World Bank Document

mid-1960s and France a few years later. The need account imbalances. The industrial economies
for reform of the international monetary system went into deficit in 1974 but reverted to a surplus
was formally recognized as early as 1963.
in 1975. Oil-importing developing countries had
By the end of the 1960s, the rate of growth of run current account deficits that averaged slightly
industrial economies had begun to slow and infla- more than 2 percent of their GNP in the 1960s and
tionary pressures to build up (see Chapter 3). Con- were at a low of 0.8 percent of their GNP in 1973.
tinued deficits in the U.S. balance of payments In 1974 they reached 3.5 percent of GNP and
found their counterpart in surpluses in Europe and climbed to 4.0 percent in 1975 (see Table 2.1,
Japan. The dollar's exchange rate started to come national accounts data). Current account deficits
under pressure. In August 1971 the United States did not return to historical levels until 1976-78,
temporarily suspended the convertibility of the when developing countries benefited from recovdollar
into gold. In December 1971 it devalued the ery in industrial economies and their own policy
dollar as part of a general realignment of curren- reforms.
cies. Further pressures on exchange markets led to The years between 1979 and 1983 saw a second
generalized floating of exchange rates in 1973. In series of major external shocks for developing
the same year, the first major increase in oil prices countries. Oil prices rose sharply in 1979-80. Real
took place. The world had changed. interest rates increased dramatically in 1980-81
(see Figure 1.4), reaching historically high levels.
From 1973 to 1984 There was a prolonged recession in industrial
countries in 1981-83. There was a recovery in 1984.
With the oil price increases, the financial system Industrial countries grew by 4.8 percent in 1984,
was faced with a major change in world current and developing countries 4.1 percent. Fastest
Table 2.1 Current account balance as a percentage of GNP in selected country groups and years, 1960-84
Data source
and country
group 1960a 2965a 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984
Based on national accounts
Low-income
countries -1.6 -1.8 -1.1 -1.6 -1.0 -0.9 -1.7 -2.1 -0.9 -0.7 -1.2 -1.4 -2.2 -1.4 -0.9 -1.0 -1.3
Asia -1.4 -1.6 -0.9 -1.0 -0.5 -0.6 -1.1 -1.2 -0.1 0.4 -0.1 -0.6 -1.4 -0.5 0.2 -0.2 -0.6
Africa -3.3 -4.1 -3.4 -7.3 -5.6 -4.4 -7.8 -10.2 -7.3 -7.6 -8.3 -7.7 -9.8 -10.5 -12.0 -10.0 -9.4
Middle-income
oil
importers -2.9 -2.0 -3.2 -3.6 -1.2 -0.8 -4.8 -5.3 -2.9 -2.3 -2.2 -3.2 -4.1 -5.2 -4.7 -4.4 -2.7
Exportersb -2.7 -2.0 -3.2 -3.5 -0.9 -0.9 -5.7 -5.5 -2.8 -1.6 -1.7 -3.1 -3.6 -4.2 -4.0 -3.1 -1.3
Other -3.5 -2.0 -3.0 -4.0 -2.2 -0.2 -1.8 -4.5 -3.4 -4.5 -3.9 -3.7 -5.9 -8.3 -7.3 -8.6 -7.4
Middle-income
oil
exporters -1.6 -2.4 -3.0 -3.0 -2.4 -1.1 3.3 -3.4 -2.4 -3.6 -5.1 -0.2 0.8 -3.8 -4.4 -2.1 -0.7
All developing
countries -2.2 -2.0 -2.3 -2.7 -1.4 -0.9 -1.9 -3.9 -2.2 -2.2 -2.6 -2.0 -2.3 -3.9 -3.7 -2.8 -1.8
Oil-importing
developing
countries -2.3 -1.9 -2.2 -2.7 -1.1 -0.8 -3.5 -4.0 -2.2 -1.7 -1.8 -2.6 -3.4 -3.9 -3.4 -3.1 -2.1
High-income oil
exporters 9.7 20.9 15.7 26.2 22.5 21.2 31.5 40.2 35.0 26.3 15.5 21.2 31.4 32.2 20.1 -4.7
Industrial
countries 1.0 0.9 0.8 1.0 0.9 0.7 -0.2 0.6 0.1 0.1 0.7 .0 -0.5 .0 .0 0.3 -0.4
Based on balance of payments,
All developing
countries .. .. -2.6 -3.0 -1.7 -1.3 -2.3 -4.2 -2.8 -2.6 -3.3 -2.9 -3.3 -4.9 -4.8 -2.8 -1.8
Oil-importing
developing
countries .. .. -2.5 -3.0 -1.5 -1.1 -3.9 -4.3 -2.6 -2.1 -2.5 -3.4 -4.6 -5.1 -4.2 -3.1 -2.1
a. Data for 1960 and 1965 do not include net private transfers.
b. Major exporters of manufactures.
c. Excluding official transfers.
Source: World Bank data.
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