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World Economic Survey 1987

Current Trends and Policies in the World Economy

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The modest expansion that characterizes the world economy during most of the first half of the 1980s persisted in 1986. Inflation has decelerated considerably and industrial countries are entering their fifth year of expansion, though at a slow pace. The world economy appears to be set in a slow growth path, which is likely to delay the great adjustments required at the national and international levels. The continuation in 1986 and early 1987 of the trade imbalances of the larger industrial economies has added to the strains on the world financial and trade systems.

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International finance, debt and balance-of-payments adjustment

The primary concern of policy makers with regard to the International financial situation differ dramatically from those of a few years ago. At the beginning of the decade some developing countries were able to borrow laTge sums from international commercial banks. There were fears that credit was too easy, but the value of trade was growing strongly. The concern today is that many of those countries are excluded from new borrowing as a legacy of debt crises and the limited prospects for the growth of world trade. Instead, much of the world’s international financial flows are directed towards the largest economy of the world, which used to be a major source of capital outflows.

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