IMF sees world pick-up in 1994

after being held back in 1993 by the poor performance of industrial

nations, international monetary sources said today.

In a new outlook that will be released next week, the International

Monetary Fund forecasts that the world economy will expand by 3.2% next

year after rising 2.1% in 1993, the sources said.

The advance will be led by an economic turnaround in recession-ridden

Europe and Japan, but the the rebound will be modest because of the need

for many industrial countries to cut back on their bulging budget

deficits, they said.

Industrial country growth is projected to increase to 2.3% next year

from 1.1% in 1993, according to the new IMF outlook.

The new forecast, which may still undergo some last-minute fine-tuning

before final publication, foresees US growth picking up to 2.7% next

year from 2.4% in 1993.

Monetary sources said that growth in the United States is likely to be

held back somewhat in 1994 by the tax increases contained in President

Bill Clinton's plan to slash the budget deficit.

Such short-term pain, though, is necessary to achieve the long-term

gain that will come from putting America's finances in better shape. The

IMF believes that further cuts in the deficit will eventually be needed

to stem government red ink.

After growing by what for it is a recessionary 0.5% this year, the

Japanese economy is expected to pick up steam next year and expand by

2.2%, the sources said.

The new Japanese government is widely expected to unveil this week an

approximately $50 billion fiscal package to boost an economy whose

recovery has been held back by a renewed rise of the yen and the damage

it has done to the country's exporters.

After contracting by an average 0.3% this year, the economies of the

European Community are forecast to expand by 1.6% in 1994 as the gradual

interest rate cuts of recent months start to have a positive impact on

growth, sources said.

Further rate cuts are needed to boost confidence and spur growth, they

added.

The IMF expects both the German and French economies to turn round

next year, the sources said. Germany's economy is forecast to expand by

1.2% next year after contracting by 1.6% in 1993, while France's is

projected to grow by 1% in 1994 .

Economic growth in Britain and Italy is also expected to pick up next

year -- to 2.8% and 1.7%, repectively, from 1.8% and 0.3% in 1993.