| Abstract: | Output has stagnated in the main industrialised countries this year but we expect the benefits of lower oil prices to show up in rapid growth from now on. The present weakness in the world economy stems from tighter US fiscal policy and the oil price shock itself. These have combined to reduce domestic demand in the United States, and hence to cut the market for Japanese exports in particular, and also to reduce expenditure by energydependent countries and companies. A further factor is that, with prices of oil-based products falling, there is an incentive to delay expenditure. We expect this impact effect of OPEC III to be short-lived and to give way to its positive effects in the second half of this year. Specifically, we expect consumer spending to lead the recovery as real incomes will be boosted by the terms of trade gain from lower oil prices - equivalent to 3 per cent of GNP in the OECD area as a whole. On the basis of oil prices holding at $15. we forecast OECD output growth of 3 per cent this year, rising to 41/2 per cent in 1987. Additionally, we expect lower oil prices to produce a significant reduction in world inflation. Zero growth of producer prices is forecast on average this year arid consumer price inflation is expected to fall to wards 2 per cent in the course of the year. |
