International economic developments.
The world economy:
more balanced growth.
The dollar: down at last.
The upward trend which characterized the
world economy in 1984 was maintained.
Admittedly, the rate of growth was slightly
slower, but on the other hand it was more evenly
distributed, and inflation declined in the
majority of countries.
The more balanced pattern of growth was
observed in the developing countries as well as
in the industrialized countries where the league
leaders as a whole lost some ground, allowing
those with a slower rate of growth to catch up to
some extent. Thus, in the United States the rate
fell from 6.5% in 1984 to 2.2%, while the
economies of the European countries
accelerated to 2.3%. Japan was again among the
star performers with a growth rate of 4.6%.
Among the developing countries, rapidly
expanding economies such as those of Korea
and Singapore suffered a check, while elsewhere,
entered its fourth year in 1985, this need not be a
cause for dissatisfaction, the more so as inflation
further diminished in most countries. In the
OECD as a whole, the rate, at 4.6%, was the
lowest since 1968, which implies that on this
ground no tightening of the policy is to be
expected in the immediate future. Moreover, the
fall in inflation opens the way for lower interest
rates, making it easier for many debtor countries
to meet their obligations.
notably in the debtor countries of South
America, a modest resumption of growth was
discernible.
The net result was a slight decrease in world
trade, but as the recovery of the world economy
In cases where the fall in inflation was not solely
a result of moderate wage demands, but also of
falling raw material prices, there were, how
ever, negative consequences. The downward
trend in raw material prices, which was due in
part to rising production in both exporting and
importing countries (making the latter more self-
sufficient), caused difficulties for many
developing countries. A striking aspect on this
occasion was that not only were a number of
"traditional" debtor countries affected, but that
also several oil producers were relatively hard
hit, albeit in most cases the effects were absorbed
by a good restrictive policy.
The year under review will long be remembered
as the one which saw the end of a five-year
climb in the value of the US dollar. The debate
as to which factor or factors was or were decisive
may well go on for ever. Was it the relative
decline in American interest rates, or the
steadily increasing current account deficit of the
USA, or the measures adopted following the
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INFLATION OECD COUNTRIES
No grounds for dissatisfaction with the development in world
trade.
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