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Treasury Chief Baker Counters Gloomy IMF Economic Outlook

September 28, 1987|Associated Press

WASHINGTON — Treasury Secretary James A. Baker III gave an optimistic view of the world economy Sunday after a gloomier one from the International Monetary Fund, which said the U.S. budget defict would shrink significantly this year but would rise through 1990.

The IMF "World Economic Outlook" said sluggishness early this year roused concern that activity would slow this year and next.

It said this concern was increased by large trade imbalances and growing friction on the issue, fears of a further decline of the dollar, low prices for Third World goods and the decline of bank lending to the area.

3% Real Growth Expected

"In the United States we expect real growth in excess of 3% for both 1987 and 1988," Baker told the fund's Interim Committee, which makes its major decisions.

"Other countries are also putting into place policies to promote global growth and a reduction of external imbalances. Japan, for example, is moving to implement a stimulative fiscal package and tax reform, both of which should support domestic demand."

Baker told his counterparts from Europe that their economies must grow faster or poor nations will suffer. His statements were made at a private meeting and a text was given to reporters.

The IMF report predicted a rising U.S. deficit despite Administration predictions to the contrary.

Compromise Called Difficult

"There continues to be uncertainty about the timing and extent of future fiscal corrections because compromises between the U.S. Administration and Congress on ways to cut deficits have proved to be extremely difficult," the IMF staff said in the annual outlook issued for meetings of the IMF and World Bank in Washington this week.

Compared to a 1986 U.S. budget deficit of $220.7 billion, the IMF staff estimated deficits of $163 billion for fiscal 1987, $173 billion for 1988 and $179 billion for 1990. The Reagan Administration projects the deficits at $158 billion for 1987, $123 billion for 1988 and $90 billion for 1990.

In an appearance on CBS-TV's "Face the Nation," Baker also predicted Sunday that the Administration can avoid seeking a tax increase to help balance the budget. "Taxes? No. Revenues, user fees, that sort of thing, maybe asset sales--yes," he said.

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