Business

FRANKFURT — The European Central Bank (ECB) took the ultimate policy leap on Thursday, launching a government bond-buying programme which will pump hundreds of billions in new money into a sagging eurozone economy.

The ECB said it would purchase sovereign debt from this March until the end of September 2016, despite opposition from Germany's Bundesbank and concerns in Berlin that it could allow spendthrift countries to slacken economic reforms.

Together with existing schemes to buy private debt and funnel hundreds of billions of euros in cheap loans to banks, the new quantitative easing (QE) programme will release 60 billion euros ($68 billion) a month into the economy, ECB President Mario Draghi indicated.

By September next year, more than 1 trillion euros will have been created under the QE, the ECB's last remaining major policy option for reviving economic growth and warding off deflation. 

The flood of money impressed markets: The euro fell more than two US cents to $1.14108 on the announcement, and European shares hit seven-year highs.

"All eyes were on Mario Draghi and he has delivered a bigger bazooka than investors were expecting," said Mauro Vittorangeli, a fixed income specialist at Allianz Global Investors, adding that the news marked "an historic crossroads for European markets".

The ECB and the central banks of eurozone countries will buy up bonds in proportion to its "capital key", meaning more debt will be scooped up from the biggest economies such as Germany than from small member states such as Ireland.

The prospect of dramatic ECB action had already prompted the Swiss central bank to abandon its cap on the franc against the euro. Denmark cut its main policy interest rate on Thursday for the second time this week after the ECB announcement, aiming to defend the Danish crown's peg to the euro.

Draghi has had to balance the need for action to lift the eurozone economy out of its torpor against German concerns about risk-sharing and that it might be left to foot the bill.

Will it work?

Economists noted that Draghi had said only 20 per cent of purchases would be the responsibility of the ECB. This means the bulk of any potential losses, should a eurozone government default on its debt, would fall on national central banks.

Critics say this casts doubt over the unity of the eurozone and its principle of solidarity, and countries with already high debts could find themselves in yet deeper water.

"It is counterproductive to shift the risks of monetary policy to the national central banks," said former ECB policy maker Athanasios Orphanides. "It does not promote a single monetary policy. This path towards Balkanisation of monetary policy would signal that the ECB is preparing for a break-up of the euro."

Tensions broke out as the ECB's meeting got under way with French Finance Minister Michel Sapin firing a broadside at Berlin. 

"The Germans have taught us to respect the independence of the European Central Bank," he told France Info radio. "They must remember that themselves."

A German lawyer who has been prominent in attempts to halt eurozone bailouts said he was already preparing a legal complaint against the bond-buying programme.

Draghi said the ECB's Governing Council had been unanimous in agreeing that the step to print money was legally sound. There was a large majority on the need to trigger it now, "so large that we didn't need to take a vote".

"There was a consensus on risk-sharing set at 20 per cent and 80 per cent on a no-risk-sharing basis," he added.

One eurozone central banking source said five policy makers opposed the expanded asset-purchase plan: The central bank chiefs of Germany, the Netherlands, Austria and Estonia, along with executive board member Sabine Lautenschlaeger, a German.

Guntram Wolff, head of the Bruegel think tank, said the plan's size was impressive. "But the ECB has given the signal... that its monetary policy is not a single one. That's a bad signal to markets and a bad signal to everybody in the eurozone."

The ECB is trying to push eurozone annual inflation back up to its target of just below 2 per cent; consumer prices fell last month, raising fears of a Japanese-style deflationary spiral. But there are doubts, and not only in Germany, over whether printing fresh money will work.

Most eurozone government bond yields are at ultra-low levels and the euro had already dropped sharply against the dollar. Lower borrowing costs and a weaker currency could both help to boost economic growth but there is a question about how much further either can fall.

Asked if the ECB had a Plan B, Draghi responded: "We just presented Plan A, and we have Plan A. Period."

The ECB could create the basis for growth, he said, but he put the onus on governments to follow. 

"For growth to pick up... you need structural reforms," he stressed. "It's now up to the governments to implement these structural reforms. The more they do, the more effective will be our monetary policy."

Draghi was echoing the view of German Chancellor Angela Merkel, who said: "Regardless of what the ECB does, it should not obscure the fact that the real growth impulses must come from conditions set by the politicians."

A plunge in the price of oil has thrown central bankers into a spin worldwide. Canada cut the cost of borrowing out of the blue on Wednesday while two rate setters at the Bank of England dropped calls for tighter monetary policy as inflation has evaporated in Britain.

The ECB has already cut interest rates to record lows. Earlier, it left its main refinancing rate, which determines the cost of eurozone credit, at 0.05 per cent.

Greece and Cyprus, which remain under European Union (EU)/International Monetary Fund (IMF) bailout programmes, will be eligible for the ECB programme but subject to stricter conditions. 

"Some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment programme," Draghi said.

The move comes just three days before an election in Greece where anti-bailout opposition party Syriza is on track to gain roughly a third of the vote.

PARIS — New car sales in Europe rose by nearly 6 per cent in 2014, ending a long slump in activity that began in 2007, but analysts warn the sector has not yet turned the corner in the region.

The European Automobile Manufacturer's Association (ECEA) said last week that 2014 new car sales grew by 5.7 per cent, but noted current volumes of activity remain significantly lower than they were before the global financial crisis that drove the sector into six years of decline.

Europe's continuing economic sluggishness means carmakers are unlikely to be able to repeat 2014's performance, with analysts expecting sales growth to be limited to 1 to 3 per cent this year.

A recovery to pre-crisis levels is most likely still years away.

Carlos Da Silva, an auto industry expert at IHS consultants, said that "2014 should be taken with relief and satisfaction".

"However, by any means, this growth should not be misinterpreted: The foundations for a flourishing car market are yet to be built," he added. "Right now, the patient is still limping, not starting to run on both legs!"

The European car sector's convalescent state is clear in comparing the 12.5 million units sold last year to the 16 million which rolled off dealer's lots in 2007 before Wall Street unleashed a global financial crisis.

IHS said it does not expect the market to approach those levels until the end of the decade.

Moreover, activity across Europe varied greatly by market, lacking the generalised effervescence needed to drive enduring growth across the industry.

Among the largest markets, Spain led the sales growth at 18.1 per cent, in part due to a new government incentive programme.

Britain followed with 9.3 per cent growth, Italy at 4.2 per cent, Germany 2.9 per cent.

France managed only 0.3 per cent growth.

"The situation in Europe is still quite contrasted, but it's much better than we expected at the beginning of the year, when we forecast 2 to 3 per cent," said Jean-Francois Belorgey, an analyst with consultants EY.

"[There is] a rather clear relationship between [national] economic health and market activity," he added.

Britain has been a bright spot in the region, with its economy expected to have grown 3 per cent in 2014.

But with the Europe-wide economic outlook remaining mostly subdued through 2015, hopes that 2014 might mark a definitive rebound for carmakers are equally guarded.

"The European economy is still ailing, with weak growth and high unemployment," said Belorgey. "It's more a case of 2014 having been a nice surprise." 

Volkswagen European leader  

The Volkswagen (VW) group remained Europe's largest car producer in 2014, with sales rising by 7.2 per cent to 3.2 million units.

It was followed by Peugeot maker PSA, which managed a 3.7 per cent increase to 1.4 million vehicles.

But No. 3 Renault posted a much larger 13.3 per cent increase to 1.2 million units.

Ford moved into fourth place, with sales rising by 5.8 per cent to 927,861 vehicles.

General Motors (GM) fell into fifth place as sales dropped by 4.3 per cent to 905,444 vehicles, due largely to the withdrawal of its Chevrolet line from Europe.

Renault said this week that low-cost models are now three of its top-five selling vehicles worldwide.

Sales of its low-cost Dacia brand rose by 23.9 per cent last year in the countries the ECEA tracks. Renault sells the vehicles under its own symbol in numerous countries around the world.

Belorgey noted that while much of Renault's growth was driven by the surge of its Dacia brand, the wider segment is not uniformly booming, as witnessed by modest activity for rivals like Kia, which posted just a 4.4 per cent advance.

By contrast, virtually all players in the premium luxury segment saw robust sales increases, including 30.1 per cent for Lexus, 12.3 per cent for Volvo, 4.8 per cent for Audi, and a whopping 70.6 per cent for Jeep.

"The automobile industry is one where the offer is a means of stimulating demand," Belorgey said.

"Cars are products that make people want them, which is reassuring for manufacturers. Rolling out new attractive models is a way... to come out ahead," he added.

Toyota sells 10.23mn vehicles in 2014, still world's top automaker

Separately, Toyota kept its title as the world's biggest automaker on Wednesday as it announced record sales of 10.23 million vehicles last year, outpacing GM and VW, but a shaky outlook for 2015 could see it lose the crown to its German rival.

The worldwide annual sales figure beat Volkswagen, which logged sales of 10.14 million vehicles, and US-based GM, which said it sold 9.92 million cars last year.

But Toyota also said sales would decline this year to an expected 10.15 million vehicles, as demand falls off in its home market.

That will likely mean VW will be in pole position this year as the German automaker rides momentum in emerging economies that could see it take the lead in global auto sales for the first time.

"Their focus is not No. 1," Peggy Furusaka, an auto-credit analyst at Moody's Investors Service, told Bloomberg News, referring to the Japanese firm.

"Toyota is more concerned about keeping profitability than chasing numbers. So for coming years, I wouldn't be surprised to see Toyota selling fewer cars than VW," she said.

Toyota broke GM's decades long reign as the world's top automaker in 2008 but lost the crown three years later as Japan's earthquake-tsunami disaster hammered production and disrupted the supply chains of the country's automakers.

However, in 2012 it once again overtook its Detroit rival, which sells the Chevrolet and luxury Cadillac brands.

Toyota boosted its fiscal year through March profit forecast to 2 trillion yen ($16.97 billion), and said revenue would come in at 26.5 trillion yen, as it saw strong results in North America while a sharply weaker yen inflated its bottom line.

But it earlier warned over a downturn in some other key Asian markets including Indonesia and Thailand, which has been hammered by political unrest.

There are also growing fears about the entire industry's prospects in China owing to concerns about the health of the world's number-two economy.

Fuel-cell cars 

Toyota's upbeat announcement on Wednesday comes despite the firm struggling to recover its reputation for safety after the recall of millions of cars around the world for various problems, including an exploding air bag crisis at supplier Takata.

The maker of the Camry sedan and Prius hybrid has frozen the building of new plants for the three years until early 2016, and a Toyota executive at the Detroit auto show told AFP last week that the giant automaker is emphasising quality of sales rather than volume.

Among the moves, Toyota is pushing further into the fast-growing market for environmentally friendly cars, especially in China where officials are struggling to contain an air pollution crisis.

Toyota said this month it had been swamped by domestic orders for its first mass market hydrogen fuel-cell car, with demand in the first month nearly four times higher than expected for the whole year.

The company received more than 1,500 orders for its "Mirai" sedan since its launch in mid-December. It had planned to sell 400 in Japan over 12 months.

It has also announced plans to develop components for hybrid vehicles with two Chinese automakers in an unprecedented technology-sharing deal aimed at increasing green car sales in the world's biggest vehicle market.

The deal marked a shift away from Japanese carmakers' traditional reluctance over such deals for fear of losing their competitive edge.

Previously, Toyota would make key components such as batteries and motors in high-cost Japan and then ship them to joint ventures overseas. But that drove up the price of models such as its Prius, which has seen sluggish sales in China.

Toyota shares slipped 0.93 per cent to close at 7,588.0 yen in Tokyo, as the broader market fell into negative territory.

WASHINGTON — The International Monetary Fund (IMF) said on Wednesday that losses from lower oil exports should sap up to $300 billion from economies in the Middle East and Central Asia this year, as countries in the region adjust to falling crude prices.

Economies that are particularly dependent on oil exports, including Qatar, Iraq, Libya and Saudi Arabia, will be hit hardest by the more than 50 per cent decline in petroleum prices, the IMF said in an update to its outlook for the Middle East and Central Asia.

Of the major exporters of the Gulf Cooperation Council (GCC), the IMF predicted that only Kuwait would maintain a budget surplus this year. Saudi Arabia, Bahrain, Oman, Qatar and the United Arab Emirates will sink into deficits.

The hit will amount to another $125 billion for other oil and gas exporters across the Middle East, Iran, Iraq, Algeria and Libya, and exporters of Central Asia, pushing nearly all into fiscal deficits this year, the IMF said.

Oil prices are now hovering near six-year lows amid expectations of an abundance of supply tied to unexpectedly high production of US shale crude.

The IMF said, however, that falling crude prices will not translate immediately into major gains for oil importers in the Middle East and Central Asia, which have been hurt by the slowing growth prospects of key trading partners in the eurozone and Russia.

The IMF this week cut its forecasts for global economic growth to 3.5 per cent for 2015 compared with an October outlook of 3.8 per cent, and significantly lowered projections for oil exporters Russia, Nigeria and Saudi Arabia.

The IMF said nearly every exporting country in the Middle East and Central Asia is expected to run a fiscal deficit this year because of the oil price shock, which prompted the IMF to downgrade the region's growth prospects by as much as 1 percentage point compared with its October forecasts, to 3.4 per cent for 2015.

The losses are likely to reach 21 percentage points of the gross domestic product (GDP) in the countries of the GCC, or about $300 billion. In non-GCC countries and in Central Asia, the expected losses are $90 billion and $35 billion this year, the IMF indicated.

Oil importers will see smaller gains, compared to exporters' losses, as their economies are less dependent on the price of petroleum, the IMF said. 

Morocco, Lebanon and Mauritania are expected to gain most from falling crude prices, while Lebanon and Egypt are likely to see improved fiscal balances, the IMF indicated.

The IMF expects oil-importing countries in the Middle East to save most of the windfall, boosting their current account positions by 1 percentage point of GDP, compared with what the IMF forecast in October.

Central Asian importers should see worse external positions this year, compared with the October forecasts, because of lower demand from Russia and China, the fund said.

"Most oil exporters need oil prices to be considerably above the $57 [a barrel] projected for 2015 to cover government spending, which has increased in recent years in response to rising social pressures and infrastructure development goals," it added.

Only Kuwait, Turkmenistan and Uzbekistan appear able to keep their budgets balanced, it indicated.

But the report said that most oil exporters retain significant cushions from years of surplus, and have substantial financial assets and borrowing power, allowing them to avoid suddenly slashing their budgets.

Even so, it said, spending growth could slow in many to adjust to what could be lower prices over several years or more.

Lower global crude prices since June, is delivering a windfall to importers and giving the global economy more support.

Separately, Kuwait's oil minister said Wednesday that his country plans to spend about $100 billion in the next five years on oil projects to modernise the vital sector.

"We already have started the implementation of the 2030 strategy, and overall spending over the next five years is estimated to be at $100 billion," Ali Al Omair told an oil conference in Kuwait City.

The funds "will be spent on various projects related to production, refining, petrochemicals, as well as transportation”, Omair said.

Kuwait, a member of the Organisation of Petroleum Exporting Countries (OPEC) plans to increase its crude production capacity to 4 million barrels per day (bpd) by 2020 and maintain it until 2030 from the current level of about 3.2 million bpd.

The investment plans come as oil prices have shed about 60 per cent of their value since June. Income from the sector accounts for around 94 per cent of Kuwait's public revenues.

The government earlier this month proposed investment spending of $155 billion during the next five-year development plan starting in April.

Nizar Al Adasani, the chief executive of national oil conglomerate Kuwait Petroleum Corp., told the conference the emirate plans to raise its production capacity to 3.5 million bpd by the end of 2015.

"We are focusing on the upstream where the challenges are so great. It is our strategy to invest to maintain excess capacity," said Adasani.

In the past year, Kuwait has launched two megaprojects, one worth $12 billion to make two of its three refineries more environmentally friendly and another valued at $4.2 billion to produce heavy crude.

It is still reviewing bids for a $15 billion project to build a new 615,000-bpd refinery.

Iraqi Oil Minister Adel Abdul Mahdi predicted that world prices would not fall much further.

"Our estimate is that the prices have reached the bottom. It is very difficult to drop lower than this," Abdul Mahdi told the conference in Kuwait.

"We do not find any real justification for the big and persistent drop in oil prices," said the Iraqi minister whose country is the second largest OPEC producer after Saudi Arabia. "A number of factors will work to correct oil prices upward."

Oil rebounded in Asia Wednesday, with international benchmark Brent North Sea crude for March, adding 44 cents to $48.42, as traders bought the commodity at cheaper prices following a slide to near six-year lows.

But analysts do not expect the rebound to last, as weakening global demand and a supply glut show no signs of abating, especially after the latest gloomy IMF forecast for the global economy.

The Iraqi minister said current low prices will knock out part of the high-cost production, especially shale oil.

This is likely to reduce the amount of surplus production, currently estimated at 2.5 million barrels per day, and support prices, he said.

The world's biggest miner BHP Billiton said on Wednesday that it was cutting back its operating US shale oil rigs by 40 per cent because of the price slump, but still expected output to rise for the financial year.

OPEC's top producer Saudi Arabia has said it will not cut production for fear of losing market share.

Its close ally the United Arab Emirates has said the price slump was necessary to correct oversupply by shale producers.

However, Abdul Mahdi said that other group members had been attempting to broker an output cut in coordination with the world's top crude producer, non-OPEC Russia, to shore up prices.

"Venezuela is exerting huge efforts... and there are contacts involving Russia and OPEC to try and cut production," he added.

But the International Energy Forum (IEF), which groups 76 member countries, including consumers as well as producers, did not share the Iraqi minister's confidence about a swift reduction in surplus production.

"It is still very hard to say when the oil market will be in balance," IEF Secretary General Aldo Flores-Quiroga told the conference.

He said that based on IEF figures, the United States has boosted global supply by 1.2 million barrels per day over the last 11 months.

Brazil added an average of 217,000 bpd of supply over the past 10 months, and China also raised its output.

"US output growth has more than compensated production losses elsewhere," Flores-Quiroga said.

He added that based on available statistics, there will still be surplus supplies of crude in the second quarter of 2015.

Non-OPEC oil producer Oman described as bad politics and bad business Wednesday the group’s November decision to make no cut in output, which sent world prices crashing.

OPEC kingpin Saudi Arabia said the decision was necessary to prevent the group losing market share after a sharp increase in US shale oil production.

But Oman, a Saudi neighbour which has been badly hit by the resulting loss in revenue, said it saw no logic to it.

“I fail to comprehend how market share became more important than revenue,” Omani Oil and Gas Minister Mohammad Al Rumhi told the conference.

Rumhi said that before the decision, with oil trading at $100 a barrel, OPEC was earning $3 billion a day from its output of 30 million bpd.

“When earnings dropped to $2.9 billion, $2.8 billion, they got up to defend market share... and as a result, revenues dropped to roughly $1.5 billion,” the Omani minister said. “This is politics that I don’t understand. Business? This is not business.”

Ruhmi said the fall in prices had hit the Gulf sultanate hard and “it is really a difficult time in Oman”.

Income from Oman’s oil output of around 1 million bpd accounts for some 80 per cent of revenues and the sultanate last month forecast a budget deficit for 2015 of $6.47 billion (5.35 billion euros).

AMMAN — The Kingdom's trade deficit went up by 4.1 percent until November 2014, reaching JD9.45 billion compared with JD9.84 billion recorded in the same period of 2013.  A report issued by the Department of Statistics (DoS) on Tuesday, attributed the increase to higher prices of oil and machineries. Total exports until end of November 2014 stood at JD5.42 billion, a 4.6 increase, compared with JD5.18 billion  in the same period of 2013. Imports went up by 4.3 percent, reaching JD14.87 billion until November of last year, compared with JD14.27 billion in the same months of 2013, according to DoS.

BEIJING — The International Monetary Fund (IMF) lowered its forecast for global economic growth in 2015, and called on Tuesday for governments and central banks to pursue accommodative monetary policies and structural reforms to support growth.

Global growth is projected at 3.5 per cent for 2015 and 3.7 per cent for 2016, the IMF indicated in its latest World Economic Outlook report, lowering its forecast by 0.3 percentage points for both years.

"New factors supporting growth, lower oil prices, but also depreciation of euro and yen, are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries,"  Olivier Blanchard, the IMF's chief economist, explained in a statement.

The IMF advised advanced economies to maintain accommodative monetary policies to avoid increasing real interest rates as cheaper oil heightens the risk of deflation.

If policy rates could not be reduced further, the IMF recommended pursuing an accommodative policy "through other means".

The United States was the lone bright spot in an otherwise gloomy report for major economies, with its projected growth raised to 3.6 per cent from 3.1 per cent for 2015.

The United States largely offset prospects of more weakness in the euro area, where only Spain's growth was adjusted upward.

Projections for emerging economies were also broadly cut back, with the outlook for oil exporters Russia, Nigeria and Saudi Arabia worsening the most.

The drop in world oil prices, which have fallen more than 50 per cent since June, is largely the result of organisation of Petroleum Exporting Countries (OPEC) not cutting supplies, a decision that is unlikely to change, Blanchard said.

"We expect the decrease in price to be quite persistent," he told reporters at a news conference launching the report. "We expect some return, some increase, but surely not an increase back to levels where we were, say, six months ago."

The IMF predicts that a slowdown in China will draw a more limited policy response as authorities in Beijing will be more concerned with the risks of rapid credit and investment growth.

Slower 2015 growth in China "reflects the welcome decision by the authorities to take care some of the imbalances which are in place and the desire to reorient the economy towards consumption and away from the real estate sector and shadow banking”, Blanchard added.

The IMF also cut projections for Brazil and India.

The forecasts are far rosier than World Bank predictions last week that the global economy would grow 3 per cent this year and 3.3 per cent in 2016.

Lower oil prices will give central banks in emerging economies leeway to delay raising benchmark interest rates,  although "macroeconomic policy space to support growth remains limited”, the report said.

According to the IMF, falling prices will also give countries a chance to reform energy subsidies and taxes.

The prospects of commodity importers and exporters will further diverge.

Oil exporters can draw on funds they amassed when prices were high and can further allow for substantial depreciation in their currencies to dull the economic shock of plunging prices.

The report is largely in line with remarks by IMF Managing Director Christine Lagarde last week, in which she said falling oil prices and strong US growth were unlikely to make the IMF more upbeat.

The eurozone and Japan could suffer a long period of weak growth and dangerously low inflation, she said.

Both Lagarde and the report indicated that money flowing back to the US as it tightens monetary policy could contribute to volatile financial markets in emerging economies.

The US Federal Reserve is widely expected to begin raising interest rates some time this year.

FRANKFURT — The German central bank or Bundesbank said Monday that it stepped up the repatriation of its gold reserves from overseas storage last year.

"The Bundesbank successfully continued and further stepped up its transfers of gold," the central bank said in a statement.

"In 2014, 120 tonnes of gold were transferred to Frankfurt from storage locations abroad: 35 tonnes from Paris and 85 tonnes from New York," it indicated.

Germany's gold reserves are the second-biggest in the world after those of the United States and totalled 3,384.2 tonnes this month, according to the latest data compiled by the World Gold Council.

For decades, the Bundesbank's gold holdings have been kept in the treasuries of other central banks, in Paris, London and New York.

According to the German central bank's own data, 1,447 tonnes are stored at the Federal Reserve Bank in New York, 438 tonnes at the Bank of England in London and 307 tonnes at the Banque de France in Paris.

There were historical reasons for this.

After World War II and the export revival of West Germany's "economic miracle" in the 1950s, the central bank accumulated dollars it swapped for gold at the Federal Reserve. With Germany split between capitalist west and the communist East German state until 1990, storing most of the gold abroad was a way to keep it out of Soviet reach during the Cold War.

But surging mistrust of the euro during Europe's debt crisis fed a campaign to bring home Germany's gold reserve from New York and London, with some political parties fuelling fears the gold might have been tampered with.

Under the Bundesbank's new gold storage plan in 2013, it decided to bring back 674 tonnes from abroad by 2020 and store half of its gold in its own vaults.

"Implementation of our new gold storage plan is proceeding smoothly. Operations are running very much according to schedule," said Bundesbank executive board member Carl-Ludwig Thiele.

"We also called on the expertise of the Bank for International Settlements for the spot checks that had to be carried out. As expected, there were no irregularities," Thiele added.

Since the transfers began in 2013, the Bundesbank said it has relocated a total of 157 tonnes of gold to Frankfurt, 67 tonnes from Paris and 90 tonnes from New York.

Separately, the central bank said the economy, Europe's biggest, has managed to shrug off faster than expected the period of weakness it experienced last year.

"The German economy appears to have overcome the phase of weakness that emerged last spring more quickly than many people expected," the Bundesbank wrote in its latest monthly report.

Among the positive factors contributing to this were the "markedly positive consumer climate, on the back of the favourable employment and income outlook, and falling energy prices," the report said.

Business confidence had also improved in December, the Bundesbank said, pointing to the increased industrial output in October and November and a rise in factory orders.

After notching up growth of 0.8 per cent in the first quarter of 2014, German gross domestic product contracted by 0.1 per cent in the second quarter and then expanded by a meagre 0.1 per cent in the third quarter.

But the federal statistics office Destatis calculated in a flash estimate last week that the economy expanded by 1.5 per cent overall in the whole of 2014, suggesting that growth must have accelerated in the fourth quarter.

The main factors driving the recovery were rising exports, increased consumer and public spending, and a rebound in investment, Destatis indicated.

ABU DHABI — The United Arab Emirates (UAE) on Monday downplayed fears that the fall in oil prices could negatively impact the development of renewable energy projects.

"Our interconnected energy landscape has evolved beyond the point where the price of oil determines the fate of clean energy," said Minister of State Sultan Al Jaber who is also chairman of Masdar, Abu Dhabi's renewable energy company.

Oil prices have fallen by almost 60 per cent since June, crashing on worries over global oversupply and weak demand in a faltering world economy.

Participants at the International Renewable Energy Agency (IRENA) conference in oil-rich Abu Dhabi on Saturday had voiced concerns that the trend could spell doom for plans to shift to clean energy.

Speaking at the World Future Energy Summit opening ceremony in Abu Dhabi, Jaber indicated that globally, investments in clean energy have increased by 16 per cent during the past 12 months amounting to $310 billion.

Meanwhile, production capacity of wind turbines and solar energy panels increased by 26 per cent during the same period, producing 100,000 megawatts.

Renewable energy has shifted "from an expensive alternative to a competitive technology", said Jaber.

"This growth has been driven by the sharp decline in cost and steady rise in technology efficiency," he added.

The Emirati official called for seizing the opportunity of falling oil prices to cut fuel subsidies that, according to him, cost the world $550 billion in 2013.

France's ecology and energy minister said Monday that the fall in oil prices poses a threat to global efforts to boost renewable energy use and lower carbon emissions.

"There is a real risk of the re-orientation of consumption towards fossil fuels, the ones that cause global warming and thus very severe climatic changes," Segolene Royal said on the sidelines of an energy conference in Abu Dhabi.

Royal told AFP the challenge to switch to cleaner forms of energy was "not insurmountable".

"We must take regulatory, fiscal and strategic decisions to ensure that this decrease [in oil prices]... can provide new flexibility to invest in renewable energy and energy savings," she said.

Royal said she was "reasonably optimistic" that renewable energy would continue to grow despite market pressure.

Renewable energy, which relies on solar, wind and other sources, is essential for meeting global CO2 emission targets.

The energy summit that opened on Monday is part of a series of events organised under the banner of Abu Dhabi Sustainability Week, including also an International Water Summit.

In March last year, Abu Dhabi opened the world's largest operating plant of concentrated solar power, which has the capacity to provide electricity to 20,000 homes.

On Sunday, An Abu Dhabi fund said that it will provide $57 million worth of concessional loans for clean energy projects in five developing countries.

The projects were aimed at bringing "reliable and sustainable power to more than 280,000 people" in Argentina, Cuba, Iran, Mauritania and St Vincent and the Grenadines, said the Abu Dhabi Fund for Development.

The second loan cycle is part of a commitment by Abu Dhabi to provide concessional loans worth $350 million (300 million euros) over seven years to finance renewable energy projects in developing countries.

The loans were announced jointly at a news conference with IRENA.

"Renewable energy offers the prospect of clean, affordable power to the 1.3 billion people currently off the electricity grid," said IRENA Director General Adnan Amin.

Ecuador, Mali, Mauritania, Samoa, and Sierra Leone are among the countries that have already benefited from such loans.

The Gulf region is one of the world's richest areas in sunshine but lagging far behind several other countries in harnessing the energy.

TUNIS/LONDON — Four years after Tunisia sparked off the Arab spring uprisings, the country is seen as a rare regional success story, but its prospects hinge on it deepening reforms and attracting foreign investment.

The North African country of 10 million people suffered its share of political and economic woes after the 2011 revolutions that swept much of the Maghreb and the Middle East, toppling several long-standing leaders including its own Zine Al Abidine Ben Ali who fled Tunisia four years ago last week.

But Tunisia's democratic election last year and a surging stock market are a contrast with the bloody turmoil in neighbouring Libya and Egypt.

So much so that Tunisia has just kicked off investor meetings for a Eurobond, its first standalone post-Arab spring deal that will come without US guarantees.

While the bond will be a key test of investor appetite, Tunisia's stock market has already reaped the benefits of political stability. The Tunis index rose more than 16 per cent in 2014 and trades just 10 per cent below record highs hit before the Arab Spring.

Joseph Rohm, portfolio manager in Investec's frontier markets team, is one of the investors looking to increase exposure to stocks again after reducing holdings in 2011.

"Tunisia has enormous potential to reform," Rohm said. "However [it] is in desperate need of foreign direct investment to drive economic growth and job creation."

Tunisia has yet to form a government, expected to happen in coming weeks, but political stability and steps towards reform make Tunisia worth a fresh look, said Jefferies' analyst Richard Segal, noting positive comments from ratings agency Fitch.

"Trends are likely to remain market friendly on balance for the next two to three months," Segal told clients. "Therefore, we'd be more likely to be positive than neutral about Tunisia”.

Tunisia signed a two year deal with the International Monetary Fund in 2013, agreeing to follow certain economic policies such as keeping its deficit under control, making the foreign exchange market more flexible and structural reforms.

The government has already cut fuel subsidies, imposed new taxes and let the dinar depreciate to re-build foreign currency reserves, but more reforms are needed. 

Ratings agency Fitch points to Tunisia's banking sector representing a key structural weakness and ripe for an overhaul.

Furthermore, investors worry in particular about its current account deficit, especially as foreign direct investment, at 1.5 billion Tunisian dinar ($780 million) last year according to official data, remains well off pre-2011 levels.

Ratings agency Fitch estimates Tunisia's 2014 current account deficit at 8.3 per cent of the gross domestic product due to energy imports. This compares to 6.7 per cent in Morocco.

Some relief for the deficit could come from oil prices which have slid 60 per cent since June, said Florence Eid, chief executive officer of think tank Arabia Monitor. Yet that could equally weigh on foreign direct investment from oil exporting countries in the Gulf.

"Tunisia will benefit in terms of lower energy prices, but will not accelerate the pace of investment as much as it could have done," Eid added.

Robert Ruttmann from the investment office at Julius Baer is doubtful Tunisian shares can repeat last year's performance.

"Tunisian earnings will have to improve substantially this year in order to justify any further index price rises," he said, adding he was not recommending Tunisian stocks to clients.

AMMAN — Jordan Investment Commission  President Montaser Oqlah on Sunday underlined the commission's commitment to provide all means of support and benefits to Japanese investors. At a meeting with Jordanian and Japanese businesspeople, he highlighted strides made in the recent years in terms of developing legislation governing investment. Oqlah called for benefitting from agreements signed between the two countries, particularly in the areas of economy, trade and investment. He also urged Japanese investors to explore new economic cooperation opportunities between the Kingdom and Japan, citing advantages offered by the Qualified Industrial Zones and the Jordanian market, such as the skilled manpower and the geographical location of the Kingdom as a gate to the Middle East. Oqlah noted that the free trade agreements Jordan is signatory to makes it an investment "incubator". Jordanian businesspeople highlighted investment opportunities in energy, ICT, tourism and pharmaceuticals industry. For their part, the Japanese delegates expressed their interest in investing in Jordan, deeming the current visit of Japan's premier as an opportunity to develop economic cooperation ties.

ABU DHABI — Falling oil prices could have a negative impact on global efforts to develop renewable energy sources, experts warned Saturday at a conference in Abu Dhabi.

Oil prices have fallen by almost 60 per cent since June, crashing on worries over global oversupply and weak demand in a faltering world economy.

Participants at the International Renewable Energy Agency (IRENA) conference that opened Saturday in the United Arab Emirates (UAE) said the trend could spell doom for plans to shift to clean energy.

The fall in oil prices could be a "game changer", Italy's Deputy Minister for Economic Development Claudio Vincenti told the meeting that concludes on Sunday.

In the past, a rise in oil prices had encouraged clean energy investments, said Vincenti, adding that a long-term fall in prices could shift the balance among various energy sources. He did not elaborate.

Salem Al Hajraf, who represented the oil-rich emirate of Kuwait at the conference, agreed saying falling oil prices are posing a "major challenge" this year as was the case two decades ago.

"The fall of oil prices in the 80s was a main reason behind the collapse of many renewable energy projects," he told participants.

Renewable energy, which relies on solar, wind and other sources, is essential for meeting global CO2 emission targets.

Delegates from more than 150 countries attended the opening session of the IRENA conference, including Israel which has no diplomatic relations with the UAE .

Representatives from more than 110 international organisations are also taking part in the meeting. 

"The story of renewables is rapidly evolving and as the importance of renewable energy grows, so does the relevance of the agency's work," IRENA Director General Adnan Amin told the conference.

He indicated that total world investments in renewable energies have reached $264 billion in 2014, $50 billion more than the previous year.

During the meeting, the Abu Dhabi Fund for Development, in partnership with IRENA, will announce a series of loans for five renewable energy projects in developing countries, organisers said.

Abu Dhabi-based IRENA, with 137 member-states and the European Union, aims to promote the sustainable use of all forms of renewable energy.

The conference coincides with a series of events organised under the banner of Abu Dhabi Sustainability Week, including Future Energy Summit on Sunday and International Water Summit on Monday.

Egyptian President Abdel Fattah Al Sisi is expected to attend Future Energy Summit while French  Energy and Environment Minister Segolene Royal will take part in the International Water Summit.

Separately, the dramatic collapse in oil prices is still insufficient to stimulate crude consumption as weakness in the economy has cancelled out the benefits of cheaper crude, the International Energy Agency (IEA) said Friday.

Although prices are expected to remain depressed in the short-term, there are now signs that the tide will turn, the agency added.

Crude prices have crashed to near six-year lows, plunging some 60 per cent from June over a supply glut and weak demand.

"How low the market's floor will be is anyone's guess," said the IEA in its latest monthly report on the oil market. "A price recovery, barring any major disruption, may not be imminent, but signs are mounting that the tide will turn."

That "rebalancing may begin to occur in the second half of the year", the IEA added, stressing however that this does not imply a price recovery to recent years' highs as the market is "undergoing a historic shift".

"OPEC's embrace of market forces last November is a game change," it indicated, referring to the decision by the Organisation of Petroleum Exporting Countries (OPEC) to maintain production levels despite plunging prices.

The shale energy revolution in the United States has also changed the landscape, it said.

Non-OPEC output declines 

Any change in direction of oil prices would be due to the supply end as energy companies have begun axing budgets and cancelling new projects.

The IEA said it was slashing its forecasts for non-OPEC supply growth for 2015 by 350,000 barrels a day from last month's report.

Colombia led the declines, said the IEA, cutting its forecast for Colombian production by 175,000 barrels a day.

Canada's was slashed by 95,000 barrels a day.

Among the latest casualties of the price rout was a $6.5 billion project in Qatar, which Shell scrapped last week.

But these actions will only have an impact on prices "further down the road".

Demand, which would have an immediate impact on prices, does not appear to be picking up.

"With a few notable exceptions such as the United States, lower prices do not appear to be stimulating demand just yet," said the IEA.

"That is because the usual benefits of lower prices, increased household disposable income, reduced industry input costs, have been largely offset by weak underlying economic conditions, which have themselves been a major reason for the price drop in the first place," it added.

The agency therefore maintained its oil demand forecast for 2015, expecting it to grow by 0.9 million barrels a day to reach 93.3 million barrels.

Brent North Sea crude for delivery in March was trading just under $50 on Friday, while US benchmark West Texas Intermediate for February was changing hands at around $47.

OPEC decided in November to maintain its collective output ceiling at 30 million barrels of oil per day.

OPEC kingpin Saudi Arabia has stated that OPEC will not cut production even if the price drops to $20 per barrel, in a move aimed at hurting US shale oil producers.