World economic organization foresees global recovery during second half of '91

July 05, 1991|By Steven Greenhouse | Steven Greenhouse,New York Times News Service

PARIS -- The Organization for Economic Cooperation and Development predicted yesterday that the industrial world's economic slowdown would end in the second half of this year, led by a recovery in the United States.

The OECD, a group of 24 industrial nations that promotes economic growth, added that the rebound would be modest and would not be strong enough to reduce unemployment in most of the industrial world.

In its semiannual economic outlook, the Paris-based organization said it "expects a moderate pickup in the second half of the year, led by upturns in some of those countries now in recession, in particular the United States."

The group's economists said the U.S. economy would grow by 2.7 percent in the second half of this year and 3.3 percent for all of 1992. That compares with a 1.8 percent drop in output in the first half of 1991.

The OECD said the U.S. recovery would be less robust than previous ones because the nation's banks might not expand their lending enough to fuel a strong recovery.

According to the OECD, whose sophisticated computer models and economic projections are widely respected, the slowdown will end because of a rebound of confidence after the Persian Gulf war and lower interest rates in countries experiencing recession.

The United States, Britain, Canada, Australia, New Zealand, Finland and Sweden have all been in recession in recent months, the group said.

The OECD report said the robust growth that Japan and Germany enjoyed last year would slow this year because of their tight monetary policies. The report added that the current-account imbalances of the United States, Japan and Germany were all decreasing.

The group said the U.S. current-account deficit would fall from $99.3 billion last year to $8.7 billion this year, partly because of the financial aid that Japan, Germany and other countries have given Washington to pay for the gulf war. The OECD expects America's current-account deficit to rise to $58 billion next year.

The report said the dollar's recent surge against other currencies carried a risk that the reduction of the American trade deficit "may stall or even be reversed through a deterioration of U.S. competitiveness."

In its first-ever projections for Eastern Europe, the group said that the Soviet Union's output would fall 8 percent this year and hyperinflation had "become a serious danger."

It predicted that all of Eastern Europe, except Poland, would be in recession this year, projecting a 2 percent increase in output in Poland, a 9 percent drop in Czechoslovakia and a 3 percent drop in Hungary.

The OECD sees the Federal Reserve raising interest rates in late 1992 to counter inflation.

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