Recession in Germany Weakens Growth Outlook for Western Europe

Growth of the world economy is projected to accelerate during the next five years. Assuming low dollar interest and exchange rates as well as only moderately rising prices for raw materials the real rate of interest on international debt may be as low as 1 percent. In such a setting world output may expand at 3½ percent and world trade at 6 percent annual rate. In Western Europe the pace of output could lag ½ percentage point behind the aggregate for the industrialized countries: In 1993 business activity will weaken notably in Germany, while it will recover in Japan and, more strongly, in the U. S. The highest risk of the present forecast surrounds the prospects for Germany. Should the current recession extend beyond 1993 the medium-term growth outlook for the whole of Western Europe would be seriously underminded.