World trade in 1997 and in the first half of 1998

Despite the turmoil in world capital markets, the global economy and trade expanded at an outstanding pace in 1997. Both GDP and trade growth were higher in 1997 than at any time in the 1990s. The increasing gap between trade and output growth rates in 1997, together with a further surge in foreign direct investment (FDI), indicate continued integration of national markets into the global economy. Increased integration inevitably means that disturbances in one country or region can have an impact elsewhere – a fact of which the world has become sharply aware in recent months, as financial crises and lower growth in Asia have affected economic conditions in other regions. These developments emphasize the need for careful and well-directed policies, based on adequate international cooperation. Among the policies that are important in reducing contagion and avoiding a downward spiral in the world economy are the maintenance of open markets for trade, the restoration of financial stability and the development of adequate regulatory frameworks in the financial sector.