Optimistic report from IMF

Press, 29 June 1983, Page 21

Optimistic report from IMF

PA Washington The International Monetary Fund has preducted mild world recovery this year and next in what officials called "their most optimistic report in four years.” But the report warned of what may happen after 1984. The prospect that the United States Government’s debt will have risen by 100 per cent between 1982 and 1986 will keep interest rates high, hold down economic growth, and raise uncertainty about inflation in the world’s most important economy, it said. “Action to reduce budget deficits would be likely to dampen economic activity in the short run, but such action is essential to enhance the prospect of lasting economic expansion,” said the fund’s annual “World Economic Outlook.” It was written largely by Charles F. Schwartz, an American who oversees the fund’s research on how countries adjust to new economic circumstances. It was submitted by Jacques de Larosiere, the fund’s, French managing director. ' Officials said that although the report does not necessarily represent the opinions of the 146 govern-

ments in the fund, their representatives have discussed it. None has presented any public dissent. The total output of the United States and the other six major industrial countries in the non-communist world actually fell last year, by 0.3 per cent. This year the rise in the first six months is put at 1.9 per cent, and in the second half at 3.1 per cent. This rise is still low compared with the average growth in the 1960 s and 19705. In Japan, the fund sees growth of 3 per cent this year and 4 per cent in 1984, in West Germany 0.5 per cent and 2.5 per cent. It sees neither growth nor decline this year in France. For 1984 it forecasts a rise of 1.25 per cent. An increase of 1.5 per cent is predicted for Britain this year, but no figure is given for 1984. Italy’s prospects are said to depend on the success of the authorities in controlling the government deficit. The report predicts that private consumption will go down about 0.5 per cent this year, that there will be an average 10 per cent increase in unemployment, and a 15 per cent increase of inflation.

Some improvement in growth is predicted for the developing countries — except where income from oil is important. High unemployment in the industrial countries is expected to show a further rise. The general rate may reach 8.8 per cent for the whole of this year — up from 8.1 per cent in 1982. All seven nations are expected to show some increase, with Japan’s growing only to 2.5 per cent from 2.4, but Britain’s 11.9 per cent increasing to 13.2. Unemployment in France is expected to rise to 9.5 per cent of the work force from last year’s 8.6, and Italy’s to 9.8 from 9.1. In West Germany, the rise predicted is to 8.5 per cent from last year’s 6.8. A fund official said some improvement could show up in 1984 “but probably not much.” He explained that the expected growth rates are not big enough to create many new jobs. “They have to be about 3 per cent — then things might begin to happen,” he said. No predictions on unemployment are made for the developing countries. An official said that no satisfactory statistics are available.