The world economy [March 1990]

The economies of the major industrialised countries have proved quite resilient to the steady tightening of monetary conditions which occurred during 1988 and 1989. Growth in the OECD countries is now expected to be just below 3% for 1990, with Japan and West Germany being the main growth economies. There is some concern about underlying inflationary pressure, however. Although OECD inflation is expected to remain relatively steady at around 4.5% during 1990, large wage settlements could undermine this projection. The prospect of widening trade surpluses in West Germany and Japan, coupled with the recent weakness of the Yen is an area of some concern, especially if there is any hint that disruption in the financial markets could spread beyond Japan.