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WORLD ECONOMIC OUTLOOK

19 January, 2016 - 15:18

Each year the International Monetary Fund (IMF), the world's overseer of international financial matters, publishes World Economic Outlook, which reviews events of the previous few years. The details of the report address the usual economic issues of output, employment, inflation, debts, and related indicators, but the underlying theme is development. In this context, development encompasses more than continuous economic growth. Table 6.2 summarizes the broader definition proposed by the Society for International Development.

Table 6.2 A New Definition of Development

By "development" we mean a sustainable process geared to the satisfaction of the needs of the majority of peoples, and not merely to the growth of things to the benefit of a minority. As summarized in the 1975 Dag Hammarskjold Report, What Now,

Development is a whole; it is an integral, value-loaded, cultural process; it encompasses the natural environment, social relations, education, production, consumption, and well-being. The plurality of roads to development answers to the specificity of cultural or natural situations; no universal formula exists. Development is endogenous; it springs from the heart of each society, which relies first on its own strength and resources and defines in sovereignty the vision of its future, cooperating with societies sharing its problems and aspirations. At the same time, the international community as a whole has the responsibility of guaranteeing the conditions for the self-reliant development of each society, for making available to all the fruit of others' experience and for helping those of its members who are in need. This is the very essence of [a] new international order.

SOURCE:   Ann Mattis (ed.), A Society for International Development: Prospectus (Durham, NC: Duke University Press, 1983), xiii.

 

Reports analogous to the IMF's World Economic Outlook are issued yearly by the World Bank, the OECD, private banks such as Barclays Bank, and other financial institutions such as Price Waterhouse, as well as by the International Chamber of Commerce. A fundamental concern of all of these organizations is the international community's ability and willingness to create the conditions for, as the United Nations puts it, "a world economy that works." The international manager thus has a rather diverse array of sources in which to seek advice.

The IMF's Outlook begins by describing the current situation and the short-term outlook in terms of output and employment, inflation and interest rates, and external adjustment and debt. Next comes an analysis of the medium-term prospects, broken down into assumptions, implications for the industrial countries, and implications for the developing countries. The outlook for the medium term is based on a scenario of economic developments five years into the future. This scenario is not a forecast, but rather an assessment of the consequences of certain assumptions about exogenous economic conditions, given other assumptions about the behavioral relations that link these conditions to actual developments. Third, suggestions are made with respect to macroeconomic and structural policies and policy coordination plans for both the industrial and the developing countries. Finally, efforts at international coordination and the role of the IMF are summarized. Following is a summary of some of the key points made in recent editions of the IMF's Outlook, which can serve as a valuable guide to any student of international business.