Wal-Mart chairman warns of lethargic economic recovery

The chairman of Wal-Mart Stores Inc. warned Wednesday the global economic recovery will likely be lethargic, even as the retailing behemoth sees great growth potential in China and India.

"The world recovery is going to be led by Asia although it's going to be very challenging. I think this recovery is going to be a slow one," Robson Walton told a global CEO business conference here.

Walton said "sales have been tough" for Wal-Mart, the world's biggest retailer, even though it was benefiting from the economic downturn as more people shop at discounters for bargains including over-the-counter drugs and eat-at-home food.

The Wal Mart chief's comments echoed remarks Tuesday in Singapore by General Electric Co. chief executive Jeffrey Immelt.

He warned that high unemployment and slower lending will drag on U.S. economic growth, likely resulting in the weakest recovery in decades.

Chairman of Wal-Mart Stores Inc Robson Walton

Walton said international operations accounted for one-third of Wal-Mart's global sales, and the proportion was expected to increase as the group focuses on larger markets in Asia.

"China is a big opportunity for us. We are just getting started in India, where there's great opportunity for us," he said.

"There is change and opportunity in the crisis. If we want to be successful, we got to change. We are working very hard to get our cost down and developing high-efficiency smaller stores to go into urban areas," he said.

He didn't elaborate and couldn't be reached for further comments.

Wal-Mart has more than 250 stores in China but only ventured into India in May to tap the country's $430 billion retail market.

Bharti Wal-Mart Private Ltd., a joint venture between India's Bharti Enterprises and Wal-Mart, opened its first wholesale outlet called "Best Price Modern Wholesale" in Amritsar in India's northern state of Punjab

The company has plans to invest $100 million over the next three years to open 10 to 15 more wholesale outlets, which would employ 5,000 people across India.

But for now, it can only sell its 6,000 food and nonfood items to other businesses because Indian law prohibits foreign companies from selling direct to customers in multi-brand retail outlets to protect smaller domestic retailers.

Wal-Mart has benefited from shoppers focusing on necessities during the recession and it has drawn more affluent shoppers away from rivals with its new focus on better brands, better service and cleaner stores.

The chain has tightened its inventory controls and improved its earnings in the second quarter.

However, the key barometer of same-stores sales in the U.S. - or sales at stores open at least a year - slipped 1.2 percent during the period - a worrisome confirmation of broad weakness in consumer spending.

It has said the U.S. economy will remain challenging in coming months and force shoppers to keep seeking low prices and small packages.

Source : STAR
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

World economy improving, estimated crisis losses reduced by US$600bil

Likely losses from the financial crisis in the three years to 2010 have been reduced by $600 billion to $3.4 trillion as the world economy grows faster than previously expected, the International Monetary Fund said Wednesday.

The organization warned however that the impetus for far-reaching financial reforms risked being lost if the improving situation leads to complacency.

In its half-yearly Global Financial Stability Report presented in Istanbul, Turkey, the fund said concerted efforts by governments and central banks to deal with the crisis and fledgling signs of a global economic recovery have helped limit the losses.

"Systemic risks have been substantially reduced following unprecedented policy actions and nascent signs of improvement in the real economy," the IMF report said.

"There is growing confidence that the global economy has turned the corner, underpinning the improvements in financial markets," it added.

The IMF said its analysis suggests that U.S. banks are more than halfway through the loss cycle to 2010, whereas in Europe loss recognition is less advanced, reflecting differences in the regions' economic cycles.

A top IMF official noted that the conference in Istanbul was taking place just over a year since the Lehman Brothers bankruptcy triggered the sharpest phase of the global financial and economic crisis.

"Fortunately, the situation is very different today," said Jose Vinals, IMF Financial Counsellor and Director of the Monetary and Capital Markets Department.

"We are on the road to recovery, but it doesn't mean that risks have disappeared."

"Bank balance sheets have been stabilized," Vinals said. But "there is still a substantial need for capital" to safeguard the financial system.

Over the last year, governments around the world have bailed out banks and stimulated their economies by increasing spending, while major central banks have slashed interest rates and pumped cheap money into the financial system in an attempt to get liquidity flowing again.

The growing confidence has been most evident in stock markets around the world - most of the world's major indexes are now in positive territory for 2009 as investors have grown more optimistic about the outlook for the world economy.

Stock markets usually rally between six to nine months before actually recovery emerges and most economists reckon that most of the world's leading economic regions will be growing by the end of the year at the very least.

Already, the recessions in France, Germany and Japan have officially ended, though it will take many years for the lost output to be recouped.

The IMF's reassessment of the potential losses stemming from the financial crisis comes ahead of Thursday's World Economic Outlook, when the fund will publish its latest estimates for the global economy.

In Wednesday's report, the IMF indicated the outlook would raise its baseline forecast for global growth, with advanced economies expected to register positive growth in 2010, and emerging economies projected to rebound significantly.

Most analysts expect Thursday's report to show that 2010 global growth will be revised up to 3 percent from 2.5 percent.

Despite its more optimistic assessment of the financial fallout from the crisis, the IMF warned that risks to global stability remained high and that banks still need to rebuild their capital, strengthen earnings and wean themselves off government support.

Commercial property markets in the U.S. and Europe also continue to weaken, the IMF said.

In particular, the IMF said governments and central banks have to be careful to make sure they time the withdrawal of their assistance carefully.

Otherwise they could spark a secondary crisis or endanger monetary and fiscal stability.

It also said that complacency was a worry.

"Banking system problems could go unresolved and much-needed regulatory reforms may be delayed or diluted," it said.

"Policymakers should promptly provide a plan for the future regulatory framework that mitigates the buildup of systemic risks, grounds expectations, and underpins confidence, thereby contributing to sustained economic growth," it added.

The IMF's warnings are likely to carry more clout than they used to. The fund has seen its role enhanced as a result of the financial crisis.

Last week, leaders of the Group of 20 rich and developing countries agreed to give it the fund more responsibility for monitoring the health of the global financial system and to create an early warning system about potential risks.

Source : Star
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]