Front Matter

Front Matter

International Monetary Fund. Research Dept.
Published Date:
October 1996
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    October 1996

    A Survey by the Staff of the International Monetary Fund


    Washington, D.C

    © 1996 International Monetary Fund

    World economic outlook (International Monetary Fund)

    World economic outlook: a survey by the staff of the International Monetary Fund.—1980– —Washington, D.C.: The Fund, 1980–

    v.; 28 cm.—(1981–84: Occasional paper/International Monetary Fund ISSN 0251-6365)


    Has occasional updates, 1984–

    ISSN 0258-7440 = World economic and financial surveys

    ISSN 0256-6877 = World economic outlook (Washington)

    1. Economic history—1971– —Periodicals. I. International Monetary Fund. II. Series: Occasional paper (International Monetary Fund)

    HC10.W7979 84-640155



    Library of Congress 8507

    Published biannually.

    ISBN 1-55775-567-1

    The cover, charts, and interior of this publication were designed and produced by the IMF Graphics Section

    Price: US$35.00

    (US$24.00 to full-time faculty members and students at universities and colleges)

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    List of Tables

    Assumptions and Conventions

    A number of assumptions have been adopted for the projections presented in the World Economic Outlook. It has been assumed that real effective exchange rates will remain constant at their average levels during July 25-August 21, 1996 except for the bilateral rates among the European exchange rate mechanism (ERM) currencies, which are assumed to remain constant in nominal terms; that established policies of national authorities will be maintained (for specific assumptions about fiscal and monetary policies in industrial countries, see Box 1); that the average price of oil will be $19.42 a barrel in 1996 and $17.94 a barrel in 1997, and remain unchanged in real terms over the medium term; and that the six-month London interbank offered rate (LIBOR) on U.S. dollar deposits will average 5.6 percent in 1996 and 6.0 percent in 1997. These are, of course, working hypotheses rather than forecasts, and the uncertainties surrounding them add to the margin of error that would in any event be involved in the projections. The estimates and projections are based on statistical information available on September 10, 1996.

    • The following conventions have been used throughout the World Economic Outlook:
    • … to indicate that data are not available or not applicable;
    • — to indicate that the figure is zero or negligible;
    • – between years or months (e.g., 1994–95 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
    • / between years or months (e.g., 1994/95) to indicate a fiscal or financial year.

    “Billion” means a thousand million; “trillion” means a thousand billion.

    “Basis points” refer to hundredths of 1 percentage point (e.g., 25 basis points are equivalent to ¼ of 1 percentage point).

    Minor discrepancies between sums of constituent figures and totals shown are due to rounding.

    * * *

    As used in this report, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.


    The projections and analysis contained in the World Economic Outlook are an integral element of the IMF’s ongoing surveillance of economic developments and policies in its member countries and of the global economic system. The IMF has published the World Economic Outlook annually from 1980 through 1983 and biannually since 1984.

    The survey of prospects and policies is the product of a comprehensive interdepartmental review of world economic developments, which draws primarily on information the IMF staff gathers through its consultations with member countries. These consultations are carried out in particular by the IMF’s area departments together with the Policy Development and Review Department and the Fiscal Affairs Department.

    The country projections are prepared by the IMF’s area departments on the basis of internationally consistent assumptions about world activity, exchange rates, and conditions in international financial and commodity markets. For approximately 50 of the largest economies—accounting for 90 percent of world output—the projections are updated for each World Economic Outlook exercise. For smaller countries, the projections are based on those prepared at the time of the IMF’s regular Article IV consultations with member countries or in connection with the use of IMF resources; for these countries, the projections used in the World Economic Outlook are incrementally adjusted to reflect changes in assumptions and global economic conditions.

    The analysis in the World Economic Outlook draws extensively on the ongoing work of the IMF’s area and specialized departments, and is coordinated in the Research Department under the general direction of Michael Mussa, Economic Counsellor and Director of Research. The World Economic Outlook project is directed by Flemming Larsen, Deputy Director of the Research Department, together with Graham Hacche, Chief of the World Economic Studies Division.

    Primary contributors to the current issue are Francesco Caramazza, Robert F. Wescott, Staffan Gorne, Paula De Masi, James Haley, Mahmood Pradhan, Jahangir Aziz, John McDermott, Phillip Swagel, and Cathy Wright. Other contributors include Guy Debell, Anne-Marie Guide, Douglas Laxton, Ceyla Pazarbaşjoǧlu, Robert Price, and Anthony G. Turner. The authors of the annexes are indicated on the first page of each. The Fiscal Analysis Division of the Fiscal Affairs Department computed the structural budget and fiscal impulse measures. Sungcha Hong Cha, Toh Kuan, and Michelle Marquardt provided research assistance. Shamim Kassam, Allen Cobler, Nicholas Dopuch, Isabella Dymarskaia, Gretchen Gallik, Mandy Hemmati, and Yasoma Liyanarachchi processed the data and managed the computer systems. Susan Duff, Caroline Bagworth, and Margaret Dapaah were responsible for word processing. Juanita Roushdy of the External Relations Department edited the manuscript and coordinated production of the publication.

    The analysis has benefited from comments and suggestions by staff from other IMF departments, as well as by Executive Directors following their discussion of the World Economic Outlook on September 4 and 6, 1996. However, both projections and policy considerations are those of the IMF staff and should not be attributed to Executive Directors or to their national authorities.

    Partnership for Sustainable Global Growth

    The following “Declaration on Partnership for Sustainable Global Growth” was adopted at the conclusion of the forty-seventh meeting of the Interim Committee of the Board of Governors of the IMF, September 29, 1996.

    The Interim Committee has reviewed the “Declaration on Cooperation to Strengthen the Global Expansion.” which it adopted two years ago in Madrid.1 It notes that the strategy set out in the Declaration, which emphasized sound domestic policies, international cooperation, and global integration, remains valid. It reiterates the objective of promoting full participation of all economies, including the low-income countries, in the global economy. Favorable developments in, and prospects for, many industrial, developing, and transition economies owe much to the implementation of sound policies consistent with the common medium-term strategy.

    The Interim Committee sees a need to update and broaden the Declaration, in light of the new challenges of a changing global environment, and to strengthen its implementation, in a renewed spirit of partnership. It attaches particular importance to the following:

    • Stressing that sound monetary, fiscal, and structural policies are complementary and mutually reinforcing: steady application of consistent policies over the medium term is required to establish the conditions for sustained noninflationary growth and job creation, which are essential for social cohesion.
    • Implementing sound macroeconomic policies and avoiding large imbalances are essential to promote financial and exchange rate stability and avoid significant misalignments among currencies.
    • Creating a favorable environment for private savings.
    • Consolidating the success in bringing inflation down and building on the hard-won credibility of monetary policy.
    • Maintaining the impetus of trade liberalization, resisting protectionist pressures, and upholding the multilateral trading system.
    • Encouraging current account convertibility and careful progress toward increased freedom of capital movements through efforts to promote stability and financial soundness.
    • Achieving budget balance and strengthened fiscal discipline in a multiyear framework. Continued fiscal imbalances and excessive public indebtedness, and the upward pressures they put on global real interest rates, are threats to financial stability and durable growth. It is essential to enhance the transparency of fiscal policy by persevering with efforts to reduce off-budget transactions and quasi-fiscal deficits.
    • Improving the quality and composition of fiscal adjustment, by reducing unproductive spending while ensuring adequate basic investment in infrastructure. Because the sustainability of economic growth depends on development of human resources, it is essential to improve education and training; to reform public pension and health systems to ensure their long-term viability and enable the provision of effective health care: and to alleviate poverty and provide well-targeted and affordable social safety nets.
    • Tackling structural reforms more boldly, including through labor and product market reforms, with a view to increasing employment and reducing other distortions that impede the efficient allocation of resources, so as to make our economies more dynamic and resilient to adverse developments.
    • Promoting good governance in all its aspects, including by ensuring the rule of law, improving the efficiency and accountability of the public sector, and tackling corruption, as essential elements of a framework within which economies can prosper.
    • Ensuring the soundness of banking systems through strong prudential regulation and supervision, improved coordination, better assessment of credit risk, stringent capital requirements, timely disclosure of banks’ financial conditions, action to prevent money laundering, and improved management of banks.

    The Committee encourages the Fund to continue to cooperate with other international organizations in all relevant areas. It welcomes the recent strengthening of Fund surveillance of member countries’ policies, which is an integral part of the strategy. It reaffirmed its commitment to strengthen the Fund’s capacity to fulfill its mandate. It will keep members’ efforts at achieving the common objectives of this strategy under review.

    1See the October 1994 World Economic Outlook, page x.
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