Hard Times
Large industrialised counties are now in a recession. What are the prospects for
economic recovery?
The three most important industrial economies in the world are, at the moment, facing
enormous problems. Germany is struggling with the cost of reunification and is in
recession. Japan is also experiencing recession and the United States has a large
budget deficit.
Forecasters and analysts face questions about the prospects of an economic recovery.
Here are some of their findings:
The election of a new president of the United States gave hope to the rest of the
world. If the US recovered, the rest of the world would face a more promising future.
However, analysts now accept that the US will only recover very slowly.
Consumer and investor confidence is still lacking. Large deficits and declining
short-term interest rates mean that there is little scope for economic stimulus.
The Japanese economy, after years of trade and budget surpluses, is in deep recession
and the growth rate has slowed down considerably. German economists have lowered
their forecasts for economic growth this year. The lowering of German interest rates
may bring some relief to other members of the European Exchange Rate Mechanism (ERM).
However, Germany's importance as Europe's largest export market may decline.
Most forecasters are predicting world growth of only one percent in 1993. Others
predict that it will only be after the completion of the GATT (General Agreement
on Tariffs and Trade) negotiations that the world economy will improve.
In some parts of the world, there are more positive signs, particularly in some
Latin American countries and in South-East Asia. Another encouraging point is that
analysts do not expect an upsurge in inflation in 1993.
Analysts says that, as long as the rate of interest stays above the rate of growth
in national income, then the ratio of debt to income will get worse. Falling interest
rates help towards overcoming this problem. They believe it may take several years
before there is real recovery. However, advances in technology and the collapse
of communism offer hope for the world economy.
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