International trade and finance

The global recession is having serious repercussions on international trade and finance. During 1981-1982, and particularly in the latter year, recessionary impulses emanating from the developed market economies spread rapidly to developing countries in the form of weakening rates of growth of real exports and, especially, deteriorating terms of trade. Moreover, the emphasis on monetary policies to combat inflation in the major industrial centres led to very high nominal and real interest rates, which contributed to the payments difficulties of developing countries. At the same time, during the course of 1982, the international banks became increasingly unwilling to continue to expand lending to most developing countries, and particularly to those countries that were experiencing difficulties in meeting their external payments. As a result, the volume of imports of developing countries contracted, adding momentum to the recessionary forces at work in the world economy. In several countries financial strains became so severe that most external payments were delayed. In the second half of the year, the international financial system was shaken by simultaneous problems in several large debtor countries.

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