A substantial reduction in the payments imbalances between deficit and surplus countries is attainable in the next few years, a Morgan Guaranty Trust Co. official said today in an optimistic assessment of the debt-heavy international financial structure.
There has been mounting concern expressed recently that the rapid build-up in international debt could topple the world financial system if it continues.
But Rimmer DeVries, vice president of Morgan Guaranty, told a conference in Philadelphia sponsored by Wharton Econometric Forecasting Associates that "the world payments outlook is a good deal more sanguine than frequently is appreciated."
DeVries predicted that between 1978 and 1981 the combined current account imbalance of the deficit countries will narrow to about $60 to $70 billion compared with a deficit of some $200 billion accumulated from 1974 to 1977, mainly as a result of higher priced oil imports.
The reduced gap, he said, could result from a big cut in the annual surplus run by the Organization of Petroleum Exporting Countries, a U.S. energy program to slice this country's oil imports, stablization moves by countries running big deifcits and aggressive efforts by Japan, West Germany, Switerland and The Netherlands to reduce their large annual export surpluses.
A key to his analysis was a projection that the annual surplus run by OPEC would narrow to about $10 billion by the end of this decade compared with the $35 to $40 billion annual total of the past two years and the $65 billion accumulated in 1974 alone.
DeVeris based this projection, which is contrary to many analysts who say the OPEC surplus will keep piling up at a $40 billion rate, upon Saudi Arabia's ability to absorb imports of goods and services to offset a large part of its massive oilearnings.
Noting that the rapid rise in U.S. dependence on oil imported from OPEC nations has moved its trade and current account into large deficits this year, he said a narrowing in the deficit through an effective energy policy would help reduce pressure on oil prices, would help to narrow the Saudi Arabian and OPEC surpluses, and thus enhance the over-all stability of the world payments system.
"Quite apart from obvious military and political considerations, the United States should formulate a strong energy policy in order to make an important contribution to therestoration of international payments equilibrium," the Morgan Guaranty officer said.
DeVries acknowledged that "the international debt buildup has been vey large in recent years," and with some countries accumulating so much external debt the refinancing or restructuring programs could be required in the next few years.