Economic recovery in the world's leading industrialized nations is likely to be patchy with growth rates in Western Europe significantly trailing those of the United States for at least the next two years, economists for the industrialized nations predicted today.
According to biannual forecasts released by the Organization for Economic Cooperation and Development, an expected upsurge in economic activity in the United States during the next two years will have only a limited impact on the rest of the world. Prospects for the millions of people out of work in Western Europe remain bleak, with unemployment levels likely to rise to new postwar peaks next year.
This growing tide of unemployment is certain to put further pressure on the fraying economic relationship between the United States and Western Europe.
The OECD predicts that 20 million people, or 12 percent of the labor force, will be unemployed in Western Europe by the end of next year. By contrast, in the United States the unemployment rate is expected to decline slightly from just over 10 percent this year to 9 1/2 percent next year.
Projections for youth unemployment are particularly alarming, rising to 20 percent for the entire OECD area in 1984 from 17 percent last year. It is estimated that every third Italian and every fourth Frenchman under the age of 24 is looking for a job.
The OECD's chief economist, Dr. Sylvia Ostry of Canada, told a press conference here that attention had shifted in the last six months from the issue of when economic recovery would take place to what kind of recovery it would be and how long it would last. She said that, while the United States seemed poised for "fairly robust, broad-based expansion," the outlook was much more uncertain in Western Europe.
The 24 OECD countries, which account for 65 percent of world production, experienced a slight recovery during the first half of this year after several years' recession, according to the report. This year's overall growth rate is likely to be about 2 percent--ranging from 3 percent in the United States and Japan to a very modest one-half percent in Western Europe, the economists estimated.
In 1984, growth rates are likely to rise to 4 1/2 percent in the United States and 1 1/2 percent in Western Europe.
The Paris-based OECD Secretariat sometimes has been criticized for taking too optimistic a view of chances for world recovery. Its predictions that the recession would end in 1982 were not borne out by events: Instead of a 1 1/4 percent rise, production actually fell by one-quarter percent.
OECD economists explained the discrepancy by saying they had failed to take into account the effects of a general tightening in monetary policy and high interest rates. This led to an increasing debt problem for non-OECD countries and a sharp fall in their imports from the industrialized world.
The fall in oil revenue and the increasing indebtedness of Third World countries continue to make economic forecasting hazardous. Ostry refused to speculate on the likely impact on world trade and economic growth of a default by a major country such as Brazil in repaying its debts.
The OECD report said that oil-producing countries such as Saudi Arabia appeared to be cutting back sharply on imports from the West in order to avoid large trade deficits. This could partly offset the favorable effects of a decline in oil prices in freeing purchasing power in the industrialized countries and reducing inflation.
Inflation in the OECD area is expected to stabilize at about 6 percent during the next two years, but there will continue to be sharp differentials among the rates in countries such as the U.S. (5 1/4 percent inflation in 1984), West Germany (3.0 percent), France (7 1/2 percent) and Italy (12 1/4 percent).
A senior OECD economist, who declined to be quoted by name, attributed the difference in economic outlook between the United States and Europe to "a profoundly different fiscal stance." He said that, while governments in Western Europe still are attempting to cut public spending deficits in order to get inflation under control, the U.S. administration is encouraging expansion.
The OECD estimates that a 1 percent rise in U.S. growth adds only about one-quarter percent to European growth through trade linkages. Ostry said that there is "a fairly widespread sentiment within Europe" that economic developments in the United States had a negative impact on the rest of the world.