JOINT ACTION SAID VITAL TO BOOST WORLD GROWTH
  Prospects for world economic growth remain
  very sluggish, and coordinated action by western governments is
  urgently needed to restore business confidence, stabilize
  currencies and encourage investment, the Organization for
  Economic Cooperation and Development (OECD) said here.
      "The economic situation has deteriorated in recent months,
  and ... Slow growth, high unemployment and large payments
  imbalances are likely to persist," it said in one of its
  gloomiest reviews of the world economy in recent years.
      The gross national product (GNP) of the 24-nation bloc of
  western industrialised countries is forecast to grow by only
  2.25 pct both this year and next, even slower than last year's
  2.5 pct growth rate.
      "We would like to see the aggregate for the OECD area
  comfortably exceeding three pct," David Henderson, head of the
  OECD's economics and statistics department, said.
      The OECD said that the dollar fall had led to rising
  inflation expectations and higher interest rates in the U.S.,
  Combining with world trade imbalances and the huge third world
  debt problem to increase the risks of a world economic
  downturn.
      "At the same time, many of the conditions for faster growth
  remain favorable," it said, citing low inflation in most major
  countries, healthy corporate finances, generally lower interest
  rates, improvements in state budget positions and more flexible
  labor markets.
      But private sector confidence had been undermined by
  uncertainties over exchange rates, it said, and warned that "for
  confidence to be restored, it is important for governments
  swiftly to implement internationally-agreed commitments."
      This was a clear reference to last February's Louvre accord
  of the Group of Five nations plus Canada, analysts said.
      The OECD said that apparent disagreements among major
  countries on implementation of the Louvre accord had helped to
  undermine business confidence, and called on more active fiscal
  policies from the U.S., West Germany and Japan to slow demand
  in the U.S. And raise it in the other two countries.
      Henderson said the 6,000 billion yen package announced
  recently by the Japanese government to encourage public works
  and cut taxes would make a significant contribution to this
  process, though it was too early to estimate its precise
  impact.
      He said the measures will help strengthen Japan's domestic
  demand significantly, quite possibly exceeding one pct of GNP.
      The inflation outlook, while broadly satisfactory, has
  worsened in recent months, with OECD consumer prices forecast
  to rise 3.5 pct this year and 3.75 pct in 1988 after a 2.8 pct
  increase in 1986.
      There is no prospect for any significant improvement in the
  unemployment situation over the next 18 months, with the
  average rate expected to stabilize at 8.25 pct, similar to last
  year.
      The OECD called for efforts to liberalize world
  agricultural markets through switching farm subsidies away from
  price guarantees and other measures linked to production
  towards direct income support for farmers.
  

