PDF file: Annual Report 2002/2003 - Scottish Crop Research Institute

Director’s Report
roads to 25 million. Provisional data on unemployment
pointed to a slight rise from 5.1% to 5.3% of
the workforce, barely easing a tight labour market that
in certain sectors attracted immigrant workers.
Manufacturing industry suffered sharp declines and
there were severe pressures on employment in financial
services. The rapidly expanding public sector,
especially in health, education, and transport, coupled
to falling taxation revenues, led to a near doubling of
the public-sector borrowing requirement to about $32
billion in 2002-2003. UK national accounts and its
recent economic history were overhauled in
September 2003 by steep revisions to the data issued
by the Office for National Statistics (ONS).
Continual substantial alteration to the data raised
questions over validity of the direction of the decisions
taken by the Bank of England’s Monetary Policy
Committee, as well as by investors and traders, based
on the credibility of ONS assessments.
Countries in Transition Growth in the countries in
transition ranged from 4.6% in the Commonwealth
of Independent States (CIS) and Mongolia, 4.4% in
Russia, to 2.7% in Central and Eastern Europe.
Much-needed reforms to the economic structures of
the CIS countries continued, and Russia began
enforcing more robust financial discipline and better
standards of corporate governance.
LDCs For the LDCs, there were mixed fortunes.
Africa as a whole was of special concern: corruption,
political and economic problems, long-standing civil
unrest and armed conflicts, and various diseases
impeded progress. The World Health Organisation
(WHO) reported that in 2002, 29.4 million people in
sub-Saharan Africa suffered from HIV/AIDS. South
Africa continued with its high economic growth rate
of 5.2%, and inflation eased somewhat. The Nigerian
economy contracted by about 2%. In Asia, there was
for the most part a rapid adaptation to the improving
import-friendly US economy. The Chinese economy
derived great benefit from a currency (renminbi) tied
to the US $ as well as from FDI and technology
inflows into its export industries, whilst its indigenous
industry and agriculture remained inefficient. The
poor monsoon in India did not detract from a 5%
growth in GDP, and both China and India targeted
high-value industries and activities. Healthy growth
of 4.9% was recorded in the newly industrialised
countries of Hong Kong (a part of China), Singapore,
South Korea, and Taiwan. A 3.6% expansion was
noted in the Association of Southeast Asian Nations’
‘group of four’ viz. Indonesia, Malaysia, the
Philippines, and Thailand. Elsewhere, the Latin
American economies contracted, exacerbated by a
financial crisis in Argentina. Growth of 3.6% in the
Middle East was forecast by the IMF, although Israeli
output declined and the region was troubled by security
problems, fluctuations in oil prices, and a decline
in tourism.
International Trade International trade was forecast
by the IMF to have risen in volume terms by 2.1%
during 2002, recovering from the 20-year performance
dip in 2001. Nevertheless, it was the second
year in succession when the rate lagged behind the
increase in global output. In 2003, the money borrowed
by investors to trade in stocks and shares started
to rise as a percentage of overall consumer debt,
but did not approach the level of 20% recorded in
1999-2000. In terms of value, the rise in world trade
was 3.1% to a projected $7.7 billion of which $6.2
billion was merchandise rather than services. The
strongest growth markets for global exports came
from the LDCs and countries in transition, with the
volumes of their exports projected to have risen by
3.8% and 6.9%, respectively. These data contrast
with 1.7% for the MDCs. Similarly, on the supply
side, LDC exports rose by 3.2%, countries in transition
by 5.3%, but MDCs only by 1.2%. The
strongest recoveries occurred in the USA and the ITproducing
and exporting countries in East Asia.
Largely as a result of weaker currencies, EU and
Japanese export growth was faster than that of
imports. This was the reverse of the position in the
USA where there was a surge in merchandise and services
imports.
Exchange rates affect trade balances, capital flows,
growth rates, profits, share prices, inflation rates, the
costs of travel and holidays, the prices of oil and computer
chips, and the relative sizes of economies.
LDCs, in particular, have enormous difficulty in managing
the risks of exchange-rate volatility.
Momentum grew in 2003 for downward pressure on
the exchange rate of the US dollar relative to the euro,
pound sterling, and the Japanese yen. Foreigners
started to switch from investing to become net sellers
of US shares, leaving the USA exposed to purchases
by other governments in US Treasury bonds, and net
capital inflows to the USA started to decline.
A recovery on the world economy would be advantageous
to Scotland as its economy is heavily dependent
on exports. Even so, growth in the Scottish economy
over the past two years was weaker than nearly all other
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