International Economic Outlook

Article excerpt

Although economic stagnation in the industrial countries persisted last year, economic growth in the developing countries remained relatively strong. Our medium term projection for the global economy identifies the year 1993 as the beginning of a global convergence in trade and industrialization for the following reasons:

1). In the industrial countries the current downswing, characterized by real economic growth of 1.0% in 1991 and 1.6% in 1992, was not as severe as during the 1974-75 and 1980-82 worldwide recessions. Capacity utilization has remained high and therefore, private investment is expected to respond without long lags to increased levels of demand and employment. The projected recovery will be modest by past standards. Real output in the industrial countries is projected to be gradually strengthening from 1.6% in 1992 to 2.5% in 1993 and 3.0% in 1994.

2). In the developing countries, excluding Eastern Europe and the former Soviet Union, economic growth has continued to accelerate from 3.3% in 1991 to an estimated rate of 5.2% in 1992 and is projected to be nearly 6.8% in 1993. The economic stabilization and reform programs of the eighties have resulted in a reduction of government deficits, control of inflation and privatization, which have led to increased efficiency and competitiveness. According to the International Monetary Fund (IMF), about 35 countries, accounting for over fifty percent of output in the developing economies, can be classified as successful adjusters and the developing world could provide a considerable stimulus to the global economy. Growth is expected to be especially strong in East Asia spurred by a growing integration of the region's economies as evidenced in the lowering of trade barriers and reallocation of labor intensive industries from high labor cost countries to surplus labor countries. For instance, the strong economic growth of China stems from the development of closer links with Hong-Kong and Taiwan. In Latin America several economies are expected to perform exceptionally well with real growth rates of 5% to 6% because of a bold drive towards liberation and privatization. The growth of regional trade has been the major factor behind the economic growth of the Asian and Latin American economies.

3). In the former centrally planned economies in Eastern Europe and the Soviet Union, real economic activity has substantially declined in the last two years. In many states economic reforms have been progressed to such a level that output contraction may have ended. In Poland and Hungary positive growth rates of output in the order of 2% and 1.5% are forecast factor 1993 compared with growth rates of about -5% in 1992 and -1 0% in 1991. However, the other Eastern European nations and the former Soviet states are still in the early stages of the economic reform process and negative growth rates in output will be the norm in 1993. For the region as whole, our system projects strong economic recovery during 1994-96 with output growth rates ranging between 3% and 6%. Economic expansion will be led by investment and by a trade boom within the area, which has currently collapsed, as well as increased trade with the neighboring Western European countries. World trade has continued to expand despite the slowdown of growth in the industrial countries. Trade in manufactures in real terms is estimated to have increased by about 4.5% in 1992 compared with a growth rate of 3.2% in 1991 and 4.6% in 1990. Our system projects global trade growth in manufactures to accelerate to a rate of 5.5% in 1993 and 6% in 1994. This scenario is based on the structural changes underway in the global economy characterized by three elements: (1) rapid industrialization in the developing world; (2) substantial progress in economic adjustment in the former centrally planned economies; and (3) a moderate recovery in the industrial countries. The growth intensity of trade between industrial and developing countries will be the dominant feature of trade developments in the world during nineties. …