers repeatedly complained the high cost of production in this country.

   The high cost is true not merely because of policies that fail to support the cost-efficiency, but because employers require brokers to ensure that their projects succeed or at least not terlibas by other projects. In this kind of transition period, state institutions do exist, but in name.

   Existing institutions can not guarantee that the transactions that occur will not be cheated by those who used to take profit. This is where the ironic role of liaison between the broker alias and the other one. They help the transaction process, getting the project, draw profits, and paid a commission for that role.

   This broker is sucking funds, public funds even though, but a broker is usually rare breach of contract with a pay for her. A broker's reputation is determined by its ability to hold promise on his client. So in an uncertain world, it should at least talk a broker can be held.

   Thus, in the case Nazaruddin, our attention should not be taken up in the drama disclosure of the parties involved as a broker as he is usually well aware of the "contract" - was as a broker. Do we just missed fortify themselves from networks of brokers who continue to try to suck funds from each of the opportunities they see in the system that is still versatile patchwork in this transition era.

   Given that the risk of large-scale corruption is quite plural kinds occur in countries with economies in transition, it is now challenged to Indonesia as soon as possible to build an institution that is suppoarted by the reputation mechanism.

   Required a special selection for screening reputation parties involved in managing the economy and entered in the budget team in Parlemen.Necessary smooth circulation of information about the parties involved so that she no longer needed a broker to ensure that the information circulating is true.

   Incentive mechanisms are needed for members who obey such they must refrain from violating the boycott on shared norms. Learning from experience in other countries, the role of institutions such as the Commission needs to be buttressed by revamping the institution where the negotiations took place public funds.

"Moody's Cuts Japan's Debt Rating on Deficit Concerns"

2011-08-24T10:11:00.001+07:00

Rating agency Moody's has cut Japan's long-term sovereign debt rating, citing concerns about the size of the country's deficit and borrowing levels.

The rating was cut to Aa3 from Aa2, though Moody's also said the country's outlook was stable.

Japan, the world's third-largest economy, has the highest public-debt level amongst developed economies.

The 2009 global financial crisis, and this year's earthquake and tsunami have increased the pressure on its finances.

"The rating downgrade is prompted by the large budget deficits and the build-up in Japanese government debt since the 2009 global recession," Moody's said in its statement.

"The March earthquake also undermined Japan's recovery from the 2009 global recession," it added.

Difficult times

Japan's economy is currently in a recession, and has contracted for three consecutive quarters.

According to the latest government figures, Japan's economy shrank by an annualised rate of 1.3% in the three months to the end of June. It shrank 0.3% from the previous quarter.

While that figure was better than many analysts had expected, there are concerns about the increased levels of borrowing and spending that Japan will have to undertake to rebuild after the tsunami.

Not least because the devastation caused by the natural disasters has seen consumer and corporate spending in Japan soften. With consumers and companies spending less, the government is set to earn fewer yen in tax revenues, further impacting their budget plans.

At the same time, Moody's warned that power problems may cap the ability of the economy to rebound quickly.

Japan's electricity production has been compromised by the crisis at the Fukushima Daiichi nuclear power plant, which was damaged by the the earthquake and tsunami. The government has cut the country's nuclear power output and is asking people to limit their use of electricity.

The fear is that continuing uncertainty about the supply of power will deter or delay investment by both the public and private sectors.

"These developments further hamper the economy's ability to achieve a growth rate strong enough to steadily reduce the budget deficit," Moody's said.

Political will?

Japan's current government has pledged to turn its annual budget deficit into a surplus by 2020.

However, Moody's said that while the government may have the will to reduce the deficit, political instability in the country was hurting its plans.

Japan has seen five different prime ministers in the last five years.

"Frequent changes in the administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies," the agency said.

To make matters worse, the current prime minister, Naoto Kan, is expected to resign within the next few days.

"The imminent change in the party's presidency and the election of a new prime minister reflect the factious nature of the country's politics," Moody's warned.

Analysts said that Moody's decision to cut the debt rating may have been triggered in part by the change in leadership.

"Looking at the candidates, there seems to be nobody among them who would seriously tackle financial reform, so that's why Moody's went ahead and cut the rating," said Yuuki Sakurai of Fukoku Capital Management Inc in Tokyo.

"Moody's probably has the view that Japan's finances will continue worsening," he added.

( source : http://www.bbc.co.uk/news/business-14625969 )

"Stock Markets Rise on Hopes of More US Fed Stimulus"

2011-08-23T18:49:00.001+07:00

Stock markets and gold have rallied, while the dollar has fallen, as markets anticipate further stimulus measures by the US Federal Reserve.

European markets rose 1%-2% in morning trading, while gold hit a new record.

The Fed's chairman, Ben Bernanke, is widely expected to discuss further stimulus actions at a keynote speech in Jackson Hole, Wyoming, on Friday.

This may involve more "quantitative easing" - buying up US debt to inject more cash into the financial system.

The Fed has already carried out two rounds of quantitative easing (QE), to stabilise the 2008-09 financial crisis, and more recently to boost the flagging recovery.

Earlier this month, the US central bank also took the unusual step of saying that it expected to keep short-term interest rates close to zero until 2013.

The second round of QE and the interest rate commitment were hinted at by Mr Bernanke when he spoke at last year's Jackson Hole gathering of central bankers.

Dollar vs gold?

The price of gold briefly rose above the $1,900 an ounce mark for the first time during Asian trading hours, setting a new all-time high of $1,913.50.

Gold, which is viewed by investors as a haven investment, has been boosted both by anticipation of QE - which is expected to erode the value of the dollar - as well as recent signs of weakness in the US and European economies.

"If they push through with more stimulus, gold could rise even further," said Colin Whitehead of Fat Prophets.

He explained that a fresh stimulus package would mean that the US would have to print more money to boost liquidity in the markets, which in turn could see the US currency weaken further.

"The underlying driver of gold prices is the depreciating US dollar value," he said, "so the more money they print, the stronger gold gets."

However, following the open in Europe, stocks rallied strongly, while the gold price fell back somewhat, with the London morning price fixing at $1,886.50 an ounce.

Analysts say that the previous round of QE boosted share prices, as investors sought to reinvest the cash received in return for debts sold to the Fed.

Meanwhile, the dollar fell against most currencies in Tuesday morning trading.

The euro rose 1.2 cents to $1.448, though some of the gains were due to industry surveys that revealed that eurozone manufacturing and services were not performing as badly as expected.

Libya uncertainty

Meanwhile, oil prices also rose in Tuesday morning trading, because of continued fighting in Libya and expectations that official figures will show a decline in US crude stockpiles.

Brent was up 25 cents to $108.61 a barrel, while US light crude advanced 87 cents to $85.58.

"It could take months before oil can start to flow again from Libya," said John Vautrain, oil analyst at energy consulting firm Purvin & Gurtz.

"I think there was a lot of euphoria on Monday. But the whole country is not completely pacified yet and we don't have an organised government. A lot is lacking."

( source : http://www.bbc.co.uk/news/business-14625918 )

"Thailand's Economic Growth Slows on Supply Chain Woes"

2011-08-23T18:37:00.002+07:00

Thailand's economic growth slowed in the second quarter due to supply chain disruptions caused by the earthquake and tsunami in Japan.

Growth was 2.6% in the three months to the end of June, from a year earlier, down from 3.2% in the first quarter.

Compared with the previous three months, the economy shrank by 0.2%.

The destruction in Japan resulted in a shortfall in parts for manufacturers in Thailand, especially for auto makers, which hurt exports.

"The net exports position remained a drag as expected, with the post-quake impact on the manufacturing sector weighing on the economy's performance." said Radhika Rao of Forecast Pte.

Foreign vs domestic demand

Thailand's exports are one of the biggest contributors to the country's economic growth. But as key markets like the US and Europe face a slowdown in growth, analysts said the Southeast Asian economy may witness further slowdown.

"A key downside risk to growth is slowing global demand due to debt problems in developed countries, which is likely to weaken Thailand's export growth." said Usara Wilaipich of Standard Chartered Bank.

However, analysts said robust domestic demand will continue to fuel growth.

"You still do have some domestic buffer coming in terms of consumption and investment," Wellian Wiranto of HSBC told the BBC.

Analysts said that higher incomes in the agricultural sector and the restoration of consumer and business confidence due to political developments in the country were among the key factors driving domestic demand in the country.

"Overall we still see the economy expanding," HSBC's Mr Wiranto added.

Policy change?

While economic growth in Thailand has led to increasing domestic demand, rising consumer prices have seen the central bank tighten its monetary policy in the past year.

The Bank of Thailand has raised benchmark interest rate eight times since July 2010, with the latest hike taking the cost of borrowing to 3.25%.

However, analysts said the weaker-than-expected data may force the central bank to change its stance.

"The data could see the newly elected government pile pressure on the Bank of Thailand to rethink its aggressive policy approach," said Forecast Pte's Ms Rao.

The central bank is expected to meet later this week to decide on monetary policy.

Ms Rao added that even though she expected a rise in the cost of borrowing, she "will not be surprised if the central bank cites global volatility and soft Q2 GDP to sit on their hands this time around."

( source : http://www.bbc.co.uk/news/business-14611211)