‘Modest’ economic growth for N.Z.

Press, 29 May 1982, Page 6

‘Modest’ economic growth for N.Z.

NZPA staff correspondent Washington

An International MonetaryFund report on the- world economic outlook says prospects for , NewZealand in 1982 arid 1983 are “modest.”

Financial policies have been restrictive since the middle of last year and export growth has dropped, although growth did reach 3 per cent in 1981, the report

says. _ 1 »■ •• New Zealand is among other smaller industrial nations which face ,an external constraint and difficult adjustment problems. The economies of these countries are characterised by high rates of inflation and subse1

quent external indebtedness. The report,. prepared by the I.M.F.’s staff, paints a gloomy picture of the world economy.

Over-all growth of gross national product in the industrial countries, after averaging 4 per cent a year in 197679. fell to about 1 per cent in 1980 and 1981, says the report.

“Until recently, the fund staff . thought that there would be a recovery, although moderate, to about 2 per cent in 1982. “But now, .with the onset of another recession in the United States, coupled with weaker prospects for several other countries, the growth of output in the industrial

world from 1981 to 1982 may average only three-quarters of 1 per cent. “This figure would comprise a small decline in the first half of the year and a modest increase in the second half. “Thus the industrial countries as a group face the prospect of a weak economic performance for the third year in a row, and the problem of low or negative growth in most of these countries appears to be even more severe and protracted than was thought likely just a few months ago. “With all the uncertainties involved, the growth rate of real G.N.P, for, 1983 is expected to show widespread 4

improvement among industrial countries but may amount to only 2V 2 per cent.” In the United States, the report says, real G.N.P. was projected to decline by 1 per cent from 1981 to 1982 and rise by less than 2 per cent from 1982 to 1983 - a weaker performance than expected for most other industrial countries. The deficits of the smaller industrial countries in which New Zealand is grouped were expected generally to remain large in 1982 and 1983. The behaviour of interest and exchange rates during the last two years had posed difficult problems in the major industrial countries,

with repercussions throughout the rest of the world. Policies to bring down interest rates and counter the volatility of exchange rates had received much attention but mechanisms were difficult and controversial.

The growth of G.N.P. in Japan during 1981 exceeded that of other industrial countries but at 2.9 per cent (75 per cent of that coming from export growth) it was the slowest recorded since 1975, said the report. The various problems "add up to a very substantial package,” constituting a serious situation for the authorities of many member countries.