Economic Recovery in the United States, Lower Growth in West Germany and Japan. Medium-term Outlook for the World Economy

The West German economy is forecasted to grow by slightly less than 1½ percent per year until 1998; the restrictive stance of both monetary and fiscal policies will depress economic activity not only in 1994 and 1995 but also will tend to reduce the medium-term growth potential. Activity in other European industrialized economies is likely to expand more rapidly (+2½ percent) as fiscal policy in these countries follows a less restrictive course than in Germany. A decline in interest rates and in the exchange rate of the dollar as well as a fiscal policy aimed at reducing the budget deficit in the medium – but not in the short – term should boost the growth rate of the U. S. to 2½ percent per year. In Japan, however, the medium-term growth rate is expected to drop markedly.