PARIS — World economic growth should start gathering pace next year, but due to heavy private and public debts growth still will be too slow to stop an inexorable rise in unemployment, the Organization for Economic Cooperation and Development said Monday.
Almost 35 million people, or 8.5% of the work force of the OECD's 24 member nations, could be without a job by mid-1994, up from slightly more than 34 million now.
In its end-of-year economic outlook, the OECD said solid expansion is under way in North America and moderate recoveries are continuing in the rest of the English-speaking world.
But the think tank for leading industrial nations said economic activity and confidence are still weak in Europe and Japan, and that growth will be poor in those areas.
As a result, global output of goods and services will grow by no more than 2.1% in 1994 after expanding 1.1% this year. Recovery to a 2.7% growth rate, as predicted in the OECD's midyear report, will be delayed until 1995.
"In most of Continental Europe, the recovery that was projected last spring is not yet apparent, although there are some indications that . . . the trough has been reached," the OECD said. "In Japan, economic activity has renewed its decline."
In Europe, the jobless crisis is particularly grave. Its unemployment is expected to near 11.5%, or 22 million, in the second half of 1994, up from 10.7% this year.
Most worrying is the prospect that jobs lost due to the economic slowdown will not be regained, adding to an already high level of structural unemployment.
A range of structural reforms must be implemented to put people back to work, the OECD said.
"The most pressing problem facing policy makers is the high and, especially in Europe, rising level of unemployment," OECD chief economist Kumiharu Shigehara told a news conference.
The OECD said that with a steady rise in public debt since 1979, countries have little room now to raise spending to boost growth and will have to rely instead on cutting interest rates.
The group expects the German Bundesbank--which largely sets interest rate levels in Europe--to ease policy further, and the cost of German three-month money should drop to an average 5% in 1994 from 7.3% this year.
"At this stage, prospects for a decline in German inflation appear favorable, and any room for easing monetary conditions without undermining the credibility of policy should be used fully," Shigehara said.
However, he said there was a risk that inflation would remain stubborn in Germany, slowing monetary easing there and in other major European countries, such as France.
While Europe's domestic demand would be subdued by interest rates and unemployment, its exports would benefit from better economic growth elsewhere, especially the buoyant Asian region and the emerging economies of Central and Eastern Europe.
Japan, which will show feeble growth of just 0.5% in 1994, will suffer from the harmful effect on exports of a rise in the yen against other major currencies.
Shigehara said the effectiveness of Japan's budget packages to stimulate demand and the fall in its interest rates to an extremely low level have been limited so far.
"Any scope for additional fiscal and monetary policy easing should be used in a timely fashion," he said.
The United States would also have to cut its budget deficit further and might have to raise interest rates at some point to lock in low inflation and ensure durable growth.
"Poor economic conditions could aggravate protectionist tendencies which have put the open multilateral trading system under pressure," the OECD added.
OECD Economic Growth
Following are figures for real gross national product and gross domestic product for the Group of Seven leading industrialized nations in a semiannual report released Monday by the Organization for Economic Cooperation and Development (percent change from previous period):
1993 1994 1995 (Half years) 1 2 1 2 1 2 United States 2.3% 2.8% 3.3% 2.9% 2.7% 2.5% Japan 0.6 -1.7 0.8 2.4 2.2 2.6 Germany -4.2 2.1 -0.6 2.4 2.0 2.6 France -1.7 0.3 1.0 2.1 2.7 3.1 Italy 0 1.4 1.5 2.4 2.3 2.4 Britain 2.0 2.8 3.0 3.0 2.9 2.9 Canada 3.3 2.9 4.0 4.1 4.2 4.1 OECD Europe -0.8 1.0 1.3 2.4 2.5 2.8 Total OECD 0.8 1.4 2.1 2.7 2.6 2.7
KEY INDICATORS Following are key economic indicators for the Group of Seven leading industrialized nations in a semiannual report released Monday by the Organization for Economic Cooperation and Development:
Real total domestic demand (% change)
1993 1994 1995 (Half years) 1 2 1 2 1 2 United States 3.3 3.4 3.8 3.2 2.9 2.6 Japan 0.8 -1.3 1.1 2.8 2.3 2.7 Germany -4.8 2.1 -1.2 2.4 1.8 2.3 France -2.4 0.1 0.6 1.8 2.5 2.9 Italy -7.9 0.4 0.8 1.8 2.4 2.8 Britain -0.2 2.6 2.8 3.0 2.9 2.9 Canada 3.0 2.5 3.7 3.9 4.1 3.9 OECD Europe -2.8 0.7 0.8 2.2 2.4 2.7 Total OECD 0.4 1.5 2.1 2.7 2.6 2.7
Inflation (GDP deflator)