Forecast of low growth for world economy

Press, 31 May 1980, Page 19

Forecast of low growth for world economy

. The world economy wouk iface higher inflation anc lower growth for the re. Imainder of the year, accord ing to-the “Australian Econ omic Review.” But it held out the hope of stable oil supplies anc pegged prices: the curren' outlook for oil supplies was “rather more certain” that at this time last year, saic the publication from the University of Melbourne’s Institute of Applied Econ omic and Social Research. It acknowledged however that there would be cutbacki compared with 1979 levels, particularly by Kuwait, Iran, Abu Dhabi, Venezuela, anc Indonesia. • “The most important country still not committed is Saudi Arabia which may drop its rate of production by one million barrels a day back to its pre-lranian revolution level of 8.5 million barrels a day by the middle of the year,” said the Review. “However, the net availability of supplies should

Id,change little because of indi creased output from non- > O.P.E.C. sources, especially 1-; Mexico and the North Sea. i-i If consumption in industrial i countries remains fairly con>eistant,. the market will be d I tight, but widespread and itl substantial shortages are not is i expected,” it concluded. n j Discussing the level of oil diprices during the remainder ieiof 1980 — based on “the ’s; uneasy demand supply i-j equilibrium which now j exists” — the review forer,least no increase in the real :s! price. 5.1 “One consideration ini I'l favour of this assumption is di that inflation this year in the dollar prices of exports it of manufactures will be d quite substantial, say 12 to y 15 per cent. ti This will be of signifiy cance at least to those i- members of O.P.E.C. such n as Venezuela, Nigeria and e Indonesia, which have the i- ability to absorb as much ;foreign exchange, as they i- can obtain. j d! “However, it is. possible I

I that nominal prices will not ■move for the rest of the year because many O.P.E.C. members seem to be turning j their attention to planning [cutbacks in production rath[er than price increases,” it [said. I In a general review of the i international economy during the next year or two, [the review said the outlook was for “higher inflation 'and lower growth than durling the second half of The 119705. as the very' large real i increase in the price of i crude oil which occurred i during 1979 is absorbed by ■ industrial countries.” The quarterly review also devoted a special section to the implications for Australia of South Korea’s industrial development strategy. The report suggested that in many respects, the economy of South Korea resembled that of Japan in the mid 1950 s — export success was the key element in the country’s development stragegy.