World Economic Outlook

Focus on Transition Economies

September 2000

A Survey by the Staff of the International Monetary Fund
©2000 International Monetary Fund

The World Economic Outlook presents the IMF staff’s analysis and projections of economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects. It is usually prepared twice a year, as documentation for meetings of the International Monetary and Financial Committee, and forms the main instrument of the IMF’s global surveillance activities.
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Assumptions and Conventions
Chapter I.  
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Prospects and Policy Challenges

Can the United States Achieve a "Soft Landing"?

Maintaining the Expansion in Europe

Regaining the Confidence of Japan's Consumers

Latin America and the Carribean: Recovery and

Asia: Continuing Strong Expansion

Commonwealth of Independent States: Will
   Macroeconomic Improvements Accelerate
   Structural Reform?

Sustaining the Momentum in Countries on the European Union Accession Track

Middle East and Africa: Recovering But Vulnerable to
   Commodity Price Cycles

The Transition Process

Appendix I: Alternative Scenarios

Appendix II: The Global Current Account Discrepancy

 1.1   Why is the Euro so Undervalued?
 1.2   Risky Business: Output Volatility and the Perils of Forecasting in Japan
 1.3   China's Prospective WTO Accession
 1.4   The Economic Impact of HIV/AIDS in Southern Africa
 1.1   Overview of the World Economic Outlook Projections
 1.2   Selected Economies: Current Account Positions
 1.3   Advanced Economies: Real GDP, Consumer Prices, and Unemployment
 1.4   Major Industrial Countries: General Government Fiscal Balances and Debt
 1.5   Selected Western Hemisphere and Asian Countries: Real GDP, Consumer Prices, and Current Account Balance
 1.6   Commonwealth of Independent States and Countries on the European Union Accession Track: Real GDP, Consumer Prices, and Current Account Balance
 1.7   Selected Middle Eastern and African Countries: Real GDP, Consumer Prices, and Current Account Balance
 1.8   Alternative Scenario: Harder Landing
 1.9   Alternative Scenario: Faster Growth in Euro Area and Japan
 1.1   Global Indicators
 1.2   World Industrial Production
 1.3   A Comparison of Global Growth in Recent Slowdowns
 1.4   Major Industrial Countries: Output Gaps
 1.5   United States: Rapid Growth, But Rising Imbalances
 1.6   Euro Area: A Strengthening Expansion Will Allow Accelerated Reform
 1.7   Japan: Modest Recovery But Consumption Still Weak
 1.8   Selected Latin American Countries: Financial Developments
 1.9   Selected East Asian Countries: Real GDP Growth and Its Composition
 1.10   Russia: Signs of a Strong Recovery
 1.11   Selected European Countries: Export Market Growth and Real Effective Exchange Rates
 1.12   Africa and the Middle East: Terms of Trade Impact of Commodity Price Changes
 1.13   Global Current Account Discrepancy
Chapter II.  
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Current Issues in the World Economy

Productivity Growth and IT in the Advanced

Developments in Global Equity Markets

International Capital Flows to Emerging Markets

Commodity Prices and Commodity Exporting

 2.1   U.S. Monetary Policy and Sovereign Spreads in Emerging Markets
 2.2   Developments in the Oil Markets
 2.1   United States: Sources of the Acceleration in Labor-Productivity Growth, 1974–99
 2.2   Market Capitalization of Information Technology Stocks as a Share of Total Market Capitalization
 2.3   Decomposition of the IT Sector into Telecommunications and Computer Subsectors
 2.4   International Correlations of Stock Price Changes
 2.5   Gross Private Financing to Emerging Market Economies
 2.6   Emerging Market Economies: Net Capital Flows
 2.7   General Government Balance
 2.8   External Debt
 2.9   Selected Primary Commodities: Recent Price Movements
 2.10   Nonfuel Commodity Exporters: Export Dependency and Terms of Trade
 2.11   Fuel Exporters: Export Dependency and Terms of Trade
 2.12   Preliminary Estimates of a First Round Effect of an Oil Price Increase in Oil Importing Developing Countries
 2.13   Macroeconomic Impact of a Ten Percent Increase in Oil Prices
 2.1   Faster-Growing Advanced Economies: Output, Employment, and Productivity Growth in the Business Sector
 2.2   Advanced Economies: Expenditure and Production of Information and Communications Technology, 1997
 2.3   Illustrative Country Scenario: New Economy Uncertainty and Monetary Policy
 2.4   Equity Price Indices
 2.5   Price-Earnings Ratios for Information Technology (IT) vs. Non-IT Sector
 2.6   Selected Regions: Equity Price 12-Month Volatility
 2.7   Market Value of Information Technology Stocks, 1999
 2.8   Emerging Markets: Bond Spreads
 2.9   Emerging Markets: Capital Flows, Bond Spread, and Volatility in Equity Returns
 2.10   Selected East Asian and Latin American Economies: Current Account Balance
 2.11   Selected Emerging Market Economies: Capital Flows
 2.12   Prices of Crude Petroleum and Nonfuel Commodities
Chapter III.  
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Transition: Experience and Policy Issues

Transition Experience to Date

Explaining Differences in Performance and Resulting
   Policy Lessons

Policy Agenda for the Future

Reinforcing the Momentum of Structural and
   Institutional Reform
Appendix: Indicators of Structural Reform and
   Institutional Quality

 3.1   The IMF and the Transition Economies
 3.2   Transition Controversies
 3.3   Addressing Barter Trade and Arrears in Russia
 3.4   Privatization in Transition Economies
 3.5   Fiscal Decentralization in Transition Economies: China and Russia
 3.1   Selected Characteristics of Transition Countries
 3.2   Transition Economies: Alternative Geographic, Political, and Reform-Effort Groupings
 3.3   Foreign Indebtedness, 1999
 3.4   Countries' Institutional Quality: Quintiles, 1997–98
 3.5   Proxy Measures of Human Capital
 3.6   Initial Conditions
 3.7   Areas of Remaining Major Reform Backlog
 3.8   Transition Economies' Membership in International Organizations
 3.9   EBRD Transition Indicators, 1999
 3.10   Liberalization Index
 3.11   Index of Institutional Quality, 1997–98
 3.12   Correlation Among Indices
 3.1   Key Elements of Reform in Transition
 3.2   Progress in Structural Reform and Output Performance
 3.3   Output and Inflation Performance During Transition
 3.4   Real GDP Ratio, 2000 to 1989
 3.5   Macrostabilization: Budget Deficit and Inflation, 2000
 3.6   Change in Poverty and Income Distribution
 3.7   Progress in Reform by Area, 1999
 3.8   Aggregate EBRD Transition Indicator, 1999
 3.9   Index of Institutional Quality, 1997–98
 3.10   Progress in Structural Adjustment
 3.11   Adjustment Gap of Regional Export Structure
 3.12   Current Account Deficit and Foreign Direct Investment, 1999
 3.13   Composition of Net Capital Flows
 3.14   Government Revenue and Expenditure, 1999
 3.15   Financial Maturity Indicators, 1994–99
 3.16   Trade-Weighted Real GDP Growth of Trading Partners
Chapter IV.  
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Accession of Transition Economies to the European Union: Prospects and Pressures

Where Do the CEECs Stand on the Road to

Accession and Convergence: Costs, Benefits,
   and Risks

Challenges for the EU as it Prepares for Enlargement

Conclusions and Policy Implications

 4.1   Formalities and Procedures of EU Enlargement
 4.2   Previous EU Enlargements
 4.3   Accession of Turkey to the European Union
 4.4   Convergence and Real Exchange Rate Appreciation in the EU Accession Countries
 4.1   Central and Eastern European Countries: Macroeconomic Indicators
 4.2   Selected European Countries: Economic Indicators
 4.3   Selected European Countries: Sectoral Value Added
 4.4   Selected European Countries: Indicators of Health and Education
 4.5   Selected European Countries: Correlation of Output and Inflation, 1993–99
 4.6   Legal Transition Indicators
 4.7   Selected European Countries: Trade
 4.8   Central and Eastern European Countries: External Account Liberalization
 4.9   Comparative Market Development Data for Selected Accession Countries: Market Regulation and Supervision
 4.10   Estimates of Labor Market Flexibility
 4.11   The European Social Charter and the Labor Market
 4.12   Hungary: EU-Related Spending and Financing
 4.13   Exchange Rate Arrangements and Anchors of Monetary Policy
 4.1   Private Sector Share of Output, mid-1999
 4.2   Indicators of Transition, 1999
 4.3   Indicators of Institutional Development
 4.4   Export Markets
 4.5   Financing the Current Account Deficit, 1999
 4.6   Government Expenditures in Relation to GDP Per Capita, 1999
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Summing Up by the Chairman
 Statistical Appendix


Data and Conventions

Classification of Countries

List of Tables
   Output (Tables 1–7)
   Inflation (Tables 8–13)
   Financial Policies (Tables 14–21)
   Foreign Trade (Tables 22–26)
   Current Account Transactions (Tables 27–32)
   Balance of Payments and External Financing
      (Tables 33–37)
   External Debt and Debt Service (Tables 38–43)
   Flow of Funds (Tables 44)
   Medium-Term Baseline Scenario (Tables 45–46)
 A1   Economic Policy Assumptions Underlying the Projections for Selected Advanced Countries
World Economic Outlook and Staff Studies for the World Economic Outlook, Selected Topics, 1992–2000