Back Matter

Back Matter

Author(s):
International Monetary Fund. Research Dept.
Published Date:
October 1993
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    See “Declaration on Cooperation for Sustained Global Expansion,” adopted at the conclusion of the fortieth meeting of the Interim Committee of the Board of Governors of the IMF, April 30, 1993 (reprinted in the May 1993 World Economic Outlook, p. x).

    Reflecting a bilateral agreement between the German and Dutch monetary authorities, the narrow band of 2¼ percent between the guilder and the deutsche mark was maintained.

    Although eligible for the STF, Albania and Mongolia have opted for ESAF arrangements.

    Detailed analyses of the causes and consequences of these asset price inflations and deflations may be found in Annex I of past editions of the World Economic Outlook (May 1992, October 1992, and May 1993).

    It should be noted, however, that revised national accounts data now suggest that the recession was somewhat less pronounced than previously assumed, and that the recovery was stronger than initially reported. As a result, the estimated output gap for 1993 shown in Chart 4 is now smaller than on the basis of previous estimates.

    For an analysis of the effects of a fall in world oil prices, see “An Extended Scenario and Forecast Adjustment Model for Developing Countries,” in Staff Studies for the World Economic Outlook (IMF, 1993, forthcoming).

    On a twelve-month basis, consumer price increases were above 4 percent for the first eight months of 1993, but a substantial portion of this is due to increases in indirect taxes—which have added more than½ of 1 percentage point to 1993 consumer price inflation—and to special pressures on the housing and service sectors due to high immigration, which has pushed inflation in these sectors in west Germany to 6 to 7 percent. Goods prices increased by less than 2 percent annually in 1991-92 and have remained broadly stable in 1993.

    See Chapter III for a detailed discussion of the background for the decision to widen the fluctuation bands in the ERM.

    The emerging stock markets, as defined by the International Finance Corporation (IFC), include those in Argentina, Brazil, Chile, Colombia, Greece, India, Indonesia, Jamaica, Jordan, Korea, Malaysia, Mexico, Nigeria, Pakistan, Philippines, Portugal, Sri Lanka, Taiwan Province of China, Thailand, Turkey, Venezuela, and Zimbabwe. Price changes reported here are changes in the IFC country stock price indices; see IFC, Quarterly Review of Emerging Stock Markets: First Quarter 1993 (Washington, 1993) and Quarterly Review of Emerging Stock Markets: Second Quarter 1993 (Washington, 1993).

    Information on 1993 trade may understate trade volumes because of reduced data coverage associated with the opening of the single market in Europe and the abandonment of customs controls on trade within the European Community.

    The guilder and the deutsche mark will continue to operate within a2¼ percent band, reflecting a bilateral agreement between the Dutch and German monetary authorities.

    Morris Goldstein, David Folkerts-Landau, and others, International Capital Markets: Part I, Exchange Rate Management and International Capital Flows, World Economic Survey (IMF, April 1993).

    Foran analysis of the macroeconomic consequences of unification, see Paul R. Masson and Guy Meredith, “Domestic and International Consequences of German Unification,” in German Unification: Economic Issues, edited by Leslie Lipschitz and Donogh McDonald, Occasional Paper 15 (IMF, 1990), pp. 93-114.

    Empirical research has shown that foreign exchange markets appear to be affected by risk premia and, accordingly, that short-term interest differentials are not unbiased predictors of future exchange rate changes. Changes in risk premia provide a theoretical mechanism through which shifts in interest rate differentials might induce exchange rate changes larger than what would otherwise be the theoretical norm.

    Some countries with floating exchange rates, such as Canada, use a weighted average of movements in short-term interest rates and of the exchange rate as a guide to monetary conditions.

    For countries with currently high ratios of government debt to GDP, the Maastricht criterion on the public debt ratio already generally implies more ambitious efforts to reduce fiscal deficits over the next few years. For countries with relatively low ratios of public debt, however, a 3 percent of GDP fiscal deficit would generally be above the level that would stabilize the public debt-GDP ratio, especially if this deficit was achieved only when the economy was performing above its cyclical norm.

    These issues were discussed in detail in the May 1993 World Economic Outlook, Chapter III, pp. 35-38. The second stage of EMU will see several institutional developments that should help to strengthen the consistency of policies across the EC and thus promote greater stability in the EMS. The creation of the European Monetary Institute (EMI) should strengthen cooperation among central banks and facilitate coordination of monetary policies. Monetary policy will continue to be the responsibility of national central banks (until the third stage of EMU, when the European Central Bank will assume authority for monetary policy), but the EMI will have the mandate to make recommendations regarding the conduct of monetary policy in individual countries. The Maastricht Treaty also incorporates provisions that prohibit monetary financing of fiscal deficits and privileged access to financial institutions by public entities. At the same time, the Community's surveillance process will begin to tighten rules for fiscal deficits (although sanctions against countries with excessive deficits will not be imposed until the third stage of EMU). The second stage will require governments to initiate the process of granting central banks independence, which should strengthen the credibility of price and exchange rate objectives.

    See the discussion on price stability in the May 1993 World Economic Outlook, Box 2, pp. 24-26.

    Annex I explains how structural balances are defined and estimated.

    See the discussion in the January 1993 Interim Assessment of the World Economic Outlook.

    For a description of the April 1993 economic stimulus package in Japan, see Box 3 in the May 1993 World Economic Outlook, p. 34.

    In 1965, the dependency ratio ranged from 48 percent in Japan to 70 percent in Canada, and in 1985 it ranged from 43 percent in west Germany to 52 percent in France and the United Kingdom. By the year 2025, this ratio is projected to range from 55 percent in Italy to between 59 and 61 percent in the other major industrial countries. For simulations of the economic effects of aging populations, see “Population Aging: An Attempt to Quantify the Long-TERM Macroeconomic Effects,” Supplementary Note 3 in the May 1990 World Economic Outlook, pp. 100-13.

    Although there is rarely full Ricardian equivalence—in which the effect on national saving of a reduction in taxes today is completely offset by an increase in private saving to meet future tax liabilities—there is a relationship between public dissaving and the net flow of foreign capital. An increase in government saving in relation to GDP may not reduce, one-forone, a country's reliance on foreign capital—because the balance of private saving and investment can also change—but it will tend to reduce the need for capital inflows over time.

    How much a country must reduce its debt in relation to GDP depends on expected growth, the initial debt-GDP ratio, and the present value of future net liabilities—which itself depends on factors such as the age structure of the population, retirement age, and existing benefit rates.

    This estimate, which is for 1991, includes workers who were either discouraged from seeking work by poor job prospects or were part-time workers who wanted to work more hours; see OECD Employment Outlook (Paris, July 1993).

    The average unemployment rate in the industrial countries was below 5 percent until 1975. The estimated increase in output is based on 1988-90 average labor productivity levels.

    See OECD Economic Outlook 53 (Paris, June 1993), p. 39.

    Based on the assumptions that the extra employment income would generate tax revenue, and that unemployment insurance outlays would be reduced, in line with the elasticities described in Annex I.

    See Chapter VI in the May 1993 World Economic Outlook.

    See OECD Employment Outlook (Paris, July 1993).

    The group of “successfully adjusting countries,” identified in the October 1992 World Economic Outlook (Chapter IV), consists of 35 developing countries divided into two categories: sustained adjusters, which initiated stabilization policies and structural reforms five or more years ago; and recent adjusters, which have put in place adjustment and reform policies during the past three to four years.

    The importance of domestic saving is indicated by the very high correlation across countries between domestic saving and investment. See, for instance, Michael Dooley, Jeffrey Frankel, and Donald Mathieson, “International Capital Mobility: What Do the Saving-Investment Correlations Tell Us?” Staff Papers (IMF), Vol. 34 (September 1987), pp. 503-30.

    Domestic saving is defined in Table A43 of the Statistical Appendix and includes official transfers. The rationale for this is that transfers, because they do not increase external liabilities and necessitate a subsequent outflow, are more akin to domestic rather than foreign saving. If transfers are included in foreign saving, Africa's foreign saving rate increases to 4 ¼ percent of GDP over 1971-93, with the domestic saving rate correspondingly lower. Foreign saving rates for other regions are not affected in any significant way.

    See Bijan B. Aghevli, James M. Boughton, and others, The Role of National Saving in the World Economy: Recent Trends and Prospects, Occasional Paper 67 (IMF, March 1990).

    Cross-country analysis suggests that, on average, a 1 percent increase in the growth of trend per capita income raises household saving by about 0.30 percent. This elasticity is based on an analysis of 50 developing countries for the period 1985-92 and is somewhat higher than the results obtained for the 1970s by Kanhaya L. Gupta, “Aggregate Savings, Financial Intermediation, and Interest Rates,” Review of Economics and Statistics, Vol. 69 (May 1987), pp. 303-11.

    For details of the reforms of domestic capital markets, see IMF, Private Market Financing for Developing Countries, World Economic and Financial Survey (December 1992).

    See Chapter III and Annex V in the May 1992 World Economic Outlook.

    There is very little evidence to support full “Ricardian Equivalence”—that anticipations of future tax liabilities are fully reflected in current private saving—for developing countries. Although individuals may form expectations about their future tax liabilities, liquidity constraints in general prevent them from acting on these expectations. One implication is that increases in taxation, when not offset by public consumption, increase saving, albeit somewhat less than proportionately. See, for example, Nadeem Ul Haque and Peter Montiel, “Consumption in Developing Countries: Tests for Liquidity Constraints and Finite Horizons,” Review of Economics andStatistics, Vol. 71 (August 1989), pp. 408-15.

    See Annex II for a discussion of trends in military expenditure.

    Capital adequacy has been enforced by the Basle guidelines, agreed in 1988, and lending to most developing countries has been influenced by national loan-loss provisioning requirements. These requirements have been adjusted by regulators to reflect sustained improvements in creditworthiness by a number of developing countries.

    For a detailed analysis of the causes of, policy responses to, and effects of capital inflows in six major countries, see Susan Schadler, Maria Carkovic, Adam Bennett, and Robert Kahn, Recent Experience with Surges in Capital Inflows, Occasional Paper (IMF, 1993, forthcoming). For a broader discussion of these issues for Latin American countries, see Guillermo A. Calvo, Leonardo Leiderman, and Carmen M. Reinhart, “Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors,” Staff Papers (IMF), Vol. 40 (March 1993), pp. 108-51. For a discussion concerning Asian countries, see Kenneth B. Bercuson and Linda M. Koenig, “The Recent Surge in Capital Inflows to Asia: Cause and Macroeconomic Impact,” paper prepared for the SEACEN/IMF Seminar, May 14-16, 1993, Seoul, Korea.

    See Eliana Cardoso and Rudiger Dornbusch, “Foreign Capital Flows,” in Handbook of Development Economics, edited by Hollis Chenery and T.N. Srinivasan (Amsterdam and New York: North-Holland, 1989). It should also be noted that, even if domestic output increases due to foreign saving, this may not translate into an increase in national income if the return on capital is less than the cost of servicing the flows.

    The correlation between changes in borrowing and changes in the investment rates for 90 developing countries was 0.68, 0.05, and 0.24 for the three periods.

    See Bijan B. Aghevli and Jorge Marquez-Ruarte, A Case of Successful Adjustment: Korea's Experience During 1980-84, Occasional Paper 39 (IMF, August 1985).

    It is estimated that in Mexico about 40 to 50 percent of the debt accumulated in the early 1980s financed capital flight. To the extent that capital flight occurs through a misinvoicing of imports and exports, recorded current account deficits are larger and domestic saving is correspondingly smaller than would be the case in the absence of capital flight. For a discussion of these issues, see Mohsin S. Khan and Nadeem Ul Haque, “Foreign Borrowing and Capital Flight: A Formal Analysis,” Staff Papers (IMF), Vol. 32 (December 1985), pp. 606-28.

    For a discussion of these factors see Mica Panic and Manmohan S. Kumar, “International Interdependence and the Debt Problem,” in Structural Change, Economic Interdependence, and World Development, proceedings of the Seventh World Congress of the International Economic Association, Vol. 2, Natural and Financial Resources for Development, edited by Silvio Borner and Alwyn Taylor (New York: St. Martin's Press, 1987).

    See Vincent Koen and Steven Phillips, Price Liberalization in Russia: Behavior of Prices, Household Incomes, and Consumption During the First Year, Occasional Paper 104 (IMF, June 1993), for an examination of the evolution of prices and the effects of inflation on household incomes and consumption in Russia during 1992.

    For the interest rates quoted above, the difference would be 70 percentage points. However, the quoted rates are not compound annual rates, and the subsidy estimate is to this extent understated. 70 percentage points. However, the quoted rates are not compound annual rates, and the subsidy estimate is to this extent understated.

    See the May 1993 World Economic Outlook, Box 7, pp. 66-67, for details on currency arrangements in the former Soviet Union.

    However, on July 24, 1993, the Central Bank of Russia announced that pre-1993 ruble banknotes would no longer be legal tender after July 26, 1993. The initial terms of this demonetization entailed a significant element of confiscation, but these terms were significantly relaxed subsequently.

    For a description of the STF, see the May 1993 World Economic Outlook, Box 8, p. 68.

    Outside the former Soviet Union, the Slovak Republic has made a drawing under the STF. Albania and Mongolia are eligible to draw under the STF, but have instead requested ESAF arrangements.

    Self-privatization refers to the seizure of the assets of stateowned enterprises, often by managers, without formal approval of the authorities.

    See “Voucher Privatization in the Czech and Slovak Federal Republic,” Box 2 in the October 1992 World Economic Outlook.

    Another factor, however, is that monopolies have frequently, but incorrectly, been blamed for inflation, particularly in the former Soviet Union. It has therefore been common to attempt to control apparent abuses of monopoly power by price and profit controls, but such measures tend to distort incentives and to hinder economic transition.

    Annex I Structural Budget Indicators for the Major Industrial Countries

    Since the early 1980s, the major industrial countries have increasingly adopted medium-term fiscal strategies to consolidate their public finances. The May 1992 World Economic Outlook reviewed progress in achieving medium-term fiscal objectives, as well as slippages and setbacks, and identified fiscal consolidation as a key policy challenge.1 Since then, the need to reduce fiscal deficits has become even more urgent. On an analytical level, the need to assess and monitor fiscal policies in a medium-term context has led to a thorough reexamination of fiscal indicators.2 In the context of the World Economic Outlook, the fiscal impulse measure has traditionally been used as the main tool to gauge the stance of fiscal policy, although it focuses on the short-term impact of fiscal policy on aggregate demand.3 To assess the medium-term stance of fiscal policies, it is necessary to focus on indicators of structural budget positions—broadly defined as the budget balance adjusted for the effects of the business cycle.

    Fiscal Trends and the Concept of the Structural Budget Balance

    At the end of the 1970s, significant increases in government expenditures led to a widening of fiscal imbalances as a percent of GDP in all of the major industrial countries (Chart 35). In most of the major industrial countries, revenue and expenditure ratios varied substantially during the 1980s, although there was a clear trend toward fiscal surplus in Japan and, until 1989, in Germany and the United Kingdom. Real interest rates on public debt increased sharply relative to real growth in the early 1980s, raising the prospect of “snowballing” publie debt-GDP ratios (see Box 4). In response to this, many countries undertook to consolidate fiscal positions and to reorient fiscal policies toward mediumterm objectives.

    Chart 35.Major Industrial Countries: General Government Fiscal Developments1

    (In percent of GDP)

    1 Blue shaded areas indicate staff projections.

    To assess medium-term fiscal strategies, it is necessary to determine the extent to which the changes in budget balances reflect structural factors, in particular discretionary fiscal policy actions, rather than cyclical factors. This distinction is important because movements of the budget balance attributable to the business cycle are essentially selfcorrecting, but increases in deficits owing to structural factors can be offset only through discretionary measures. Removing the self-correcting cyclical component from the observed budget balance, therefore, provides a more accurate indication of medium-term fiscal positions.

    Movements in the structural components of revenues and expenditures are often interpreted as broadly indicative of discretionary fiscal policy measures. As conventionally defined, however, these movements also reflect factors not directly related either to discretionary fiscal policy measures or to the business cycle. On the revenue side, these would include changes in natural resource revenues, nonneutralities of the tax system with respect to inflation, and changes in the composition of the economy's tax base induced by growth. On the expenditure side, they include changes in interest rates, changes in the demographic composition of the population, and contingencies that lead to nondiscretionary expenditures. No effort is made here to distinguish the truly discretionary components of the structural deficit from these other factors.

    Measures of the structural budget balances have their historical roots in the “full-employment deficit,” which has traditionally been used as a yardstick to judge the adequacy of fiscal policy in supporting aggregate demand. Calculations of structural budget balances are typically based on one of two alternative approaches.4 The first approach yields direct estimates of the level of the structural budget balance (5*), using budget elasticities to adjust revenues (T) and expenditures (G) for movements in the cyclical output gap (GAP):

    where eR and eG are the elasticities of revenue and expenditure with respect to output. Expressing the level of the structural balance in percent of potential output gives the structural budget balance. The cyclical budget balance can then be estimated as the difference between the observed and the structural budget balance.5

    In the alternative approach used here, the cyclical revenue and expenditure components can be expressed as ratios to GDP and directly estimated using parameters that describe the cyclical response of revenue and expenditure to movements in the cyclical output gap. The budget balance as a percent of GDP (b) is defined as the difference between the observed revenue-GDP ratio (t) and expenditure-GDP ratio (g):

    Decomposing the revenue and expenditure ratios into cyclical and structural components yields

    where the asterisk (*) indicates structural budget components and the superscript (c) denotes cyclical budget components. The difference between the cyclical revenue and expenditure components is the impact of cyclical effects on the budget balance:

    where αR and aG denote the cyclical response of the revenue and expenditure ratios to an increase of 1 percentage point in the cyclical output gap. The overall effect of the business cycle on the budget is given by the difference of the two cyclical response parameters (aRaG). The structural budget balance is the difference between the observed and the cyclical budget balances.

    Although the two approaches to calculating structural budget balances are equivalent,6 there are advantages to presenting the estimates as ratios to GDP. The sensitivity of structural budget balance estimates to changes in assumptions about the cyclical output gap and the cyclical responsiveness of the budget is more easily evaluated. Moreover, the cyclical budget response parameters are comparable across countries, whereas the budget elasticities would have to be weighted by the country-specific revenue and expenditure ratios to make them comparable.

    Although movements in the structural budget balance are indicative of the orientation of fiscal policy, they should not be used to gauge the effects of fiscal policy on the economy. They do not include the effect of automatic stabilizers on aggregate demand—for example, the potentially different aggregate demand effects (multipliers) of individual expenditure and revenue components are not captured; the effects of fiscal policy on long-term interest rates are neglected; and the distortions of tax and transfer programs on the supply side of the economy are not taken into account.7

    Estimates of Structural Budget Balances

    A key aspect of the cyclical adjustment is the estimate of potential output, which is defined as the maximum sustainable level of economic activity that is consistent with stable inflation. For each major industrial country, a production-function approach has been used to link output to capital and labor inputs and to total factor productivity. Potential is the level of output that is consistent with normal capital utilization and with the “natural” rate of unemployment—the rate consistent with stable nominal wage growth. These, in turn, are estimated by removing cyclical variations in labor market participation rates, total factor productivity, and unemployment. Recent work has also focused on explaining movements in total factor productivity in terms of underlying economic factors, such as public infrastructure investment, expenditure on research and development, and international trade.8 The growth of potential output is estimated to have slowed in all of the major industrial countries during the 1970s to the mid-1980s, and it is expected to remain broadly stable in the period to 1998 (Table 22). The output gaps (the difference between actual and potential output, in percent of potential) turned sharply negative in all countries as economic activity slowed in the early 1990s, but they are expected to close gradually in the years ahead.

    Table 22.Major Industrial Countries: Potential Output Growth1(Average annual percent change)
    1971-791980-891990-941995-98
    Major industrial countries3.12.62.82.5
    United States2.62.42.32.3
    Japan4.84.03.83.0
    Germany22.82.02.82.5
    France3.92.22.52.5
    Italy3.82.72.12.3
    United Kingdom1.92.22.32.1
    Canada4.42.83.02.9

    Staff estimates.

    Western Germany before 1990.

    In most major industrial countries, the estimates of the cyclical output gaps move with the ratios of the general government balance to GDP, indicating the extent to which the business cycle has influenced public finances in the short term. However, the medium-term movements in budget balances are, by construction, unrelated to the business cycle.

    The cyclical adjustment of general government revenues draws in part on revenue elasticities estimated by the OECD, and in part on IMF staff estimates (Table 23).9 The elasticities are available at a disaggregated level for personal income taxes, corporate income taxes, indirect taxes, social security contributions, and other revenues. Aggregate revenue elasticities are formed as a weighted average of the five disaggregated revenue component elasticities by using the average share of the revenue component in total revenue during the 1980s as weights. For corporate income taxes, a partial collection lag of one year is assumed for the United States, France, Italy, the United Kingdom, and Canada. General government expenditures excluding unemployment benefits are assumed to be independent of cyclical output movements. Unemployment benefit payments are adjusted in proportion to the gap between the actual and the structural rate of unemployment, which is estimated in the context of calculations of the output gap as described above.

    Table 23.Major Industrial Countries: Revenue Elasticities and Lags in Corporate Tax Collection1
    Corporate TaxIndividual TaxSocial SecurityIndirect TaxOther TaxesWeighted ElasticityCorporate Tax Lag2
    United Stales
    OECD2.50.90.31.00.4
    IMF2.50.90.31.01.00.900.4
    Japan
    OECD3.71.20.50.51.0
    IMF1.351.01.00.951.01.0751.0
    Germany
    OECD2.51.40.50.8l.0
    IMF2.51.40.70.81.00.911.0
    France
    OECD3.01.20.50.90.7
    IMF1.61.40.50.61.00.880.7
    Italy
    OECD2.90.80.40.80.7
    IMF2.51.01.00.81.01.040.7
    United Kingdom
    OECD3.41.00.50.70.3
    IMF3.11.10.50.71.01.080.2
    Canada
    OECD2.41.40.60.80.7
    IMF2.41.40.60.81.01.120.7

    OECD figures are from Jean-Claude Chouraqui, Robert P. Hagemann, and Nicola Sartor, “Indicators of Fiscal Policy: A Reexamination,” OECD Economics and Statistics Department Working Paper No. 78 (Paris, April 1990).

    A lag of 1.0 indicates that 100 percent of revenues for the tax liabilities in a year are collected in that year. A lag of 0.7 indicates that 70 percent of the revenues are collected in that year and that the remaining 30 percent are collected in the following year.

    The cyclical response parameters that have been derived on the basis of these elasticities are shown in Table 24. The cyclical responsiveness of general government budget balances is relatively low in the United States and Japan—a 1 percentage point increase in the output gap raises the balance-GDP ratio by about 0.40 percentage point. The cyclical responsiveness of budget balances in the major European countries and in Canada is higher, ranging from about 0.50 to 0.60 percentage point. Except for the United Kingdom, the partial collection lag for corporate income taxes and, therefore, the lagged cyclical effect are small.

    Table 24.Major Industrial Countries: Cyclical Responsiveness of General Government Budget1
    CurrentLaggeuTotal
    Major industrial countries0.390.030.42
    United Stales0.320.040.36
    Japan0.370.37
    Germany0.560.56
    France0.440.040.48
    Italy0.490.49
    United Kingdom0.400.100.50
    Canada0.580.020.60

    Percentage point change in the ratio of fiscal balance to GDP for a 1 percentage point change in the output gap.

    Estimates of structural budget balances—which incorporate both the effects of the cycle on revenues, as measured by the cyclical responsiveness parameters, and the adjustment for unemployment benefits—show that fiscal consolidation efforts in the major industrial countries over the course of the 1980s met with different degrees of success (Table 25). In Japan, expenditure restraint coupled with a sharp structural increase in the revenue-GDP ratio accounted for an improvement in the structural balance of about 7 percent of GDP between 1978 and 1992. Despite the very different deficit experiences of Japan and Italy, observed and structural general government budget balances moved closely together over the 1980s in both countries, reflecting relatively small cyclical output gaps. In Germany and the United Kingdom, consolidation efforts at the beginning of the 1980s were mainly based on expenditure restraint, with both countries registering significant improvements in their structural positions. These gains, however, were not preserved. Because of the large fiscal costs of German unification, the actual and structural fiscal positions deteriorated sharply in 1990-92. For the United Kingdom, the structural fiscal position began to deteriorate well before the actual budget balance moved sharply into deficit. After significant consolidation gains in the second half of the 1980s, the structural balance in France worsened at the beginning of the 1990s, and a further sharp deterioration is projected for 1993. In the United States, the structural estimates indicate a relatively steady erosion of the fiscal position. In Canada, after a sharp deterioration in the first half of the 1980s, the structural deficit has been reduced substantially since 1985.

    Table 25.Major Industrial Countries: General Government Structural Budget Balances, Actual Budget Balances, and Output Gaps1(In percent of GDP)
    1982-83198519891990199119921993199419951998
    United States
    Structural balance-2.6-3.7-2.8-3.3-3.1-4.0-3.9-2.9-2.3-2.2
    Output gap-3.31.73.51.8-1.2-1.0-0.7-0.6-0.4-0.4
    Actual balance-3.8-3.1-1.5-2.5-3.4-4.4-4.1-3.0-2.4-2.2
    Japan
    Structural balance-3.4-1.02.22.42.62.01.71.82.5
    Output gap-0.40.81.11.51.0-1.5-4.6-5.5-5.6-1.3
    Actual balance-3.6-0.82.52.93.01.5-0.30.4-0.5
    Memorandum
    Structural balance excluding social insurance-6.1-4.1-1.1-1.1-1.1-1.8—2.2-2.0-1.0-2.0
    Actual balance excluding social insurance-6.3-3.9-0.7-0.6-0.8-2.3-3.8-3.9-2.6-2.4
    Germany2
    Structural balance-1.00.2-3.0-4.7-3.6-3.1-1.1-0.9-1.4
    Output gap-3.3-1.80.11.92.71.6-2.7-3.6-3.3-1.4
    Actual balance-3.0-1.20.1-1.9-3.1-2.7-4.8-3.5-3.0-2.3
    France
    Structural balance-2.9-1.9-2.2-2.5-2.3-3.4-3.8-3.0-2.5-1.8
    Output gap-0.3-1.72.22.20.4-0.7-4.0-5.3-4.0-1.6
    Actual balance-3.0-2.9-1.3-1.5-2.1-3.9-6.0-5.9-4.7-2.7
    Italy
    Structural balance-9.8-11.8-10.6-11.5-10.2-8.8-8.2-6.9-5.8-4.1
    Output gap-2.5-1.50.2-0.9-2.1-3.7-4.0-3.8-2.8
    Actual balance-11.0-12.5-10.5-11.5-10.7-10.0-10.3-9.2-8.0-5.6
    United Kingdom
    Structural balance-1.3-2.0-1.5-3.2-2.3-3.8-5.7-5.0-4.0-3.2
    Output gap-2.9-1.04.52.5-2.1-5.0-5.3-4.7-3.6-1.8
    Actual balance-2.9-2.90.9-1.3-2.7-6.2-8.6-7.4-5.8-3.9
    Canada
    Structural balance-3.9-7.1-5.6-5.1-4.3-3.2-3.5-2.9-2.6-1.9
    Output gap-4.01.45.01.5-3.0-5.0-5.2-4.4-3.1-0.4
    Actual balance-6.4-6.8-2.9-4.1-6.3-6.6-7.0-5.8-4.6-2.1

    The structural budget balance is the budgetary position that would be observed if the level of actual output coincided with potential output. Changes in the structural budget balance consequently include effects of temporary fiscal measures, the impact of fluctuations in interest rates and debt-service costs, and other noncyclical fluctuations in the budget balance. The computations of structural budget balances are based on staff estimates of potential GDP and revenue and expenditure elasticities (see the text). Structural balances are expressed as a percent of potential output, and the output gap is defined as actual output minus potential output, as a percent of potential output.

    Data for Germany before 1990 refer to west Germany.

    Annex II Economic Benefits of Reducing Military Expenditure

    Recent changes in the world political situation, particularly with respect to the former Soviet Union, have had profound effects on the global economy. One area where this is particularly true is military expenditure. The World Economic Outlook has recently started to collect data on such expenditure, which indicate that military spending relative to output has fallen by almost one quarter between 1986 and 1992. Furthermore, this fall has been very generalized, involving almost all regions of the world. After a preliminary note about data on military expenditure, the first part of this annex discusses past trends and staff projections.

    The second part of the annex uses MULTIMOD, the IMF's world macroeconometric model, to illustrate the economic impact of military expenditure, looking at both the short-term impact on activity and the longer-run economic welfare benefits that accrue from lower military spending. Although the primary impact of military expenditure is on national security rather than on the economy, this annex focuses only on the economic impact.1 A change in the allocation of resources to the military has important indirect economic effects, and identifying the economic consequences provides an important input for overall policy decision making.

    There are many factors—such as the impact of changing the composition of government spending—that are not considered in the relatively simple macroeconomic approach adopted here. Nevertheless, the results provide several insights into the economic effects of reductions in military expenditure, as well as an illustration of the potential economic welfare gains. Cutting military spending by 20 percent worldwide could produce a long-run increase in private consumption and in investment of around 1 percent and 2 percent, respectively. These gains, in turn, produce the major share of the rise in economic welfare, which is estimated to have a present value of almost $10 trillion in 1992 dollars (around 45 percent of 1992 world GDP). Those countries that implement the largest cuts have the largest long-term gains in consumption and investment, as well as the largest shortterm losses in output. Relative to the size of the spending cuts, net debtor developing countries gain somewhat more than industrial countries, since the benefits from lower world interest rates and increased demand for their exports are larger. Among the developing country regions analyzed below, Africa has the largest economic welfare gains.

    An important implication of this analysis is that military expenditure cuts in any one country produce significant positive externalities for the rest of the world, both through lower interest rates and changes in real exchange rates. As a result, the distribution of the economic benefits is considerably more even than the distribution of the cuts. This implies that there are economic, as well as security, reasons for coordinating military expenditure cutbacks.

    Trends and Prospects

    Since the mid-1980s, the proportion of output that is estimated to have been devoted to military spending has fallen by almost one-fourth, from nearly 4 percent in 1986 to around 3 percent in 1992.2 As a result, total world military expenditure amounted to $661 billion in 1992, compared with $832 billion if the total had been the same size relative to GDP as it was in 1986. This reduction in military spending has been very general, with almost all regions having significantly decreased their ratio of military expenditure to GDP.3

    In the industrial countries, part of this fall in the ratio of military expenditure to GDP reflects a reversal of the buildup of military spending in the early half of the 1980s (Chart 36). This trend is particularly true of the United States, which accounts for over half of all industrial country military expenditure, reflecting both its economic size and that it has the highest ratio of military spending to GDP among the major industrial countries (Table 26). By contrast, the second-largest economy in the world, Japan, has the lowest ratio of military spending to GDP and has shown little change in the ratio of military spending to GDP since 1980. The EC and other industrial country groups, which represent something of a midpoint between these two extremes in terms of percent of output devoted to military spending, had little or no military buildup in the first half of the 1980s but nevertheless show a significant downsizing in the period since 1986.

    Chart 36.Trends in Military Spending1

    (In percent of GDP)

    1 Blue shaded area indicates staff projections.

    Table 26.World Military Spending(In percent of GDP)
    1980198619921998
    World (excluding countries of the former Soviet Union)3.5 (4.0)3.9(4.2)3.12.3
    Industrial countries3.6(3.6)4.1 (4.1)3.32.3
    United States5.3(5.4)6.5 (6.6)5.33.2
    EC3.0(3.4)3.0(3.3)2.41.8
    Japan0.8(0.9)0.9(1.0)0.90.9
    Other industrial countries2.0(2.1)2.1(2.2)2.01.8
    Developing countries3.3 (5,2)3.4 (4.8)2.62.3
    Africa3.1 (3.2)2.7(3.4)2.32.2
    Asia3.1 (6.0)3.0(4.4)2.42.1
    Middle East and Europe8.5(9.6)10.5 (9.5)7.25.5
    Western Hemisphere1.1(2.6)1.0(2.2)1.11.1
    Countries in transition (excluding countries of the former Soviet Union)4.1 14.1)4.2 (4.0)3.82.9
    Source: Staff estimates; external estimates in parentheses.

    Developing countries and countries in transition show a pattern similar to that of the EC and other industrial countries: little change in military expenditure as a ratio to output in the early 1980s, followed by a significant fall. The World Economic Outlook estimates imply that military expenditure, which is estimated to have amounted to $110 billion in developing countries in 1992, would have been $144 billion if their share in relation to GDP had remained at its 1986 level. Other estimates indicate higher levels of military expenditure for developing countries, although the general trends are similar.4 As mentioned earlier, such differences underline the uncertainties inherent in any empirical analysis of military spending (Box 10).

    There are significant differences in the proportion of output devoted to defense among different developing country regions (Chart 37). At 7¼ percent of GDP in 1992, the Middle East and Europe region is estimated to have had by far the highest ratio of military spending to output among developing countries, followed by the countries in transition, where military spending amounted to 3¾ percent of GDP.5 At the opposite end of the spectrum, the Western Hemisphere region had a ratio of military spending to GDP of only 1 percent; Asia and Africa were both below the world average, with ratios of around 274 percent. The spending of small lowincome economies (4 percent of GDP) was significantly higher than the average for developing countries and for the world as a whole.

    Chart 37.Regional Trends in Military Spending1

    (In percent of GDP)

    1 Blue shaded areas indicate staff projections.

    Box 10.Military Spending Data

    Because military spending is politically sensitive, it is one of the most difficult areas of government expenditure for which to collect reliable data. An important external source, extensively used in several studies, is the Stockholm International Peace Research Institute (SIPRI), although the data do not conform to standard national accounts conventions. SIPRI makes some adjustments to the basic ministry of defense statistics for different countries to take account of factors such as expenditures that are hidden in other ministries' budgets or are off-budget, although the accuracy of these adjustments is unknown.

    Recently, the World Economic Outlook data base has been expanded to include data on military expenditure, which are currently available for 84 countries. The estimates may not include all the adjustments in the SIPRI numbers; hence the World Economic Outlook estimates of military spending in developing countries are somewhat lower than other estimates largely based on SIPRI numbers (see Table 26), highlighting the difficulties in obtaining consistent estimates of military spending across countries. However, the SIPRI and World Economic Outlook estimates have very similar trends, which is reassuring given the uncertainties surrounding the absolute values. Data on military spending are also published annually in the IMF's Government Finance Statistics Yearbook. The 1992 issue contains up-to-date data for approximately 70 countries. The World Economic Outlook estimates have two major advantages compared with other sources: they are more current, and they include annual projections of military spending to 1998.

    There are also significant differences in the ratio of military spending to output within these regions. These differences are most pronounced in Africa, where countries such as Ghana, Mauritius, and Nigeria have military spending ratios below 1 percent of GDP, but several other countries are estimated to spend more than 4 percent of GDP on the military. Cross-country differences in military spending are also important in Asia, where several countries have military spending ratios of below Vh percent of GDP. There is more uniformity in military spending in the Middle East and Europe region, where only a few countries have ratios much below or above the average. The intraregional differences in military spending are least pronounced in the Western Hemisphere.

    Despite the diversity in spending, the fall in the ratio of military spending to output has been relatively general across developing countries, with significant declines in Africa, Asia, and the Middle East and Europe. Several factors may have contributed to the cutback in military spending since 1986.6 Financial factors are found to have a significant impact on military spending, making it likely that the poor growth performance in many developing countries during the 1980s and in industrial countries in the latter part of the decade contributed to the fall in the ratio of military spending to output. The type of government in power was also found to be a major influence on military expenditures, implying that the profound political changes that have occurred in many countries may be another factor in the fall in military spending. Future moves toward more democratic forms of government in developing countries could have a further restraining effect on military spending, since democratic regimes were found to spend the least on the military. Finally, the improved global security environment, and the associated fall in the level of military aid, contributed to the decline in military spending.

    The projections indicate that world military expenditure relative to GDP will continue on the downward trend started in the mid-1980s. In the industrial countries, the military spending ratio is projected to fall a further 30 percent between 1992 and 1998. The reduction is particularly large in the United States, where the ratio of military spending to output is expected to fall by 40 percent, but large declines are also projected for the EC and other industrial country groups. The projections for developing countries indicate that the proportion of output devoted to military spending will also fall, although by less than in the industrial countries. As with the decline between 1986 and 1992, it is projected to be very general across geographic regions. The region with the largest decline in military spending relative to GDP is the Middle East and Europe. Small, low-income economies are projected to decrease their military spending ratio by a percentage similar to that of developing countries as a whole.

    Economic Impact of Cuts in Military Expenditure

    The IMF's multiregional macroeconometric model, MULTIMOD, has been used to simulate the economic impact of worldwide military spending cuts.7 The main links among the industrial and developing countries in MULTIMOD are through trade, exchange rates, and interest rates.8 Three features of the model are particularly important for the results. It is a rational expectations model, which means that expectations about future behavior feed back into exchange rates, interest rates, consumption, and investment. It has a well-defined supply side that is based on a production function, so that changes in investment feed through into future potential output. Finally, the trade equations take account of the geographic distribution of trade across different economies.9

    At the same time, the limitations of the highly aggregated MULTIMOD framework should be recognized. It combines all government spending and thus limits the extent to which the model can deal with issues related to the conversion from military to civilian production. The model assumes that prices are sticky in the short run, which implies that reductions in military spending lead to temporary reductions in output and employment. However, any estimate of these adjustment costs is inherently uncertain and depends on many factors (such as the timing of the military spending cuts, the macroeconomic policy response, and the size of the government fiscal multipliers).10 In addition, no analysis is made of the distributional consequences of lower military spending for different sectors or regions of a country, an issue of economic as well as political significance. Finally, the aggregate production functions take no account of the fact that some capital currently used in the production of military output may not be convertible to civilian production.11

    Before discussing the simulation results, it is important to consider the nature of the economic costs and benefits from cutting military spending.12 Although real GDP is a useful indicator of the shortrun impact of military spending cuts on activity and unemployment, it is not a good measure of the economic benefits of military spending cuts. The appropriate measure of the economic benefits from curtailing military spending is the rise in nonmilitary consumption over time. The total cost of a cut in military spending includes any decrease in security induced by lower military spending; however, this security loss is difficult—or impossible—to measure, particularly for the type of coordinated military spending cuts considered in these simulations. For this reason the analysis focuses on the economic benefits from military spending cuts, while acknowledging that these benefits should be weighed against any impact on national security.

    All countries are assumed to simultaneously carry out a 20 percent reduction in military expenditures in equal increments over five years, a reduction broadly comparable to the decline already incorporated in the medium-term projections. Each nation is also assumed to lower its military aid, military imports, and military exports by the same amount, so that the cut can be thought of as a phased reduction in all types of military spending. To illustrate the benefits of military downsizing for a given fiscal policy, the cuts in government consumption were assumed to be accompanied by tax cuts of a sufficient magnitude so as to leave the government deficit unchanged. The monetary base was assumed to remain the same as in the baseline in most industrial countries. The results from a basic simulation (Table 27) are discussed in detail below. The impact of alternative assumptions—such as implementing the spending cuts immediately rather than gradually, or assuming that part of the spending cuts represents a fall in investment rather than consumption—is also discussed.

    Table 27.Impact of a 20 Percent Cut in Worldwide Military Spending(In billions of 1992 dollars)
    Government
    Consumption
    Private
    Consumption
    Private
    Investment
    GDP
    Industrial countries1
    Year 1-26.5 (-0.7)3.7 (-)17.2 (0.5)-6.2 (-)
    Year 6-150.0 (-3.9)109.1 (0.9)76.6 (1.8)34.8 (0.2)
    Year 11-169.7 (-3.9)143.9 (1.0)82.6 (1.8)59.6 (0.3)
    United States
    Year 1-15.3 (-1.3)0.7 (-)4.2 (0.4)-3.1 (-)
    Year 6-87.7 (-7.1)50.4 (1.0)23.4 (1.9)9.6 (0.1)
    Year 11-98.8 (-7.1)67.0 (1.2)27.3 (2.1)22.5 (0.3)
    Japan
    Year 1-1.7 (-0.2)1.2 (0.1)4.5 (0.5)-0.4 (-)
    Year 6-8.5 (1.3)13.6 (0.5)13.3 (1.2)7.2 (0.1)
    Year 11-10.3 (-1.3)18.3 (0.6)15.0 (1.3)11.5 (0.2)
    Net debtor developing countries2
    Year1-4.2 (-1.1)1.7 (0.1)2.8 (0.4)0.6 (-)
    Year 6-24.2 (-5.5)15.2 (0.6)15.8 (2.1)6.9 (0.2)
    Year 11-27.2 (-5.5)23.0 (0.8)18.6 (2.1)11.9 (0.2)
    Western Hemisphere
    Year 1-0.7 (-0.7)0.6 (0.1)0.9 (0.5)0.1 (-)
    Year 6-4.2 (-3.4)4.3 (0.8)4.4 (2.0)2.1 (0.2)
    Year 11-4.7 (-3.4)6.4 (0.8)4.7 (1.9)3.9 (0.3)
    Africa
    Year 1-0.6 (-0.8)0.3 (0.1)0.5 (0.6)0.10
    Year 6-3.5 (4.2)2.4 (0.8)2.5 (2.5)1.3 (0.2)
    Year 11-3.8 (-4.2)3.4 (1.0)2.9 (2.5)2.0 (0.3)
    Other developing countries
    Year 1-2.8 (-1.4)0.8 (0.1)1.4 (0.3)0.6 (-)
    Year 6-16.5 (-7.1)8.5 (0.8)9.0 (2.0)3.5 (0.2)
    Year 11-18.7 (-7.1)13.2 (0.9)10.9 (2.2)6.0 (0.3)
    Source: Tamim Bayoumi, Daniel Hewitt, and Steven Symansky, “The Impact of Worldwide Military Spending Cuts on Developing Countries,” IMF Working Paper (1993, forthcoming).Note: Figures in parentheses represent percent deviations from baseline.

    Including four newly industrializing Asian economies (NIEs).

    Excluding NIEs.

    Like any reduction in government spending, the initial impact of the cut in military spending on the industrial countries13 is to reduce the rate of growth of GDP. The short-term fall in aggregate demand reflects the reduction in government spending, which outweighs the higher demand associated with the tax cuts. Lower government spending, however, leads to lower interest rates and allows governments to decrease taxes. Lower taxes and reduced interest rates raise private sector spending on investment and consumption, which reverses the initial decline in output, and GDP rises significantly above the baseline in the medium term and long run.

    First-year military spending cuts of $27 billion reduce GDP by $6 billion in the simulation, reflecting an increase in private consumption and private investment of $4 billion and $17 billion, respectively.14 The relatively small initial output loss reflects the gradual nature of the military spending cuts. Given that agents are forward looking, private sector expenditures are stimulated both by current reductions in government spending and by anticipated future reductions, which lower future taxes and interest rates, thereby raising current wealth. Because the cuts are phased in over several years, the short-run stimulus is relatively large in comparison with the initial expenditure cuts, and the shortterm losses to GDP are correspondingly smaller.15

    By the second year of the simulation, the output loss is reversed as private spending continues to grow, and by the sixth year of the simulation, when the decreases in military spending have ceased, the economic performance of the industrial countries is considerably improved. By the end of the eleventh year, GDP, consumption, and investment are $60 billion (0.3 percent), $144 billion (1 percent), and $83 billion (almost 2 percent) above baseline, respectively, and military spending is $170 billion lower. The present value of the gain in economic welfare (using a 4 percent discount rate) is estimated to sum to $8.1 trillion, or 45 percent of 1992 GDP, compared with military spending cuts with a present value of $6.5 trillion, or 36 percent of 1992 GDP (Table 28).16

    Table 28.Present Value of Costs and Benefits of Reducing Military Spending in 19921
    In Billions of 1992 U.S. DollarsIn Percent of 1992 GDP
    First
    ten years
    Beyond
    ten years
    TotalFirst ten
    years
    Beyond
    ten years
    Total
    Industrial countries2
    Nonmilitary consumption701.27,355.08,056.23.940.744.6
    Military spending-982.3-5,512.8-6,495.1-5.4-30.5-36.0
    United States
    Nonmilitary consumption322.63,063.23,385.75.148.954.0
    Military spending-572.9-3,210.1-3,783.1-9.1-51.2-60.4
    Japan
    Nonmilitary consumption90.61,079.11,169.72.428.731.1
    Military spending-58.2-333.1-391.3-1.5-8.9-10.4
    Net debtor developing countries3
    Nonmilitary consumption100.01,351.51,451.53.243.046.2
    Military spending-158.6-883.9-1,042.5-5.0-28.1-33.2
    Western Hemisphere
    Nonmilitary consumption28.5362.0390.42.937.340.2
    Military spending-27.6-152.7-180.3-2.8-15.7-18.6
    Africa
    Non military consumption15.6204.0219.63.546.249.7
    Military spending-22.4-124.5-147.0-5.1-28.2-33.3
    Other developing countries
    Nonmilitary consumption56.0785.5841.53.245.448.6
    Military spending-108.6-606.7-715.2-6.3-35.1-41.3
    Source: Bayoumi, Hewitt, Symansky, “The Impact of Worldwide Military Spending Cuts on Developing Countries.”

    The discount rate used in the present value calculations is 4 percent.

    Including NIEs.

    Excluding NIEs.

    Results are also shown separately for the United States and Japan. During 1987-89 (the baseline period for the simulations), military spending in the United States represented 6 percent of GDP, the largest ratio in the industrial countries.17 As might be expected, the short-term impact of this relatively large cut in military spending—1¼ percent of GDP after five years—is to reduce GDP below the baseline for several years. These losses in output are, however, relatively small; over the first five years the cumulative loss in real GDP is some $7 billion (less than 0.03 percent of GDP) compared with cumulative expenditure cuts of almost $250 billion. After eleven years, private consumption and private investment rise by 1¼ percent and 2 percent respectively—somewhat higher than in the industrial countries as a group.

    In Japan, military expenditures represent approximately 1 percent of GDP, the smallest ratio among the major industrial countries. Because of Japan’s relatively low military expenditures in proportion to GDP, two very different results occur. First, the initial fall in output is short lived and mild in comparison with that in the United States; by the second year, real GDP is already above the baseline and continues to increase thereafter. Second, the long-run gains relative to GDP are somewhat smaller in Japan than in the United States. By the eleventh year, real consumption and real investment rise by ½ of 1 percent and 1¼ percent respectively.

    Although the gains in Japan are smaller than in the United States, the difference is smaller than might be expected given the difference in military spending. The reason for these relatively favorable effects in Japan is that global cuts in military spending create a positive international economic externality: the economic benefits to all countries are greater in the case of a coordinated reduction in military expenditure than in the case of a unilateral reduction. The externality results from lower world interest rates and from increased volumes of international trade caused by the fact that military spending has a lower trade component than the private sector spending that replaces it. Therefore, cross-country differences in welfare gains are smaller than the differences in the underlying cuts.

    The welfare calculations illustrate this point (Table 28). At $3½trillion, the present value of the gain in economic welfare in the United States is 54 percent of 1992 GDP, a significantly higher ratio to output than the 31 percent of GDP ($1¼ trillion) of Japan. However, these differences are considerably smaller than the differential in military spending cuts. The United States experiences military spending cuts with a present value of 60 percent of 1992 GDP, whereas those in Japan total only 10 percent of 1992 GDP.

    The impact of this externality can also be seen in the results for net debtor developing countries (excluding the NIEs). For this group, the simulation indicates that the response of private consumption and investment is strong enough to offset the contraction in government consumption, so that GDP does not fall even in the short run. As with industrial countries, however, the short-run effects on output and spending are mostly small. The effects are more strongly felt in the medium term; government consumption shows a sharp decrease over this period, and private consumption and investment, along with GDP, show a sharp increase. The eventual increase in GDP, eleven years after the cut in military expenditures, is $12 billion ¼ of 1 percent), whereas private consumption and investment are higher by $23 billion (¾ of 1 percent) and $18.6 billion (2 percent), respectively.

    The present value of the welfare gain is 46 percent of 1992 GDP ($1½ trillion). As a ratio to GDP, these gains are marginally higher than those for the industrial countries, compared with military spending cuts having a present value of 33 percent of 1992 GDP (slightly lower than in the industrial countries). These effects reflect several factors. Lower government spending abroad reduces world interest rates and hence reduces interest payments on foreign debt, whereas the replacement of military spending (which is largely on domestic goods and services) with more import-intensive private consumption and investment boosts world trade and raises commodity prices. These international factors tend to improve the external position of the developing countries, allowing them to invest more.18

    The results for individual developing country regions illustrate the effect of the size of the relative cuts and the impact of trade patterns on the level and pattern of benefits from decreasing military expenditure. The Western Hemisphere region experiences the smallest cut in military spending. At the same time, its trade relations are predominantly with the United States, which implements the largest cut in military spending among the major industrial countries, and hence has the largest increase in its demand for imports, many of which are from the developing countries in the Western Hemisphere. As a result, the region experiences welfare gains of 40 percent of 1992 GDP—over twice the present value of the military spending cuts of 19 percent of 1992 GDP. The cuts in military spending in Africa are larger than those in the Western Hemisphere when measured in relation to GDP, although smaller in absolute terms. Because Africa’s trade is heavily oriented toward Europe, where military spending in relation to output is lower than in the United States, the boost to exports from cuts in foreign military spending is smaller than for the Western Hemisphere, although Africa does gain significantly from the rise in commodity prices. At 50 percent of 1992 GDP, the welfare gains are the highest of any developing country region and come from military spending cuts of 33 percent of 1992 GDP. The other developing countries, taken as a region, implement the largest cut in military spending. The gains to consumption and investment are, however, relatively modest. This reflects the regional pattern of trade. Unlike Africa and the Western Hemisphere, which export and import to different areas of the world in roughly equal proportions, other developing countries are net importers from Japan and net exporters to the United States. The military spending cuts in the industrial countries lead to a depreciation of the dollar and to an appreciation of the yen. This loss in the terms of trade for the other developing countries leads to a diversion of domestic output into exports. As a result, the welfare gain is only 49 percent of 1992 GDP, compared with military spending cuts of 41 percent.

    Military expenditures in net creditor developing countries, primarily oil exporters, are relatively high: 7 percent of GDP. Because a large portion of military expenditure is imported, costs of conversion would be low, since nonmilitary imports can easily be substituted for military ones. As a result, cuts in military spending are immediately replaced by higher private consumption and investment. For these countries, the reduction in military spending of about 1½ percent of GDP is replaced approximately one-for-one by consumption and investment. The present value of this rise in private sector expenditure is 80 percent of 1992 GDP ($569 billion), reflecting the high level of initial military expenditure.

    The sensitivity of the simulation results has been examined by running alternative scenarios involving faster implementation of the military spending cuts; failure of the private sector to anticipate spending cuts in the future; less forward-looking consumption and investment; and the assumption that part of the military spending cuts represents a reduction in productive government investment.19 The first three of these variations, which affect the short-term response of demand, tend to make the short-term reductions in GDP larger than in the base case, but they have little effect on the long-run equilibrium and, hence, on the welfare calculations. In contrast, if part of the cut in military spending is considered to be investment, the welfare gains are reduced appreciably, but the short-run response is essentially unaffected.

    Annex III Medium-Term Projections

    The medium-term projections in the World Economic Outlook are conditional on several technical assumptions and are therefore not necessarily forecasts of the most likely outcomes. These assumptions include unchanged fiscal policy, except for measures already announced and likely to be implemented; unchanged monetary policy (generally interpreted as nonaccommodating, with shortterm interest rates moving in response to changes in inflationary pressures and cyclical conditions); constant real effective exchange rates, except for bilateral rates in the ERM, which are assumed to be constant in nominal terms; and specific assumptions about commodity and oil prices.1

    For the developing countries, two scenarios are considered. The baseline scenario assumes that the economic policies underlying IMF-supported adjustment and reform programs will be fully implemented. This is, of course, an optimistic assumption—although the strong performance of many developing countries in recent years clearly suggests that such an assumption is not unrealistic. Nevertheless, in view of earlier experiences, an alternative scenario has also been included that illustrates the implications of possible policy slippages.

    Baseline Scenario for Industrial Countries

    Real GDP growth in the industrial countries as a group is projected to recover gradually over the next five years, rising from only1¼ percent in 1993 to an average of 3 percent a year in 1995-98 (Table 29). In general, growth is expected to pick up most in those countries that are now near the trough of the business cycle—Japan, Germany, France, and Italy among the major industrial countries. Although this projected recovery is relatively modest, it would be sufficient to reduce gradually the margins of economic slack that have emerged in the past two years. In some countries growth may be restrained by special factors. In Germany, the strains of unification have contributed to a deterioration in international competitiveness, and in Italy the ongoing need for significant fiscal consolidation and the continuing uncertainty in financial markets are expected to weaken growth of domestic demand.

    Table 29.Industrial Countries: Indicators of Economic Performance1(Anuual percent change unless otherwise noted)
    1991199219931994Average
    1995-98
    Major industrial countries
    Real GDP0.41.81.32.33.0
    Real total domestic demand0.11.81.52.43.0
    GDP deflator4.03.02.62.62.4
    General government balance2-2.4-3.5-4.3-3.6-2.5
    Current account balance2-0.2-0.2-0.4-0.4-0.4
    United States
    Real GDP-0.72.62.72.62.4
    Real total domestic demand-1.42.93.42.72.4
    GDP deflator3.92.92.82.72.7
    General government balance2-3.4-4.4-4.1-3.0-2.3
    Current account balance2-0.1-1.1-1.8-1.9-1.9
    Japan
    Real GDP4.01.3-0.12.04.5
    Real total domestic demand2.70.60.12.85.0
    GDP deflator2.11.81.31.31.4
    General government balance23.01.5-0.3
    Current account balance22.23.23.23.02.5
    Germany
    Real GDP1.71.9-1.61.23.2
    Real total domestic demand4.52.4-1.41.32.8
    GDP deflator4.75.44.63.12.2
    General government balance2-3.2-2.8-4.8-3.5-2.8
    Current account balance2-1.2-1.3-1.7-1.5-1.2
    Fiscal balance: Territorial authorities2-4.4-3.8-5.2-4.3-3.2
    France
    Real GDP0.71.4-1.01.13.4
    Real total domestic demand0.50.4-1.10.93.1
    GDP deflator3.02.32.22.22.6
    General government balance2-2.1-3.9-6.0-5.9-3.5
    Current account balance2-0.50.20.20.30.4
    Italy
    Real GDP1.30.90.31.72.7
    Real total domestic demand1.91.0-1.51.22.7
    GDP deflator7.44.73.74.23.2
    General government balance2-10.7-10.0-10.3-9.2-6.8
    Current account balance2-1.9-2.2-1.4-1.3-0.6
    United Kingdom
    Real GDP-2.2-0.51.82.82.7
    Real total domestic demand-3.30.41.43.12.8
    GDP deflator6.54.42.03.92.8
    General government balance2-2.7-6.2-8.6-7.4-4.8
    Current account balance2-1.8-1.5-2.3-2.6-2.9
    Canada
    Real GDP-1.70.72.63.83.9
    Real total domestic demand-0.72.12.93.5
    GDP deflator2.51.10.81.51.7
    General government balance2-6.3-6.6-7.0-5.8-3.2
    Current account balance2-4.3-4.0-3.7-2.9-2.0
    Other industrial countries
    Real GDP0.80.91.73.4
    Real total domestic demand0.40.7-0.31.23.3
    GDP deflator5.13.73.03.12.7
    General government balance2-3.6-4.8-6.1-5.7-3.5
    Current account balance2-0.3-0.10.40.70.9
    Memorandum
    European Community
    Real GDP0.81.1-0.21.63.2
    Real total domestic demand1.41.2-0.71.43.1
    GDP deflator5.54.53.43.42.7
    General government balance2-4.6-5.3-6.8-6.1-4.2
    Current account balance2-1.1-0.9-0.9-0.8-0.7
    West Germany
    Real GDP4.51.6-2.20.82.7
    Real total domestic demand3.61.5-2.30.92.6
    GDP deflator3.94.43.82.82.0
    Developing countries
    Real GDP4.55.86.15.56.1
    Countries in transition
    Real GDP-12.0-15.4-10.2-1.15.2

    See the introduction to the Statistical Appendix for the technical assumptions underlying these projections.

    In percent of GDP.

    As a consequence of the subdued medium-term output growth, excess capacity will remain in output and labor markets in most countries for the next few years. Significant inflationary pressures are therefore not expected to re-emerge, and inflation is projected to fall over the medium term, particularly in Germany and Italy, or to stabilize. In contrast to the previous cycle in the 1980s, when inflation expectations remained high, the lack of inflationary pressure should permit monetary policy to support economic activity during a period when, as described in Chapter IV, the medium-term prospects of many industrial countries would be improved by sustained fiscal consolidation. Actual fiscal deficits are projected to decline significantly over the medium term, mainly because of the recovery of output. On the basis of announced plans, however, progress toward reducing underlying structural budget deficits is expected to be limited (see Chapter IV and Annex I).

    In general, current account imbalances are expected to narrow only moderately over the medium term. In the United States, the recovery of foreign demand and some fiscal consolidation are projected to broadly offset the effect of the recovery in domestic economic activity, leaving the current account deficit at about 1¾ percent of GDP. Japan’s current account surplus is expected to fall to about 2½ percent of GDP in 1995-98 as the economic recovery boosts import demand. The current account balances of the other major industrial countries, and of the smaller industrial countries as a group, are projected to fall or to stabilize in the medium term, with the exception of the United Kingdom, where the expansion of demand may widen the deficit to an average 3 percent of GDP in 1995-98.

    Baseline Scenario for Developing Countries

    In countries with IMF-supported adjustment programs, the medium-term projections assume that the policies underlying the programs will be implemented.2 More generally, many other countries have undertaken or begun to put in place significant structural reforms that are expected to raise longterm growth prospects. The assumption that these countries continue to successfully implement these reforms underpins the projections, particularly for countries in the Western Hemisphere and Africa.

    Nonfuel commodity prices are assumed to increase by 4¼ percent a year in 1995-98, and exchange rates are assumed to remain unchanged in real terms. Given projected price developments in industrial countries, these assumptions imply little change in the terms of trade of developing countries in 1995-98 (Table 30). Total financing flows to the net debtor developing countries are expected to increase in the medium term (compared with 1983-92) as recently resumed commercial bank lending continues, particularly to several Latin American countries, and as flight capital continues to return.

    Table 30.Developing Countries: Indicators of Economic Performance(Annual averages unless otherwise noted)
    1983-921993-941995-98
    All developing countries
    In percent change or percent of GDP
    Real GDP4.75.86.0
    Real GDP per capita2.53.83.9
    Consumer prices41.639.211.3
    Investment ratio25.026.227.2
    Export volume7.09.39.0
    Import volume4.99.28.5
    Terms of trade-2.4-0.5-0.1
    In billions of U.S. dollars
    Trade balance27.3-19.9-13.7
    Current account balance-37.3-82.3-92.5
    Non-debt-creating flows, net7.54.02.1
    Official transfers9.3-4.3-6.7
    Direct investment, net6.77.84.8
    Total net external credit47.463.565.2
    Memorandum
    Net official credit130.926.415.2
    Net bank credit214.620.620.7
    In percent of exports of goods and services
    Total external debt3116.3107.480.8
    Debt-service payments17.913.011.2
    Of which: Interest payments9.46.14.8
    Net debtor countries
    In percent change or percent of GDP
    Real GDP4.85.96.0
    Real GDP per capita2.73.94.1
    Consumer prices44.742.111.8
    Investment ratio25.326.227.2
    Export volume8.210.59.9
    Import volume5.510.39.1
    Terms of trade-1.7-0.2-0.1
    In billions of U.S. dollars
    Trade balance-12.5-60 3-62.2
    Current account balance-39.3-75.5-81.1
    Non-debt-creating flows, net9.04.32.4
    Official transfers6.0-6.4-5.9
    Direct investment, net11.310.15.3
    Total net external credit45.463.965.6
    Memorandum
    Net official credit129.526.817.0
    Net bank credit214.022.519.6
    In percent of exports of goods and services
    Total external debt3137.5124.491.7
    Debt-service payments21.614.712.4
    Of which: Interest payments11.46.95.4
    Countries with debt-servicing difficulties
    In percent change or percent of GDP
    Real GDP2.03.34.9
    Real GDP per capita-0.31.12.6
    Consumer prices107.7116.819.7
    Investment ratio19.519.220.4
    Export volume3.65.86.0
    Import volume-0.14.85.4
    Terms of trade-3.1-0.10.2
    In billions of U. S. dollars
    Trade balance13.3-17.3-12.9
    Current account balance-27.8-48.4-52.5
    Non-debt-creating flows, net6.22.3-1.8
    Official transfers4.4-9.2-15.2
    Direct investment, net7.58.82.6
    Tolal net external credit22.729.130.9
    Memorandum
    Net official credit119.314.37.3
    Net bank credit24.112.914.2
    In percent of exports of goods and services
    Total external debt3282.4264.6207.1
    Debt-service payments32.329.226.5
    Of which: Interest payments19.014.311.3
    Countries without debt-servicing difficulties
    In percent change or percent of GDP
    Real GDP6.97.56.7
    Real GDP per capita4.95.64.9
    Consumer prices10.510.27.4
    Investment ratio29.430.230.9
    Export volume11.012.311.2
    Import volume9.012.310.3
    Terms of trade-0.8-0.2-0.2
    In billion of U.S. dollars
    Trade balance-25.8-43.0-49.3
    Current account balance-11.4-27.1-28.6
    Non-debt-creating flows, net12.25.95.3
    Official transfers7.8-3.9-0.1
    Direct investment, net16.011.17.3
    Total net external credit22.734.834.7
    Memorandum
    Net official credit110.212.59.7
    Net bank credit29.99.65.4
    In percent of exports of goods and services
    Total external debt378.372.853.5
    Debt-service payments15.19.37.5
    Of which: Interest payments6.64.13.3

    Estimate of long-term borrowing from official creditors. See footnotes to Table A32 in the Statistical Appendix.

    Estimate of net lending from commercial banks. See footnotes to Table A32 in the Statistical Appendix.

    End-of-period, excluding liabilities to the Fund.

    On the basis of these assumptions and the medium-term projections for industrial countries, real GDP growth in the net-debtor developing countries is projected to average 6 percent a year in 1995-98. Although this would be only slightly higher than in 1993-94, the projected medium-term growth rate is considerably stronger than in 1983-92. This improvement can be traced to a marked pickup in activity in the countries that have recently experienced debt-servicing difficulties. Annual growth in this group is expected to rise to 5 percent in 1995-98, compared with only 2 percent in the ten years to 1992, because of a significant decline in external debt and debt-service payments, a sharp increase in export volumes, and a bottoming out of the decline in the terms of trade. Average inflation is projected to fall to 20 percent, and investment ratios are expected to rise by 1 percentage point compared with 1983-92 levels. In countries without debt-servicing difficulties, growth is expected to average 6¾ percent over the medium term, about the same as in 1983-92, with continuing low inflation and buoyant investment and exports.

    In Africa, growth is projected to increase to 4¾ percent in 1995-98, assuming success in structural reforms in many countries, reductions in civil strife, and a small improvement in the region’s terms of trade (Table 31). Projections for Africa are subject to higher downside risks than for other regions. A decisive improvement in prospects will require continuation of reform policies accompanied by political stability and improved governance, as well as increased financial and technical assistance. In the Middle East and Europe region, medium-term growth is expected to average 6½ percent, considerably higher than in the recent past. This assumes that oil production of countries involved in the regional conflict returns to normal levels, and that several other countries benefit from adjustment programs and significant structural reforms.

    Table 31.Net Debtor Developing Countries: Indicators of Economic Performance(Annual average unless otherwise noted)
    1983-921993-941995-98
    Africa
    In percent change or percent of GDP
    Real GDP2.12.14.7
    Real GDP per capita-0.7-0.61.9
    Consumer prices21.329.38.5
    Investment ratio21.221.222.8
    Export volume3.50.12.4
    Import volume-1.5-1.52.7
    Terms of trade-3.7-1.3-0.2
    In billions of U.S. dollars
    Trade balance5.41.40.6
    Current account balance-6.4-8.1-9.3
    Non-debt-creating flows, net6.9-1.16.0
    Official transfers9.9-3.94.5
    Direct investment, net-1.513.011.3
    Total net external credit7.48.99.5
    Memorandum
    Net official credit17.59.98.1
    Net bank credit2-0.7-2.2-0.4
    In percent of exports of goods and services
    Total external debt3226.4235.4199.7
    Debt-service payments25.130.222.2
    Interest payments10.811.57.5
    Asia4
    In percent change or percent of GDP
    Real GDP7.27.96.9
    Real GDP per capita5.36.25.1
    Consumer prices9.08.15.8
    Investment ratio30.030.831.7
    Export volume11.612.911.7
    Import volume10.013.310.9
    Terms of trade-0.4-0.2-0.3
    In billions of U.S. dollars
    Trade balance-16.8-31.0-38.7
    Cunent account balance-11.2-27.3-32.1
    Non-debt-creating flows, net13.510.06.6
    Official transfers3.31.7-6.9
    Direct investment, net17.511.58.3
    Total net external credit20.830.031.1
    Memorandum
    Net official credit19.19.27.4
    Net bank credit28.410.410.5
    In percent of exports of goods and services
    Total external debt371.166.148.3
    Debt-service payments12.37.26.0
    Interest payments5.63.42.7
    Middle East and Europe5
    In percent change or percent of GDP
    Real GDP3.64.26.5
    Real GDP per capita1.11.73.9
    Consumer prices33.833.728.6
    Investment ratio21.419.518.2
    Export volume3.416.77.7
    Import volume-1.210.65.6
    Terms of trade-2.10.70.8
    In billions of U.S. dollars
    Trade balance-21.6-21.8-18.3
    Current account balance-9.0-2.6-1.7
    Non-debt-creating flows, net3.6-9.8-22.8
    Official transfers3.5-15.3-41.0
    Direct investment, net4.421.73.5
    Total net external credit4.36.74.9
    Memorandum
    Net official credit13.91.6-0.4
    Net bank credit22.41.00.7
    In percent of exports of goods and services
    Total external debt3262.0224.6161.0
    Debt-service payments27.620.015.8
    Interest payments14.310.38.4
    Western Hemisphere
    In percent change or percent of GDP
    Real GDP2.03.44.4
    Real GDP per capita1.52.5
    Consumer prices175.9190.623.8
    Investment ratio19.719.821.2
    Export volume5.25.46.8
    Import volume3.35.26.0
    Terms of trade-3.10.20.1
    In billions of U.S. dollars
    Trade balance20.6-9.0-5.8
    Current account balance-12.7-37.5-38.0
    Non-debt-creating flows, net9.36.30.1
    Official transfers9.30.20.9
    Direct investment, net9.27.00.1
    Total net external credit12.918.420.1
    Memorandum
    Net official credit19.06.11.9
    Net bank credit24.213.38.8
    In percent of exports of goods and services
    Total external debt3252.8238.1193.2
    Debt-service payments37.831.832.4
    Interest payments23.115.713.8

    Estimate of long-term borrowing from official creditors. See footnotes to Table A32 in the Statistical Appendix.

    Estimate of net lending from commercial banks. See footnotes to Table A32 in the Statistical Appendix.

    End-of-period; excluding liabilities to the IMF.

    Excludes Taiwan Province of China.

    Excludes Islamic Republic of Iran, Kuwait, Libya, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

    Real output in Asia is projected to increase by 7 percent a year on average in 1995-98, somewhat lower than in 1993-94, as several countries in the region implement policies to prevent overheating and to reduce bottlenecks. Continuing high growth in Asia reflects policies that have liberalized trade and financial systems, a continuation of macroeconomic stability, very high domestic saving and investment rates, and high export growth.

    In the Western Hemisphere, GDP growth is projected to rise to about 4½ percent a year in the medium term, from 2 percent a year in 1983-92. This would imply annual per capita growth of nearly 2½ percent, compared with no growth in 1983-92. Inflation is expected to decline sharply, to around 24 percent, in the medium term. The major factors behind this improvement are the macroeconomic adjustments and significant structural reforms implemented in several countries in recent years, which have laid the groundwork for higher medium-term growth. A continuation of capital inflows, albeit at a more sustainable pace than in the recent past, is expected to complement domestic saving.

    The combined current account deficit of the net debtor developing countries is projected to average $81 billion a year in 1995-98, about $5 billion higher than the 1993-94 average. This increase is due mostly to an increase in the deficits of countries that had experienced debt-servicing difficulties, reflecting renewed inflows of capital. These trends imply a marked decline in the deficit as a percent of export receipts and reflect some tapering off in the rate of growth of imports in Asia and Latin America in recent years.

    The aggregate debt-export ratio of the net debtor developing countries is projected to decline to an average of about 91 percent in 1998, about half of its 1986 peak, because of debt restructuring—including substantial buybacks and debt-equity swaps—and better export performance. Debt-service payments, including interest payments on total debt plus amortization payments on long-term debt, are expected to decline to around 12¾ percent of export receipts, the lowest ratio since the outbreak of the debt crisis in 1982. This reduction in debt and debt-service ratios should further support macroeconomic stability and sustainable growth in debtor countries.

    Alternative Scenario for Developing Countries

    As emphasized above, the medium-term projections for the developing countries assume that adjustment programs remain on track. If macro economic stability or the momentum of structural reform is undermined by policy slippages, however, inflation would fall more slowly than in the baseline, with detrimental effects on investment and growth. The developing country scenario and adjustment model have been extended to model policy transmissions more completely and to illustrate with more clarity how policy slippages might affect the medium-term projections.3 The model now incorporates monetary and fiscal sectors and explicitly captures links among government policy, investment, output, and inflation.

    It is assumed that policy slippages are manifested in increased government expenditure that is financed by higher money growth. For countries with moderate to high inflation (less than 50 percent a year), money growth and fiscal deficits are assumed to remain at their average for the two years preceding program implementation, rather than falling to the lower levels projected in the baseline. In the case of countries with very high inflation, money growth and fiscal deficits are assumed to revert to their average values in 1984-88, which are significantly higher than the more optimistic paths embodied in the baseline projections.

    For the 35 countries that were undertaking IMFsupported structural adjustment programs at the end of July 1993, these slippages result in a significant deterioration in economic performance (Table 32). Although the increases in money supply and government expenditure initially boost aggregate demand, by the end of the forecast horizon the crowding out of private absorption, higher inflation, and the loss of external competitiveness result in a decline in output growth relative to the baseline. Average inflation in the medium term is about 20 percentage points higher than in the baseline, and most of the rise is due to increases in the heavily indebted countries. Investment declines markedly, total factor productivity growth falls from 3¾ percent to 2 percent, and potential output growth falls from 6 percent to 4¼ percent.

    Table 32.Developing Countries: Alternative Projections Assuming Policy Slippages1(In percent)
    InflationInvestment Ratio
    (In percent of GDP)
    Growth of Total
    Factor Productivity
    Growth of
    Export Volume
    Growth of Total
    Potential Output
    BaselineAlternativeBaselineAlternativeBaselineAlternativeBaselineAlternativeBaselineAlternative
    Net debtor countries27.027.725.724.73.71.98.06.36.14.3
    By region
    Africa8.819.222 121 83.41.73.83.45.33.6
    Asia4.410.125.424.74.42.310.09.18.05.6
    Middle East and Europe4.29.223.521.83.61.94.84.55.43.4
    Western Hemisphere9.850.626.325.13.01.57.45.14.33.0
    By financial criteria
    Countries with recent debt servicing problems9.849.126.225.03.01.57.25.14.33.0
    Countries without recent debt-servicing problems4.510.225.324.54.42.39.58.77.95.5
    Fifteen heavily indebted countries10.153.426.725.52.91.57.75.34.33.0

    The alternative scenario assumes that adjustment programs and structural reforms are not fully implemented in a number of countries.

    On the basis of the developing country scenario and adjustment models for the 35 countries with IMF-supported programs at the end of July 1993.

    Statistical Appendix

    Assumptions

    Except for Japan, the statistical tables in this appendix have been compiled on the basis of information available on September 10, 1993; for Japan, the projections incorporate the national accounts estimates for the second quarter released on September 14 and the fiscal package announced on September 16. The estimates and projections for 1993 and 1994, as well as those for the medium-term scenario for 1995-98, are based on a number of assumptions and working hypotheses.

    • For the industrial countries, real effective exchange rates are assumed to remain constant at their average level during August 16-20, 1993, except for the bilateral exchange rates among the ERM currencies, which are assumed to remain constant in nominal terms. For 1993 and 1994, these assumptions imply average U.S. dollar/SDR conversion rates of 1.396 and 1.390, respectively.

    • “Present” policies of national authorities will be maintained.

    • The price of oil will average $16.68 a barrel in 1993 and $17.23 a barrel in 1994. In the medium term, the oil price is assumed to remain unchanged in real terms.

    • Interest rates, as represented by the London interbank offered rate (LIBOR) on six-month U.S. dollar deposits, will average 3.5 percent in 1993 and 4.1 percent in 1994; the three-month certificate of deposit rate in Japan will average 2.8 percent in 1993 and 3.2 percent in 1994; and the three-month interbank deposit rate in Germany will average 7 percent in 1993 and 5.9 percent in 1994.

    Conventions

    Composite data for country groups in the World Economic Outlook are either sums or weighted averages of data for individual countries. Arithmetic weighted averages are used for all data except inflation and money growth for nonindustrial country groups, for which geometric averages are used.

    The following conventions apply.

    • Country group composites for interest rates, exchange rates, and the growth of monetary aggregates are weighted by GDP converted to U.S. dollars at market exchange rates (averaged over the preceding three years) as a share of world or group GDP.

    • Composites for other data relating to the domestic economy, whether growth rates or ratios, are weighted by GDP valued at purchasing power parities (PPPs) as a share of world or group GDP.

    • Composite unemployment rates and employment growth are weighted by labor force as a share of group labor force.

    • For data relating to the external economy (balance of payments and debt), composites are sums of individual country data after conversion to U.S. dollars at the average (for debt, end of period) exchange rates in the years indicated. Composites of foreign trade unit values, however, are arithmetic averages of percentage changes for individual countries weighted by the U.S. dollar value of exports or imports as a share of world or group exports or imports (in the preceding year). Group composites of trade volumes are derived as sums of trade values (on a balance of payments basis) deflated by corresponding unit-value group composites.

    For the central European countries, external transactions in nonconvertible currencies through 1990 are converted to U.S. dollars at the implicit U.S. dollar/ruble conversion rates obtained from each country’s national currency exchange rate for the U.S. dollar and for the ruble. Trade among the states of the former U.S.S.R. is not yet included in the data because of lack of information.

    Unless otherwise indicated, multiyear averages of growth rates are expressed as compound annual rates of change.

    Classification of Countries

    Summary of the Country Classification

    The country classification in the World Economic Outlook divides the world into three major groups: industrial countries, developing countries, and countries in transition.1 Rather than being based on strict criteria, economic or otherwise, this classification has evolved over time and is only intended to facilitate the analysis and provide a reasonably meaningful organization of data. Each of the three main country groups is further divided into a number of subgroups. Tables A and B provide an overview by these standard groups in the World Economic Outlook, showing the number of countries in each group and the average shares of groups in aggregate PPP-valued GDP, total exports of goods and services, and total debt outstanding.

    Table A.Industrial Countries: Classification by Standard World Economic Outlook Groups and Their Shares in Aggregate GDP and Exports of Goods and Services, 19901
    Percentage of
    Total GDPTotal exports of
    goods and services
    Number of Countries
    Included in Group
    Industrial
    countries
    WorldIndustrial
    countries
    World
    Industrial countries23100.054.4100.075.7
    United States41.322.518.113.7
    Japan14.07.611.78.9
    Germany7.84.313.710.4
    France6.43.59.77.3
    Italy6.23.46.54.9
    United Kingdom6.33.59.97.5
    Canada4.02.24.03.0
    Other industrial countries1613.97.626.520.0
    Industrial country groups
    Seven major industrial countries786.146.973.655.7
    European Community1234.018.555.241.8
    Industrial countries except the United States, the European Community, and Japan910.65.815.011.3
    Seven major industrial countries except the United States644.824.455.542.0
    Major European industrial countries426.814.639.730.1

    The GDP shares are based on the purchasing power parity (PPP) valuation of country GDPs.

    Table B.Developing Countries and Countries in Transition: Classification by Standard World Economic Outlook Groups and Their Shares in Aggregate GDP, Exports of Goods and Services, and Total Debt Outstanding, 19901
    Percentage of
    Total GDPTotal exports of
    goods and services
    Total debt,
    developing
    countries
    Number of Countries
    Included in Group
    Developing
    countries
    WorldDeveloping
    countries
    World
    Developing countries130100.034.4100.020.3100.0
    By region
    Africa5011.84.19.92.017.2
    Asia2851.417.752.310.628.0
    Middle East and Europe1813.04.521.24.321.1
    Western Hemisphere3423.98.216.53.433.6
    Sub-Saharan Africa454.41.53.30.78.7
    Four newly industrializing Asian economies46.92.432.06.53.0
    By predominant export
    Fuel1923.48.027.25.531.7
    Nonfuel exports11176.626.472.814.868.3
    Manufactures1150.017.251.010.430.8
    Primary products5410.93.87.81.620.2
    Agricultural products408.32.95.31.114.7
    Minerals142.60.92.50.55.5
    Services and private transfers336.62.3440.98.6
    Diversified export base139.13.19.51.98.6
    By financial criteria
    Net creditor countries86.92.421.44.44.4
    Net debtor countries12293.132.078.616.095.6
    Market borrowers2250.017.253.310.843.6
    Diversified borrowers3128.59.817.03.530.3
    Official borrowers6914.55.08.31.721.6
    Countries with recent debt-servicing difficulties7237.813.026.45.459.3
    Countries without debt-servicing difficulties5055.219.052.210.636.3
    Other groups
    Small low-income economies459.43.23.20.611.1
    Least developed countries465.21.82.10.47.7
    Fifteen heavily indebted countries1528.19.720.04.139.1
    Countries in transition22811.24.0
    Central Europe122.81.4
    Former U.S.S.R.158.3

    The GDP shares are based on the purchasing power parity (PPP) valuation of country GDPs.

    Including Mongolia.

    The general features and the compositions of groups in the World Economic Outlook classification are as follows.2

    The group of industrial countries (23 countries) comprises

    Australia

    Austria

    Belgium

    Canada

    Denmark

    Finland

    France

    Germany

    Greece

    Iceland

    Ireland

    Italy

    Japan

    Luxembourg

    Netherlands

    New Zealand

    Norway

    Portugal

    Spain

    Sweden

    Switzerland

    United Kingdom

    United States

    The seven largest countries in this group in terms of GDP—the United States, Japan, Germany, France, Italy, the United Kingdom, and Canada—are collectively referred to as the major industrial countries.

    The members of the European Community are also distinguished as a subgroup.3 They are

    Belgium

    Denmark

    France

    Germany

    Greece

    Ireland

    Italy

    Luxembourg

    Netherlands

    Portugal

    Spain

    United Kingdom

    In 1991 and subsequent years, data for Germany refer to west Germany and the former German Democratic Republic. Before 1991, economic data are not available on a unified basis or in a consistent manner. In general, data on national accounts and domestic economic and financial activity through 1990 cover west Germany only, whereas data for the central government, foreign trade, and balance of payments apply to west Germany through June 1990 and to unified Germany thereafter.

    The group of developing countries (130 countries) includes all countries that are not classified as industrial countries or as countries in transition, together with a few dependent territories for which adequate statistics are available.

    The regional breakdowns of developing countries in the World Economic Outlook conform to the IMF’s International Financial Statistics (IFS) classification, with one important exception. Because all of the developing countries in Europe except Cyprus, Malta, and Turkey are included in the group of countries in transition, the World Economic Outlook classification places these three countries in a combined Middle East and Europe region. It should also be noted that Egypt and the Libyan Arab Jamahiriya are included in this region, not in Africa. Two additional regional groupings are included in the World Economic Outlook because of their analytical significance. These are sub-Saharan Africa4 and four newly industrializing Asian economies.5

    The developing countries are also grouped according to analytical criteria: predominant export, financial criteria, and other groups. The export criteria are based on countries’ export composition in 1984-86, whereas the financial criteria reflect net creditor and debtor positions as of 1987, sources of borrowing as of end-1989, and experience with debt servicing during 1986-90.

    The first analytical criterion, by predominant export, distinguishes among five groups: fuel (Standard International Trade Classification—SITC 3); manufactures (SITC 5 to 8, less diamonds and gemstones); nonfuel primary products (SITC 0, 1, 2, 4, and diamonds and gemstones); services and private transfers; and diversified export base. A further distinction is made among the exporters of nonfuel primary products on the basis of whether countries’ exports of primary commodities consist primarily of agricultural commodities (SITC 0, 1, 2 except 27, 28, and 4) or minerals (SITC 27 and 28 and diamonds and gemstones).

    The financial criteria first distinguish between net creditor and net debtor countries. Countries in the latter, much larger group are then differentiated on the basis of two additional financial criteria: by predominant type of creditor and by experience with debt servicing.

    The country groups shown under other groups constitute the small low-income economies, the least developed countries, and 15 heavily indebted countries.

    The group of countries in transition (28 countries) comprises central and eastern European countries, non-European successor states of the former Soviet Union, and Mongolia. A common characteristic of these countries is the transitional state of their economies from a centrally administered system to one based on market principles. The group of countries in transition comprises

    Albania

    Armenia

    Azerbaijan

    Belarus

    Bosnia and Herzegovina

    Bulgaria

    Croatia

    Czech Republic

    Estonia

    Georgia

    Hungary

    Kazakhstan

    Kyrgyz Republic

    Latvia

    Lithuania

    Macedonia, Former Yugoslav Rep. of

    Moldova

    Mongolia

    Poland

    Romania

    Russia

    Slovak Republic

    Slovenia

    Tajikistan

    Turkmenistan

    Ukraine

    Uzbekistan

    Yugoslavia, Fed. Rep. of (Serbia/Montenegro)

    Two subgroups are distinguished among the countries in transition, central Europe and the former U.S.S.R. The countries in central Europe (12 countries) are

    Albania

    Bosnia and Herzegovina

    Bulgaria

    Croatia

    Czech Republic

    Hungary

    Macedonia, Former Yugoslav Rep. of

    Poland

    Romania

    Slovak Republic

    Slovenia

    Yugoslavia, Fed. Rep. of (Serbia/Montenegro)

    Detailed Description of the Developing Country Classification by Analytical Group

    Countries Classified by Predominant Export

    Fuel (19 countries). Countries whose average ratio of fuel exports to total exports in 1984-86 exceeded 50 percent are assigned to this category. The group comprises

    Angola

    Algeria

    Cameroon

    Congo

    Ecuador

    Gabon

    Indonesia

    Iran, Islamic Rep. of

    Iraq

    Kuwait

    Libya

    Mexico

    Nigeria

    Oman

    Qatar

    Saudi Arabia

    Trinidad and Tobago

    United Arab Emirates

    Venezuela

    Nonfuel exports (111 countries). This category identifies countries with total exports of goods and services including a substantial share of (a) manufactures, (b) primary products, or (c) services and private transfers. However, those countries whose export structure is so diversified that they do not fall clearly into any one of these three groups are assigned to a fourth group, (d) diversified export base.

    (a) Economies whose exports of manufactures accounted for over 50 percent of their total exports on average in 1984-86 are included in the group of exporters of manufactures (11 countries). This group includes

    Brazil

    China

    Hong Kong

    India

    Israel

    Korea

    Singapore

    Taiwan Province of China

    Thailand

    Tunisia

    Turkey

    (b) The group of exporters of primary products (54 countries) consists of those countries whose exports of agricultural and mineral primary products (SITC 0, 1, 2, 4, and diamonds and gemstones) accounted for at least half of their total exports on average in 1984-86. These countries are

    Afghanistan, Islamic State of

    Argentina

    Bhutan

    Bolivia

    Botswana

    Burundi

    Central African Rep.

    Chad

    Chile

    Colombia

    Comoros

    Costa Rica

    Côte d’Ivoire

    Djibouti

    Dominica

    El Salvador

    Equatorial Guinea

    Gambia, The

    Ghana

    Guatemala

    Guinea

    Guinea-Bissau

    Guyana

    Honduras

    Kenya

    Lao People’s Dem. Rep.

    Liberia

    Madagascar

    Malawi

    Mali

    Mauritania

    Mauritius

    Myanmar

    Namibia

    Nicaragua

    Niger

    Papua New Guinea

    Paraguay

    Peru

    Rwanda

    São Tomé and Principe

    Solomon Islands

    Somalia

    Sri Lanka

    St. Vincent and the Grenadines

    Sudan

    Suriname

    Swaziland

    Togo

    Uganda

    Uruguay

    Viet Nam

    Zaïre

    Zambia

    Among exporters of primary products, a further distinction is made between exporters of agricultural products and minerals. The group of mineral exporters (14 countries) comprises

    Bolivia

    Botswana

    Chile

    Guinea

    Guyana

    Liberia

    Mauritania

    Namibia

    Niger

    Peru

    Suriname

    Togo

    Zaïre

    Zambia

    All other exporters of primary products are classified as agricultural exporters (40 countries).

    (c) The exporters of services and recipients of private transfers (33 countries) are defined as those countries whose average income from services and private transfers accounted for more than half of total average export earnings in 1984-86. This group comprises

    Antigua and Barbuda

    Aruba

    Cape Verde

    Cyprus

    Dominican Rep.

    Egypt

    Ethiopia

    Fiji

    Grenada

    Jamaica

    Jordan

    Bahamas, The

    Barbados

    Kiribati

    Lebanon

    Lesotho

    Maldives

    Malta

    Mozambique, Rep. of

    Nepal

    Netherlands Antilles

    Pakistan

    Burkina Faso

    Cambodia

    Panama

    Seychelles

    St. Kitts and Nevis

    St. Lucia

    Tanzania

    Tonga

    Vanuatu

    Western Samoa

    Yemen, Rep. of

    (d) Countries with a diversified export base (13 countries) are those whose export earnings in 1984-86 were not dominated by any one of the categories mentioned under (a) through (c) above. The group comprises

    Bahrain

    Bangladesh

    Belize

    Benin

    Haiti

    Malaysia

    Morocco

    Philippines

    Senegal

    Sierra Leone

    South Africa

    Syrian Arab Rep.

    Zimbabwe

    Countries Classified by Financial Criteria

    Net creditor countries (8 countries) are defined as developing countries that were net external creditors in 1987 or that experienced substantial cumulated current account surpluses (excluding official transfers) between 1967-68 (the beginning of most balance of payments series in the World Economic Outlook data base) and 1987. The net creditor group consists of the following economies:

    Iran, Islamic Rep. of

    Kuwait

    Libya

    Oman

    Qatar

    Saudi Arabia

    Taiwan Province of China

    United Arab Emirates

    Net debtor countries (122 countries) are disaggregated according to two criteria: (a) predominant type of creditor and (b) experience with debt servicing.

    (a) Within the classification by predominant type of creditor (sources of borrowing), three groups are identified: market borrowers, official borrowers, and diversified borrowers.

    Market borrowers (22 countries) are defined as net debtor countries with more than two-thirds of their total liabilities outstanding at the end of 1989 owed to commercial creditors. They comprise

    Algeria

    Antigua and Barbuda

    Argentina

    Bahamas, The

    Brazil

    Chile

    China

    Hong Kong

    Israel

    Kiribati

    Korea

    Malaysia

    Mexico

    Panama

    Papua New Guinea

    Peru

    Singapore

    Suriname

    Thailand

    Trinidad and Tobago

    Uruguay

    Venezuela

    Official borrowers (69 countries) are defined as net debtor countries with more than two-thirds of their total liabilities outstanding at the end of 1989 owed to official creditors. This group comprises

    Afghanistan, Islamic State of

    Aruba

    Bangladesh

    Belize

    Bhutan

    Bolivia

    Botswana

    Burkina Faso

    Burundi

    Cambodia

    Cameroon

    Cape Verde

    Central African Rep.

    Chad

    Comoros

    Djibouti

    Dominica

    Dominican Rep.

    Egypt

    El Salvador

    Equatorial Guinea

    Ethiopia

    Gabon

    Gambia, The

    Ghana

    Grenada

    Guinea

    Guinea-Bissau

    Guyana

    Haiti

    Honduras

    Jamaica

    Lao People’s Dem. Rep.

    Lesotho

    Madagascar

    Malawi

    Maldives

    Mali

    Malta

    Mauritania

    Mauritius

    Morocco

    Mozambique, Rep. of

    Myanmar

    Namibia

    Nepal

    Netherlands Antilles

    Nicaragua

    Niger

    Nigeria

    Pakistan

    Rwanda

    São Tomé and Principe

    Somalia

    St. Kitts and Nevis

    St. Lucia

    St. Vincent and the Grenadines

    Sudan

    Swaziland

    Tanzania

    Togo

    Tonga

    Tunisia

    Uganda

    Viet Nam

    Western Samoa

    Yemen, Rep. of

    Zaïre

    Zambia

    Diversified borrowers (31 countries) consist of those net debtor developing countries that are classified neither as market nor as official borrowers.

    (b) Within the classification by experience with debt servicing, a further distinction is made. Countries with recent debt-servicing difficulties (72 countries) are defined as those countries that incurred external payments arrears or entered into official or commercial bank debt-rescheduling agreements during 1986-90. Information on these developments is obtained from relevant issues of the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions.

    All other net debtor countries are classified as countries without debt-servicing difficulties (50 countries).

    Other Groups

    The group of small low-income economies (45 countries) comprises those IMF members—excluding China and India—whose GDP per person, as estimated by the World Bank, did not exceed the equivalent of $425 in 1986. These countries are

    Afghanistan, Islamic State of

    Bangladesh

    Benin

    Bhutan

    Guinea

    Guinea-Bissau

    Guyana6

    Haiti

    Kenya

    Lao People’s Dem. Rep.

    Lesotho

    Madagascar

    Malawi

    Maldives

    Burkina Faso

    Burundi

    Cambodia

    Central African Rep.

    Chad

    Mali

    Mauritania

    Mozambique, Rep. of

    Myanmar

    Nepal

    Niger

    Pakistan

    Rwanda

    São Tomé and Principe

    Senegal

    Sierra Leone

    Comoros

    Equatorial Guinea

    Ethiopia

    Gambia, The

    Ghana

    Somalia

    Sri Lanka

    Sudan

    Tanzania

    Togo

    Uganda

    Vanuatu

    Viet Nam

    Zaïre

    Zambia

    The countries currently classified by the United Nations as the least developed countries (46 countries) are7

    Afghanistan, Islamic State of

    Bangladesh

    Benin

    Bhutan

    Botswana

    Burkina Faso

    Burundi

    Cambodia

    Cape Verde

    Central African Rep.

    Chad

    Comoros

    Djibouti

    Equatorial Guinea

    Ethiopia

    Gambia, The

    Guinea

    Guinea-Bissau

    Haiti

    Kiribati

    Lao People’s Dem. Rep.

    Lesotho

    Liberia

    Madagascar

    Malawi

    Maldives

    Mali

    Mauritania

    Mozambique, Rep. of

    Myanmar

    Nepal

    Niger

    Rwanda

    São Tomé and Principe

    Sierra Leone

    Solomon Islands

    Somalia

    Sudan

    Tanzania

    Togo

    Uganda

    Vanuatu

    Western Samoa

    Yemen, Rep. of

    Zaïre

    Zambia

    The group of 15 heavily indebted countries8 (the Baker Plan countries) comprises those countries associated with the “Program for Sustained Growth” proposed by the Governor for the United States at the 1985 IMF-World Bank Annual Meetings in Seoul. These countries are

    Argentina

    Bolivia

    Brazil

    Chile

    Colombia

    Côte d’Ivoire

    Ecuador

    Mexico

    Morocco

    Nigeria

    Peru

    Philippines

    Uruguay

    Venezuela

    Former Yugoslavia

    Table A1.Summary of World Output1(Annual percent change)
    Average
    1975-84
    1985198619871988198919901991199219931994
    World3.33.73.63.94.63.42.20.61.72.23.2
    Industrial countries2.53.32.93.24.33.22.30.51.71.12.2
    United States2.53.22.93.13.92.51.2-0.72.62.72.6
    European Community2.02.52.92.94.23.53.00.81.1-0.21.6
    Japan4.05.02.64.16.24.74.84.01.3-0.12.0
    Other industrial countries2.44.02.73.43.93.21.1-1.10.61.22.7
    Developing countries4.55.24.95.75.34.13.74.55.86.15.5
    By region
    Africa2.33.71.91.33.93.61.91.60.41.62.6
    Asia6.37.37.08.19.05.55.76.17.88.77.1
    Middle East and Europe3.62.92.45.90.75.64.22.47.83.44.6
    Western Hemisphere3.23.54.03.21.11.60.33.32.53.43.5
    By analytical criteria
    Fuel exporters3.62.80.72.91.55.04.14.15.92.94.4
    Nonfuel exporters4.86.06.46.66.43.83.64.65.77.05.8
    Net creditor countries3.31.50.31.70.56.77.27.210.13.85.1
    Net debtor countries4.65.55.36.05.63.93.54.35.46.35.5
    Market borrowers5.06.86.36.95.93.63.15.87.38.06.1
    Official borrowers3.35.13.63.34.14.03.83.52.23.74.7
    Countries with recent debt-servicing difficulties3.23.43.63.82.02.30.22.12.12.93.7
    Countries without debt-servicing difficulties5.97.26.77.78.35.05.75.77.58.36.6
    Countries in transition3.92.13.62.64.32.3-3.5-12.0-15.4-10.2-1.1
    Central Europe3.33.13.71.91.50.2-7.1-12.6-9.1-1.81.9
    Former U.S.S.R.24.11.73.62.85.33.0-2.3-11.8-17.8-13.7-2.4
    Memorandum
    Median growth rate
    Industrial countries2.53.12.93.14.13.82.11.41.40.21.6
    Developing countries3.83.43.43.03.63.63.13.13.24.24.0
    Countries in transition4.11.73.62.85.33.0-2.3-11.9-14.7-5.12.6
    Output per capita
    Industrial countries1.82.62.22.63.62.51.5-0.30.90.41.5
    Developing countries1.92.92.33.75.21.91.82.63.34.03.5
    Countries in transition3.11.43.01.83.61.7-4.1-12.1-15.6-10.2-1.4

    Real GDP. For most countries included in the group “countries in transition,” total output is measured by real net material product (NMP) or by NMP-based estimates of GDP.

    Figures from 1990 onward are weighted averages of separate estimates for the 15 states of the former U.S.S.R.

    Table A2.Industrial Countries: Real GDP and Total Domestic Demand(Annual percent change)
    Fourth Quarter1
    Average
    1975-84
    1985198619871988198919901991199219931994199219931994
    Real GDP
    United States2.53.22.93.13.92.51.2-0.72.62.72.63.92.02.5
    Japan4.05.02.64.16.24.74.84.01.3-0.12.00.72.7
    Germany21.81.92.21.43.73.65.71.71.9-1.61.2
    France2.11.92.52.34.54.32.50.71.4-1.01.10.6-0.82.1
    Italy2.52.62.93.14.12.92.11.30.90.31.7-0.21.71.2
    United Kingdom31.53.84.34.85.02.20.4-2.2-0.51.82.8-0.42.43.0
    Canada3.24.83.34.25.02.4-0.2-1.70.72.63.80.83.34.2
    Seven countries above2.63.32.93.24.53.12.30.41.81.32.31.91.52.4
    Spain1.52.43.55.65.24.83.62.31.0
    Netherlands1.62.72.11.12.64.73.92.21.6
    Belgium1.60.81.62.34.64.03.71.90.7
    Denmark2.14.33.60.31.20.62.01.21.1
    Greece3.13.11.6-0.74.13.5-0.11.81.5
    Portugal2.33.04.15.14.05.54.22.21.5
    Ireland3.53.13.74.64.26.59.12.64.9
    Luxembourg2.73.25.04.26.47.84.62.72.2
    Sweden1.62.22.22.82.32.41.4-1.7-1.7
    Switzerland3.72.02.02.93.92.3-0.1-0.6
    Austria2.02.51.11.93.83.84.63.01.5
    Finland2.93.32.14.05.45.40.4-7.1-4.0
    Norway4.05.34.22.00.12.01.71.63.3
    Iceland2.93.86.59.2-0.30.41.4-2.7
    Australia2.94.81.94.44.44.61.3-0.91.8
    New Zealand1.5-1.03.3-0.80.5-1.00.2-2.02.8
    Other industrial countries1.93.02.63.03.64.02.70.80.91.7
    All industrial countries2.53.32.93.24.33.22.30.51.71.12.2
    European Community2.02.52.92.94.23.53.00.81.1-0.21.6
    West Germany1.81.92.21.43.73.65.74.51.6-2.20.8-1.11.2
    Real total domestic demand
    United States2.83.63.02.73.01.80.8-1.42.93.42.74.32.82.5
    Japan3.24.13.75.17.65.85.02.70.60.12.8-0.61.53.5
    Germany31.80.93.32.63.62.95.24.52.4-1.41.3
    France1.72.54.53.34.73.92.80.50.4-1.10.90.3-0.91.1
    Italy1.82.83.04.14.42.82.51.91.0-1.51.2-1.81.20.5
    United Kingdom1.43.05.05.37.92.9-0.6-3.30.41.43.10.52.53.0
    Canada2.95.34.25.35.54.3-0.7-0.72.12.9-1.33.53.1
    Other industrial countries1.43.33.63.74.15.22.30.40.7-0.31.2
    All industrial countries2.33.33.53.54.43.32.00.11.71.32.2
    Seven countries above2.53.33.53.54.53.02.00.11.81.52.41.81.92.4
    European Community1.62.34.03.95.03.72.41.41.2-0.71.4
    West Germany1.80.93.32.63.62.95.23.61.5-2.30.91.6-1.21.2

    From fourth quarter of preceding year.

    Data through 1990 apply to west Germany only.

    Average of expenditure, income, and output estimates of GDP at market prices.

    Table A3.Industrial Countries: Components of Real GDP(Annual percent change)
    Average
    1975-84
    1985198619871988198919901991199219931994
    Private consumer expenditure
    United States2.94.43.62.83.61.91.5-0.42.63.02.3
    Japan3.73.43.44.25.24.33.92.21.70.72.7
    Germany12.01.53.43.32.72.85.24.52.1-0.40.9
    France2.62.43.92.93.33.12.91.41.70.40.8
    Italy3.13.03.74.24.23.52.52.31.8-1.10.9
    United Kingdom1.73.86.85.37.53.20.6-2.22.12.6
    Canada3.05.24.44.44.53.41.0-2.01.11.62.9
    Other industrial countries1.83.13.43.32.93.52.52.01.61.0
    All industrial countries2.73.63.83.44.02.82.40.82.01.51.9
    Seven countries above2.93.73.93.44.12.72.30.62.01.72.1
    European Community2.22.64.33.84.13.33.02.01.60.31.2
    West Germany2.01.53.43.32.72.85.24.51.7-0.70.6
    Public consumption
    United States1.66.15.23.00.62.03.11.5-0.1-1.1
    Japan4.11.74.50.42.22.01.91.72.42.32.3
    Germany12.02.12.51.52.2-1.62.23.4-0.40.4
    France3.12.31.72.83.40.52.02.52.71.10.9
    Italy2.73.42.03.42.80.81.21.51.10.2
    United Kingdom1.5-0.11.61.00.71.42.52.50.2-1.11.5
    Canada2.63.21.61.74.14.03.42.10.20.60.4
    Other industrial countries3.13.53.33.22.43.32.93.02.00.90.5
    All industrial countries2.43.93.92.41.71.82.61.81.10.6
    Seven countries above2.24.04.02.31.51.52.61.61.0-0.10.6
    European Community2.52.22.42.62.31.02.11.82.00.6
    West Germany2.02.12.51.52.2-1.62.20.33.2-0.30.3
    Gross fixed capital formation
    United States3.05.00.4-0.54.20.l-1.7-7.76.29.57.6
    Japan2.45.34.89.611.99.38.83.0-1.1-0.92.9
    Germany10.83.62.14.66.38.57.34.1-1.61.8
    France-0.73.24.54.89.67.92.9-1.5-2.0-6.40.4
    Italy-0.20.62.25.06.94.33.80.6-1.4-4.01.7
    United Kingdom0.74.22.610.213.55.5-3.4-9.8-1.11.43.9
    Canada3.49.56.210.810.36.1-3.5-2.0-1.31.66.7
    Other industrial countries-0.24.45.65.38.38.91.2-3.0-2.3-1.21.4
    All industrial countries1.84.32.73.77.24.41.4-3.32.03.04.5
    Seven countries above2.24.32.23.47.03.71.5-3.32.73.75.0
    European Community-0.12.44.35.68.86.93.8-0.2-2.61.7
    West Germany0.83.62.14.66.38.56.11.1-4.51.0
    Final domestic demand
    United States2.74.83.42.33.11.71.3-1.22.53.22.7
    Japan3.33.83.95.47.05.75.32.40.80.32.8
    Germany11.81.33.32.63.02.65.34.22.8-0.71.0
    France1.92.53.63.34.63.62.81.01.1-0.90.7
    Italy2.22.53.24.24.53.32.61.81.0-1.50.9
    United Kingdom1.53.15.05.27.23.31.1-2.7-0.21.42.6
    Canada3.05.64.25.15.64.10.5-1.20.41.43.2
    Other industrial countries1.53.43.83.74.04.62.21.00.8-0.11.0
    All industrial countries2.43.83.63.44.33.12.40.31.61.32.1
    Seven countries above2.53.93.63.44.33.12.40.21.81.52.3
    European Community1.72.43.93.94.73.63.01.51.3-0.41.2
    West Germany1.81.33.32.63.02.65.34.01.8-1.50.6
    Stock building2
    United States0.1-1.1-0.30.4-0.10.2-0.5-0.30.30.30.1
    Japan-0.20.4-0.1-0.30.60.2-0.30.3-0.2-0.20.1
    Germany1-0.30.1-0.10.60.3-0.10.3-0.4-0.80.2
    France-0.2-0.10.90.10.10.30.1-0.4-0.7-0.20.2
    Italy-0.40.3-0.1-0.40.10.3
    United Kingdom-0.1-0.10.10.7-0.4-0.9-0.60.60.5
    Canada-0.1-0.30.10.1-0.11.2-1.20.4-0.50.7-0.3
    Other industrial countries-0.1-0.1-0.20.20.61.2-0.6-0.1-0.10.3
    All industrial countries-0.5-0.10.10.10.2-0.3-0.20.2
    Seven countries above-0.5-0.10.20.10.1-0.4-0.10.1
    European Community-0.1-0.10.10.30.1-0.1-0.1-0.1-0.20.3
    West Germany-0.30.1-0.10.60.3-0.1-0.4-0.3-0.80.3
    Foreign balance2
    United Stales-0.3-0.6-0.20.30.90.60.40.7-0.3-0.8-0.2
    Japan0.70.9-1.0-0.9-1.2-1.1-0.21.30.7-0.1-0.8
    Germany11.0-1.0-1.10.20.90.7-2.7-0.5-0.2
    France0.4-0.5-1.9-1.1-0.30.3-0.40.20.90.10.2
    Italy0.2-0.2-0.1-1.1-0.5-0.5-0.7-0.11.90.4
    United Kingdom0.9-0.7-0.6-3.7-1.11.31.6-1.10.4-0.4
    Canada0.3-0.5-0.7-0.9-1.2-1.60.7-0.60.80.40.8
    Other industrial countries0.4-1.0-0.8-0.6-1.40.20.50.20.60.5
    All industrial countries0.1-0.6-0.4-0.2-0.10.30.4-0.1-0.1
    Seven countries above-0.1-0.6-0.3-0.10.10.30.4-0.1-0.2-0.2
    European Community0.20.2-1.0-1.1-0.9-0.30.2-0.5-0.20.50.2
    West Germany1.0-1.0-1.10.20.90.71.10.2-0.1

    Data through 1990 apply to west Germany only.

    Changes expressed as percent of GDP in the preceding period.

    Table A4.Industrial Countries: Employment, Unemployment, and Real Per Capita GDP(In percent)
    Average1
    1975-84
    1985198619871988198919901991199219931994
    Growth in employment
    United States1.92.02.32.62.32.00.5-0.90.61.71.4
    Japan1.00.70.81.01.71.92.01.91.10.2
    Germany2-0.20.71.40.70.81.53.0-2.4-1.7-1.8-0.6
    France-0.30.10.30.81.41.10.1-0.5-1.2
    Italy0.40.50.8-0.11.3-0.51.41.4-0.6-0.6
    United Kingdom-0.41.10.32.33.32.70.3-3.2-2.7-1.11.0
    Canada1.82.62.82.93.22.00.7-1.8-0.81.22.6
    Other industrial countries-0.11.11.81.61.82.21.7-0.3-1.0-1.3-0.1
    All industrial countries0.81.21.51.71.91.81.3-0.5-0.20.6
    Seven countries above1.01.31.41.71.91.81.2-0.5-0.10.30.7
    European Community-0.20.40.91.11.71.61.7-0.8-1.2-1.4-0.1
    West Germany-0.20.71.40.70.81.53.02.60.8-1.4-0.8
    Unemployment rate
    United States7.77.27.06.25.55.35.56.87.46.86.5
    Japan2.22.62.82.82.52.32.12.12.22.52.7
    Germany14.88.07.67.67.66.86.26.77.79.310.0
    France6.410.210.410.510.09.48.89.410.111.511.9
    Italy8.210.311.112.011.512.011.011.311.912.512.7
    United Kingdom6.410.911.110.08.16.35.88.19.810.410.0
    Canada8.710.59.58.87.87.58.110.311.311.310.8
    Other industrial countries6.810.610.310.09.68.78.49.210.412.112.6
    All industrial countries6.27.97.87.55.56.36.27.17.88.38.4
    Seven countries above6.17.37.36.96.35.85.76.67.37.57.5
    European Community7.011.011.010.910.19.38.69.210.211.612.0
    West Germany4.88.07.67.67.66.86.25.55.87.88.8
    Growth in real per capita GDP
    United States1.52.32.02.23.01.60.2-1.81.51.71.5
    Japan3.14.32.13.65.84.34.53.71.0-0.31.8
    Germany22.02.12.21.33.22.63.70.81.1-2.31.0
    France1.61.52.11.84.03.82.00.31.0-1.40.7
    Italy2.32.22.83.03.92.82.00.90.80.21.6
    United Kingdom1.53.53.94.54.21.80.2-2.4-0.91.52.5
    Canada2.14.02.53.13.81.2-1.5-3.1-0.81.12.5
    Other industrial countries1.32.52.12.53.23.42.10.10.2-0.51.2
    All industrial countries1.82.62.22.63.62.51.5-0.30.90.41.5
    Seven countries above1.92.72.22.63.72.31.4-0.41.00.61.6
    European Community1.72.32.72.73.83.02.30.40.6-0.61.4
    West Germany2.02.12.21.33.22.63.73.20.4-3.20.4

    Compound annual rate of change for employment and per capita GDP; arithmetic average for unemployment rate.

    Data through 1990 apply to west Germany only.

    Table A5.Developing Countries: Real GDP(Annual percent change)
    Average
    1975-84
    1985198619871988198919901991199219931994
    Developing countries4.55.24.95.75.34.13.74.55.86.15.5
    By region
    Africa2.33.71.91.33.93.61.91.60.41.62.6
    Asia6.37.37.08.19.05.55.76.17.88.77.1
    Middle East and Europe3.62.92.45.90.73.64.22.47.83.44.6
    Western Hemisphere3.23.54.03.21.11.60.33.32.53.43.5
    Sub-Saharan Africa2.33.63.12.53.02.81.21.2-0.62.73.3
    Four newly industrializing
    Asian economies8.44.411.012.39.86.27.07.35.46.06.2
    By predominant export
    Fuel3.62.80.72.91.55.04.14.15.92.94.4
    Nonfuel exports4.86.06.46.66.43.83.64.65.77.05.8
    Manufactures5.88.67.98.18.04.64.05.17.18.66.5
    Primary products2.21.34.93.51.51.21.93.64.24.14.1
    Agricultural products2.41.14.72.91.61.52.64.04.84.34.1
    Minerals1.32.25.45.40.90.32.12.03.14.0
    Services and private transfers4.94.64.86.13.93.15.44.42.54.25.1
    Diversified export base4.00.41.92.76.33.33.42.91.73.34.1
    By financial criteria
    Net creditor countries3.31.50.31.70.56.77.27.210.13.85.1
    Net debtor countries4.65.55.36.05.63.95.54.35.46.35.5
    Market borrowers5.06.86.36.95.93.63.15.87.38.06.1
    Diversified borrowers4.53.44.65.85.94.34.01.83.64.34.9
    Official borrowers3.35.13.63.34.14.03.85.52.23.74.7
    Countries with recent debt-servicing difficulties3.23.43.63.82.02.30.22.12.12.93.7
    Countries without debt-servicing difficulties5.97.26.77.78.35.05.75.77.58.36.6
    Other groups
    Small low-income economics3.64.04.23.53.53.93.83.82.24.15.1
    Least developed countries2.72.43.12.32.52.82.51.71.63.64.0
    Fifteen heavily indebted countries3.03.64.12.71.92.00.52.41.12.63.5
    Memorandum
    Real per capita GDP
    Developing countries1.92.92.33.73.21.92.62.63.34.03.5
    By region
    Africa-0.50.6-0.8-1.41.10.9-0.9-0.9-2.2-1.1-0.1
    Asia4.15.54.96.17.13.63.94.46.07.05.3
    Middle East and Europe-0.5-0.82.7-2.01.12.50.11.60.41.8
    Western Hemisphere0.81.40.72.2-0.8-0.8-1.61.40.61.51.5
    Table A6.Developing Countries—By Country: Real GDP1(Annual percent change)
    Average
    1975-84
    19851986198719881989199019911992
    Africa2.33.71.91.33.93.61.91.60.4
    Algeria3.95.6-0.2-0.7-1.94.9-1.40.22.8
    Benin4.32.42.1-1.53.0-2.04.03.03.5
    Botswana12.47.57.18.013.25.78.85.84.0
    Burkina Faso1.511.35.61.35.73.36.00.7
    Burundi3.511.73.35.54.51.53.55.02.7
    Cameroon6.812.8-4.4-3.6-10.90.9-7.3-6.2-5.4
    Cape Verde2.48.52.77.67.66.92.42.53.5
    Central African Republic1.713.34.6-3.32.32.31.0-1.6-2.4
    Chad-1.321.1-4.2-2.015.54.8-0.58.33.1
    Comoros4.32.71.91.62.7-1.60.92.11.6
    Congo7.6-1.2-6.90.21.82.61.01.52.6
    Côte d’Ivoirc4.14.93.4-1.6-2.0-1.1-2.1-0.8
    Djibouti1.8-0.2-1.20.50.90.3-0.32.6-1.0
    Equatorial Guinea2.22.0-2.34.42.7-1.23.3-1.113.0
    Ethiopia1.8-5.86.99.51.91.6-1.4-0.6-7.4
    Gabon-0.95.8-2.1-15.43.57.04.06.30.5
    Gambia, The4.41.64.12.81.74.35.22.34.1
    Ghana-1.55.15.24.85.65.13.35.03.9
    Guinea2.05.03.13.06.33.24.22.53.2
    Guinea-Bissau7.24.4-1.05.66.94.53.33.02.8
    Kenya4.54.47.15.96.04.54.32.30.4
    Lesotho-0.53.21.15.212.811.84.54.80.7
    Liberia-0.4-2.0-0.91.33.1-10.80.32.91.9
    Madagascar-0.22.11.91.23.44.13.1-6.91.0
    Malawi3.64.6-0.21.63.05.24.87.8-7.7
    Mali0.81.38.41.2-0.211.80.8-0.26.1
    Mauritania4.22.05.82.91.74.8-1.82.62.4
    Mauritius3.95.08.510.88.75.74.76.65.1
    Morocco3.96.38.3-2.510.42.53.75.1-3.0
    Mozambique, Rep. of0.1-8.61.03.95.65.41.32.7-1.4
    Niger7.41.84.61.86.90.9-1.32.5-6.5
    Nigeria-1.49.72.5-0.79.97.28.24.84.1
    Rwanda3.24.45.5-0.3-0.51.20.9-2.12.5
    São Tomé and Principe0.28.51.0-1.52.03.1-2.21.51.5
    Senegal2.73.84.64.05.1-0.44.51.22.9
    Seychelles3.210.30.84.54.312.97.6-2.94.2
    Sierra Leone0.8-5.918.43.12.52.5-0.80.7-0.8
    Somalia2.48.23.45.1-0.6-0.2-1.5-20.0
    South Africa2.5-1.22.14.22.3-0.5-0.4-2.1
    Sudan2.9-1.83.91.41.61.6-0.36.08.9
    Swaziland3.16.88.516.910.03.58.83.8-2.6
    Tanzania3.72.33.66.15.13.63.53.84.5
    Togo1.06.11.60.56.23.80.62.9
    Tunisia5.65.2-1.16.70.13.77.63.98.0
    Uganda0.20.71.16.57.77.04.53.43.2
    Zaïre-0.82.52.72.72.50.60.6-6.0-8.0
    Zambia-0.11.60.72.81.91.60.7-2.0-2.8
    Zimbabwe1.67.42.1-0.57.34.52.24.9-7.7
    Asia6.37.37.08.19.05.55.76.17.8
    Afghanistan, I.S. of-0.60.33.0-10.3-8.3-7.1-2.5-0.6
    Bangladesh4.64.14.33.52.74.65.03.84.2
    Bhutan6.03.710.217.81.15.03.13.14.0
    Cambodia9.93.51.27.67.0
    China7.213.49.711.010.74.24.37.813.0
    Fiji2.0-3.86.2-5.92.412.04.80.72.8
    Hong Kong8.90.211.114.58.32.83.24.25.0
    India5.06.64.14.99.75.05.82.33.3
    Indonesia5.92.55.94.95.87.57.16.65.8
    Kiribati-5.0-6.4-1.30.310.02.2-3.82.81.5
    Korea8.06.912.412.011.56.29.28.54.8
    Lao P.D. Republic-2.114.36.74.07.0
    Malaysia7.0-1.01.25.48.99.29.78.78.0
    Maldives5.313.88.67.310.39.316.27.66.1
    Myanmar5.72.9-1.1-4.2-8.3-0.13.0-0.15.8
    Nepal2.76.14.33.97.23.98.04.62.1
    Pakistan5.96.56.06.44.84.75.67.73.0
    Papua New Guinea0.64.03.13.63.0-1.4-3.09.59.0
    Philippines3.9-4.43.44.86.36.12.4-1.00.6
    Singapore8.0-1.61.89.411.19.28.36.75.8
    Solomon Islands4.91.8-0.94.07.74.81.52.23.3
    Sri Lanka5.25.04.41.42.72.36.24.64.3
    Taiwan Province of China8.65.011.612.37.37.64.97.26.6
    Thailand7.03.54.99.513.212.010.08.27.5
    Vanuatu4.41.1-2.00.40.64.55.23.51.0
    Viet Nam6.15.63.42.55.18.15.14.05.0
    Western Samoa1.57.65.40.52.6-7.4-1.6-4.3
    Middle East and Europe3.62.92.45.90.71.04.22.47.8
    Bahrain6.2-0.90.5-1.27.32.51.22.7
    Cyprus5.54.73.87.08.78.07.31.58.2
    Egypt7.17.44.88.73.52.22.31.20.4
    Iran, Islamic Republic of1.14.2-9.3-2.2-6.54.511.28.64.6
    Iraq
    Israel2.84.03.86.22.61.75.46.76.6
    Jordan9.06.17.72.6-0.5-13.51.71.811.3
    Kuwait-1.7-4.38.68.1-10.025.0
    Lebanon
    Libya1.04.6-15.2-23.6-10.27.210.86.04.0
    Malta7.22.63.94.18.48.26.36.04.7
    Oman10.313.73.4-3.85.73.37.57.57.7
    Qatar1.6-13.03.70.94.75.33.61.06.4
    Saudi Arabia3.2-4.15.8-1.56.60.510.89.82.9
    Syrian Arab Republic5.96.1-4.91.413.2-8.97.68.28.0
    Turkey4.44.58.77.24.4-0.39.21.05.4
    United Arab Emirates3.3-2.5-19.45.5-2.613.317.35.24.0
    Former Yemen Arab Republic8.75.78.34.46.73.4
    Former Yemen, P.D. Republic of0.2-3.2-11.91.41.02.5
    Yemen, Republic of
    Western Hemisphere3.23.54.03.21.11.60.33.32.5
    Antigua and Barbuda1.116.09.79.07.75.22.81.62.5
    Argentina0.1-6.67.32.6-1.9-6.20.18.98.7
    Aruba-0.315.917.012.310.44.63.1
    Bahamas, The3.24.12.53.82.40.20.9-3.1-1.2
    Barbados4.01.19.63.83.13.7-3.3-5.2-4.4
    Belize2.72.24.512.910.114.27.65.26.0
    Bolivia1.2-1.0-2.52.63.02.82.64.13.4
    Brazil3.77.97.63.60.33.3-4.40.9-0.9
    Chile1.82.45.75.77.410.02.16.010.4
    Colombia3.73.35.85.44.13.44.32.13.5
    Costa Rica3.20.75.54.83.45.63.62.27.3
    Dominica3.61.76.86.88.0-1.26.42.22.1
    Dominican Republic4.0-2.63.27.90.74.1-5.4-0.97.6
    Ecuador4.44.43.1-6.010.50.22.34.43.7
    El Salvador-0.12.00.62.71.61.03.43.54.6
    Grenada3.64.95.56.05.35.75.22.6-0.9
    Guatemala2.5-0.60.13.53.74.13.13.34.8
    Guyana-1.42.0-0.90.9-2.6-3.3-2.56.07.8
    Haiti2.40.20.60.6-1.5-1.5-3.0-4.0-10.8
    Honduras3.74.20.76.14.54.30.13.04.9
    Jamaica0.7-0.94.6-3.13.33.44.74.10.8
    Mexico4.62.6-3.71.71.23.34.43.62.6
    Netherlands Antilles3.1-2.1-5.50.23.34.27.23.36.6
    Nicaragua-1.4-4.1-1.0-0.7-12.5-1.7-0.3-0.40.8
    Panama4.34.73.42.3-15.6-0.44.69.38.0
    Paraguay6.64.04.36.45.83.12.51.7
    Peru1.22.09.28.3-8.2-11.8-4.42.6-2.8
    St. Kitts and Nevis4.55.66.27.49.86.73.06.85.0
    St. Lucia6.06.05.82.112.77.43.61.86.3
    St. Vincent and the Grenadines6.24.67.26.38.67.27.13.14.7
    Suriname2.8-0.9-2.4-13.310.82.1-1.2-2.6-3.0
    Trinidad and Tobago0.8-5.6-1.7-5.0-3.4-0.20.73.00.2
    Uruguay1.31.58.87.91.30.92.97.4
    Venezuela1.80.26.53.65.8-8.66.510.47.3

    For many countries, figures for recent years are staff estimates. Data for some countries arc for fiscal years.

    Table A7.Countries in Transition: Real GDP1(Annual percent change)
    Average
    1975-84
    19851986198719881989199019911992
    Central Europe3.33.13.71.91.50.2-7.1-12.6-9.1
    Albania0.81.85.6-0.8-1.49.8-10.0-27.7-7.8
    Bulgaria5.88.75.65.72.5-0.5-9.1-11.7-5.6
    Former Czechoslovakia3.13.62.82.12.54.5-0.4-15.9-8.5
    Hungary3.4-0.34.74.1-0.1-0.2-4.3-11.9-4.4
    Poland1.95.14.22.04.10.2-11.6-7.61.0
    Romania5.8-0.82.30.8-0.5-5.8-7.4-15.1-15.4
    Former Yugoslavia2.50.83.2-1.1-1.70.8-7.5-17.0-34.0
    Former U.S.S.R.24.11.73.62.85.33.0-2.3-11.8-17.8
    Armenia-11.8-40.0
    Azerbaijan-0.7-26.3
    Belarus-1.9-10.0
    Estonia-11.9-23.3
    Georgia-20.6-45.6
    Kazakhstan-13.0-14.0
    Kyrgyz Republic-5.0-26.0
    Latvia-8.3-32.9
    Lithuania-13.4-35.0
    Moldova-18.0-21.3
    Russia-12.9-18.5
    Tajikistan
    Turkmenistan-4.7-5.3
    Ukraine-13.4-14.0
    Uzbekistan-0.9-9.5
    Other
    Mongolia6.55.79.43.55.14.2-2.0-9.9-7.6

    Data for most countries refer to real net material product (NMP) or are estimates based on NMP. For many countries, figures for recent years are staff estimates. The figures should be interpreted only as indicative of broad orders of magnitude because reliable, comparable data are not generally available. In particular, the growth of output of new private enterprises or of the informal economy is not fully reflected in the recent figures.

    Figures for 1990 onward are weighted averages of the separate estimates for the 15 states of the former U.S.S.R.

    Table A8.Summary of Inflation(In percent)
    Average
    1975-84
    1985198619871988198919901991199219931994
    GDP deflators
    Industrial countries8.34.23.73.23.74.44.44.13.12.62.7
    United States7.33.62.73.13.94.64.33.92.92.82.7
    European Community10.85.95.54.04.34.95.35.54.53.43.4
    Japan4.31.61.80.41.82.22.11.81.31.3
    Other industrial countries8.34.64.55.35.35.74.53.31.51.52.2
    Consumer prices
    Industrial countries8.54.32.73.23.54.55.14.63.33.02.7
    United States7.73.51.93.74.14.85.44.23.03.02.8
    European Community10.55.93.63.23.54.85.35.44.53.83.5
    Japan5.62.00.60.10.72.33.13.31.71.20.8
    Other industrial countries8.55.45.05.14.75.35.95.02.12.62.4
    Developing countries24.235.128.335.253.661.965.435.738.843.834.7
    By region
    Africa17.214.615.216.721.422.016.932.341.336.422.6
    Asia7.56.78.39.213.811.57.58.47.58.37.8
    Middle East and Europe19.420.720.122.425.222.223.924.023.322.721.3
    Western Hemisphere59.2130.786.5124.6245.0363.3480.1135.9165.9221.1162.9
    By analytical criteria
    Fuel exporters18.818.726.436.235.618.917.116.917.516.312.1
    Nonfuel exporters26.541.428.934.959.578.083.741.845.953.242.3
    Market borrowers36.161.941.855.194.7122.8131.750.458.872.656.9
    Official borrowers17.923.927.927.135.426.323.334.332.229.920.7
    Countries with recent debt-servicing difficulties42.181.762.883.6143.0183.6226.892.5109.3135.0100.0
    Countries without debt-servicing difficulties10.69.88.19.114.313.79.710.910.810.79.7
    Countries in transition3.95.16.77.510.327.632.3103.2786.0581.5138.1
    Central Europe11.917.419.325.142.3135.5157.7119.3162.2142.179.6
    Former U.S.S.R.0.80.72.11.50.32.35.498.11,284.6940.6170.0
    Memorandum
    Median inflation rate
    Industrial countries9.15.43.64.14.54.85.44.23.13.02.9
    Developing countries11.38.27.07.68.29.710.211.49.46.95.4
    Countries in transition0.81.12.01.30.62.05.6102.8822.3457.332.5
    Table A9.Industrial Countries: GDP Deflators and Consumer Prices(Annual percent change)
    Fourth Quarter1
    Average
    1975-84
    1985198619871988198919901991199219931994199219931994
    GDP deflators
    United States7.33.62.73.13.94.64.33.92.92.82.72.82.92.7
    Japan4.31.61.80.41.82.22.11.81.31.31.41.21.2
    Germany24.02.23.31.91.52.43.14.75.44.63.1
    France10.55.85.23.02.83.03.03.02.32.22.21.91.92.8
    Italy16.38.97.96.06.76.27.67.44.73.74.23.64.44.0
    United Kingdom12.95.73.35.06.07.16.46.34.42.03.92.83.04.0
    Canada7.92.62.44.74.64.83.32.51.10.81.51.60.71.6
    Seven countries above8.03.83.22.93.44.14.14.03.02.62.62.72.62.5
    Spain15.58.611.95.85.77.07.76.66.0
    Netherlands5.51.80.4-0.81.21.22.53.02.2
    Belgium6.36.13.71.91.34.63.02.73.7
    Denmark9.04.34.64.73.44.22.62.51.9
    Greece17.417.717.514.315.512.720.519.515.3
    Portugal20.821.520.511.311.513.314.513.612.5
    Ireland14.45.25.82.33.14.6-1.70.91.1
    Luxembourg7.72.51.1-3.11.00.21.33.82.3
    Sweden10.06.66.84.86.57.99.47.51.6
    Switzerland3.83.13.82.62.44.25.76.12.3
    Austria5.43.13.82.42.12.82.93.44.3
    Finland10.04.74.55.36.96.95.52.31.0
    Norway9.05.0-1.47.23.74.73.42.3-1.1
    Iceland28.531.124.519.623.220.514.57.63.2
    Australia10.26.27.37.48.27.34.61.81.1
    New Zealand15.016.117.413.26.88.52.41.11.4
    Other industrial countries10.36.87.05.15.36.05.95.13.73.03.1
    All industrial countries8.34.23.73.23.74.44.44.13.12.62.7
    European Community10.85.95.54.04.34.95.35.54.53.43.4
    West Germany4.02.23.31.91.52.43.13.94.43.82.84.14.11.8
    Consumer prices
    United States7.73.51.93.74.14.85.44.23.03.02.83.12.93.0
    Japan5.62.00.60.10.72.33.13.31.71.20.81.01.11.2
    Germany24.32.2-0.10.21.32.82.74.84.74.62.9
    France10.65.82.53.32.73.53.43.22.42.22.21.82.32.4
    Italy16.19.15.94.75.06.36.56.35.24.54.64.75.04.0
    United Kingdom312.45.23.64.14.65.98.16.84.73.23.83.73.44.0
    Canada8.44.04.24.44.05.04.85.61.51.81.51.81.51.7
    Other industrial countries9.67.06.04.94.75.66.45.44.13.83.4
    All industrial counlrics8.54.32.73.23.54.55.14.63.33.02.7
    Seven countries above8.43.92.12.93.34.34.94.43.12.92.62.82.72.7
    European Community10.55.93.63.23.54.85.35.44.53.83.5
    West Germany4.32.2-0.10.21.32.82.73.54.04.12.73.73.52.4

    From fourth quarter of preceding year.

    Data through 1990 apply to west Germany only.

    Retail price index excluding mortgage interest.

    Table A10.Industrial Countries: Hourly Earnings, Productivity, and Unit Labor Costs in Manufacturing(Annual percent change)
    Average
    1975-84
    1985198619871988198919901991199219931994
    Hourly earnings
    United States8.35.04.12.24.03.94.95.25.12.22.4
    Japan6.13.92.41.03.26.76.55.94.65.64.7
    West Germany6.83.85.05.23.94.25.87.27.02.93.2
    France13.87.25.14.63.94.85.24.14.02.22.9
    Italy19.710.23.17.67.910.29.09.46.74.24.1
    United Kingdom14.38.57.97.48.09.09.89.26.55.15.1
    Canada9.93.92.83.43.95.25.44.73.62.52.3
    Other industrial countries12.28.67.36.55.86.68.07.45.34.83.8
    All industrial countries10.05.94.63.84.65.56.26.25.33.43.3
    Seven countries above9.65.54.13.34.45.46.06.05.23.23.2
    European Community13.47.85.76.25.86.87.47.66.34.23.8
    Productivity
    United States1.93.12.66.52.50.51.11.84.54.12.3
    Japan3.12.84.17.44.52.81.5-3.7-0.22.7
    West Germany3.53.61.01.94.23.33.52.81.41.4
    France4.03.43.65.07.35.11.40.62.80.71.1
    Italy3.73.3-0.85.46.13.32.01.83.12.82.6
    United Kingdom2.62.53.85.45.44.31.92.54.97.42.8
    Canada2.14.7-0.22.50.3-0.22.01.33.63.32.6
    Other industrial countries4.53.61.81.93.82.80.92.02.12.11.6
    All industrial countries2.93.21.84.84.12.31.71.82.52.72.2
    Seven countries above2.63.21.95.24.12.21.81.82.62.82.3
    European Community3.73.52.13.85.23.71.92.02.72.41.9
    Unit labor costs
    United States6.31.81.4-3.91.53.43.83.40.6-1.80.1
    Japan2.91.02.4-3.0-3.92.03.54.38.65.82.0
    West Germany3.20.24.03.3-0.20.82.24.35.42.91.8
    France9.53.71.5-0.4-3.2-0.33.83.41.11.51.7
    Italy15.56.64.02.11.76.76.87.53.51.41.5
    United Kingdom11.35.94.01.92.54.67.76.61.5-2.22.2
    Canada7.6-0.83.00.93.65.43.33.3-0.8-0.3
    Other industrial countries7.95.15.44.52.03.77.05.33.32.72.2
    All industrial countries7.12.62.7-0.90.63.24.54.32.80.71.1
    Seven countries above6.92.22.3-1.80.43.14.14.12.70.40.9
    European Community9.44.23.62.30.73.05.55.53.61.81.9
    Table A11.Developing Countries: Consumer Prices(Annual percent change)
    Average
    1975-84
    1985198619871988198919901991199219931994
    Developing countries24.235.128.335.253.661.965.435.738.843.834.7
    By region
    Africa17.214.615.216.721.422.016.932.341.336.422.6
    Asia7.56.78.39.213.811.57.58.47.58.37.8
    Middle East and Europe19.420.720.122.425.222.223.924.023.322.721.3
    Western Hemisphere59.2130.786.5124.6245.0363.3480.1135.9165.9221.1162.9
    Sub-Saharan Africa23.619.718.927.027.527.325.867.877.767.642.1
    Four newly industrializing
    Asian economies10.21.71.82.65.15.87.17.75.95.85.6
    By predominant export
    Fuel18.818.726.436.235.618.917.116.917.516.312.1
    Non fuel exports26.541.428.934.959.578.083.741.845.953.242.3
    Manufactures24.039.728.536.868.186.594.243.158.273.258.0
    Primary products55.698.856.460.1108.1176.1184.988.245.439.428.0
    Agricultural products56.695.558.163.1101.0157.3154.462.125.622.317.8
    Minerals52.8109.351.351.6131.1242.7307.1202.6133.5112.666.9
    Services and private transfers10.811.712.114.012.316.116.316.313.79.47.5
    Diversified export base11.513.511.712.410.69.911.510.79.26.35.8
    By financial criteria
    Net creditor countries10.91.16.99.57.17.36.18.18.16.46.1
    Net debtor countries25.538.430.137.357.666.971.038.041.547.237.2
    Market borrowers36.161.941.855.194.7122.8131.750.458.872.656.9
    Diversified borrowers13.912.012.715.217.115.718.719.317.716.013.5
    Official borrowers17.923.927.927.135.426.323.334.332.229.920.7
    Countries with recent debt-servicing difficulties42.181.762.883.6143.0183.6226.892.5109.3135.0100.0
    Countries without debt-servicing difficulties10.69.88.19.114.313.79.710.910.810.79.7
    Other groups
    Small low-income economies18.419.230.732.134.521.925.642.439.337.427.1
    Least developed countries17.918.917.825.526.128.527.661.565.753.636.2
    Fifteen heavily indebted countries53.1113.175.8109.4209.1332.6386.3119.9174.5215.4152.8
    Memorandum
    Median
    Developing countries11.38.27.07.68.29.710.211.49.46.95.4
    By region
    Africa12.29.18.17.57.710.310.010.49.96.85.1
    Asia8.14.65.66.78.67.58.910.58.86.45.7
    Middle East and Europe9.85.05.55.56.59.110.17.26.57.77.7
    Western Hemisphere12.715.011.614.611.211.420.622.712.19.46.0
    Table A12.Developing Countries—By Country: Consumer Prices1(Annual percent change)
    Average
    1975-84
    19851986198719881989199019911992
    Africa17.214.615.216.721.422.016.932.341.3
    Algeria10.310.414.05.95.99.216.722.831.8
    Benin4.44.63.63.24.30.50.30.92.6
    Botswana11.88.110.09.78.411.611.411.816.2
    Burkina Faso9.97.0-0.4-0.43.00.81.23.9-1.9
    Burundi13.13.71.87.14.611.67.08.94.5
    Cameroon12.36.24.32.81.71.61.5-0.62.0
    Cape Verde16.95.414.04.04.44.39.87.67.0
    Central African Republic12.36.73.90.8-2.13.91.7-0.32.5
    Chad9.65.5-15.8-4.914.6-4.60.50.5-0.6
    Comoros11.78.48.33.30.34.4-7.4-1.72.4
    Congo11.46.12.51.24.04.12.00.12.1
    Cote d’Ivoire12.61.86.87.06.91.0-0.71.64.2
    Djibouti9.92.318.111.86.43.04.54.06.0
    Equatorial Guinea16.281.2-15.8-9.0-3.45.22.7-0.91.5
    Ethiopia10.719.15.0-9.52.29.65.220.921.0
    Gabon13.37.36.4-1.0-9.86.66.01.9-9.4
    Gambia, The11.821.835.046.212.410.810.29.112.0
    Ghana64.410.324.639.831.425.237.218.010.1
    Guinea18.719.064.736.727.428.319.419.616.6
    Guinea-Bissau24.045.037.086.860.380.833.057.669.6
    Kenya13.813.04.05.18.39.915.719.627.3
    Lesotho14.213.718.78.815.912.217.715.517.0
    Liberia7.6-0.63.65.09.725.310.010.010.0
    Madagascar14.410.514.515.526.39.011.88.515.0
    Malawi11.014.914.826.831.415.711.511.922.7
    Mali11.59.1-1.4-14.99.0-0.21.61.5-0.8
    Mauritania4.413.67.87.81.713.16.55.610.1
    Mauritius13.88.34.30.71.516.010.712.82.9
    Morocco9.87.78.72.72.43.16.78.24.9
    Mozambique, Rep. of5.947.812.2175.855.042.149.233.246.6
    Niger12.1-0.9-3.2-4.3-0.6-0.8-1.5-2.4-1.7
    Nigeria20.37.45.711.354.550.57.413.044.6
    Rwanda11.61.7-1.14.13.01.04.219.69.5
    São Tomé and Principe8.20.15.925.040.344.840.536.127.4
    Senegal11.012.86.1-4.1-1.80.40.3-1.8
    Seychelles10.50.80.32.61.81.53.92.01.8
    Sierra Leone26.176.680.9178.732.762.8111.0102.765.5
    Somalia31.237.835.728.181.7110.4140.455.1
    South Africa12.716.218.516.112.814.714.315.313.9
    Sudan23.445.623.321.562.965.365.2123.5117.6
    Swaziland13.920.313.213.212.212.913.513.09.0
    Tanzania21.539.128.332.430.728.119.520.621.7
    Togo10.7-1.94.10.2-1.21.00.52.4
    Tunisia8.57.66.28.27.27.76.57.85.5
    Uganda67.0155.5153.1237.0199.176.826.932.545.1
    Zaïre56.123.845.790.482.090.474.12,155.04,130.0
    Zambia16.437.854.047.154.0128.3109.793.4191.3
    Zimbabwe12.39.214.211.97.111.615.523.942.7
    Asia7.56.78.39.213.811.57.58.47.5
    Afghanistan, I.S. of12.29.7-8.718.229.289.8158.8165.0
    Bangladesh11.89.69.710.99.68.79.16.93.5
    Bhutan5.84.89.96.810.09.110.711.010.5
    Cambodia90.5152.387.9176.8
    China2.18.86.07.318.617.82.12.75.5
    Fiji9.04.41.85.711.86.28.26.54.9
    Hong Kong8.73.52.95.57.410.19.712.09.4
    India6.00.75.88.27.57.410.013.410.5
    Indonesia14.24.75.99.38.17.07.89.47.6
    Kiribati7.84.56.66.53.15.34.85.55.0
    Korea14.32.42.73.07.15.78.69.36.2
    Lao P.D. Republic11.959.535.713.49.8
    Malaysia5.00.30.70.32.52.83.14.44.7
    Maldives10.8-3.89.111.76.57.23.614.717.2
    Myanmar6.76.414.722.122.423.422.427.324.0
    Nepal8.74.115.913.311.08.19.79.820.8
    Pakistan9.45.83.74.93.37.29.711.79.4
    Papua New Guinea7.53.75.53.74.75.17.57.05.0
    Philippines14.223.10.83.89.110.612.712.48.9
    Singapore3.70.5-1.40.51.52.43.43.42.3
    Solomon Islands8.49.713.410.617.115.08.715.213.8
    Sri Lanka11.21.58.07.714.011.621.512.211.4
    Taiwan Province of China6.8-0.20.70.51.34.44.23.64.5
    Thailand7.62.41.92.53.95.56.05.74.1
    Vanuatu7.22.04.814.78.87.55.06.54.1
    Viet Nam29.091.6487.2316.7394.035.067.067.025.0
    Western Samoa13.99.15.74.68.56.515.2-1.48.5
    Middle East and Europe19.420.720.122.425.222.223.924.023.3
    Bahrain9.8-2.4-2.5-1.70.21.21.30.8
    Cyprus7.45.01.22.83.43.84.55.06.5
    Egypt13.112.123.919.718.821.416.719.813.6
    Iran, Islamic Republic of17.04.423.727.720.917.49.019.621.6
    Iraq
    Israel96.3304.648.119.916.320.217.219.012.0
    Jordan9.43.0-0.36.625.816.18.24.0
    Kuwait6.1-3.6-0.617.46.59.1
    Lebanon
    Libya11.29.13.34.43.11.36.85.05.0
    Malta6.1-0.22.00.41.00.93.02.51.6
    Oman4.3-4.17.12.51.61.310.17.23.4
    Qatar9.91.91.64.54.63.33.03.12.1
    Saudi Arabia9.1-3.0-3.1-1.60.91.02.14.7-0.4
    Syrian Arab Republic11.017.436.059.534.611.419.47.78.1
    Turkey41.145.034.638.875.463.360.366.070.1
    United Arab Emirates11.63.55.55.55.06.09.53.03.5
    Former Yemen Arab Republic13.224.729.120.713.919.4
    Former Yemen, P.D. Republic of7.25.10.82.50.5
    Yemen, Republic of
    Western Hemisphere59.2130.786.5124.6245.0363.3480.1135.9165.9
    Antigua and Barbuda21.41.00.53.66.83.77.02.13.0
    Argentina218.2672.290.1131.3343.03,080.52,314.7171.724.9
    Aruba1.13.63.14.05.85.63.9
    Bahamas, The7.04.65.46.14.15.44.57.35.7
    Barbados10.94.90.23.64.86.23.06.36.1
    Belize5.43.80.82.03.22.13.05.62.6
    Bolivia80.311,749.6276.314.616.015.217.121.412.1
    Brazil80.9225.5142.2224.8684.61,319.92,738.8413.7991.1
    Chile64.330.719.519.914.717.026.021.815.4
    Colombia23.424.018.923.328.125.929.130.527.0
    Cosia Rica20.915.011.816.820.816.519.028.721.8
    Dominica11.85.62.24.72.26.81.96.25.3
    Dominican Republic11.037.59.715.944.445.459.453.94.6
    Ecuador19.028.023.029.558.275.748.448.855.0
    El Salvador13.122.331.925.319.917.624.014.411.2
    Grenada15.32.60.5-0.94.05.62.82.63.8
    Guatemala9.218.736.812.711.211.041.135.110.1
    Guyana15.415.07.928.739.989.763.6105.926.6
    Haiti8.78.38.5-5.12.910.920.619.825.2
    Honduras8.83.44.42.44.69.823.334.08.8
    Jamaica18.029.724.411.26.99.216.024.868.6
    Mexico35.357.786.2131.8114.220.026.722.715.5
    Netherlands Antilles8.30.51.23.82.63.93.63.61.4
    Nicaragua21.6219.5681.6911.914,315.84,696.07,485.02,945.023.7
    Panama5.21.0-0.11.00.3-0.10.61.61.2
    Paraguay13.425.231.721.823.026.038.224.315.1
    Peru61.8169.377.985.8667.03,398.67,481.6409.273.4
    St. Kitts and Nevis12.62.70.90.25.14.24.22.9
    St. Lucia9.71.22.27.00.84.44.46.05.7
    St. Vincent and the Grenadines10.42.01.22.90.32.77.35.93.8
    Suriname9.010.818.953.37.32.719.526.035.0
    Trinidad and Tobago13.77.77.710.87.811.411.02.38.0
    Uruguay52.572.276.463.662.280.4112.5101.868.5
    Venezuela11.011.411.628.129.484.540.734.231.4

    For many countries, figures for recent years arc staff estimates. Data for some countries are for fiscal years.

    Table A13.Countries in Transition: Consumer Prices1(Annual percent change)
    Average
    1975-84
    19851986198719881989199019911992
    Central Europe11.917.419.325.142.3135.5157.7119.3162.2
    Albania35.5226.0
    Bulgaria0.82.82.72.72.56.421.6333.582.6
    Former Czechoslovakia1.62.30.50.10.21.410.859.011.0
    Hungary6.27.05.38.615.517.028.936.423.0
    Poland19.015.117.825.260.2251.1585.870.343.0
    Romania2.9-0.20.71.12.60.94.7161.1210.3
    Former Yugoslavia28.275.788.1122.1200.01,257.7584.0270.06,146.6
    Former U.S.S.R.20.80.72.11.50.32.35.498.11,284.6
    Armenia100.0790.0
    Azerbaijan105.6607.2
    Belarus94.11,074.5
    Estonia210.61,069.0
    Georgia78.5913.1
    Kazakhstan147.02,568.0
    Kyrgyz Republic85.0854.6
    Latvia124.4951.2
    Lithuania224.71,020.3
    Moldova162.01,277.0
    Russia92.71,353.0
    Tajikistan
    Turkmenistan113.3492.9
    Ukraine91.21,445.3
    Uzbekistan82.0515.0
    Other
    Mongolia0.3-1.0140.4202.5

    For some countries, figures for recent years are staff estimates. The figures should be interpreted only as indicative of broad orders of magnitude because reliable, comparable data are not generally available.

    Figures for 1990 onward are weighted averages of the separate estimates for the 15 states of the former U.S.S.R.

    Table A14.Summary Financial Indicators(In percent)
    198519861987198819891990199I199219931994
    Industrial countries
    Central government fiscal halance1
    Industrial countries-4.7-4.3-3.3-2.7-2.4-2.8-3.3-4.2-4.7-3.9
    United States-4.5-4.7-3.3-2.8-2.3-2.9-3.6-4.6-4.3-3.3
    European Community-5.8-4.8-4.2-3.8-3.4-4.0-4.1-5.1-6.0-5.5
    Japan-3.7-3.2-2.2-1.3-1.2-0.5-0.3-1.3-2.1-1.9
    Other industrial countries-3.5-2.3-1.5-1.0-0.6-1.2-2.9-4.0-5.1-4.1
    General government fiscal balance1
    Industrial countries-3.5-3.5-2.6-1.9-1.3-2.2-3.0-4.0-4.7-3.9
    United States-3.1-3.4-2.5-2.0-1.5-2.5-3.4-4.4-4.1-3.0
    European Community-5.2-4.8-4.3-3.7-3.0-4.1-4.7-5.4-7.0-6.3
    Japan-0.8-0.90.51.52.52.93.01.5-0.3
    Other industrial countries-3.2-2.6-1.2-0.4-0.3-1.1-3.7-5.2-6.3-5.4
    Growth of broad money
    Industrial countries9.18.96.38.07.17.15.74.0
    United States8.29.43.55.55.03.53.01.53.95.3
    European Community12.27.19.510.110.512.16.65.75.05.5
    Japan3.010.44.88.62.44.59.53.9
    Other industrial countries11.59.510.510.111.98.14.14.4
    Short-term interest rates2
    United States7.56.05.86.78.17.55.43.43.03.6
    Japan6.55.03.94.04.76.97.04.12.83.2
    Germany5.44.64.04.37.18.59.49.47.05.9
    LIBOR8.66.87.38.19.38.46.13.93.54.1
    Developing countries
    Central government fiscal balance1
    Weighted average-4.9-5.9-6.1-5.7-4.8-3.5-3.4-3.5-3.1-2.7
    Median-4.5-5.4-5.3-5.1-4.7-4.2-4.0-3.5-3.6-3.0
    Growth of broad money
    Weighted average41.733.445.463.077.073.157.066.460.543.7
    Median15.418.315.717.317.215.515.314.712.210.5
    Countries in transition
    Central government fiscal balance1,3-2.6-2.7-2.6-2.6-2.8-5.6-11.1-17.2-9.5-4.4
    Growth of broad money12.210.618.122.332.622.2125.9627.8189.348.3

    In percent of GDP.

    For the United States, three-month treasury bills; for Japan, three-month certificates of deposit; for Germany, three-month interbank deposits; for LIBOR, London interbank offered rate on six-month U.S. dollar deposits.

    Due to country differences in definition and coverage, the estimates for this group of countries should be interpreted only as indicative of broad orders of magnitude. In particular, estimates for several countries in the former U.S.S.R. group apply to a wider concept of government.

    Table A15.Major Industrial Countries: Central Government Fiscal Balance and Impulse(In percent of GDP)
    1985198619871988198919901991199219931994
    Fiscal balance
    United States1-4.5-4.7-3.3-2.8-2.3-2.9-3.6-4.6-4.3-3.3
    Japan2-3.7-3.2-2.2-1.3-1.2-0.5-0.3-1.3-2.1-1.9
    Germany3,4-2.5-1.2-1.4-1.7-0.9-1.8-1.9-1.3-2.4-2.3
    France4-3.3-2.8-2.2-2.0-1.6-1.4-2.0-3.2-4.7-4.5
    Italy5-13.8-12.6-11.9-11.8-11.6-11.1-11.1-11.3-10.6-9.1
    United Kingdom6-2.3-2.0-1.01.21.2-1.2-2.5-6.0-8.4-7.2
    Canada6-6.6-4.7-3.8-3.2-3.2-3.8-4.5-3.8-4.2-3.2
    Seven countries above-4.7-4.4-3.4-2.8-2.4-2.8-3.2-4.2-4.5-3.8
    Seven countries except the United States-4.9-4.1-3.4-2.8-2.5-2.7-3.0-3.8-4.7-4.2
    Four European countries-5.3-4.4-4.0-3.4-3.0-3.7-4.2-5.2-6.2-5.5
    + Expansionary, - contractionary
    Fiscal impulse7
    United States8-1.2-0.50.5-0.8
    Japan8-0.8-1.0-0.6-0.6-0.60.9
    Germany3,8-0.4-1.30.4-0.71.9-2.1-0.9
    France-0.4-0.50.90.7-0.5
    Italy0.7-1.6-0.50.6-0.5-0.4-1.5-1.6
    United Kingdom-1.21.51.52.1-0.7
    Canada-1.7-0.4-0.8-1.2-0.8
    Seven countries above-0.8-0.7
    Seven countries except the United States-0.9-0.5-0.7-0.6
    Four European countries-0.80.7-0.70.4-0.8

    Data are on a budget basis.

    Data are on a national income basis and exclude social security transactions.

    Data through June 1990 apply to west Germany only.

    Data are on an administrative basis and exclude social security transactions.

    Data refer to the state sector and cover the transactions of the state budget as well as those of several autonomous entities operating at the same level; data do not include the gross transactions of social security institutions, only their deficits.

    Data are on a national income accounts basis.

    For a definition of the fiscal impulse measure, see The New Palgrave Dictionary of Money and Finance, edited by Peter Newman, Murray Milgate, and John Eatwell (London: Macmillan, 1992; New York: Stockton, 1992). Impulse estimates equal to or less than ±0.3 percent of GDP arc indicated by “—.”

    For 1990 through 1992, the fiscal impulse is calculated on the basis of data adjusted for net international financial transfers related to the 1990-91 regional conflict in the Middle East.

    Table A16.Major Industrial Countries: General Government Fiscal Balance and Impulse1(In percent of GDP)
    198519861987198S19891990[991199219931994
    Fiscal balance
    United States-3.1-3.4-2.5-2.0-1.5-2.5-3.4-4.4-4.1-3.0
    Japan-0.8-0.90.51.52.52.93.01.5-0.3
    Germany2-1.1-1.3-1.9-2.10.1-1.9-3.1-2.7-4.8-3.5
    France3-2.9-2.7-1.9-1.7-1.3-1.5-2.1-3.9-6.0-5.9
    Italy4-12.5-12.0-11.3-11.2-10.5-11.5-10.7-10.0-10.3-9.2
    United Kingdom5-2.9-2.4-1.31.00.9-1.3-2.7-6.2-8.6-7.4
    Canada-6.8-5.4-3.8-2.5-2.9-4.1-6.3-6.6-7.0-5.8
    Seven countries above-3.4-3.4-2.5-1.9-1.2-2.1-2.8-3.9-4.5-3.7
    Seven countries except the United States-3.7-3.4-2.6-1.8-1.0-1.8-2.3-3.3-4.9-4.3
    Four European countries-4.6-4.4-4.0-3.4-2.5-3.9-4.6-5.5-7.3-6.3
    + Expansionary, - contractionary
    Fiscal impulse6
    United States70.40.4-0.7-0.60.50.4-0.9
    Japan7-0.9-1.4-0.4-0.9-0.50.90.5
    Germany2,7-0.70.8-1.7-3.7-0.9-0.4-1.8
    France7-0.90.70.51.1-0.9
    Italy1.1-1.00.8-0.40.9-1.3-1.3-0.6-1.3
    United Kingdom-0.6-1.31.21.32.3-0.8
    Canada1.3-1.1-0.8-0.4-0.5-0.7-0.7
    Seven countries above-0.7-0.60.4-0.4-0.8
    Seven countries except the United States-0.6-0.5-1.10.4-0.8
    Four European countries-0.40.5-1.5-1.2
    Memorandum
    Fiscal balance excluding social security transactions
    United States-4.5-5.1-4.3-4.2-3.8-4.7-5.3-6.0-5.6-4.5
    Japan-3.9-3.9-2.3-1.6-0.7-0.6-0.8-2.3-3.8-3.9
    Germany-1.4-1.8-2.2-2.2-0.6-2.6-4.0-2.8-4.3-3.6
    France-3.2-2.4-2.1-1.9-1.5-1.4-2.0-3.5-5.2-5.4
    Italy-8.0-7.7-7.2-6.6-5.9-6.2-5.9-5.0-5.6-5.1
    Canada-5.1-3.5-1.7-0.4-0.7-1.9-3.8-3.9-4.2-3.0

    On a national income accounts basis.

    Data through 1990 apply to west Germany only.

    Adjusted for valuation changes of the foreign exchange stabil