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.