A Year-End Peek At the World Economy
For the first time since 1990, the people of the world have become on average more affluent.
World Bank economist Michael Ward reported this week that per capita real gross national product (GNP) - the amount of goods and services available to each person - grew by 1 percent in 1994. Though all 1995 statistics aren't in yet, Mr. Ward estimates that output once again grew faster than population.
Such an average covers up a great amount of growth deviation from country to country. Some politically troubled nations in Africa and many former Soviet republics are doing poorly. But Russia is "beginning to turn around," says Mr. Ward, who is in charge of putting out the World Bank Atlas, an annual cornucopia of international statistics.
Recently a team of World Bank economists worked with Soviet statisticians and found that output actually declined only 4.4 percent in 1994, far less than the 17 percent previously measured. In 1995, the Russian economy either was no worse than in 1994 or improved slightly, Ward figures.
"Russia was not so seriously affected negatively by the transition [toward capitalism] as was assumed," says Ward.
Stanley Fischer, first deputy managing director of the International Monetary Fund, says the IMF's "Russian program is one of the best things that happened in 1995." He expects that consumer prices rose only 3 percent this month in Russia, vastly better than the rapid inflation earlier, as a result of "a strong program carried out faithfully."
The industrial nations account for more than half of world output and thus are important. "Despite signs of slowing in both the United States and Europe in the second half of 1995, the prospects of low inflation and stable growth in the industrial countries in 1996 remain good," says Mr. Fischer, an economist.
Economists at the rich nations' club, the Organization for Economic Cooperation and Development in Paris, earlier this month calculated that real growth for its 25 members was about 2.4 percent in 1995 and would pick up to 2.6 percent in 1996. This would be only enough to bring average unemployment in these countries to 7.7 percent in 1996, down from 7.8 percent this year.
Since that forecast, however, 11 European nations have lowered interest rates. Germany's central bank dropped its discount rate to 3 percent from 3.5 percent on Dec. 14. C. Michael Aho, international economist for Prudential Securities in New York, suspects this monetary stimulation should boost European Union output slightly in 1996 from the 2.8 percent rate he had forecast earlier. He anticipates another interest-rate cut in spring.
Japan too has taken more measures to revive its economy and bail out its banks. "Despite myriad maladies, Japan's economy is ready to grow after four years of suffering," Mr. Aho says.
In the US, the Federal Reserve dropped short-term interest rates Dec. 19 to boost the economy. The consensus of 51 forecasters polled by Blue Chip Economic Indicators in Sedona, Ariz., foresees 2.6 percent real growth in 1996. In terms of purchasing power, the US stands as No. 2 in the world after Luxembourg.
As for the developing nations, increased prosperity is providing the resources to expand people's access to education and health services. World Bank statistics show that Botswana, China, Indonesia, South Korea, and Singapore, all with economic growth rates above 6 percent per capita in the past decade, have 96 percent or more of their primary age children in school.
Thailand had the highest growth in GNP per capita in the 1985 to 1994 decade - an 8.2 percent annual rate. South Korea came next at 7.8 percent, followed by China and Singapore at 6.9 percent, Botswana at 6.6 percent, and the Maldives at 6.5 percent.
A detriment to national prosperity is corruption by government officials. The next annual World Development Report of the World Bank will be looking at the economic impact of integrity and honesty on economic progress, says Ward. If the income generated by a nation's economy goes improperly into private pockets, it is not available for education and health expenditures. Corruption and other criminal activities are seen as an impediment to growth in some former Soviet and African nations.
"Corruption can be really damaging to development," says the IMF's Fischer. It also reduces the likelihood that the well-to-do nations will provide financial aid. "We are very active in trying to straighten things out when we see something."