Front Matter

Front Matter

International Monetary Fund. Research Dept.
Published Date:
October 1994
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    © 1994 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 9781557753854

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

    Price: US$34.00

    (US$23.00 to full-time faculty members and students at universities and colleges)

    Please send orders to:

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    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, 1994 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 $15.16 a barrel in 1994, $15.15 a barrel in 1995, 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 5 percent in 1994 and 6 percent in 1995. 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 12, 1994.

    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 (for example, 1993–94 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

    • / between years or months (for example, 1993/94) 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 (for example, 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.


    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 the 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 Robert P. Ford, Staffan Gorne, Tamim Bayoumi, Paula De Masi, Monica Hargraves, Vincent Koen, Mahmood Pradhan, Alexander Hoffmaister, Hossein Samiei, and Cathy Wright. Other contributors include Bas Bakker, Sheila Bassett, Robert Feldman, Barry Johnston, Manmohan Kumar, Carmen Reinhart, Ratna Sahay, Sayuri Shirai, Gilbert Terrier, and Carlos Végh. The authors of the annexes are indicated in each case. The Fiscal Analysis Division of the Fiscal Affairs Department computed the structural budget and fiscal impulse measures. Anthony G. Turner, Sungcha Hong Cha, and Toh Kuan provided research assistance. Shamim Kassam, Allen Cobler, Nicholas Dopuch, Gretchen Gallik, Yasoma Liyanarachchi, Prem Pillai, and Subodh Raje processed the data and managed the computer systems. Susan Duff, Margarita Lorenz, and Nora Mori-Whitehouse were responsible for word processing. James McEuen 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 8 and 9, 1994. 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.

    Cooperation to Strengthen the Global Expansion

    The following “Declaration on Cooperation to Strengthen the Global Expansion” was adopted at the conclusion of the forty-third meeting of the Interim Committee of the Board of Governors of the IMF, October 2, 1994.

    1. The immediate prospects for economic growth in the world economy are better than they have been at any time in this decade. But serious policy challenges remain. For the industrial countries the most important are to sustain economic growth, reduce unemployment, and prevent a resurgence of inflation. Growth in the developing countries (and in particular, in the poorest countries) must be maintained and extended. The economies in transition must be integrated into the international economy and set firmly on the path of sustainable growth.

    2. The planned entry into force of the Uruguay Round trade agreements on January 1, 1995 will enhance world economic prospects by deepening global economic integration. The Committee urges ratification of the agreements without delay, and calls for action to sustain the impetus of trade liberalization and for close cooperation between the Fund and the proposed WTO. The Committee also welcomes the growing trend toward currency convertibility and encourages member countries to remove impediments to the free flow of capital.

    3. The recent success of many developing economies illustrates once again the validity of a strategy based on steadfast implementation of strong programs of macroeconomic adjustment and structural reform. The Committee urges other countries to follow a similar bold strategy for sustained economic growth and domestic and external financial stability. Such efforts by developing countries must be supported by a global environment characterized by improved access to industrial country markets and timely financial support on appropriate terms, including a flexible approach to official bilateral debt reduction for low-income countries, in the context of strong policies.

    4. The impressive turnaround in several economies in transition also attests to the benefits of macroeconomic discipline and structural reforms. The Committee urges all other economies in transition to be bolder in their approaches to stabilization and reform. Experience has demonstrated the central importance of early fiscal reforms and firm monetary discipline in the early stages of the transformation process to achieve financial stability. This needs to be accompanied by institution building, price and external sector liberalization, enterprise restructuring and privatization, and financial sector reform. Social safety nets that are well targeted and cost efficient are also necessary, to alleviate the adverse impact of higher open unemployment. As in the case of developing countries, the Committee recognizes the importance of a supportive international environment.

    5. The improved economic outlook for the industrial countries creates an opportunity for them to strengthen growth and reduce unemployment, while safeguarding the progress toward price stability. The Committee attaches particular importance to the following three elements of a common strategy.

    • Structural reforms to eliminate impediments to sustained growth, including steps to dismantle nontariff trade barriers and to ensure the long-term financial viability of health care and public pension systems. The Committee notes that problems of long-term unemployment and lack of jobs for young and unskilled persons should be addressed by efforts to improve education and training and by fundamental labor market reforms to reduce disincentives to employment.

    • A strengthening of fiscal consolidation efforts in 1995 and beyond as part of a medium-term strategy to significantly reduce fiscal deficits beyond the effects of cyclical recovery, and cut debt-to-GDP ratios, thereby facilitating lower real interest rates. The Committee notes in particular that countries with especially serious fiscal problems must not delay major corrective action.

    • Readiness to adjust monetary conditions to maintain price stability, as a condition for sustaining medium-term growth, including by timely increases in interest rates with a view to preventing the emergence of inflationary pressures. This will reinforce the hard-won credibility of anti-inflationary monetary policies.

    6. The Interim Committee will review progress in implementing the agreed common strategy at its Spring 1995 meeting.

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