Recovery will last—I.M.F.

Press, 4 May 1984, Page 20

Recovery will last—I.M.F.

Parliamentary reporter

The world economic recovery which began last year should continue in 1984 and 1985, says the International Monetary Fund, but it has warned of the need to reduce real interest rates, control exchange rates and reduce big deficits. In its latest monthly survey, the I.M.F. also warns of the danger posed by heavy debt in developing countries, and says that this will constrain their capacity to resume development.

The I.M.F. believes that the recovery in 1984-85 will be marked by more even growth rates among indus-

trialised countries, as the expansion in the United States and Canada slows down to the more “moderate” pace expected for most of the rest of the industrialised world.

The world economy in 1983 was characterised by a strong but uneven recovery in economic activity in industrialised countries, further moderation in inflationary pressures, and a return to more sustainable balance of payments in developing, non-oil-producing countries. However, future prospects are “not without danger,” the I.M.F. says. Easing of the debt problems faced by

developing countries will depend on the pace and extent of recovery in industrialised countries, it says. Recovery in industrialised countries, though, was still unbalanced. Real interest rates remained “worryingly high,” there was concern still about exchange rates, and about the level of debt in developing countries.

The I.M.F. adds that there is a “major potential danger” to sustained world recovery in the deficits run up in industrialised countries, particularly the United States, Canada and Italy. It calls for further efforts to narrow these deficits.