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Contents : 22 GulfDailyNewsSaturday 10thApril2010 Iceland finalises deal on $159m IMF loan "Agreement has been reached on a letter of intent for the second review under Iceland's Stand-By Arrangement with the IMF " IMF mission chief to Iceland Mark Flanagan said. The executive board was "tentatively" set to discuss the review on April 16 he said. Upon completion of the review In association with www.tradearabia.com Exportsboost Germany's tradesurplus BERLIN: Rising exports helped boost Germany's trade surplus more than expected in February data showed yesterday adding to signs Europe's largest economy is on the path to recovery. Adjusted for seasonal swings exports rose 5.1 per cent on the month to 71.3 billion euros ($94.9bn) while imports unexpectedly also gained up 0.2pc to 59.2bn euros the Federal Statistics Office said. This yielded a trade surplus with the rest of the world of 12.1bn euros in February up from 8.7bn euros in January. A reading of 11.2bn had been forecast. Exports had been expected to rise by 4.4pc and imports to fall by 1.0pc in February. Germany was the world's biggest exporter of goods from 2003 to 2008 before being overtaken by China. The German economy emerged from its deepest postwar recession in the second quarter of last year before stalling over the winter. Indicators covering the first quarter have suggested the economy struggled to grow at the start of the year partly due to unusually harsh weather but the latest forward-looking surveys point to a more durable upturn. German business sentiment surged last month to its highest level since June 2008 while unemployment fell unexpectedly posting its biggest drop since June 2008. Data earlier this week showed that manufacturing orders held steady from the prior month in February after an upward revision to the January figure. WASHINGTON: The International Monetary Fund (IMF) and Iceland yesterday announced agreement on the conditions for a $159 million IMF loan payment requiring IMF board approval. Iceland would become eligible to draw the controversial third instalment of a $2.2 billion IMF loan authorised in November 2008. The Icelandic ministry of economic affairs said the letter of intent to the IMF "describes the progress made so far in limiting the impact of the crisis and setting the stage for a sustained recovery." The letter will be made public after the IMF board approval the ministry said. The agreement caps intensive work in recent weeks by IMF and Icelandic officials aimed at "eliminating obstacles in the way of completing the second review" of the loan arrangement the ministry said. Iceland's Economic Affairs Minister Gylfi Magnusson met IMF managing director Dominique Strauss-Kahn and executive directors in Washington. Only half of the huge loan has been disbursed so far in two instalments with the last one made in October. The much-delayed third disbursement has been embroiled in a conflict with IMF members Britain and the Netherlands. The IMF board where Britain and the Netherlands have a vote had refused to place the payment of fresh instalments of the loan on its agenda in a dispute over compensation for the collapse of online Icelandic bank Icesave. In a referendum voters in Iceland overwhelmingly rejected an arrangement under which the government would pay Britain and the Netherlands 3.9bn euros ($5.3bn) to compensate British and Dutch savers who lost money in the collapse of Icesave in October 2008. Iceland officials have warned that if the loan continues to be blocked Iceland's recession could deepen this year. Poland bid to weaken currency WARSAW: Poland's central bank sold zlotys yesterday surprising markets with its first intervention since introducing a free float in 2000 as it sought to temper the surging currency's impact on exports and the wider economy. The central bank said it had bought "some currencies" on the market. It gave no other details but a Warsaw-based dealer said he believed the central bank bought about 40-50 million euros for zlotys. The action which the government said it backed fully drove the zloty down 0.5 per cent against the euro though economists said the currency might strengthen again. The European Union's biggest ex-Communist member Poland is the only country in the bloc to have avoided recession last year and currency investors have taken note. Before yesterday's move the zloty had gained 6pc against the euro in the year so far and was near a 16-month high. "This is a battle with our own success because the zloty's rise in the last three months is a result of the large demand for Polish bonds from abroad as well as privatisation inflows " said ING Bank senior economist Rafal Benecki. The country's robust growth prospects stand in stark contrast to a number of European countries notably peripherals such as Greece or Spain. Poland's debt levels are also well below the EU average making Polish debt attractive to investors. "This is definitely a beneficial move. It's a factor that the market needs to take into account in its analysis. We fully agree with the central bank's policy on that matter " Deputy Finance Minister Dominik Radziwill said. He said the ministry shared the central bank's concern over the zloty's strength. The currency's strength has prompted concern that Poland could pay an economic price as zloty gains have made exports less competitive. Frenchgrowth forecastcut PARIS: French economic growth is likely to have slowed to 0.4 per cent in the first quarter down from 0.6pc in the final three months of last year the Bank of France said yesterday maintaining an earlier forecast. The national statistics institute INSEE has lowered its own first-quarter growth projection to 0.2pc from 0.4pc. The agency foresees momentum of 0.3pc in the second quarter. The government is anticipating growth of 1.4pc for all of the year after the economy suffered a 2.2pc contraction last year in the midst of its worst recession in more than 60 years. The French economy recorded the euro zone's fastest growth pace in fourth quarter last year but has since lost some steam and is now growing at the euro zone average according to INSEE. The Bank of France and INSEE meanwhile reported that business sentiment in France strengthened slightly last month from February with a key indicator inching up to 103 from 102. INSEE also said French industrial production was stagnant in February after having risen 1.1pc in January. n A general view of an exhibition hall on Press preview day at the AMI Auto Show in Leipzig Germany yesterday. The show opens to the public today. UK factory gate inflation rises LONDON: British factory gate inflation rose last month at its fastest pace in 16 months driven by a surge in the cost of oil and imported goods official data showed yesterday. The Office for National Statistics said producer output prices rose 0.9 per cent on the month more than twice the jump analysts had forecast for an annual rise of 5pc its highest since November 2008. The pound rose to a seven-week high against the euro and gilt futures hit a session low as investors wondered whether British interest rates would stay at record lows for as long as they previously expected. "The producer price data may well lift speculation that interest rates could rise well before the end of the year " said Howard Archer at IHS Global Insight. The Bank of England (BoE) has forecast that consumer price inflation currently running a full percentage point above the BoE's 2pc target will fall back below target later this year due to the large amount of slack in the economy. While many economists still expect price pressures to ease over the year some questioned whether consumer price inflation would fall as fast as the central bank hoped. "I think there are genuine signs here that we will see a slower pace of deceleration in the CPI numbers than we thought previously " said BNP Paribas UK economist Alan Clarke. The rise in factory gate prices was led by petroleum products which added more than two percentage points to the annual rate and are up by a quarter since a year ago. Even excluding the direct effect of oil prices factory gate inflation showed a marked rise. Core producer output price inflation which strips out food beverages tobacco and petroleum products rose by an annual 3.6pc its highest rate since February last year. There was also a sharper than expected jump in input price inflation which rose 10.1pc on the year up from 7.5pc in February and the biggest annual jump since October 2008. Higher crude oil prices accounted for around 95pc of that annual rise. On the month crude oil prices rose 9.7pc and imported metals were up 5.3pc the biggest monthly jump since records for that category began in February 1991. The cost of a barrel of oil has doubled in dollar terms over the past year and is still on the rise. Brent crude hit a 17-month high above $86 a barrel this week.

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