Irish credit rating is downgraded

The Irish Republic has had its credit rating downgraded by a leading ratings agency, Standard and Poor’s (S&P).

S&P fears that the growing cost of propping up the country’s troubled banking sector will further weaken the government’s finances.

It now thinks that the Irish government will spend 90bn euros ($101bn; £74bn) helping the banks, 10bn euros higher than previous estimates.

The country’s own debt agency described the analysis as “flawed”.

It claimed that S&P’s outlook was based on an “extreme and unrealistic” scenario of the cost of recapitalising the banks and questioned its calculations.

S&P cut the rating one step to from AA to AA-, its lowest since 1995.

This follows clearance earlier this month for an additional injection of 10bn euros into Anglo Irish Bank.

The agency now forecasts that net government debt – the sum of all borrowing – will rise to 113% of GDP in 2010. That would be a substantial increase on the 64% level recorded in 2009.

Continue Reading: http://www.bbc.co.uk/news/business-11081069

Iceland cuts interest rates to 7%

Iceland’s central bank has cut its key interest rate to 7% from 8%.

A rate cut had been predicted after inflation eased and the country’s currency strengthened, although the reduction was larger than expected.

Iceland’s interest rate hit a peak of 18% in October 2008 when the country’s banking system was thrown into crisis by the global credit crunch.

The crisis led to the country’s largest banks being taken over by the government.

In late 2008, the International Monetary Fund approved a $2.1bn (£1.4bn) loan for Iceland, making the country the first Western European nation to get an IMF loan since 1976.

Gabon moves to diversify economy

Gabon has signed deals to diversify its economy in an attempt to be less reliable on its dwindling oil reserves.

The government has announced contracts with Asian companies worth $4.5bn billion dollars.

President Ali Bongo signed the agreements on the eve of the country’s 50th anniversary of its independence from France.

The projects will revamp infrastructure and create about 50,000 jobs.
New partners

Gabon’s oil output has been declining for years and the new deals are presented as the first steps towards diversification.

The largest deal is the with OLAM, a Singapore-based company which plans to develop a huge palm oil plantation in the south east.

The government wants to become the leading palm oil producer in Africa.

In terms of infrastructure, the OLAM deal involves the construction of a refinery, and there are plans for a possible port.

Continue Reading: http://www.bbc.co.uk/news/business-10985014

China marches towards world’s No. 2 economy

China's GDP was smaller than Japan's in 2009 but the IMF expects that wont be the case by the end of this year. But China still trails the United States by a wide margin.

China is on track to overtake Japan as the world’s second-largest economy after the United States, figures released Monday show.
Japan’s gross domestic product, or GDP, totaled $1.29 trillion for the three months ending in June, the nation’s Cabinet Office announced. China’s official figure for the same period was $1.34 trillion.

Economist Frederic Neumann at HSBC in Hong Kong said China is forecast to overtake Japan by the end of the year — making China the world’s No. 2 economy. However, official annual figures won’t come until early 2011.

The International Monetary Fund expects China’s output to reach $5.4 trillion by the end of 2010. By comparison, it estimates Japan’s GDP at $5.3 trillion.

Another analyst says the whole matter is academic.

“Basically, China’s underlying growth rate is going to be about 8 percent over the next decade. Japan’s underlying is going to be about 1 percent,” said Jesper Koll, an economist with JPMorgan in Tokyo. “In 10 year’s time, the Chinese economy will be twice the size of the Japanese economy.”

Continue Reading: http://money.cnn.com/2010/08/16/news/international/japan_china/index.htm

German economy sees ‘record’ growth of 2.2%

The German economy grew by 2.2% in the three months to the end of June, its fastest quarterly growth in more than 20 years, official figures show.

“Such quarter-on-quarter growth has never been recorded before in reunified Germany,” the national statistics office, Destatis, said.

The main reason for the higher-than-expected growth was strong exports, helped by a weaker euro.

The eurozone economy grew by 1% during the quarter.

This compares with growth of 0.2% in the first three months of the year, the area’s official statistics agency, Eurostat, said.

The French economy grew by 0.6% in the second quarter, also up from 0.2%, while the Spanish economy grew by 0.2%, compared with 0.1% in the previous three months.

The pace of growth in the Italian economy remained the same, at 0.4%.

Continue Reading: http://www.bbc.co.uk/news/business-10962017