Jacques de Larosiere, managing director of the International Monetary Fund, predicted yesterday that the world's major international economic ailments "are on the way to being cured."
It was the most hopeful note of a week that by and large reflected a reversal of the gloomy economic trends foreseen last April, at the IMF Interim Committee meeting in Mexico City.
In an interview, German Bundesbank President Otmar Emminger said the major reason was a belief that "real domestic demand outside of the United States next year will be higher than in the U.S. That's quite a turnaround."
In a comparably optimistic mood, World Bank President Robert S. McNamara reported "near unanimity" on the need for a formal decision to boost the bank's capital sufficiently to allow bank lending to grow 5 per cent a year in real terms.
The United States is the major holdout, withholding its formal approval of a doubling of the bank's capital until it can do an effective sales job on Capitol Hill. U.S. Treasury officials are cautious, but other high American policy makers leave little doubt that eventually, something close to doubling of the Bank's capital will be approved by the Carter administration.
De Larosiere's comment, at the conclusion of the joint annual meeting of the IMF and World Bank, was based on his belief that the two main underlying causes of troublesome fluctuations in the foreign exchange markets will be less pressing in 1979 and 1980.
These are first, the wide gap between the U.S. growth rate, and economic progress in other countries, which helped create an enormous deficit for the U.S. and a huge surplus for Japan. The shift in this relationship is the one stressed by Emminger.
And the second is that the strong levels of inflation in most of the industrial world - with the notable exception of the United States - have been brought down. And de Larosiere noted that the U.S. administration is commiting itself to a new anti-inflation program.
The combination of these shifting forces, it was widely predicted at the annual meetings, will make a dramatic difference in the balance of payments picture in 1979.
The IMF staff "World Economic Outlook" predicted that in the first half of 1979, the Japanese current account (trade and services) surplus would drop from $19 billion this year to an annual rate of $10 billion in the first half of 1979.
And the U.S. deficit would drop from the IMF estimate of $15.5 billion this year to a rate of only $7.5 billion in the first six months of 1979.
De Larosiere also expressed his satisfaction in the agreement reached last Sunday by the Interim Committee to increase the over-all IMF quotas by 50 per cent and to allocate 4 billion special drawing rights (SDRs) a year for three years beginning in 1979. SDRS are a paper asset distributed by the IMF to its members.
De Larosiere didn't say so, but the compromise agreement on quotas was facilitated by a last minute decision by Germany that its continued insistence on an increase of only 30 to 35 per cent would leave it isolated.
The German government, which has been pressing for the adoption of a European Monetary System, also did not want to appear to oppose more global liquidity while pressing its own regional interests in Europe.