The International Monetary Fund, calling economic prospects "better than for some time," said yesterday that real growth in the industrial world will reach a 3 percent annual rate in the second half of this year, and continue at that pace for 1984.
The recovery period would last through 1986, with the average growth rate for the three years 1984 through 1986 "slightly less" than 3 percent, if the present mix of economic policies stays about the same, according to the IMF's annual World Economic Outlook.
The report credits declining inflation and interest rates, as well as a 12 to 15 percent drop in oil prices earlier this year, for generating "a return of confidence and a more sustainable growth of output."
The report said that a recovery in the industrial nations measured by a 3 percent growth rate "is not strong" compared with previous economic cycles, and hence will bring little gain on the grim unemployment front.
To get substantially stronger economic growth, the report said, high European wage rates, which have increased more than productivity gains, would have to be adjusted downward to allow a greater return on capital investment.
Nonetheless, if a 3 percent growth rate is achieved in the industrial world in 1984, it would be its best performance since 1979's 3.4 percent, prior to the impact of the second "oil shock." For the year 1982 as a whole, the IMF put the industrial nations' growth rate at 1.6 percent, compared with minus 0.3 percent in 1981.
For the seven key industrial nations, the report predicted an 8.8 percent rate of unemployment in 1983, up from 8.1 percent for 1982, but down fractionally from a year-end rate of 9 percent. In the recession year of 1975, the unemployment rate for these seven nations averaged only 5 percent.
The report noted that the current $29 per barrel oil price, although down almost 20 percent from the peak in 1981, is still about 75 percent higher in real terms than in 1978. But even if oil demand strengthens a bit as world economic activity improves, the report suggested that there might be a further decline in world oil prices.
The drop in oil prices transformed the oil exporting countries' current account (trade and services) surplus of $114 billion in 1981 into an estimated $27 billion deficit this year. But developing countries as a group, benefiting from lower oil costs, will have a current account deficit of $68 billion in 1983, down from $87 billion in 1982 and $108 billion in 1981.
The IMF report did not recommend a shift to a decisively expansionist policy, fearing an acceleration of inflation and a new recession in 1985-86. But it did in effect endorse the policy thrust of the last ministerial meeting of the Organization of Economic Cooperation and Development and of the Williamsburg Summit Declaration: "There is now a widespread and pressing need for more economic growth . . . that would be noninflationary and sustainable."
For the less developed nations (LDCs) as a group, excluding oil exporters, the 1982 growth rate was estimated at 1.4 percent, down from 2.5 percent in 1981. The IMF staff projection for 1983 was put at 2.3 percent. Excluding China, the LDC growth rate was only 0.9 percent in 1982, and was forecast to rise to only 1.9 percent in 1983. These rates are down dramatically from the 5 to 6 percent gains recorded in the late 1960s and in the 1970s.
The report depicted the external debt situation of most Third World countries as serious but manageable, but warned that if banks curtailed their loans, there is "the risk of severe internal disruption for the countries concerned."
It estimated that total Third World debt had increased $57 billion to $612 billion in 1982, the smallest rise since 1977. Anticipating a further slowdown, with about $50 billion-plus in net new external debt for this year, the report forecast the end-l983 figure at $664 billion.
Despite the slower growth of LDC debt in 1982, debt service payments rose sharply as a proportion of export earnings--to 24 percent, compared with 20 percent in 1981, and only 15 percent in 1976-77.