The world economy appears to be "distinctly better shape" than one or two years ago, but is still well below normal in terms of jobs and economic growth when judged against a longer historical yardstick.
Moreover, because the major industrial countries have adopted a "patient and even handed approach" that rejects over-ambitious targets, not much improvements is immediately in view.
Those are among the major conclusions of the Annual Report of the International Monetary Fund, issued yesterday. The Annual Meeting of the IMF, which will discuss many of the problems raised by the annual report, begins September 25 in Washington.
Predictably, the annual report took a calmer view of the need to shore up the resources of the international monetary system than did Sen. Jacob Javits (R. N.Y.), who warned at the end of last month that worldwide depression could result unless the lending potential, espically for the IMF, were increased.
But the report noted that the recent tendency of countries needing help to rely on the private banking system could worsen their troubles if they allowed private loans to postpone necessary stabilization measures.
"An increase in the capacity of the Fund would complement the resources available through markets and increase confidence" in the monetary system, the report said.
The report dealt at length with a central problem of the world economy, the dramatic shift of the oil cartel into a current account surplus of about $40 billion annually - the result of a five-fold price increase after 1972. The rest of the world, those who import oil, have the equivalent deficit.
But the report labeled as a "simplistic notion" the view expressed by some economists and government officials here and elsewhere that each of the big industrial nations and some of the smaller ones "should have some 'fair share' of the collective" deficit.
That overlooks, the report said, major differences among nations in the composition of the deficits and in savings and investment patterns. Nevertheless, the report cited major current account surplus positions for West Germany, Switzerland, the Netherlands and Japan, and said that declines in such surpluses would smooth the operation of the "international adjustment process."
The report also said that the volume of world trade seems to be settling "into a more sustainable" pace of expansion around 7 per cent in 1977, and reiterated concerns that pressing economic problems - especially unemployment - have given rise to protectionist pressures.
But the document submitted to the Board of Governors by IMF managing director H. J. Witteveen, endrosed the moderate, go-slow approach. "In the short run," it said, "the scope for improvements in the present unsatisfactory situation is . . . limited" by the constraints of inflation and balance of payments problems.
On the whole, the report found that actual resort to restrictions on international trade by the major nations had been few, but said that "rising protectionist sentiments" are a cause "for serious concern."
According to the report, after a decline of 1 per cent in the industrial nations combined gross national product in 1975, there was an increase of almost 5.5 per cent in 1976, with a decline to a rate of 5 per cent in the first half of 1977. Projections by other international agencies since the IMF report was completed more than a month ago suggest that the growth rate may slip even more in 1973.
But the rate of inflation has subsided, thanks in part to "the depressed conditions of 1974 and 1975, together with the moderateness of the ensuing recovery," the report said. From a peak of 13.5 per cent late in 1974, the overall rate of inflation (with variations) to an average of 6.5 to 7 per cent.
The report published for the first time the details of staff projections of current account balances for 1977, compared with the averages for 1967-72, after adjusting the latter period to 1977 price and production levels.
This shows the following:
Current Account Balances
(billions of dollars)(TABLE) Rescaled(COLUMN)Projection 1967-72 average(COLUMN)for 1977 OPEC . . . 3(COLUMN)37 Industrial world . . . 31(COLUMN)minus 1 More developed(COLUMN) non-oil countries . . . minus 6(COLUMN)minus 12 Less developed(COLUMN) non-oil countries . . . minus 28(COLUMN)minus 25(END TABLE)
These figures show at a glance what has happened since OPEC raised the price of oil: OPEC has emerged as the principal surplus group, replacing the western industrial countries. The more sizable among the poorer oil-importing countries have been hurt the most, while the weaker are about where they were before, or perhaps a little better off.
The big difference is that it is OPEC, rather that the industrial West, that is the net supplier of resources, while the industrial nations merely recycle the funds.