OECD Economic Outlook 69 - Biblioteca Hegoa

24 - OECD Economic Outlook 69
Falling US interest rates will
provide support to some heavily
indebted countries
If a recession were to take place
in the United States in
the near term…
Table I.9. US consumption of primary commodities
Per cent of global supply
Crude oil (1999) 26.1
Coal (1998) 23.2
Iron ore (1998) 25.4
Refined aluminium (1996) 26.4
Refined copper (1996) 21.7
Refined nickel (1996) 16.5
Source: OECD; International Energy Agency; World Bureau of Metal Statistics, World Metal Statistics Yearbook 1997.
While the non-OECD area may be adversely affected by both weaker demand
for its products and lower export prices, some countries will benefit directly from
lower US interest rates. The principal beneficiaries will be heavily indebted countries
(Table I.10) whose debt is short-term and largely denominated in US dollars. Comprehensive
data on the currency and maturity composition of debt of non-OECD
countries are not available. However, if by way of illustration it is assumed that the
bulk of all Brazilian and Argentine external debt is denominated in US dollars, the
reduced interest payments on short-term debt could compensate to a significant
extent for real income losses associated with lower exports to the United States.
Moreover, since part of longer-term debt carries variable interest rates, there would
be additional savings on debt servicing in the two countries. The gains would be
much less in other major emerging economies where net indebtedness is smaller.
A deeper and more prolonged downturn in the United States would have serious
consequences for the world economy. To assess the implications for the rest of the
world, the OECD has prepared various scenarios around its short-term projections
and the accompanying medium-term reference scenario (see Appendix) using the
INTERLINK model. In the first instance, an assumed fall in equity prices and a cut
in business investment in the United States generates a fall in real GDP in the second
and third quarters of the current year, with the year-on-year growth for the year as a
whole close to zero in the absence of a policy response (Figure I.13, Panel A). The
impact of such a scenario in the United States on the rest of the world depends
on whether it is transmitted only through normal trade linkages or whether it has
Table I.10. External debt in selected emerging market economies
End-1999
Total external debt
% of export revenues a
External debt due within one year
% of total external debt
Brazil 301.6 23.9
Argentina 420.7 30.7
China 59.8 17.7
Indonesia 198.5 18.8
Malaysia 36.6 25.3
Thailand 99.0 23.0
Russian Federation 120.7 11.6
a) Revenues from exports of goods and services, and factor incomes from abroad.
Source: OECD, and IMF, International Financial Statistics.