World growth 'lowest in 60 years'

The organisation predicted that banking industry losses may reach $2.2 trillion [EPA]

The International Monetary Fund (IMF) has slashed its economic growth forecasts, predicting global growth is set to fall to its slowest pace in six decades.

"World growth is projected to fall to ... its lowest rate since World War II, [reaching] 0.5 per cent in 2009," the organisation said in a sharp downward revision of its November forecasts.

It also predicted that banking industry losses may reach $2.2 trillion, sharply worsening its previous estimate of $1.4 trillion.

The IMF said in two reports published on Wednesday the ongoing financial crisis was restricting credit for companies and consumers and was the primary reason the global economy was in dire straits.

'Uncertain outlook'

The 185-nation-member institution said: "Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy."

It warned its projections were made in a "highly uncertain outlook" and that "the timing and pace of the recovery depend critically on strong policy actions".

"A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit markets are unclogged," the Washington-based organisation said.

The United States, the epicentre of the financial crisis, was predicted to endure a 1.6 per cent contraction, well down on the organisation's prior estimate of 0.9 per cent.

Japan's economy would shrink by 2.6 per cent in 2009, instead of the former estimate of 0.2 per cent, while the 27-member eurozone economy would hit a wall, suffering a two per cent contraction after growing one per cent in 2008.

The previous 2009 estimate was for a 0.5 per cent contraction.

The IMF offered some light at the end of the tunnel, saying it saw a gradual recovery in the global economy in 2010 of growth of three per cent, spurred by "continued efforts to ease credit strains as well as expansionary fiscal and monetary policies".

'Toxic effects'

Developing countries were forecast to have relatively weak growth of 3.3 per cent in 2009, about half the 6.3 per cent expansion of last year.

China would remain the world's fastest-growing economy with a 6.7 per cent increase, down from nine per cent in 2008.

India's economic growth would slow to 5.1 per cent after 7.3 per cent.

The IMF cautioned that "the uncertainty surrounding the outlook is unusually large".

"Downside risks continue to dominate, as the scale and scope of the current financial crisis have taken the global economy into uncharted waters," the organisation said.

"The main risk is that unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth."

Russia 'halts' missile deployment

Russia has halted a plan to respond to a proposed US missile-defence shield by stationing its own missiles near Europe's borders, the Russian military says.

The tactical-response missiles were to be deployed in a Russian exclave wedged between Nato and EU members Poland and Lithuania, in the Western outpost of Kaliningrad.

"Russia does not need to place Iskander missiles in Kaliningrad if a US missile defence shield is not going to put fear into Eastern Europe," a military official told Interfax news agency on Wednesday.

"The realisation of these plans has been suspended in connection with the fact that the new American administration is not speeding up its plans" for missile defence facilities in Poland and the Czech Republic.

Kurt Volker, the US ambassador to Nato, said: "If true, this would of course be a very positive step."

Barack Obama, the US president, spoke to Dmitry Medvedev, the Russian president, by telephone on Monday, in their first contact since the US inauguration.

The two men agreed to stop the "drift" in their countries' relations, the White House said on Tuesday.

Softer stance

The administration of George Bush, the former US president, angered the Kremlin with its push to deploy interceptor missiles in Poland and a radar in the Czech Republic.

It said the system was needed to protect from potential missile strikes by what it called "rogue states" - specifically Iran and North Korea.

Bush, left, angered the Kremlin with its push to deploy missiles in Poland [AFP]

Russia has argued that the proposed system would threaten its own national security and was further evidence - along with the eastward expansion of the Nato alliance - of Western military influence encroaching near its borders.

Medvedev later qualified his remarks on deploying Iskander missiles to Kaliningrad, saying that would only go ahead if Washington made the first move by starting work on its missile shield installations.

The row over the shield has helped drive diplomatic ties between Moscow and Washington to their lowest level since the end of the Cold War.

But Russian officials have said they are encouraged by early signals from the Obama administration and hopeful of a fresh start in their relations.

It is possible the Kremlin will be seeking a reciprocal concession from the White House when Medvedev meets Obama on the sidelines of a Group of 20 summit in London on April 2.

Budget likely to show Mugabe's desperation

HARARE (Reuters) - Zimbabwe will present its annual budget this week, which analysts expect to contain desperate measures in the wake of economic collapse amid political crisis.

President Robert Mugabe's acting Finance Minister Patrick Chinamasa will unveil the 2009 budget in parliament Thursday most likely in U.S. dollars because soaring hyper-inflation has left the Zimbabwean dollar virtually worthless.

Analysts say the budget -- coming two months later than usual -- would be both a number-crunching exercise and a confirmation that Zimbabwe has been forced to use foreign currencies after the spectacular collapse of its own currency.

The Zimbabwean dollar currently trades at anything up to 40 trillion to the U.S. dollar, despite being re-denominated through the removal of 10 zeroes in August. An average worker earns trillions, but struggles to buy a loaf of bread in the few shops that still accept the local unit.

"The situation is so desperate and I think, outside the usual statements about political enemies, we are going to see some desperate proposals to try to get the economy out of this mess," said John Robertson, an economic consultant.

Besides "dollarization," Mugabe's government is expected to introduce some new taxes in foreign currency -- including income and capital gains -- to try to boost empty state coffers.

"The simple change of currency is not going to save the economy, but may actually create more problems by getting the whole country, workers across the board, to believe they can get foreign currency without production," Robertson said.

"What is going to save the economy is an acceptance that we are in this mess because of bad policies and bad politics and that we have to change those to have a foundation for recovery."

John Makumbe, a veteran political analyst and Mugabe critic, also said the 2009 budget would -- as with others in the last 10 years -- not be able to pull Zimbabwe out of its deep troubles.

"Mugabe has turned Zimbabwe into a pariah state, and the economy stands condemned and is not going to get any substantial foreign investment or foreign aid until the political crisis is sorted," he said.

Zimbabwe's economic data is anyone's guess at the moment.

The government has not released any official inflation figures since July when annual inflation stood at a staggering 231 million percent -- the highest in the world -- while state spending figures have also not been disclosed.

In its 2008 budget, Mugabe's government forecast that the Zimbabwe's gross domestic product (GDP) would grow by four percent after nearly a decade in decline and that inflation -- which stood at 8,000 percent in November 2007 -- would average below 2,000 percent in 2008 on increased farming output.

Instead, the economy has plumbed deeper into recession and what had been dubbed "the mother of all farming seasons" turned into another disaster.

Mugabe's disputed re-election in a violent campaign last year worsened the country's crisis which, following a collapse in agriculture, includes shortages of food and fuel, power cuts and lately a cholera outbreak that has killed over 3,000 people.

About half Zimbabwe's 13 million population is surviving on food handouts, and international aid agencies say a lack of funds combined with projections of more food shortages this year could make the crisis worse.

Mugabe, who turns 85 next month and has been in power since independence from Britain in 1980, accuses Western countries of sabotaging Zimbabwe's economy.

"In Zimbabwe's position, you are going to need a budget that is going to address this man-made disaster, and I don't think that's what we are going to get," Robertson said.

Obama urges passage of stimulus bill

WASHINGTON (Reuters) - President Barack Obama pitched his $825 billion (507 billion pound) economic stimulus plan to business leaders on Wednesday, as the House of Representatives debated the legislation it was expected to pass later in the day.

Amid attacks from Republicans in Congress that Obama and his fellow Democrats have composed a package too flawed to save the stumbling economy, the new president got a boost from corporate heads he met with at the White House.

"The message has to be that the situation is dire," said David Cote, chief executive of Honeywell. "It needs to get done fast," he added, referring to the Democrats' economic stimulus plan. "Everybody is being touched by this."

Obama said the 13 CEOs were "on the front lines in seeing enormous problems in our economy right now." It is important "that we act and act swiftly in order to get this economy back on track," he said, and predicted success in winning passage of one of the most expensive single bills ever considered by Congress.

But it is widely acknowledged that righting an economy that has been in recession for more than a year will be difficult.

On Friday, the government is due to release an estimate of economic performance that economists expect will show the economy contracted at an annual rate of 5.4 percent last year. That would put the U.S. economy closer to the 6.4 percent contraction in 1931, which was followed by 13 percent in 1932, during the Great Depression.

Other executives who met with Obama included the head of Corning Inc, which this week announced 4,900 job cuts, and Xerox Corp, which cut 3,000 late last year.

The House debated legislation written by Obama's fellow Democrats that would spend $825 billion over the next few years with a combination of emergency spending and tax cuts to create and save up to 4 million jobs.

"This $825 billion package is not too large ... in fact it's probably smaller than it ought to be," House Appropriations Committee Chairman David Obey said, noting the horrible shape of the U.S. economy.

REPUBLICANS OPPOSED

Most House Republicans planned to oppose the legislation. and thus cast votes against some of the Democrats' pet projects such as new money for education and alternative energy.

They will offer a competing plan, which is expected to fail, that would scrap the Democrats' hundreds of billions of dollars in spending to jump-start the economy and instead call for a series of tax cuts.

Representative David Dreier, a conservative Republican from California, said the "growth-oriented tax cuts" that members of his party are seeking would be better at jump-starting the economy.

Once the House votes, action moves to the Senate, which is considering a more expensive bill. Its price tag is now about $887 billion because it will include a one-year fix to insulate middle-class taxpayers from the Alternative Minimum Tax, which originally was aimed at the wealthy but is affecting a growing number of middle-class taxpayers because of inflation.

Democrats want to send Obama a bill he can sign into law by mid-February. The bill could change by then, especially if Obama strives to get Republican support.

U.S. stocks rose on Wednesday on optimism that the new administration was moving quickly to stabilise banking and hopes for a stimulus package soon.

The bill the House is debating combines $275 billion in temporary tax cuts to spur spending and business investment, along with hundreds of billions of dollars for job creating investment projects, health industry improvements, expanded aid for the poor and unemployed, and improving education.

While Obama wants a strong bipartisan vote on final passage, that will depend on whether Republicans think they have gotten at least some of what they want, such as more business tax breaks in the bill.

Egypt attacks Iran and allies in Arab world

CAIRO (Reuters) - Egypt aired its grievances against Iran, the Palestinian Islamist movement Hamas and the Lebanese Shi'ite group Hezbollah, saying they worked together in the fighting over Gaza to provoke conflict in the Middle East.

"(They tried) to turn the region to confrontation in the interest of Iran, which is trying to use its cards to escape Western pressure ... on the nuclear file," Foreign Minister Ahmed Aboul Gheit said in an interview with Orbit satellite channel broadcast Wednesday.

Aboul Gheit also said that Egypt undermined Qatar's attempts to arrange a formal Arab summit on Gaza earlier this month, arguing that it would have damaged "joint Arab action."

"Egypt made the summit fail... This summit, if it had taken place as an Arab summit with a proper quorum, would have damaged joint Arab action. We can see what others do not see," he said.

The interview was broadcast Tuesday evening and Wednesday morning and the state news agency MENA carried excerpts.

The comments are the first acknowledgement by Egypt that it actively sought to prevent the Doha summit on January 16, which was the subject of a bitter tug-of-war between rival Arab states.

It also indicated that a reconciliation meeting in Kuwait last week between Egypt and Saudi Arabia on one hand, and Qatar and Syria on the other, had only a short-term effect.

Qatar failed to win enough support to hold a formal Arab League summit on Gaza but it went ahead anyway with an informal consultative meeting of Arab leaders.

The wrangling reflected deep divisions between Arab governments. On one side Saudi Arabia and Egypt, wary of the Islamist group Hamas in Gaza, favored discussing Gaza at a separate economic summit in Kuwait a few days later.

Diplomats say Egypt resents the Qatari challenge to its traditional role as leading Arab mediator and dislikes the influence of the satellite television channel Al Jazeera, which is based in Doha and owned by the Qatari government.

"Some people imagined that a satellite channel could bring down the Egyptian state, without realizing that Egypt is much stronger than that," Aboul Gheit said.

"Egypt is very big and has extensive influence despite attempts to influence this stance and role, whether in the Al Jazeera channel or other channels," he added.

The Egyptian minister also criticized Hamas for what he called its coup against the forces of the Palestinian Authority in the Gaza Strip in 2007.

Pirates release Super-tanker

Sirius Star, the oil-laden supertanker seized in the Indian Ocean in November, is now released by its captors, the Somali pirates said today that they had released it, in return for a $3.2 million ransom.

Photos taken by the US Navy appeared to show to the ransom payment being parachuted on to the deck of the Sirius Star from a light aircraft.

Satyam Founder faces fraud investigation

B. Ramalinga Raju, the disgraced IT mogul behind India's largest-ever corporate fraud, will appear before the country's market regulator tomorrow amid doubts the company he founded has enough money to pay its 50,000 staff this month's wages.

The Securities and Exchange Board of India (Sebi) will ask just how the former chairman of Satyam, India's fourth-largest outsourcing company, was able to orchestrate a £1 billion fraud by wildly overstating the group's profitability, cash reserves and other assets for several years.

Mr Raju faces up to ten years in prison under Indian law if found guilty of misleading investors. The Indian Government has demanded that he is punished to the full extent possible for destroying confidence in the country's coprorate governance system.

Gaza Grave

250 children are now killed, among nearly 800 now killed in Gaza & 1080 children injured in Gaza compared to 13 Israelis killed, out of which 10 are military personnels, and 3 civilians. Humanitarian body, the Red Cross says that they were prevented from entering three houses where 15 people died, and children were left huddled up next to their dead mothers.