IMF world report on 1980: good marks on petrodollars, money control
The International Monetary Fund annual report card on the performance of the world economy in 1980 shows widely varying grades for various topics: Recycling: Private markets have so far done well in the recycling of the surplus petrodollars of the oil-exporting nations. "Adjustment to the second round of large increases in oil prices -- with the threefold impact of those increases on prices, real economic activity, and the current account of the balance of payments -- has been managed better than was the adjustment to the 1973-74 increases. Monetary control: The major industrial countries have been bringing their monetary aggregates under better control. This is considered important to the prospects for getting inflation down. For the seven largest industrial countries as a group, the average annual rate of increase in money and quasi-money (called M-2 by economists) declined from 12.5 percent over the four years ended in 1978 to 10 percent over the following two years. Wages: These have grown more slowly in the industrial countries than after the 1973-74 oil price explosion. This too is regarded as favorable to the reduction in inflation. For the same seven countries, the average rate of increase in hourly compensation in manufacturing industries rose from 9.5 percent to 11 percent from 1978 to 1980, a period in which consumer prices increases accelerated from 7 percent to 12 percent. Oil consumption: Energy consumption in the industrial countries declined by 3 percent in 1980. It was about the same as in 1973, despite a 19 percent growth of real gross national product (GNP) -- the output of goods and services. Energy substitutes are being found for oil. Consumption of non-oil energy in the industrial countries rose an estimated 7 percent from 1978 to 1980, while the consumption of oil declined 8 percent. Inflation: This remains a severe worldwide problem. But the IMF expects fiscal and monetary restraint to bring the annual increase in consumer prices in the industrial countries down from an average 12 percent in 1980 to 9.5 percent this year and less than 8 percent in 1982. Growth: Slow, and in some countries, negative, growth persists. Average real growth in GNP in the industrial countries slowed from an annual rate of 4 percent in 1976-79 period to 1.25 percent in 1980 and an expected 1.5 percent this year. Moreover, the IMF economists anticipate that growth will reach only 2 percent in 1982. That means more unemployment. It also makes it more difficult for the developing countries to export their products to the industrial nations. International payments: The industrial countries swung from a surplus of $14 billion in their current-account balance in 1978 to a deficit of $66 billion last year. This year and next year, the IMF reckons, the deficit could be $50 billion. The financing will be no real problem.
The surplus of the oil-exporting countries rose from $3 billion in 1978 to $ 112 billion last year, which is roughly equivalent in real terms to the surplus of $68 billion recorded in 1974. This year, assuming real oil prices remain constant, the surplus should decline to $96 billion and to some $80 billion in 1982.
The IMF staff report expressed "added concern" about the international payments problems of the nonoil developing countries. Their export volume growth has slowed because of sluggish demand in the industrial countries and a deterioration in their terms of trade, that is, the prices of their exports has declined relative to the price of the goods they import. Moreover, higher interest payments on their mounting external debt have been cutting into the purchasing power of their export earnings. Their combined current-account deficit has risen from $38 billion in 1978 to $82 billion in 1980, and an expected $97 billion in 1981 and $102 billion in 1982. Trade: The danger of increased protectionism still looms. Growth in the volume of world trade slumped to 1.5 percent in 1980 and is project ed to remain at that very low rate in 1981.