The world economy [March 1988]

The outlook for the world economy is, on balance, probably more favourable than when we last reported in November: a further significant deterioration in equity prices has been avoided and business confidence appears to be holding up well. World economic growth will be lower in 1988 than would have been the case but there appears a good chance that recession can be avoided. The key to future exchange rate stability and the maintenance of business confidence in the world economy rests on the progress being made in the US, Japan and West Germany in introducing domestic macro-economic policies to remove the continuing financial imbalances. West Germany's weakening resolve in this connection is a major cause for concern