Jacques de Larosiere, managing director of the International Monetary Fund, yesterday sketched what he characterized as a "grim" picture of the world economy, dominated by "intolerable" levels of inflation and as many as 25 million person on unemployment rolls in the industrial world next year.
In a speech to the Commonwealth Club of California -- in effect, a curtain-raiser for a meeting of the IMF's policy-making Interim Committee in Gabon at the end of May -- de Larosiere said that rich and poor countires alike would have to follow austere policies to beat back inflationary pressures.
A shift toward expansionary policies to fight the ravages of inflation might ease the situation for a year or two, but the longer term results "could be very bad," he warned.
"All in all, the current picture of the world economy is one of the large and widespread economic imbalances, both among groups of countries and within most individual countries. Clearly, the situation presents major policy challenges at the national level, as well as for the IMF," de Larosiere said.
One of the most worrisome aspects of the international economic scene is that the combined current-account deficit of the less developed countries (LDCs) is increasing rapidly, and many reach as much as $100 billion by 1982, de Larosiere pointed out. (The current account shows the net deficit or surplus on trade and services exports and imports, taken together).
A $100 billion LDC current-account deficit would be up from about $90 billion for 1981. De Larosiere said yesterday that the red-ink level in 1980 was $80 billion, $10 billion higher than the IMF estimated at the time of its last annual meeting. As recently as 1978, the LDC current-account deficit was only $38 billion.
But economic growth in the LDCs as a group is holding up well at about 5 percent annually, with the help of high levels of activity in a few of the larger countries; for most of the small LDCs, growth rates are far below those recorded in the 1960s and 1970s, de Larosiere said.
Meanwhile the oil cartel continues to generate enormous current-account surpluses for the same reason that LDC deficits are rising: the stunning boost in oil prices in 1979 and 1980. De Larosiere said that the current account surplus for Organization of Petroleum Exporting Countries members balloned from practically nothing ($3 billion) in 1978 to $68 billion in 1979 and then to a massive $112 billion in 1980. For 1981 and 1982, "Our projections indicate only a moderate decline" in the OPEC surpluses, he said.