By Ron Scherer, writer of The Christian Science Monitor
The Christian Science Monitor
THE world economy is set to take off, growing at its fastest rate this decade. Yet it may be some time until that growth rate translates into a significant number of new jobs.
In its July assessment of the world economy, a United Nations economic department concludes that the global economy will grow by a 2-1/2 percent annual rate this year and 3 percent next year. Economic strength in the United States will provide enough energy to boost the economies of Western Europe and Japan, which are slowly moving out of recession.
For the second consecutive year, the UN Department for Economic and Social Information and Policy Analysis expects the vibrant countries of Southeast Asia to lead the world in growth, headed by China with a 10 percent increase in gross domestic product.
"I think it adds up to a period of gradual return to more normal growth from the period of low growth in the 1990s," says William Cline, a senior fellow at the Institute for International Economics in Washington.
Despite this economic growth, unemployment will remain at record highs, the Paris-based Organization of Economic Cooperation and Development (OECD) predicts in a report issued July 19. The report forecasts that unemployment this year among the 25 nations that are members of the OECD will be 8.5 percent, or about 35 million people. Next year, however, the OECD expects unemployment to fall to 8.3 percent.
The key factors determining the shape of the world economy over the next 18 months will be the strength of the recovery in Europe and Japan, according to economist Michael Aho of Prudential Securities Inc. in New York.
Europe's recovery will depend on the Bundesbank, Germany's central bank. "When they cut interest rates, everyone follows," says Mr. Aho, who estimates that Germany will grow by 2 percent this year and 2.5 percent in 1995. "It's not a barn burner but it's better than the last two to three years." Japan's fragile recovery
Aho describes the Japanese economic recovery as "fragile." At a time when the country's economy is teetering between recovery and recession, "Clinton is beating them over the head on trade, so the recovery is very precarious," he says.
The fastest growth will be in Asia, particularly China, which grew at 13 percent in 1993. Mr. Cline says he wonders if China will start to experience imbalances because of the surging growth. "There are inflationary pressures, income differences among provinces, and trade issues," he explains.
For example, as Chinese manufacturing becomes a larger part of international trade, there will be pressure for China to join the General Agreement on Tariffs and Trade, which sets the ground rules for international trade. "At some point, the world has to come to terms with how it absorbs China," Cline says.
The second fastest-growth area will be Latin America, Aho predicts. …