LONDON (AP) _ Monetary union of the two Germanys is expected to foster growth in the West German economy and help rebuild the East, but the cost may be high.

It probably means higher inflation, interest rates and taxes in the West and business failures, lost jobs and higher prices in the East. How much of each remains a question.

The economic merger takes place July 1, when the West German mark becomes East Germany's currency and East Germany abandons its communist economics for Western capitalism.

''All in all, it's a good chance for the west part of Germany to continue its performance,'' said Ulrich Hombrecher, an economist at Westdeutsche Landesbank Girozentrale in Duesseldorf.

A report by the National Institute of Economic and Social Research in Britain said the merger is ''likely to provide a renewed stimulus to the West German economy.''

The union will enlarge West Germany's economy by an estimated 5 to 10 percent, but few statistics are available on the East German economy.

''We have so little information about the East German businesses and economy,'' Hombrecher. ''It really is a problem.''

West Germany already benefits from East German demand for its cars and consumer electronics, and consumer spending is likely to increase after East German savings are converted into West German marks.

Experts say unification could help Germany sustain growth at the current West German level of above 3 percent, but no one has any real idea how much the East Germans will buy.

''That is one of the great unknowns at the moment,'' said Mark Houghton- Berry , executive director of foreign exchange trading at Goldman Sachs and Co. in London.

Business investment should rise and West Germany will gain cheaper East German labor, which should slow wage increases and boost corporate profits, the experts predict.

Inflation is the big fear. The rate in West Germany is an enviable 2.3 percent, but printing new deutsche marks to convert East German marks will swell the West Germany money supply by 10 percent.

A larger money supply does not disturb Stephen King, international economist with the London investment firm James Capel and Co.. ''You need the 10 percent ... to cope with the 10 percent added in GNP,'' he said.

Another risk for West Germany interest rates, now at 8 to 9 percent.

Its central bank, the Bundesbank, is expected to continue a tight monetary policy, but rates could be pushed higher by large demands for credit to rebuild the East.

Hombrecher predicts monetary unification will add 1 percent to West German economic growth, inflation will move up to 3.5 percent and interest rates will rise to just over 9 percent.

He sees the $80 billion trade surplus shrinking by 7 percent and the $50 billion budget deficit soaring by 30 percent.

Higher taxes might be necessary to finance East Germany's reconstruction and povide help for the unemployed, whose ranks are sure to swell.

Estimates of how many East German jobs will be lost range from 300,000 to 3 million. The actual number has risen so far this year from 20,000 to 130,000.

Hombrecher predicts unemployment will reach 11 percent. West Germany's rate is a low 6.3 percent.

Direct West German aid to the East is expected to be about $20 billion a year in the near future.

East Germans can expect cheaper durable goods; construction, retail and wholesale sectors and tourism could flourish; factories will get the newest technology, and roads will be rebuilt.

In the beginning, East German prices for housing, food and public transport are expected to rise because state subsidies have kept them artificially low.

Some East Germans worry about Westerners snapping up state-owned businesses, property and workers cheaply. East Germans earn one-third to half the average West German monthly wage of $2,020, but West German productivity is three times as high.