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Uncertainty Clouds Prospects for Economic Growth

December 19, 1991

PARIS (AP) _ The major industrial democracies appear poised for moderate economic growth, although many have expanded slower than expected this year, the Organization of Economic Cooperation and Development said Thursday.

The 24-nation OECD, in the latest of its twice-yearly economic overviews, said ″fundamental conditions for renewed growth at a moderate pace are in place.″

The report predicted that growth among its members could reach 3 percent by mid-1992, but repeatedly cited the United States as the most prominent example of an economy performing below expectations.

Elaborating at a news conference, OECD experts said there was a possibility the U.S. economy might slip back into recession before a serious recovery takes hold.

Rick Imai, one of the OECD’s economists, said there was a ″30 to 40 percent chance″ that the United States could experience a so-called double- dip recession.

Economic growth in the United States, the United Kingdom and possibly Canada may not be firmly established until the end of the first half of 1992, the OECD summarized in its 213-page report.

Elsewhere, growth is ″slowly picking up in countries where it had been weak, and it is slowing to a more sustainable pace in Germany and Japan, where signs of overheating had persisted into 1991,″ the report said. ″Hence differences in rates of expansion across countries should narrow considerably.″

It said unemployment in OECD countries, which soared from 6.2 percent to 7 percent over the past year, could rise to 7.4 percent by mid-1992 and was likely to stay above 7 percent through 1993.

Overall, inflation appeared under control, although some individual countries face problems, the report said. The collective annual inflation rate has dropped from 5 percent to 4.5 percent in 1991 and could fall further in the coming year, it said.

The report warned that an element of uncertainty had pervaded the world economic scene, a potential threat to the pace of recovery.

″Unclear signs about the U.S. economic situation have probably affected confidence in other OECD countries,″ it said. ″ If the prevailing climate of wait-and-see continues, particularly in France and Italy. ... the situation of firms and the labor market could deteriorate even further, which would make a subsequent pickup of activity more difficult to achieve.″

Overall growth in the OECD was only 1 percent for the second half of 1991. The report predicted a rate of 2.2 percent for the first half of 1992, and 3.1 percent for the second half.

The U.S. economy, which declined by 0.5 percent in 1991, was expected to grow by 2.2 percent in 1992 and 3.8 percent in 1993.

Japan’s growth, 4.5 percent for 1991, was projected at 2.4 percent for 1992 and 3.5 percent for 1993. Germany’s growth rate, 3.2 percent for 1991, was projected at 1.8 percent for 1992 and 2.5 percent for 1993.

In each case, growth projections were lower than had been forecast by the OECD in July.

The report also said the disintigration of the Soviet Union has crippled exports to the country and urged OECD members to open their markets to goods from eastern and central Europe.

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