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.