| Abstract: | Clear signs that the world recovery is underway have e merged in the first half of 1983. We have revised our forecast upwards and predict an increase of 1 3/4 per cent in OECD GNP in I983 and a further 3% per cent in 1984. By hirtorical standards such a recovery would be extremely modest and would not be expected to trigger off a resurgence in inflation. If so GNP could advance a further 2% per cent in each of I985 and 1986. However, there is a danger that the relaration of monetary policy in the US in conjunction with the expansionary fiscal stance will bring about a very rapid upswing in the second half of 1983, thereby generating upward pressures on US interest rates. If, as the Presidential election approaches, these pressures are resisted and US monetary growth maintains its recent rapid expansion, an increase in the rate of inflation would be likely in 1984. If this were met with a tighter policy response (higher interest rates both in the US and elsewhere) after the election, the prospects would be for a sharp slowdown in the world economy in 1985. |
