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