© 1995 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)
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Has occasional updates, 1984—
ISSN 0258-7440 = World economic and financial surveys
ISSN 0256-6877 = World economic outlook (Washington)
I. Economic history—1971– —Periodicals. I. International
Monetary Fund. II. Series: Occasional paper (International Monetary
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Contents
Assumptions and Conventions
Preface
Chapter I. Economic Prospects and Policies
Industrial Countries
Developing Countries
Transition Countries
Chapter II. The World Economy in 1995–96
Economic Activity
Inflation and Commodity Prices
Foreign Exchange and Financial Markets
Trade, External Payments, and Debt
Chapter III. Financial Market Turmoil and Economic Policies in Industrial Countries
Market Volatility Versus Fundamental Misalignment
Did Currencies Overshoot?
Fiscal Consolidation and Currency Values
Priorities for Policy Action
Rebalancing Policies for More Sustainable Growth
Costs of Policy Slippage
Labor Market Policies
Special Policy Challenges in Japan
Chapter IV. Increasing Openness of Developing Countries—Opportunities and Risks
Changing Relationships Between Developing and Industrial Countries
Growth and Diversification of Trade
Changing Nature of Financial Linkages
Reaping the Opportunities of Increased Integration
External Financial Liberalization
Implications of a Reversal of Capital Inflows
Chapter V. Policy Challenges Facing Transition Countries
Sustaining Disinflation and Growth in Countries More Advanced in the Transition
Countries Less Advanced in the Process of Stabilization and Restructuring
Financial Fragility and Macroeconomic Stability
Annex Exchange Rate Effects of Fiscal Consolidation
Short-Run Effects of Changes in Government Budgets
Interest Premiums
Long-Term Implications of Fiscal Consolidation
Empirical Evidence on the Exchange Rate Effects of Fiscal Policy
References
Statistical Appendix
Assumptions
Data and Conventions
Classification of Countries
List of Tables
Output (Tables A1–A7)
Inflation (Tables A8–A13)
Financial Policies (Tables A14–A21)
Foreign Trade (Tables A22–A26)
Current Account Transactions (Tables A27–A32)
Balance of Payments and External Financing (Tables A33–A37)
External Debt and Debt Service (Tables A38–A43)
Flow of Funds (Table A44)
Medium-Term Baseline Scenario (Tables A45–A46)
Boxes
Chapter
I 1. September 1995 Economic Stimulus Package in Japan
II 2. Nonfuel Primary Commodity Prices
IV 3. Uganda: Successful Adjustment Under Difficult Circumstances
4. Financial Liberalization in Africa and Asia
V 5. Price Liberalization and Inflation Dynamics in Transition Economies
6. Changing Wage Structures in the Czech Republic
7. Trade Among the Transition Countries
8. Subsidies and Tax Arrears
Tables
Chapter
I 1. Overview of the World Economic Outlook Projections
II 2. Industrial Countries: Real GDP, Consumer Prices, and Unemployment Rates
3. Selected Developing Countries: Real GDP and Consumer Prices
4. Countries in Transition: Real GDP and Consumer Prices
5. Selected Countries: World Export Market Shares
6. Selected Countries: Current Account Positions
III 7. Industrial Countries: General Government Fiscal Balances and Debt
8. Industrial Countries: Balanced Government Deficits in Five Years and Reduced Structural Unemployment Rates
9. Industrial Countries: Hard-Landing Scenario
IV 10. Developing Countries: Trade and Economic Performance, 1988–94
11. Developing Countries: Diversification of Exports
12. Developing and Industrial Countries: Diversification of Export Markets
13. Developing Countries: Trends in Agriculture
14. Developing Countries: Macroeconomic Stability and Trade
V 15. Countries More Advanced in the Transition: General Government Budget Balance
Annex
16. United States: Effects of Fiscal Consolidation on the Exchange Rate
17. Italy: Effects of Fiscal Consolidation and a Reduced Interest Premium on the Exchange Rate
Boxes
1 Japan: Summary of Economic Stimulus Packages, 1992–95
Japan: Structural Budget Balance, Excluding Social Security
7 Poland: Foreign Trade by Direction
Charts
Chapter
I 1. World Indicators
II 2. Selected Industrial Countries: Output Growth and Leading Economic Indicators
3. Industrial Countries: Indicators of Consumer Confidence
4. Industrial Countries: Indicators of Business Sector Profitability
5. Three Major Industrial Countries: Policy-Related Interest Rates and Ten-Year Government Bond Rates
6. Major Industrial Countries: Output Gaps
7. Selected Industrial Countries: Producer Prices
8. Commodity Prices
9. Three Major Industrial Countries: Real Effective Exchange Rates
10. Selected Industrial Countries: Real Effective Exchange Rates
11. Developing Countries: Net Capital Flows
12. Emerging Markets: Equity Prices
13. Major Industrial Countries: Net Investment Income
14. Selected Developing Countries: Secondary Market Prices for Bank Loans
III 15. Major Industrial Countries: Long-Term Interest Rates and Consumer Price Inflation
16. Selected Industrial Countries: Inflation and Changes in Effective Exchange Rates
17. Japan: Real Prime Interest Rate
IV 18. Developing and Industrial Countries: Openness
19. Developing and Industrial Countries: Output Growth
20. Shares of World Output
21. Developing Countries: Export Shares
22. Developing and Industrial Countries: Current Account Convertibility
23. Trends and Cycles in Prices of Commodities and Manufactured Goods
24. Developing Countries: Capital Flows
25. Developing Countries: Net Capital Flows by Region, 1989–94
26. Developing Countries: Medium-Term Effects of a Reversal of Capital Inflows
V 27. Countries More Advanced in the Transition: Inflation
28. Selected Countries in Transition: Open Unemployment Rates
29. Selected Countries in Transition: Growth in GDP and Exports of Goods and Services
30. Selected Countries in Transition: Inflation
31. Selected Countries in Transition: Real GDP
32. Selected Countries in Transition: General Government Expenditure, Revenue, and Deficit
Boxes
2 Nonfuel Primary Commodity Prices
3 Uganda and Other Sub-Saharan Africa: Growth and Inflation
4 Selected African and Asian Countries: Indicators of Financial Deepening
5 Russia and Kazakhstan: Relative Price Variability
Assumptions and Conventions
A number of assumptions have been adopted for the projections presented in the World Economic Outlook. It has been assumed that average real effective exchange rates will remain constant at their August 1-23, 1995 levels, except for the bilateral rates among the exchange rate mechanism (ERM) currencies, which are assumed to remain constant in nominal terms; that “established” policies of national authorities will be maintained; that the average price of oil will be $16.67 a barrel in 1995 and $15.51 a barrel in 1996, and remain unchanged in real terms over the medium term; and that the six-month U.S. dollar London interbank offered rate (LIBOR) will average 6¼ percent in 1995 and 1996. 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 18, 1995.
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 less than half the final digit shown;
– 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 constituent figures and totals 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.
Preface
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 and Fiscal Affairs Departments.
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, Senior Advisor in the Research Department, together with David T, Coe, Chief of the World Economic Studies Division.
Primary contributors to the current issue are Francesco Caramazza. Staff an Gorne, Robert F. Wescott, Vincent Koen, Mahmood Pradhan, Paula De Masi, Alexander Hoffmaister, Thomas Helbling. Hossein Samiei, and Cathy Wright. Other contributors include Sheila Bassett, Ximena Cheetham, Hema De Zoysa. Robert Feldman. Douglas Laxton. Calvin McDonald, Steven Symansky, and Anthony G. Turner. The authors of the annex are indicated in the annex. The Fiscal Analysis Division of the Fiscal Affairs Department computed the structural budget and fiscal impulse measures. Sungcha Hong Cha and Toh Kuan provided research assistance. Shamim Kassam. Allen Cobler, Nicholas Dopuch, Isabella Dymarskaia, Gretchen Gallik, Mandy Hemmati, Yasoma Liyanarachchi, and Subodh Raje processed the data and managed the computer systems. Susan Duff, Margarita Lorenz, and Margaret Dapaah were responsible for word processing. Juanita Roushdy of the External Relations Department edited the manuscript and coordinated production of the publication; Tom Walter coordinated production of the Arabic, French, and Spanish editions.
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 11 and 13, 1995. 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.