Economic Report of the President

The volume of international financing is reflected in Table 32,which describes current-account positions, net of official transfers,for broad country groupings, as compiled and projected by theOECD. The table provides an indication of the orders of magnitudeinvolved, but specific numbers should not be overemphasized sinceeven the historical numbers are subject to substantial margins oferror. The projections for 1981 are particularly uncertain because theassumption of a constant real oil price that underlies these projectionsis at risk on account of the Iran-Iraq struggle.Very large financing needs will persist over the next several years.While the OPEC surplus is expected to decline if oil prices do notrise sharply again, the decline will be more than matched by a projectedimprovement in the current-account positions of the largerOECD countries. The deficits of the smaller OECD countries willremain roughly unchanged at levels that—while broadly financeable—arenevertheless viewed as a problem by the countries themselves.The already substantial deficits of a number of the non-oil developingcountries are projected to rise further, but whether financingon the scale implied by such deficits will be forthcoming mustremain a question of serious concern.TABLE 32.—Global current-account balances, exclusive of official transfers, 1978-81[Billions of U.S. dollars; OECD basis]Country 1978 1979 1980' 1981 2OECDOPECBis Seven »Other .. ..Non-oil developing countries..Other «Residual« . . .28355-30%-9%7-132-1570-47-3-47-14-33120-62-6-5-1221%-33%1 Preliminary.* OECD projection.:i United States, Japan, Germany, France, United Kingdom, Italy, and Canada.4 Centrally planned economies, Gibraltar, Malta, South Africa and Yugoslavia.A Reflects statistical errors and asymmetries. Given the very large gross flows of world balance of payments transactions,statistical errors and asymmetries easily give rise to world totals (balances) that are significantly different from zero.Source: Organization for Economic Cooperation and Development (OECD).At an aggregate level, of course, the borrowing needed to financedeficits must be matched by the lending that surplus countries undertake.The relative ease, compared to expectations, with which the"recycling" of funds was carried out after the first oil-price shock nodoubt owes a great deal to this "adding-up" property. The sharp increasesin liquidity arising from massive inflows of OPEC funds intothe major national and Eurocurrency banks provided the funding forthe large increase in lending by these banks to the deficit countries.86-69-94202