Trade Imbalances a Growing Threat, IMF Says

The world economic picture has darkened in the past year and could turn even worse if trade imbalances grow among the United States, Japan and West Germany, the International Monetary Fund said Wednesday.

Economic growth in industrialized nations slowed, prices for commodities dropped, trade balances tilted more sharply than ever and cries for protectionism grew during 1986 and early this year, the IMF said in its annual report.

It quickly added that there have been some positive changes during the year, among them continued growth in many developing nations and further efforts by developed countries to make their currency exchange rates more realistic.

But the international agency said more problems lie ahead for the United States, West Germany and Japan because of the U.S. trade deficit and the other nations’ trade surpluses.

“Because of the threat of protectionism and the risk of financial market unrest, these imbalances are potentially destabilizing, with the serious implications for growth throughout the world economy if they were to persist over an extended period of time,” the IMF said.

The agency’s warning likely will be discussed by financial officials from about 150 countries when the IMF and World Bank hold their annual meetings in Washington later this month. At that time, the IMF will issue its estimate of economic growth in 1987.

It said the growth in gross national products of developed nations slowed to a 2.75% gain in 1986 from a 3.25% increase in 1985.

“This outcome was disappointing in view of the higher rate of growth that had been expected on account of lower oil and commodity prices, exchange rate adjustments and easier monetary conditions,” the agency said.

Developing nations fared better, growing 4% in 1986, compared to 3.25% the previous year. But the results varied sharply, the IMF said, with countries that depend on income from fuel exports watching their economies shrink and countries that did not depend on fuel exports for cash seeing their economies grow.

Fuel exports rank as prime examples of the problems faced last year by nations that earn their income by exporting commodities. Oil prices fell to single-digit levels last year, sharply cutting the income of oil producing nations such as Mexico and Nigeria.

But countries that depended on other raw materials often fared little better. Many prices for commodities, after adjustments for inflation, were at their lowest levels last year since the Depression, the IMF said.

Since its founding in 1944, the IMF has tried to help countries with problems balancing their books. As of July 1, the IMF had lines of credit open with 25 countries and loaned about $4 billion in the fiscal year that ended June 30.

The World Bank has a similar role but concentrates on longer-term growth and on development projects.

The IMF also has played a key role in easing the debt crisis faced by the developing nations, which owe foreigners a total of $1.1 trillion. Private banks often use the IMF as a sort of credit bureau to determine a country’s creditworthiness.