Problem

Uneven economic recovery

Other Names:
Imbalance in the recovery from recession
Incidence:
While a reversal of recessionary trends began in 1983, recovery has not become general. There are contradictory influences at work in the world economy making for a diversity of experience among regions. Some parts of the world, especially North America and some developing countries of south and east Asia, are now experiencing quite a rapid pace of advance in income and output. Economic growth in the centrally planned economies has also accelerated, though its rate generally remains at a lower level than in past years. But most developing countries are beset by problems which seriously hinder their prospects for vigorous reactivation of development; and recovery in western Europe has so far been weak. World output appears to have expanded at a rate of about 2% in 1983, accelerating to between 3.5 and 4% in 1984 and 1985. While these rates are markedly higher than those attained in the first three years of the decade, they are modest for a period of economic recovery.

The situation in much of the developing world remains deeply troubling. Many countries are emerging from the recession with a legacy of difficulties which will not be dissipated by recovery elsewhere. The aftermath of a pervasive drought has left many sub-Saharan African countries with a very precarious payments position. Debt-service ratios, particularly in Latin America, are likely to remain unusually high even after recovery in industrial countries; and debtor countries will still be compelled to retrench drastically. Apart from a number of countries, mostly in South and East Asia, per capita incomes have fallen for several consecutive years, and investment expenditures are generally well below the levels realized in the late 1970s. External loan financing from private sources has slowed down to a trickle, and the stringent international liquidity situation restricts capital goods imports. Among the developed market economies, a normal cyclical upswing in the USA and continued growth in Japan are being accompanied by a recovery in western Europe that is so far limited to some countries and is cyclically weak. While an expansionary fiscal policy has aided recovery in the USA, a number of western European countries have chosen to pursue relatively restrictive fiscal policies in order to reduce structural budget deficits and the overall size of the government sector. Lack of dynamism in demand has also restrained the expansion of output in Western Europe. Intra-European trade, which comprises a large percentage of total exports, has been adversely affected by weak aggregate demand; and exports to developing countries - more than half of total exports to countries outside the region - have contracted in absolute terms.

Problem Type:
F: Fuzzy exceptional problems
Date of last update
01.01.2000 – 00:00 CET