Clinton Administration Foresees No Recession : Economy: Upbeat midyear report sticks with earlier predictions of continued modest growth.

Rapidly rising interest rates and the international collapse of the U.S. dollar will not lead to another recession, the Clinton Administration predicted Thursday.

White House officials, in an upbeat midyear report on the state of the nation’s economy, said the Administration will stick with its earlier predictions of continued modest growth throughout the remainder of President Clinton’s term.

However, the White House did not attempt to break down its economic forecast by region, so offered no predictions about the outlook for areas of the country such as Southern California that are still struggling.

The White House said interest rate increases will dampen growth somewhat by 1996 but not significantly, and that effect will be offset by strong job growth and increases in business investment. U.S. exports, which are now rising at double the rate of those of other industrial nations, will continue to boost the economy, largely because of America’s improved international competitive position.

Laura D’Andrea Tyson, chairwoman of the White House Council of Economic Advisers, said the Administration still believes the economy will grow by 3% this year--the same rate it predicted in its last official forecast in January.

The Administration said it does not believe the economy can sustain its 3.4% first-half pace during the last six months of the year, but it also said it does not believe that the rapid rise in interest rates over the past few months will lead to big drops in employment or growth. Officials made only slight reductions in growth estimates, trimming the Administration forecast by 0.1% for each of the years 1996, 1997, 1998 and 1999.

The White House sought to use the mid-session budget and economic review as a forum to provide an 18-month “report card” on Clinton’s handling of the economy.

A series of Administration officials, armed with full-color charts and graphs, each credited the Clinton economic plan of 1993 for bringing about the turnaround. Indeed, for an Administration sorely in need of good news, the economic figures seemed to provide welcome relief.

“The 1992 election hinged on one major issue, and that was the economy, so I’m here with charts to give you the report card,” Treasury Secretary Lloyd Bentsen said at a White House briefing. “By any standard, this economy is doing well, and we’re doing it with inflation under control.”

Bentsen, just back from an economic meeting in Naples, Italy, added that the U.S. economy is now growing faster than that of any other major industrial nation.

“We are confident of our forecast because the foundations for a period of moderate growth with low inflation and rising incomes are stronger now than they’ve been in a generation,” said Tyson.

Despite fears on Wall Street of a surge in inflation--fears that have put almost constant upward pressure on interest rates since February--the Administration’s new forecast calls for inflation at the consumer level to rise only gradually to 3.2% next year and to peak at 3.4% by 1997.

Administration officials said they believe the best news, however, is on the job front. Since Clinton entered office, they said, 3.8 million jobs have been created. That puts him ahead of his campaign pledge to create 8 million jobs in four years.