WORLD ECONOMY

Nino Arveladze

The year 2006 started difficultly for the world economy – record high oil prices, rising in price of gold to 570 USD/oz, the conflict around Iranian nuclear program, Hamas’s victory in Palestinian elections and aggravation of the situation in the Middle East, where Israel has blocked Palestine’s 55 million of customs duties, and the World Bank – financial aid in the amount of 65 million. Disturbances in Nigeria and cold winter in Europe.

Added to this is Alan Greenspen’s retirement and his intention to work as an adviser of British Finance Minister. Before his retirement, Greenspen increased the rate by 4.5%. By doing so he tried to stop the process of dollar’s devaluation, but he did not leave a possibility of maneuvering for his successor and dollar is again under the threat of declining. Bank interest rates are increasing in price and production growth rates are declining everywhere except China, which finished 2005 with the growth rate of 10.8%. Experts called this “a revolution in the world economy” The Situation in the uS During 2005 the US has been constantly trying to hold up the growth of inflation and for this purpose the Federal Reserve System has been continuously raising the interest rates on credits. By the end of the year the inflation indicator decreased, and in October 2006 the presumable inflation indicator will make up 1.2%. The strengthening of USD at the beginning of the year will be one of the factors stipulating for this low indicator. The opinion polls have shown that President Bush’s rating is improving, however, the US economy is again confronting trade deficit, unemployment and inflation; though the unemployment indicator has considerably decreased, economists believe that this indicator is sure to rise. Natural gas prices are unstable again, but it can be said for certain that high prices for natural gas will be retained during the whole year. International specialists predict a black future for USD in 2006. According to their data, in 2006 the cost of USD will be reduced to a minimum and 1 Euro will cost 1. 8 USD, there are also forecasts that this year USD will lose 20% of its cost. According to City Group, the US GDP growth in 2006 will make up . %, which is comparatively low in comparison with the last year’s indicator. Most of Russian experts agree with this forecast and believe that decreasing of Euro’s cost on the international market is not at all stipulated by the progress of the US economy and is caused by political problems of the European Union. Indeed, Euro’s indicator fell during the German elections and the ongoing riot in France, while the US Federal Reserve System is periodically raising the tariffs, which makes the US assets attractive for investors. The second group of investors believes that the exchange rate of USD will rise if oil falls in price, and in this case the exchange rate of USD will make up 1.10 – 1.15 USD for 1 Euro. Meanwhile, in spite of all forecasts, the Russians continue to keep their savings in foreign currency, it is clear that here USD is implied. The exchanges of the US have cured their sores, Dow Johns indicator has grown by 2 tenths thanks to 5% growth of General Motors’ shares. NASDAQ has reached 2249 since Sand P500 has increased by 4 tenths and reached 1265. In New York futures for crude oil makes up 68 USD per barrel. Meanwhile gold is rising in price and reaches 566 USD/oz. Exchange rate of USD in relation to Euro, Japanese yen, UK pound is decreasing. The price of shares on Asian markets is decreasing. bush has made a Precautionary Statement in the Congress The US President addressed the Congress and made the following statement: “America depends on unstable regions of the world in the issues of oil import, and the best way of ridding of this dependence is technologies.” He made a proposal that by 2025 the US should reduce consumption of oil from Middle East by 75%. Analysts are skeptical about his proposal and believe that this is an unachievable goal, since over the coming 20 years a quarter of each barrel of oil will be produced in the Middle East countries. President Bush said that his country should develop new technologies, including nuclear and solar energy. “American economy is a cut above other countries’ economies, but in conditions of dynamic development of the world economy we face such competitors as China and India”, – Mr. President said. As it can be seen, the rates of the central banks of the US and Europe will remain unchanged during one year, since economic growth in the US is slowing down. Experts believe that the Japanese bank will raise the rate for short-term credits in October-December period. Increasing of rates in the US in 2004 was a result of rising inflation and the increased demand in the country, while European Central Bank increased the rate in December 2005 for the first time and it became 2.25%. According to the studies based forecast, tariffs in Euro zone wil increase by 50 tenths and reach 2.75% by the end of June. Representatives of European Central Bank s d which, in its turn, will raise the economy of the Euro zone that largely depends on export demand. However, slowing down of export is expected by the end of the year, since the growth of the US economy is slowing down as well, the unemployment indicator is high and domestic consumer demand is decreasing. According to the forecast, from June to the end of the year the European Central Bank will not change the rate and it will make up 2.27%, while in 2007 – %. Experts hope that oil prices will be controlled in 2006-07. There is also a real chance that Japan’s Central Bank will reconsider its almost 0% rate policy. Canadian Central Bank has increased the tariffs three times after September which now make up .25%. As it is expected, it will increase inter-bank credit rates in future as well. Problems of the uS budget 7 billion dollars – this is a forecast of the US budget deficit made by the Congress. In comparison with the forecast of President Bush’s administration, it is a less pessimistic one. In accordance with the forecast of the President’s administration, the budget deficit will make up 400 billion dollars. Economists believe that, in spite of the deficit, the exchange rate of USD will not drop and they expect strengthening of the currency. The congress has added another 2 billions to the forecast made in August. It is noteworthy that the sums spent on military operations in Iraq and Afghanistan were not taken into account. According to Reuters, if we take into account the spending on military operations and the damage inflicted by Catherine hurricane, the losses will make up 60 billion USD. Economists are concerned about the high deficit rate since the exchange rate of USD in relation to other currencies is decreasing. According to the information of the Congress’s Budget Committee, a rapid economic growth will inhibit the formation of a large deficit. If we take into account the forecasts, the US deficit makes up 2.6% of the GDP. Average US GDP indicator in 2006 makes up .6%, and in 2007 – .4%. If we take into account the sums spent on military operations in Iraq and Afghanistan, this figure will increase by 20-25 billion USD. A long-term deficit may turn into a serious problem and stop the process of tax cutting. If the congress continues tax cutting, the deficit is sure to rise. In last days of 2005 the US Finance Minister John Snow addressed the Congress with a letter. He warned that in the nearest future, more exactly in March 2006, serious problems threaten the US economy. Meanwhile, the exchange rate of USD in Asia considerably decreased. The US Secretary of Commerce says that consumer goods trade increased by 1. % in December 2005. After publication of the forecasts, some experts raised the expected GDP indicator. According to them, the US GDP has grown by 2.8% in the last quarter. Analysts believe that if the forecasted data is high, it will strengthen the market and the exchange rate of USD will become stabilized. The Exchange rate of uSd is decreasing The President of New York Federal Reserve Timothy Gatener said that the global economy is under threat because of growing trade and financial deficit of the US. The confrontation between Iran and the West, rising in price of oil and decreasing of share prices agitated the investors and they prefer Euro and Swiss franc to USD. The statement of federals that they are going to raise the rate for the last time and by doing so put an end to the 18 months long campaign has done more harm than good to dollar. The exchange rate of Euro in relation to USD has increased by 1.1%. A representative of New York Fortis Bank Hue Walsh says the federals do not take right decisions. The federals say that they should take care of the economy or the world economy will have problems as well. According to them, it will be the last raising of the rate. “This time inflation is not the main problem”, – maintain the federals. Meanwhile, the exchange rate of USD decreased in relation to Swiss franc by 1.2%, and in relation to yen – by 0.6%. Some analysts believe that Euro will rise in price still more, and if this tendency will continue, the stability of USD will be called into question. China becomes the main Economic Competitor of the uS In its forecast the World Bank has again raised the indicator of China’s economic growth. It was 9, % in 2005 and it will make up 8,7% in 2006 since it is based on big domestic demand and sharply increased export. The World Bank raises the presumable indicator of China’s economic growth for the third time. The bank declares that changes in the forecast were introduced because of the increased domestic demand; in accordance with the bank’s forecast, the low inflation rate trend will continue in 2006. The Director General of China’s People’s Bank – Teng Hu says that in 2006 yuan will be under pressure for a short period of time until it finally strengthens. In July Chinese monetary unit was evaluated anew, however, the effect of increased demand for foreign currency has not been observed in the country yet. On January 4 Chinese yuan reached the rate of 8.0627 in relation to USD, which is the highest indicator after the 2005 evaluation of yuan. In his interview to Reuters Mr. Teng says that there is no deflation threat in the country and points out that Chinese government has already reached its objectives – there is a low inflation in the country, the economy has grown. They hope that the next year will be successful as well, and will try to raise the economic growth indicator to 9%. Oil Prices have Created Problems to the indian Economy but it Continues to grow In 2006, a rapid growth of India’s economy is expected. According to the data of the Asian Development Bank, India’s GDP in 2006 will make up 6.9%. The chairman of the council for leather export – Mr. Rafic Ahmed says that the export of leather goods will increase in 2006 from 1 % to 15% and by 2010 it will make up 5.2 billion USD. Last year the export of leather goods made up 2.5 billion USD. It is clear that a big progress in production and services sectors will contribute to increasing of India’s GDP in 2006-07 and this indicator will make up 7.7%, however, rising of the interest rate on credits is expected because of the increasing inflation threat. The presumable inflation indicator for wholesale prices in 2006-07 will make up 5.1%, which is higher than the 2005-06 indicator (4.6%). Negotiations between India and Korea concerning free trade will start next month. India’s population will make up 1.1 billion people and it holds the fourth place among the countries having the largest markets in the world; over the past three years India annually receives 7.5% of the economic growth from the market. In 2006 a big activity on India’s stock exchanges, implementation of foreign investments will continue as well. Indian oligarchs maintain that in two years’ period India’s economy will take the lead over the Chinese one, and, in their opinion, this is not only ambitions but a real possibility. Indian Sugar-Refineries Make Big Profits due to high Prices Last month Indian sugar-refineries imported a vast amount of unrefined sugar which will be exported after its refining. The gladness of sugar-refineries’ owners has no limits since now sugar prices are the highest over the past 16 years. Analysts say that the price of sugar shares will be high this year. Indian sugar-refineries are the second largest in Asia by the volume of export, over the past two years they exported 2.7 million tons of unrefined sugar. According to the plan, they must sell 500 000 tons of unrefined sugar by the end of September. Regulators allowed sugar-refineries to export only white sugar. Analysts say that low sugar production in Europe and great demand for it will keep the prices high. Importers of unrefined sugar are in big profit. After refining they will export it and sell at higher prices. White sugar futures in London may reach 400 USD per ton. Over the past 16 years such a high price for sugar has not been observed. According to analysts, it will rise in price still more. Sugar-refineries are not in a hurry to sell the imported sugar and wait till it rises in price still more. The Existence of Tokyo Exchange becomes Questionable Tokyo stock exchange is planning to increase tradr ability to 80% by the end of the year. This statement was preceded by the problems that shaped at Tokyo Exchange. Japanese Minister of Economy and Finance Kaoru Iosana said that the Exchange’s existence would become questionable unless the trade problems were settled. The Exchange’s President and Chairman pointed out that, according to his plan, the trade ability will increase from 7 to 8 millions by the end of 2006. 2 00 companies are included in the list of one of Japan’s largest exchanges TSE. After this statement the Exchange was closed down for 15 hours, 4 million worth of trade operations were carried by this time. The Speaker of Tokyo Stock Exchange said that New York Stock Exchange is the largest in the world and 2800 companies are included in its list, and its daily operations made up 5 million USD during 2005. TSE is glad that now it is possible to trade by means of Internet and involve individual and foreign investors in trade. A as a result, the total price of daily transactions reaches 5.4 million, or twice more in comparison with the last year’s indicator. In order to avoid disablement of the system, the Exchange delays starting of trades for half an hour. According to some analysts, this is a rather poor move, while others believe that the problem will be solved in the course of time. There are also those who think that it is not the fault of Tokyo Stock Exchange, supposing that the Exchange will reach the intended goal by the end of the year. high unemployment rate and interest rates in Sweden Swedish unemployment indicator increased after December, however, the Central Bank continues to increase interest rates. In November the unemployment indicator was 5.0%, while in December the number of unemployed people increased and made up 5.4%. Analysts say that increasing of the number of unemployed people is a dangerous tendency. In November there were 4. 04 million employed people in the country, this figure does not include people employed in the government. In December the number of employed people decreased and made up 4.264 million people. Swedish Central Bank is arranging annual meetings on the monetary policy issues. Its representatives expect increasing of the interest rates, the Central Bank has not increased the tariffs since 2002. Experts say that when are a lot of unemployed people in the country, a central bank should not raise the tariffs. European Economic Problems The indicator of Europe’s economic activity in 2005 made up 1.5%, while for 2006 it is expected at the level of 2.1%, and 2007 – 2.4%. The EU hopes that during the next years 6 millions of new jobs will be created, which will contribute to decreasing of the unemployment indicator that made up 8.1% in 2005. The inflation indicator will increase to 2.3% because of oil prices, and in 2007 the indicator will decrease to 1.9%. In 2006 a considerable growth of German and Italian economies is expected, though high prices for energy resources may create certain problems for the economic growth. As to the countries of East and Central Europe, here a lower growth in the economic sphere is expected, since Poland and Hungary have problems related the budget. Should we expect this year a high inflation indicator and high interest rates on credits arising from it? A few months ago only a theoretical discussion on this issues was possible, but now it is clear that in 2005 Europe will have a high inflation indicator – increasing of oil prices started as far back as a year ago. Inflation rate will be higher in the countries where economic activity was comparatively unstable, for instance in Spain where the inflation indicator of 2005 made up %. The issues of Caucasus’s regional Economy azerbaijan, armenia According to the data of Azerbaijan’s National Bank, the country’s money reserves exceed the state foreign debt by 1. times. According to the National Bank’s data, Azerbaijan is known in the world as a country with a stable budget, as it is expected, this year Azerbaijan’s budget will increase by 40%. In 2006 retail oil prices will increase as well, which is manifestly an effect of the increased world oil prices. Intensive economic development and stability of the national currency’s exchange rate resulted in growth of Azerbaijan’s GDP. Correspondingly, in 2006 incomes per head will increase and make up 1.250 USD, which is more than the initial forecast (1177.6 USD). We believe that as a result of this progress Azerbaijan will not be a poor country that used to be a client of the International Development Association and will cooperate with the International Bank for Reconstruction and Development. President Aliev says that in 2006 the country’s GDP will increase by 0% and the wages – by 25%. Increasing of export-import activity is also planned, in particular, import will increase by 4 billion USD, and export – by 7.1 billion USD. There is a high probability that Azerbaijan will stop importing food products from Turkey because of Bird Flu cases revealed there. According to the study carried out by Wall Street Journal, Armenia holds the 27th place among the 157 countries with liberal economy, in 2005 it held the 41st place in the list. Georgia held the 68th place, Azerbaijan – the 12 rd, and Turkey – the 85th. In 2005 Armenia’s GDP made up 8%, in 2006 decreasing of GDP is expected (6%). According to the data, in 2006 the state budget will increase by 21%. The expected inflation indicator in 2006 makes up 3%. russia The growth of Russia’s GDP alleviated in the second half of 2005, but they hope that high oil prices will check slowing down of the GDP growth in 2006. Russia’s Finance Minister – Aleksei Kudrin says that in 2006 the budget will be orientated for economic growth of 5.9%, the ruble’s exchange rate in relation to USD is expected at the level of 27.2, the expected inflation indicator – 7.8%, while the expected budget surplus will make up 0.5%. In his opinion, it cannot be ruled out that the state will take additional measures for strengthening of the national currency. It is possible that in 2006 Russia will pay a part of the foreign debt (110 billion USD). The minister pointed out that a lot will depend on the world oil prices. The Russian prime minister is satisfied with Kudrin’s economic plan, especially taking into account the fact that budget increase is expected this year. However, economists believe that Kudrin is too optimistic and point out that the expected inflation indicator of 2006 will be 12%. Table. Russian Economy’s Forecasts Source IMF-2005 data We cannot leave out the subject concerning natural gas, Russia is rich in mineral resources and Putin uses them to punish Russia’s former vassals, the glaring example of which is the confrontation that has recently developed between Russia and Ukraine. Russia’s explanation is as follows: it does not want to sell natural gas cheaply and that is why raises its price for Georgia and Armenia (Georgia openly declares that it wants to join the North Atlantic Alliance). Turkey At the beginning of 2006 a fall in exchange of Turkish lira is expected, which, in its turn, will cause inflation – its expected indicator is 8.8%. The expected indicator of the GDP is .8% and of the state budget – 6_7%. In 2006 the national debts will make up 70% of the GDP. The cases of bird flu revealed in Turkey will have an effect on the country’s economy since other countries give up importing of Turkish food products, which, first of all concerns chicken-meat. The Turkish government made a statement that the bird flu danger in the county has been half diminished, and it concerns both humans and domestic animals. However, UN experts say that strengthening of this virus is possible which may threaten the neighboring countries. Strengthening of the virus is expected during the cold months of the year and it will mainly spread in the countries of eastern Asia. The launched global campaign against the virus will cost international donors 1.4 billion USD. Turkey’s official representatives point out the fact that so far the virus has not taken away many people’s lives the way it was in Asia. UN Food and Agriculture Organization (FAO) declared that spreading of bird flu in Turkey seriously threatens the neighboring countries. FAO called the neighboring countries, including Georgia, for implementation of intensive control. There is a high probability that the countries will close their borders and stop importing Turkish food products. It is already beyond doubt that Turkish economy is in great danger in the form of bird flu. Iran has already closed its border with Turkey and recommends tourists not to visit the neighboring country in order to avoid the danger related to bird flu. It is clear that Turkish tourism is under threat. Spreading of bird flu will affect not only Turkish economy, it is sure to have an effect on the world economy. wheat and Sugar Today everybody speaks of the threat related to bird flu epidemic. News programs are intensively broadcasting information on the revealed cases of the disease in different countries. The disease is particularly widespread in China, Turkey, south-east Asia and in some European countries. The demand for poultry will recede into the background and come to naught. By the example of China it can be said that poultry consumption was substituted by pork. Spreading of H5N1 virus caused disturbance in Europe as well. At the time of the virus spreading in 200 , 25 million of birds were exterminated, but later on the poultry farming sector was revived and the demand for poultry reached the initial level. The demand for wheat may also decrease because of the above-mentioned virus since media’s attention is focused on it. However the US export will not be reduced in 2006. The south-east Asia, Europe and Russia did not did not implement large-scale import from the US, which means that the American market will not suffer big losses. As it is expected, in 2006 Argentinean, Chinese and Brazilian exports will decrease by 29%, while the US export will remain unchanged. This year rye trade will reach the lowest level in 0 years’ period; the export license is issued for 2 000 tons only, while in 2005 the same license was issued for 261 000 tons. In 2006 cereals shares will slightly rise (8%) in the five leading cereals exporting countries – Canada, the US, Europe, Australia and Argentina, as a result, cereals prices will not considerably increase in 2006. The US cereals export will increase by 25 million bushels (1 bushel = 6.4 liter), the average price of one bushel of wheat wobbles between 2.85 and . 5 USD, which is 25 cents more in comparison with the last year’s prices. According to the forecast, world sugar output will make up 147.8 million tons and will increase by .7%; world sugar consumption will make up 148 million tons. A large part of production growth takes place at the expense of the developing countries, where total output will make up 106 million tons due to record yield indicator in Brazil and the improved situation in India. Among the developing countries, Latin America, the Caribbean region and Brazil produce 0 million tons, which is a .5% higher indicator compared to the past years. A 7% drop in sugar production is expected in Cuba. Sugar production in China will increase by about 6% which is equal to 107 million tons; Guanghe region produces 60% of China’s total sugar output. In the developed countries a 1 million tons drop in sugar production is expected, since sugar production in the CIS and the EU countries has decreased. The expected sugar production indicator in the US makes up 7.9 million tons and does not significantly differ from the last year’s indicator. The planned indicator in South Africa makes up 2.7 million tons, which is 2 % higher in comparison with 2004-2005. The world sugar consumption in 2006 will reach 148 million tons and will increase by 2% compared to 2005. Consumption increase will also take place at the expense of the developing countries in which sugar consumption will reach 100 million tons. India consumes the largest amount of sugar in the world, this year the sugar consumption indicator in the country will make up about 20.1 million tons. Sugar prices remain unchanged due to the balanced demand and supply. Under the international agreement, the average price of 1 bushel of sugar makes up 9.20 USD. A significant increase of prices is not expected in 2006. meat Bird flu is again in the focus of attention. This virus widespread in Asia which is dangerous to human health will cause rising in price of bird meat and sharp reduction in its consumption in the world. The countries in which spreading of bird flu is expected will prohibit import, which will cause increasing of prices. At the same time the demand for other meat products will increase, which will make meat prices higher all over the world. H5N1 virus spread in Asia in 200 . People were taken ill with it and at least 65 of them died because of it. Noteworthy is the fact that the disease cannot be easily transmitted from one human to another. The world prices for bird meat has increased by 20% since 2004. The Turkish prime minister expresses his anxiety concerning the fact that Turkey’s population refuses to consume bird meat and eggs and assures people that their consumption does not represent any threat for health. According to his words, the main thing in the shaped situation is to keep calmness. Bird meat and eggs consumption has been practically suspended, however the experts assure that their consumption in boiled condition does not constitute any threat to health. According to the country’s government, bird flu may inflict the loss of 3 billion USD, that is 1% of the GDP. As to the tourism sector, here the talk is of the loss in the amount of 20 billion USD. 455 000 birds were exterminated in Turkey by the order of agriculture officials. The fact that Turkish economy is under a great threat is beyond doubt. Bird meat trade that that used to make up 2.5 billion USD annually, was reduced by half by October, and decreased by 70% after the second onset of bird flu. To be on the safe side, the Turkish government ordered to exterminate another 00 000 domestic birds. However the whole attention of Turkey is focused on tourism. Officials say that the media spread panic artificially and strained the situation. Unlike Russia, Germany and Britain have not yet warned their citizens against the dander of traveling to Turkey. The Russians have already advised their sun-loving tourists to refrain from having a rest in Turkey. Russia is an important market for Turkish resorts. The Greek government have also warned the country’s citizens but it is not going to close the border with Turkey yet. Iran is taking preventive measures against spreading of the virus. The country has already banned bird trade with Turkey and is treating cargoes at border-crossing points with disinfectant solution. Physicians fear that the virus may mutate and will be able to be easily transmitted from one human to another, which makes the measures being taken against the virus still stricter. In Iranian city of Teheran the price of a chicken exceeds 5 USD. Iran exterminated from 50 000 to 75 000 birds at the border with Turkey. Bulgarian Minister of Agriculture and Forestry says that Bulgaria has no grounds for panic, and added that if it is necessary to exterminate poultry in the country, its owners will be paid a double compensation. However, in spite of this statement, the consumption of bird meat and eggs in Bulgaria was almost suspended. In Georgia’s regions that are located near the Turkish border, the population has exterminated all kinds of birds. According to the statement of Russian nationalist Vladimir Zhirinovsky, all migrant birds should be fired at. Starting from July Russia started a struggle against the bird flu virus and exterminated 600 000 domestic animals. It also banned import of bird meat from Ukraine where in some villages bird flu cases were revealed. The EU declares that it will continue strict monitoring in all 25 countries of the union. Bird meat consumption is considerably decreasing in Spain as well. According to Spanish Ministry of Agriculture, bird meat became % cheaper than last year, 1 kg of bird meat costs 0.50 Euro, which is less than the cost price of the product. Spanish Poultry Farming Association declares that if the government does not take measures for their support, this sector will be completely destroyed, farms go bankrupt and the unemployment indicator increase. The EU annually produces about 11 million tons of bird meat, out of which chicken meat makes up 70%, turkey and goose – 20%. The world Sugar Production and Consumption million tons Cost of raw materials EU annual export makes up 1.1 million tons. In Italy the demand for bird meat decreased by 0 – 40%. The world demand for other kinds of meat is increasing. Consumers give up bird meat and substitute it for pork. In 2006 a 1- % growth of the US pork export is expected. The US is also looking forward to recommencing of its beef export to Japan which was banned because of cow disease. Japan banned chicken export from the US after the virus was revealed in one of the states. Like Hong Kong and South Korea, Singapore and Malaysia stop export from the US. Japan banned chicken export from the main suppliers – Thailand and China, that is 20% of Japan’s chicken meat consumption hang in mid-air. World mutton consumption will also increase. Australian mutton export has already broken all the records, and, presumably, a new record will be broken in 2006. As we have already pointed out, bird meat consumption will be substituted for other meat products. In 2006 consumption of pork will increase, and the average price of 100 kg of pork will make up 125-1 0 USD. The metals market Analysts have different opinions – according to forecasts of one group, steel prices are increasing again. In 2006 the price of 1 ton of steel will make up 480 USD, which is 40 USD higher against the previous forecasts. The second group predicts cheapening of steel and explains the situation in the following way: increasing of import in the US may cause production growth in China which is an important representative of steel exporters’ network. Its rising in price in the EU countries is not expected as well. At the beginning of 2006, the price of 1 ton of steel will make up less than 500 Euro. Rising in price is expected if construction and industrial sectors will become more active. According to forecasts, global demand for steel in 2006 will increase by 1.160 million tons. Its price in the US is the highest, and, as it is expected, this trend will continue this year as well. The price of copper will drop by 25%. In short, in 2006 the price of the metal will be frozen, and only insufficient drop or rise is expected. The highest price of gold since 198 was fixed in London – 506.78 USD/oz (1 ounce = 28. grams). After the beginning of 2005 the price of gold increased by 22%. The increased demand of investment funds for this precious metal caused a sharp increase of prices. In view of high inflation rate in the US, investment funds prefer to buy gold, which is a safe investment in conditions of high inflation. Along with gold, silver is increasing in price as well – 8.62 USD/oz, and white gold, that is platinum – 1000 USD/oz. Such a high price of white gold is fixed for the first time in 25 years. The price of 1 ton of zinc makes up 1.776.50 USD. After 1980 the price of 1 ton of zinc increased by 1.000 USD. China declares that it will sell a large amount of copper in order to reduce its price. China will often have problems with transactions because of high copper prices. Technological innovations . The European group for technological innovations has revealed the leading countries introducing technological innovation – Sweden, Finland and Switzerland, which take the lead over Germany. Switzerland, Denmark, Germany, Ireland, Italia and the Netherlands have always successfully presented their achievements. One of the reasons for their success is that there is always a great demand of population for innovations there, which can be considered as a barometer in this sphere. . Viewing of TV shows, concerts and movies is already available by means of mobile phones. According to TVMyPod, viewing of a two-hour long movie or program is possible, the main thing is to choose the necessary one. . America Online (AOL) declares that it is planning to create a new local telephone space in the UAE and promises consumers extension of capabilities and inculcation of innovations. . The US Earth Link company is concluding a contract with a famous Motorola company in order to jointly produce wireless equipment and carry out designing and integration of the system in five cities. Such contracts are evidence that soon telephone communications will be developing based on Internet innovations. . From the beginning of 2006 Europe is planning creation of a new European search system that will challenge American search systems Google and Yahoo. Representatives of French and German high tech laboratories say that they are already working on creation of new systems in which the translation service will be developed well. . In January 2006 the world forum on third generation mobile phones will be held once again. Strategists and regulators will present the technologies and services of the third generation phones and consider new capabilities of fourth generation mobile phones.