Chapter 4 addresses the economic situation in Central Asian economies of the ECE region and their progress toward a market economy. The final version will be published in May. The western market economies Economic activity in western Europe picked up again in the course of 1996, but for the year as a whole the annual increase in real GDP was only 1.9 per cent compared with 1995, when there was an equivalent growth rate of 2.6 per cent. In the United States, growth forces gathered renewed momentum and real GDP rose by 2.4 per cent in 1996 compared with an annual growth rate of 2 per cent in preceding year. In Japan, the impulses associated with the fiscal stimulus of late 1995 were a major factor in the significant acceleration in the rate of economic growth to 3.6 per cent in 1996, the highest among the major seven economies.
Cyclical positions continue to diverge significantly.
The United States is on the plateau of a long cyclical upswing, whereas in many west European countries, notably France, Germany and Italy, cyclical growth forces remain weak and a sustained upswing is not yet in sight. Domestic demand was supported by lower interest rates, while exports benefited from the appreciation of the US dollar. The upswing in the United States continued to be broadly based, supported by private consumption, business fixed investment and export growth. Although exports were a mainstay of economic activity in 1996, there was, nevertheless, a significant slow down in the volume of merchandise trade in western Europe, which, in the main, goes on account of the significant deceleration in growth of domestic demand. As a consequence, import demand rose by only some 2.5-3 per cent, and this had significant negative repercussions on the export performance of the transition economies.