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World Economic Survey 1986

Current Trends and Policies in the World Economy

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The large imbalances in trade and payments that have in recent years characterized the world economy persisted in 1985 and early 1986. In particular, unprecedented disequilibrium prevailed in the trade and financial relations of major industrial countries, and there was a continued overall net transfer of resources from developing to developed countries, largely related to the international debt crisis. Both of these situations were, in the course of 1985, increasingly perceived as unsustainable, economically as well as politically.

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World economic conditions: Main features, policies and prospects

Although the world economy in 1985 was marked by disappointingly slow growth in world output and international trade, several important policy initiatives were taken, which have improved the environment for economic decisions of policy makers and private sector agents. As a result, short-term prospects for developed market economies appear more encouraging than a year ago. The steps taken to reduce the United States fiscal deficit, the downward trend in nominal interest rates and the fall of the dollar exchange rate have eased pressures in financial markets and improved the outlook for the correction of the high trade and current account imbalances among major countries. Since late 1985, oil prices have declined sharply, improving the growth prospects for energy-importing countries, but at the cost of a considerable

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