World Economic Outlook

World Economic Outlook

Safeguarding Macroeconomic Stability at Low Inflation

September 1999

A Survey by the Staff of the International Monetary Fund
©1999 International Monetary Fund

The World Economic Outlook presents the IMF staff’s analysis and projections of economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects. It is usually prepared twice a year, as documentation for meetings of the International Monetary and Financial Committee, and forms the main instrument of the IMF’s global surveillance activities.

Disclaimer
Use the free Adobe Acrobat Reader to view PDF files.
Tips for using PDF files

Contents
Assumptions and Conventions
Further Information and Data
Preface
Chapter I.	World Economic Outlook and the Challenges of Global Adjustment
	Macroeconomic Stability and the Forces of Globalization:     Lessons from the 1990s
	The Inevitable U.S. Slowdown and Adjustment
	Japan: Recovery in Sight?
	Securing a Lasting Revival of Growth in Europe
	Emerging Market Economies in Asia and Latin America:     Ensuring Sustainable Recoveries
	Middle East and Africa: Varying Responses to Adjustment     Pressures
	After a Decade of Transition: Widening Gaps Between     Strong and Weak Performers
	Appendix: Year 2000 Contingency Planning
	Boxes
	1.1	Australia and New Zealand: Divergences, Prospects, and Vulnerabilities
	1.2	Policy Assumptions Underlying the Projections for Selected Advanced Economies
	1.3	Comparing G-7 Fiscal Positions--Who Has a Debt Problem?
	1.4	Oil Price Assumptions and the World Economic Outlook
	1.5	The Regional Economic Impact of the Kosovo Crisis
	Tables
	1.1	Overview of the World Economic Outlook Projections
	1.2	Selected Economies: Current Account Positions
	1.3	Advanced Economies: Real GDP, Consumer Prices, and Unemployment
	1.4	Major Industrial Countries: General Government Fiscal Balances and Debt
	1.5	Selected Developing Countries: Real GDP and Consumer Prices
	1.6	Countries in Transition: Real GDP and Consumer Prices
	1.7	Developing and Transition Economies: Y2K Scenario Results
	Figures
	1.1	Global Indicators
	1.2	Financing Conditions for Emerging Markets
	1.3	Selected European Countries, Japan, and the United States: Indicators of Consumer and Business Confidence
	1.4	Y2K Interest Rate Spike
Chapter II.	From Crisis to Recovery in the Emerging Market Economies
	Improving Financial Conditions
	Patterns of Recovery in Asia and Latin America
	Structural Reform Requirements in Crisis-Hit Asian     Economies: Conditions for a Durable Recovery
	Russia and Neighboring Countries in Transition: Prospects     for Recovery and Reform
	Boxes
	2.1	The Emerging Market Crises and South Africa
	2.2	Capital Flows to Emerging Market Economies: Composition and Volatility
	2.3	Structural Reforms in Latin America: The Case of Argentina
	2.4	Malaysia's Response to the Financial Crisis: How Unorthodox Was It?
	2.5	Financial Sector Restructuring in Indonesia, Korea, Malaysia, and Thailand
	2.6	Counting the Costs of the Recent Crises
	Tables
	2.1	Gross Private Financing to Emerging Market Economies
	2.2	Emerging Market Economies: Net Capital Flows
	2.3	Financial Sector Restructuring
	2.4	Russian Federation: Macroeconomic Indicators, 1996–99
	2.5	Countries in Transition: Average Annual Growth Rates in 1994–98, and 1998 GDP Per Capita in U.S. Dollar Purchasing Power Parity Terms
	2.6	Countries in Transition: Structural Reform Indicators, 1994–98 Averages
	2.7	Countries in Transition: Indicators of Export Performance and Labor Productivity in Industry, 1994–98 Averages
	Figures
	2.1	Selected Emerging Market Economies: Short-Term Interest Rates
	2.2	Selected Emerging Market Economies: Bilateral U.S. Dollar Exchange Rates
	2.3	Emerging Market Economies: Equity Prices
	2.4	Selected Emerging Market Countries: Eurobond Yield Spreads and Brady Bond Spreads
	2.5	Selected Emerging Market Economies: Real GDP
	2.6	Selected Asian and Latin American Economies: Real Effective Exchange Rates
	2.7	Selected East Asian and Latin American Countries: Bank Credit to the Private Sector and Total External Debt, 1998
	2.8	Selected East Asian Countries: Progress with Corporate Sector Restructuring
Chapter III.	Growth Divergences in the United States, Europe, and Japan: Trend or Cyclical?
	Assessing the Sustainable Level of Output
	The United States: Will the Good Times Endure?
	Japan: Why the Decade of Lost Growth May Be     an Aberration
	Can Europe Grow Faster?
	Alternative Scenarios: Harder Landing or Higher     World Growth?
	Tables
	3.1	United States, the Euro Area, and Japan: Estimates of Potential Output Growth
	3.2	Selected European Economies: General Government Structural Balances and Long-Term Interest Rates
	3.3	Harder Landing Scenario
	3.4	Accelerated Adjustment Scenario
	Figures
	3.1	United States, the Euro Area, and Japan: Economic Performance Indicators
	3.2	United States, the Euro Area, and Japan: Vintages of Potential Output Growth and Output Gaps
	3.3	United States, the Euro Area, and Japan: Output Per Employee and Per Head of Population
	3.4	United States: Output, Labor Productivity, and Inflation in Recent Expansions
	3.5	United States: Policy and Demand Indicators
	3.6	United States, the Euro Area, and Japan: Changes in WEO Export Market Growth Assumptions
	3.7	United States: Selected Price Indices
	3.8	Japan: Policy and Demand Indicators
	3.9	Euro Area: Policy and Demand Indicators
	3.10	Euro Area: Economic Performance Indicators
	3.11	Euro Area: Convergence of Output Per Worker
	3.12	United States, the Euro Area, and Japan: Household and National Saving Rates
Chapter IV.	Safeguarding Macroeconomic Stability at Low Inflation
	The Achievement of Reasonable Price Stability
	Can Inflation Be Too Low?
	Price Stability and Macroeconomic Stability
	Asset Prices and Monetary Policy
	Boxes
	4.1	The Effects of Downward Rigidity of Nominal Wages on (Un)employment: Selected Simulation Results
	4.2	The Effects of a Zero Floor for Nominal Interest Rates on Real Output: Selected Simulation Results
	4.3	Recent Episodes of Negative Inflation
	4.4	Global Liquidity
	Tables
	4.1	Selected Countries: Measurement Bias in the Consumer Price Index
	4.2	Deflation and Output Growth
	4.3	Pronounced Changes in Real Equity Prices
	4.4	Selected Countries: Illustrative Examples of Potential Stock Market Overvaluation (First Quarter, 1999)
	4.5	Selected Countries: Correlation of Equity Price Inflation and Goods Price Inflation
	Figures
	4.1	Industrial Countries: Consumer Price Inflation
	4.2	Hypothetical Distribution of Nominal Wage Increases
	4.3	Selected Countries: Short-Term Interest Rates
	4.4	Industrial Countries: Output Gap and Inflation
	4.5	Comparison of Two Stock Market Crashes
	4.6	Selected Countries: Stock Prices
	4.7	Selected Countries: Measures of Stock Market Valuation
	4.8	Selected Countries: Net Financial Balances
Chapter V.	Trends and Issues in the Global Trading System
	Trends in Trade and Policies
	Current Issues and the New Round
	Table
	5.1	Intraregional Export Shares, 1990–98
	Figures
	5.1	Exports of Goods
	5.2	Developing Countries and Countries in Transition: Average Annual Growth of Exports, 1988–98
	5.3	World Merchandise and Services Exports
Chapter VI.	Growth in Sub-Saharan Africa: Performance, Impediments, and Policy Requirements
	Past Growth in SSA Countries and Its Relationship to Policies
	Improving SSA's Growth Performance Further
	The Path to Sustained Growth
	Box
	6.1	Africa and World Trends in Military Spending
	Tables
	6.1	Sub-Saharan Africa and Other Developing Country Groups: Education and Health
	6.2	Sub-Saharan Africa and Other Developing Country Groups: External Performance
	6.3	Sub-Saharan Africa and Other Developing Country Groups: Quality of Governance, Institutions, and Public Services
	6.4	Sub-Saharan Africa and Other Developing Country Groups: Financial and Infrastructure Indicators
	6.5	Sub-Saharan Africa: Selected Debt Sustainability Indicators
	Figures
	6.1	Sub-Saharan Africa and Other Developing Country Groups: Growth, Investment, and Saving
	6.2	Sub-Saharan Africa and Other Developing Country Groups: Inflation and Fiscal Balance
Annex.	Summing Up by the Chairman
	Statistical Appendix
	Assumptions
	Data and Conventions
	Classification of Countries
	List of Tables
		Output (Tables 1–7)
		Inflation (Tables 8–13)
		Financial Policies (Tables 14–21)
		Foreign Trade (Tables 22–26)
		Current Account Transactions (Tables 27–32)
		Balance of Payments and External Financing (Tables 33–37)
		External Debt and Debt Service         (Tables 38–43)
		Flow of Funds (Table 44)
		Medium-Term Baseline Scenario (Tables 45–46)
	World Economic Outlook and Staff Studies for the World Economic Outlook,
	Selected Topics, 1992–99