Normally, an economic slowdown will force down prices. But the Treasury experts report that "inflation rates continue to remain disturbingly high in the industrial world."

They anticipate a slight drop from a "projected" nine per cent for 1976 to "perhaps" eight percent in 1977. This means people will have to pay higher prices in 1977, without the higher income to meet their bills.

Citing the problem countries, the Treasury reports that Great Britain's financial plight "has worsened progressively during 1976." The exchange rate "has plunged from a March level of $2.02 to a current value of about $1.62" in spite of massive borrowing.

Yet the Treasury is satisfied that the British have taken "important first, steps in the right direction to restore confidence in the exchange rate, which mirrors confidence in the government's ability to manage the economy."

The Italian economy also is still staggering from the impact of the oil price increases. Italy's mounting deficits tapered off in 1975. But "this illusion of improvement was achieved," report the Treasury experts, "through a sharp recession."

"The large differential in inflation between Italy and her trading partners," state the Treasury experts, "has" resulted in consistent downward pressure on the lire, especially during the past 11 months."

But tiny Portugal, whose government was saved from a Communist takeover, is struggling against the worst economic obstacles. A Treasury analysis sums these up starkly:

"The revolution and the return of African colonists have left Portugal with 10-15 per cent unemployment, supressed inflation at 20 per cent or more, wages 25 per cent higher than those of competitors, disorganized management and undisciplined and unproductive labor.