American officials are taking a more optimistic view of world economic prospects as they prepare for a high-level international meeting in Mexico City this weekend.
In terms of economic growth, inflation, and narrowing the balance of payments gap between the Organization of Petroleum Exporting Countries and the rest of the world, "prospects are better than they have been for some time," Under Secretary of the Treasury Anthony Solomon said yesterday.
Behind the better tone - although American officials shy away from saying so publicly - is the expectation or at least the hope that the U.S. dollar has "bottomed out" after a long slide in 1977 and earlier this year.
At a minimum, many private market experts here and in Europe think that the dollar may have hit a psychological floor. It has been remarkably steady against major currencies since reaching a low point early this year, despite U.S. resistance to European demands for massive market intervention to prop up the dollar.
The Mexico City meeting this weekend will bring together Treasury Secretary W. Michael Blumenthal, Federal Reserve Chairman G. William Miller, and their finance minister and central bank counterparts of other major nations.
They will attend meetings of the International Monetary Fund's policy-managing Interim Committee, the Group of Ten of the richer developed nations, and the Group of Twenty-Four, representing the less developed world.
Solomon appeared to take a rather dim view of the principal new initiative to be discussed at Mexico City, a proposal by IMF Managing Director H. J. Witteveen to encourage a new issue of Special Drawing Rights (SDRs) - which at the same time would soak up excess dollars.
SDRs are an asset created by the IMF and distributed in proportional amounts to all members. Witteveen's plans would in effect substitute SDRs for dollars held in reserves by many nations. The dollars would be frozen and not available to be drawn again, but the interest they earned would be credited to the nations that turned them in.
Witteveen believes that his scheme would offset the objections some nations have to an outright new issue of SDRs, because total world liquidity would not be increased.
Solomon said that "we do not feel the proposal is spelled out . . . it would need further study."
But the Treasury official said that the U.S. would offer a proposal of its-own involving procedures by which the IMF, under new rules recently adopted, inherits responsibility for surveillance of exchange rate changes.
He said they would be detailed in a presentation by Blumenthal in Mexico City. European sources, who note that the basic procedures for surveillance have already been set by the IMF, take the U.S. procedural suggestion as a psychological commitment by the U.S. to the importance of the IMF's surveillance function.
It may be seen, some Europeans think, as a further assurance by the U.S. that is abandoning "benign neglect" of the dollar. Other recent steps in support of the dollar, including last week's announcement of gold sales, have contributed to dollar stability.
The agendas for all three of the Mexico City sessions will cover the world economic outlook and the question of creating additional world reserves through a new allocation of (SDRs). In addition, the IMF Interim Committee will discuss the next (seventh) round of quota increases.
Solomon's optimistic appraisal of the world outlook was based, he said, on "somewhat better balanced growth (prospects) around the world." He cited a Common Market estimate that European growth might be at a 4.5 percent rate by mid-1979.
He said that West German prospects were "somewhat less clear" and that "they may need more stimulus" but that the official Bonn forecast was for a 4.5 to 5.0 percent growth rate by the end of the year.
Europeans at Mexico City are expected to bring a somewhat less optimistic view of their own growth prospects. Leading private institutions in West Germany have just published a pessimistic report, estimating growth during 1978 at only 2.5 percent, compared with the Bonn government's 3.5 percent figure.
Solomon said that prospects look better for Japan to come closer to its 7 percent growth target for 1978, and that the less developed countries overall would show an additional 0.5 percent growth.
He said that "inflation is continuing to come down in more countries," and that the U.S., with a new anti-inflation drive "is determined to do better."
The greatest change in prospects, Solomon said, relates to the likelihood that the OPEC current account surplus will be shaved by a least $10 billion to a range of $20 to $25 billion this year, and that the Japanese current account surplus should decline "substantially" later in 1978.
That would mean, he pointed out, a reduction in the mirror-image deficits borne by many other countries. But he said that the overall U.S. current account deficit would still be around the $20 billion mark, although the rate toward the end of the year would be well under the staggering $28 billion annual rate of the final quarter of 1977.