Increased Uncertainties Regarding Growth Prospects of the World Economy

The economic fundamentals governing the development of the global economy over the next five years are likely to be more stable than in the eighties. The interest rate and the exchange rate of the dollar will be relatively low, mainly because of the weakness of the U. S. economy. Prices of raw materials, of crude oil in particular, are projected to rise only moderately. Prices in overall world trade will rise at a rate of about 3 percent from 1991 to 1996. The real interest rate for international debts will therefore not exceed 2 percent, a rate markedly lower than in the eighties. Under these conditions world-wide output could expand by 3 percent per year on average, world trade by 6 percent per year. The weakness of the international economy, recorded since the middle of 1991, constitutes a serious risk factor for the present forecast, however. If a world-wide stagnation or recession were to occur in 1992, medium-term growth would also be affected. Countries, which have contributed the most to overcoming international recessions, as for example the U. S., will no longer be in a position to play the role of a "locomotive".