In a gloomy portrait of the world economy, the Organization for Economic Cooperation and Development predicted yesterday that the global recession will worsen and unemployment among its 24 member nations will rise to a record of nearly 35 million by the end of next year.
The organization said the bleak economic outlook has been exacerbated by a sharpening decline in world trade and the impact of austerity measures that caused the economies of industrialized nations to shrink this year after a modest increase in 1981.
In its year-end report on the West's economic outlook, the organization said the unexpected severity of the recession meant that prospects for a sustained recovery among the world's major economic powers now seem worse than at any time in recent years.
The downward cycle may continue even if the United States experiences an upturn early next year because protectionist pressures and the need to cut imports have inhibited the kind of export growth that fueled much of the world's prosperity in the postwar era.
"There is little evidence to suggest that this mood of pessimism will dissipate soon. A lengthy period of subdued spending, particularly in respect of fixed investment, now seems likely in nearly all countries," the report said.
The Paris-based OECD is the umbrella organization coordinating the economic programs of the world's 24 leading industrialized democracies. Its yearly reports are regarded as important forecasts for the world economy. The report was released in Paris, and summaries were made available in other OECD capitals.
The OECD found some optimism in the fact that inflation has fallen more rapidly than expected and was now at its lowest level in nearly a decade.
But the report suggested that the cost of tight money policies to squeeze inflation out of western economies may have been too high in terms of the protracted recession and record unemployment.
High interest rates have forced large debtor nations to cut back substantially on their imports, meaning that OECD members in Europe, along with Japan and the United States, are able to find fewer of the export markets that normally would enable them to accelerate expansion plans.
The OECD expressed concern that large U.S. budget deficits, which may exceed $170 billion next year depending on congressional action, threaten to ignite another spurt in interest rates that could plunge the world into a deeper recessionary cycle.
The strong dollar also has hurt Europe and Japan by hiking the cost of oil and other dollar-priced raw materials, thus negating to a large degree any improvement in their trade posture created by undervalued currencies.
The weak export prospects, the OECD said, caused a sharp downward revision of earlier growth predictions among the 24 member countries and meant that overall gross national product would fall 0.5 percent this year after a 1.2 percent rise in 1981.
Earlier hopes for a recovery during 1982 were dashed, the OECD said, because "the build-up of pressures in international capital markets and the effects of deteriorating business and consumer confidence were greater than appreciated at the time."
The organization said that bank lending abroad was greatly reduced, aggravating the slowdown in non-OECD imports. Companies and consumers also hesitated over investments and purchases because of fears about the recession and the high yields offered by savings funds.
The rapid rise in unemployment during the past three years surpassed earlier expectations. The number of unemployed in the 24 countries jumped from 24.7 million in 1981 to 30.25 million this year. By early 1984, the figure may reach 34.75 million, the OECD said.
Unemployment and growth prospects appear worst for Europe, which is now entering its fourth year of recession. The OECD warned that "the longer slow growth continues in Europe, the greater the risk that it will become self-perpetuating."
GNP growth for Europe is expected to rise by less than 2 percent next year after falling 1 percent in the last half of 1982. The United States experienced zero growth over the last six months but can expect an average 3 percent rise through next year.
Inflation in the 24 OECD nations dropped to the lowest level since 1973 at 7.2 percent, a steep decline from the 1980 peak of 13 percent that followed a second sharp rise in oil prices.
The OECD report predicted further improvement in inflation, with the average rate expected to fall to 6.75 percent next year and 6.5 percent in early 1984.
With developing countries compelled to slash their imports, industrialized countries will find their balance of payments deficit expand from $38.5 billion this year to $54 billion in early 1984.
The most drastic shift will occur in the United States, the report predicted. The cumulative effect of the strong dollar and more buoyant demand in the U.S. economy will cause the current account position to swing from a $4.5 billion surplus last year to a $45.5 billion deficit in the first half of 1984.
The lopsided change is due to the competitive loss for U.S. products caused by the overvalued dollar, while the domestic economy continues to absorb more foreign goods at lower prices.
The deep world recession also has affected oil producing countries, whose huge current account surpluses were eradicated by softening oil prices and slumping demand.
The OECD said that the 13 members of the Organization of Petroleum Exporting Countries would find the $65 billion surplus they reaped in 1981 reduced to nothing this year. OPEC could recover next year to a $15 billion surplus if a gradual economic recovery enables oil export volumes and revenues to improve.
The OECD report also noted that the large deficit of developing countries outside OPEC should continue to narrow as a result of austerity regimens that aim at cutting imports. From a peak of $75 billion in 1981, the shortfall among developing countries is expected to decline to $65 billion this year and $50 billion in 1983.