International

THE CURRENT PERFORMANCE OF THE WORLD ECONOMY

The major trends and performance of the world economy are a reflection of the globalisation process. An examination of recent performance will highlight the major challenges that globalisation poses for various developing regions.

World industrial activity continued its upward trend in 1996--when the most recent data are available--with manufacturing value added (MVA) growing at 2.6% and GDP at 2.8%. As a group, the developing countries have posted better MVA growth rates than the industrialised countries. During 1990-1996, MVA in the developing countries grew at an annual rate of 6.9% compared to 1.3% for the industrialised countries. But to put this growth in perspective, the share of industrialised countries in world MVA in 1996 was 75.6% compared to about 21% for the developing countries.³

If income growth rates in terms of GNP are considered, industrialised countries, on average, cannot expect growth rates of more than 2% during the next decade. Growth rates in the developing countries, on the other hand, are expected to be greater than 4.5%, with some Asian countries exceeding a 6% growth. So most of the future growth of world income will come from developing countries. On current trends, they will also be the major sources of import and export growth. At present, the developing countries have more than a 25% share of world trade with export growth, on average, double that of industrialised countries. Although, this growth mainly stems from a small group of East Asian countries--particularly China--and a few Latin American ones, new countries such as Uganda, which grew by nearly 9% last year, are joining the group. Also, in terms of purchasing power, the combined GNPs of developing countries is nearly half of total world GNP. In the next decade, this figure is set to increase significantly.⁴ However, although the developing

³ UNIDO database.
⁴ Rubens Ricupero, Secretary General of UNCTAD, Extended Remarks, Round Table
countries as a group showed impressive performance, this aggregate performance masks wide regional differences:

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  South Asia did extremely well (9.5% MVA growth)
  
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  South-East Asia and China did well (9%)
  
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  North Africa and West Asia (6.4%)
  
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  Latin America and the Caribbean (4.5%)
  
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  Sub-Saharan Africa (3.7%)
  

Africa, however, continues to face serious economic difficulties. The share of sub-Saharan Africa (SSA) in total world exports has decreased steadily in recent years. SSA’s share of total world exports decreased from 1.25% in 1990 to 0.85% in 1995; North Africa’s share from 1.05% to 0.73% during the same period. But more optimistically, MVA growth in SSA improved in 1996 to 3.7% from 3.4% in 1995.

What about the countries in transition? MVA growth improved from - 8.8% in 1994 to -2.5% in 1996. But again the performance in this region was uneven. Those early reformers with sound macroeconomic policies have made impressive strides (the Czech Republic, Poland, Hungary, Slovakia and Slovenia). But for those countries less far along in the transition to competitive market economies (the Russian Federation and the CIS) growth has hardly started. Indeed, MVA continued to decline, albeit at nowhere near the same rate as when they began the transformation process. One should, however, recognise the important advances made especially in the Russian Federation with respect to the macro-economy and the control of inflation. Nonetheless, the resumption of growth in the Russian Federation and CIS depends on more widespread and accelerated economic reforms and political stability.

Let us now summarise the current performance of the global economy:

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  The developing countries are growing faster than the industrialised countries.
  

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  But industrialised countries still hold by far the greatest share of world MVA.
  

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  Within developing regions, performance has been mixed with South Asia growing well, followed by South-East Asia and China, North Africa, West Asia and Latin America and the Caribbean. Africa continues to run the
  

Discussion, South-South Conference on Trade, Investment and Finance, San José, Costa Rica, 13-15 January 1997.

strong risk of marginalisation and a serious risk of being delinked from the global trading system.

3.