Wes 1981–1982
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IN!I/IIII Im?l B E/1982/46 ST/ESA/124 Department of International Economic and Sodal Affairs WORLD ECO OMIC SURVE~ 1981-1982 Current Trends in the World Economy UNITED NATIONS New York, 1982 NOTE Symbols of United Nations documents are composed of capital letters combined with figures. Mention of such a symbol indicates a reference to a United Nations document. E/1982/46 ST/ESA/124 UNITED NATIONS PUBLICATION Sales No. E.82.II.C.1 00900 PREFACE Each year, in accordance wi th General Assembly resolution 118 (II) of 31 October 1947, the Economic and Social Council, at its second regular session, holds a general discussion on international economic and social policy. In the general discussion, as specified by the Assembly, the Council considers a survey of current world economic conditions and trends ••• in the light of its responsibility under Article 55 of the Charter of the United Nations to promote the solution of international economic problems, higher standards of living, full employment and conditions of economic and social progress and development. The World Economic Survey 1981-1982 has been prepared to assist the Council in its deliberations at the second regular session of 1982. The Survey is intended to provide the basis for a synthesized appraisal of current trends in the world economy, particularly as they affect the progress of developing countries. It is accordingly hoped that the Survey will also be of interest and use to other United Nations bodies, to Governments and to the general public. Annual surveys prepared by the regional commissions complement the World Economic Survey by providing a more extensive and detailed analysis of current trends at regional and national levels. The Survey has been prepared in the Office of Development Research and Policy Analysis of the Department of International Economic and Social Affairs of the United Nations Secretariat and is based on information available to the Secretariat as at 1 April 1982. -iii- CONTENTS Chapter I. THE WORLD ECONOMY IN THE EARLY 1980s ••••••••••••••••••••••••••••••.••• 1 The world economic situation, 1981-1983: salient features 1 Widespread slow-down of economic activity in 1981 •••••••••••••••••• 1 1982: a critical year •••..••.•••.•.•••.••• -•...•••••..••.••••••••••• 3 Wor,ld economic recovery fraught with uncertainties................. 4 The threat of protectionism e-••• •'••••••••••• e,••••••'........ 5 A slow recovery in developing countries............................ 6 A longer-term perspective ••••••••••••..•..•..•••••.•..••.•••••••••••• 8 The decline of growth rates in the last 15 years................... 8 Adaptability and domestic rigidities in developed market economies ••••••••••••••••••••••••••••••••••••••• '.. ••••••••• • 10 Cbncluding remarks ••••.•...•....•....•.•..••....•.. .-..•....•• e·•••• • '.. 14 II. GROwrH IN THE WORLD ECONOMY AND CURRENT POLICY STAlCES •••••••••••• ~ •• 18 Marked deceleration of growth rates throughout the world economy •••••••••••••••••••••••••••••••••••••••••••• _. •• • •• •••••••••••• 18 Virtual stagnation in developing countries ••••••••••••••••••••••••••• 21 Developed market economies: deepening recession in 1981-1982 •••••••••••••••_•• _••••••••••.• '.'•••••.••.•••••••••••'.......... 25 Further weakening of economic activity in the centrally planned economies ••••.•••.••••••••••••-••.•.•.•• -. .•••.•••.•••••••.••.• 36 Agricultural production: improved over-all performance 42 Changing patterns of energy consumption and production ••••••••••••••• 48 III. INTERNATIONAL TRADE AND PA~NTS ••••••••••••••••••••••••••••••••••••• 54 An over-all view: the transmission of recession through international trade and .f inancial markets. ••••••••••••• •••••••••••••• 54 Stagnation in world trade ••••..•.••••••••.••••••••••.••.••••••••••••• 55 Weakening primary commodity prices. •••••••••••••••••••••••••••••••••• 58 E\1rther adverse terms of trade movements in energy-importing developing countries ••••.•••••••••••••••••••••••••••••••.•••••••••.•• 61 -iv- CONTENTS (continued) Chapter Lessened current account imbalances in the world economy 62 Worsening payments difficulties in deficit developing countries - -........................... 64 Rapid changes in developing countries' interest payments flows ~ ...•..•...... .: . ••..••...• -. .... ..• ..•.• 65 Financing the deficits of developing countries~ serious liquidity problems in energy-importing countries .......... - ' . 68 The developed market economies~ large shifts in the aggregate deficit to the smaller countries ......... - . 72 Adjustment efforts in centrally planned economies .- . 75 Selected policy issues '•............... .'-...•... '.......... 77 Volatility in exchange rates for major currencies. ••••••••••••••••• 77 The growing protectionist threat ••••••••••••••••••••••••••••••••••• 80 IV. AOJUSTMENT A~D INTERNATIONAL CAPITAL FLOWS TO DEVELOPING OOUNTRI ES ••••••••••••••• '•••••••••••• •••••••••••••••••••••••• ". •••••••• 83 Short-term adjustment measures and their effects ....... - '. 83 Measures to bring about structural adjustment........................ 86 Investment and adjustment of productive structures ........... .......'. 87 External finance for structural adjustment ••••••••••••••••••••••••••• 89 Current limitations to accelerated borrowing from private financial institutions •••••••••••• ~........................ 89 The uncertain contribution of other financial market flows ' ,....••..•...-...•.•..•.•.. • -................. 91 The path of direct investment....................................... 93 The inadequacy of official flows ••••••••••••••••••••••••••••••••••• 93 Conclusions -. - '.......•. '. ............ 96 .-v- CONTENTS (continued) List of tables Table 1-1. World production: annual rate of growth in gross domestic prod.uc~ •••••••••••••••'•••••••••'•••••••••••'.'.............. 2 Mediu~teDn 1-2. growth trends in the world economy ................. '... 9 1-3. Developed market economies: long-term changes in selected parameters _ ' '. ............. 13 11-1. World production: annual growth rates of output volume, by country groups and major sectors, 1971-1982 •••••••••••••••••••• 19 11-2. Developing countries: rates of growth of real gross domestic product, 1971-1983 ••••••••••••••••••••••••••••••••••••••• 22 11-3. Developed market economies: rates of growth of real gross national product/gross domestic product, 1976-1983 •••••••••••••••• 27 II-4. Developed market economies: central government budget surpluses or deficits as percentages of GNP ••••••••••••••••••••••• 29 11-5. Major industrial countries and Switzerland: commercial bank lending rates to prime borrowers, end of period, 1978-1981 ••••• -••••-•••••••••••• '.'•....•••••..••••••••••'............. 31 11-6. Developed market economies: rates of change in consumer prices, 1978-1981 . _................................................ 33 11-7. Eastern Europe and the Union of Soviet Socialist Republics: basic economic growth indicators, 1976-1982 37 11-8. World food production, 1970-1981: indices and trends............. 43 11-9. World trade in food products, 1970-1980: volume indices and trends •••••••••••••••••••••••••••••••••••••••••••••••••••••• • '. 45 11-10. World cereal production trends and trade volumes, 1970-1980 ••••••• 47 11-11. World oil production and consumption, 1979-1981 ••••••••••••••••••• 50 111-1. World trade: annual rates of change in volume and prices, 1976-1982 ...•••••• '._••••••..•......•.......•••._........... .•.••..•.. 56 111-2. Changes in the prices of internationally traded commodities, 1980-19.82 ••••••••••••••..•....'.................................... S9 111-3. World: balance of payments on current account, by country groups, 1978--1982 ••••••••••.•••••••••• •.•••••.••...•..••.•••••••••• 63 -vi- CONTENTS (continued) Table 111-4. Net energy-importing developing countries: external interest payments and direct investment income as shares of total current foreign exchange earnings, 1976-1981 ••••••••••••••••••••••• 66 III-5. Net flow of IMF credit to energy-importing developing countries, 1978-1981 .•.....•...•••....•••.•••.•....••••.••••.•...•. 70 111-6. Developed market economies: balance of payments on current account, 1978-1982 .....•........................................... 73 I II-7. Eastern Europe and the USSR: trade balances, 1979-1981 75 111-8. Nominal and effective exchange rates for selected convertible currencies, 1978-1981 •••••••••••••••••••••••••••••••••• 78 IV-I. Net energy-importing developing countries: trade balance in real and nominal terms, 1977-1981 •••••••••••••••••••••••••••••••••• 85 -vii- Explanatory notes The following symbols have been used in the tables throughout the report: Three dots ( ••• ) indicate that data are not available or are not separately reported. A dash (-) indicates that the amount is nil or negligible. A blank in a table indicates that the item is not applicable. A minus sign (-) indicates a deficit or decrease, except as indicated. A full stop (.) is used to indicate decimals. A slash (I) indicates a crop year or financial year, e.g. 1970/71. Use of a hyphen (-) between dates representing years, for example, 1971-1973, signifies the full period involved, including the beginning and end years. Reference to "tons" indicates metric tons and to "dollars" ($) United States dollars, unless otherwise stated. Annual rates of growth or change, unless otherwise stated, refer to annual compound rates. Details and percentages in tables do not necessarily add to totals, because of rounding. The following abbreviations