NATO COUNTRY ECONOMIC SUMMARIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000303550001-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: November 23, 2009
• Sequence Number: 1
• Publication Date: November 20, 1985
• Content Type: MEMO

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Central Intelligence Agency
MEMORANDUM FOR: Mr. William M. George
Director, International Economics
Defense Technology Security Administration
SUBJECT : NATO Country Economic Summaries
Attached are the NATO Country Economic Summaries that you requested
in your memorandum of 16 October. We hope Secretary Weinberger finds
useful our contribution to the briefing material you are pulling
together for his attendance at the December NATO ministrial meeting. If
you have any further questions or if we can be of further assistance,
please call
Deputy Chief, West European Division, on
Director
European Analysis
Attachment:
As stated.
25X1
25X1
25X1
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BELGIUM-LUXEMBOURG: GENERAL ECONOMIC DATA
BELGIUM
Population (1984): 9.9 Million GDP (Purchaser's Value)/Capita: $7,890
Total Output (Billion $US - 1984 Exch Rate)
1982
1983
1984
1985*
GDP (Purchaser's Value - Current Prices)
GDP (Constant Prices - % Change by Year)
Cost-of-Living Index (1980 = 100)
LUXEMBOURG
68.3
0.7
117
72.5
0.4
126
78.1
2.2
134
83.0
1.5
140
Population (1984): 0.37 Million GDP (Purchaser's Value)/Capita: $13,240
*
Total Output (Billion $US - 1984 Exch Rate)
1982
1983
1984
1985
GDP (Purchaser's Value - Current Prices)
4.0
4.2
4.9
5.1
GDP (Constant Prices - % Change by Year)
2.1
-0.5
0.1
0.5
Cost-of-Living Index (1980 = 100)
118
128
136
141
restrained by continued government austerity measures and structural weaknesses. Despite
a 6-percent rise in investment spending, real GDP will be up only about 1.5 percent this
year--not enough to cause a significant fall in the 13.4 percent unemployment rate.
Economic growth should pick up slightly in 1986, to about 2.0 percent. On a more positive
note, inflation has slowed to about 5 percent this year and probably will improve somewhat
further in 1986.
reduce the budget deficit from 13 percent of GNP in 1983 to 7.8 percent in 1986. His re-
elected government's first task will be to formulate a 1986 budget, and Brussels will need
to make spending cuts of at least $560 million to meet its goal. Further deficit
reduction will be difficult, however, given trade union hostility to social spending
reductions and the government's commitment to a series of tax cuts beginning in 1986.
p
,
g
percent in 1985 while slow economic growth will hold down import growth. As a result,
Belgium's current account, in deficit since 1977, will approach balance in 1985, and could
even register a surplus.
TRADE AND PAYMENTS (Billion $US BOP Basis)
1982
1983
1984
1985*
(Belgium-Luxembourg)
Exports of Goods
and Services
82.9
75.5
76.8
79.5
Imports of Goods
and Services
84.4
75.2
77.0
78.6
Balance of Goods
and Services
-1.5
0.3
-0.2
0.9
Curre
nt Account B
alance
-2.7
-0.8
-0.6
0.1
Long-
Term Capital
-3.7
-5.1
-5.5
-5.3
Total
Reserves Mi
nus Gold (yearend)
3.9
4.7
4.6
4.7**
*Projected
**September
The Belgian economy maintained its steady but unspectacular recovery in 1985, 25X1
The principal objective of Prime Minister Martens's fiscal policy has been to 25X1
which constitute about 70 percent of GNP, will grow by about 3.5 25X1
orts
ian ex
Bel
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CANADA: GENERAL ECONOMIC DATA
Population (1984): 25.2 Million GDP (Purchaser's Value)/Capita: $13,360
Total Output (Billion $US - 1984 Exch Rate) 1982 1983 1984 1985*
GDP Purchaser's Value - Current Prices) 286.7 310.8 336.7 363.6
GDP Constant Prices - % Change by Year) -4.5 3.2 4.7 4.0
Cost-of-Living Index (1980 = 100) 125 132 138 144
Prime Minister Mulroney's Conservative government is currently preoccupied with
reversing its decline in the polls--from a 47-percent approval rating in June to 40-
percent in October--and resolving a potential crisis in the country's banking industry.
Since Parliament reconvened in September, the government has been shaken by the
resignation of two important Cabinet ministers in scandal-related circumstances. More
ominous has been the collapse of two Canadian banks--the first such failures in 62
years. Ottawa has been forced to spend $730 million to shore up the banking system.
The Canadian economy is growing this year at a 4-percent rate, down from near 5-
percent in 1984. Although the 1985 budget only managed to slow the growth of Canada's
fiscal deficit--currently projected to be $27 billion, or about 7.5 percent of GNP--it did
stimulate higher employment by delaying tax hikes until 1986. Investment spending has
been strong because of declining interest rates and a new federal energy policy which
substantially reduces taxes in the energy sector. The employment rate has fallen to about
10 percent and should drop into single figures in 1986. Inflation will average near 4
percent in 1985 and is expected to increase slightly to 5 percent next year.
against the US dollar since the beginning of 1985--should enable Canada to post an
estimated $15 billion trade surplus this year. This is only about $1 billion short of
last year's record of $16.4 billion, despite the high level of imports due to the strong
growth of the Canadian economy. Most of the trade surplus is offset by large services
payments, however, particularly for interest and dividends. The current account surplus
will decline about one-third this year, to approximately $1.2 billion. Ottawa's effort to
procure guaranteed access to the US market through a freer-trade accord will dominate the
economic agenda in 1986.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods
and Services
82.4
87.7
101.3
104.1
Imports of Goods
and Services
81.4
87.0
100.1
103.5
Balance of Goods
and Services
1.0
0.7
1.2
.6
Current Account Balance
2.1
1.3
1.8
1.2
Long-Term Capital
4.7
-0.1
1.3
3.0
Total Reserves Minus Gold (yearend)
3.0
3.5
2.5
2.5**
*Projected
**September
The relatively weak Canadian dollar--the only major currency to have depreciated
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DENMARK: GENERAL ECONOMIC DATA
Population (1984): 5.1 Million GDP (Purchaser's Value)/Capita: $10,700
Total Output (Billion $US - 1984 Exch Rate) 1982 1983 1984 1985*
GDP Purchaser's Value - Current Prices) 45.1 49.7 54.6 58.7
GDP Constant Prices - % Change by Year) -2.9 2.1 3.9 2.3
Cost-of-Living Index (1980 = 100) 123 132 140 147
Denmark's economic growth rate will drop from 3.9 percent last year to about 2.3 25X1
percent in 1985 and should remain at that level in 1986. Investment spending probably
will continue to be the strongest component of domestic demand, while private consumption
should stagnate because of an incomes policy agreement reached in the spring limiting wage
increases to 2 percent in both 1985'and 1986. We expect prices to rise only about 3
percent next year, down from an estimated 4.7 percent in 1985.
The growing current account deficit--expected to reach $2.0 billion this year--is 25X1
Denmark's most pressing economic problem. The deficit is primarily attributable to
interest payments on foreign debt which are expected to total $2.5 billion this year. In
an effort to slow the growth of the current account deficit and reduce foreign borrowing
by the public sector, the government has been reducing its budget deficit, frbm over 10
percent of GDP in 1982 to a projected 4 percent next year.
Denmark's unemployment rate--nearly 10 percent--remains troublesome, but continued 25X1
job creation eation as a result of investment growth could push the rate below 9 percent next
year. The key uncertainty is the course of fiscal policy. If the current account fails
to improve, Copenhagen may feel compelled to raise taxes in an effort to restrain import
demand. This in turn would jeopardize further improvements in unemployment.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services 22.2
22.5
22.4
24.0
Imports of Goods and Services 24.3
23.5
24.1
26.6
Balance of Goods and Services -2.1
-1.0
-1.7
-2.6
Current Account Balance -2.3
-1.2
-1.6
-2.0
Long-Term Capital 2.4
2.5
1.9
4.5
Total Reserves Minus Gold (yearend) 2.3
3.6
3.0
5.0**
*Projected
**September
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FRANCE: GENERAL ECONOMIC DATA
Population (1984): 54.8 Million GDP (Purchaser's Value)/Capita: $8,940
Total Output (Billion $US - 1984 Exch Rate)
1982
1983
1984
1985*
GDP Purchaser's Value - Current Prices)
408.2
450.3
490.0
504.0
GDP Constant Prices - % Change by Year)
1.8
0.7
1.6
1.2
Cost-of-Living Index (1980 = 100)
127
139
149
158
The austerity program adopted by the Socialist government in 1983 continues to pay 25X1
off in reducing inflation and improving the balance of payments. Recovering from a $12
billion deficit in 1982, the current account probably will register a small surplus this
year, and is likely to improve further in 1986. On a December-to-December basis,
inflation fell below 7 percent last year and may fall to 5 percent this year. More
important, the inflation differential vis-a-vis France's major trading partners has been
reduced to about 2 percentage points--although further progress will be slow. Real GDP
will be up about 1.2 percent this year, slightly less than the increase recorded in 1984,
while unemployment continues to hover near 10.5 percent. Economic growth should pick up
next year, reaching 2 percent for the first time since 1979.
During the past year the Socialists have continued their bold effort to 25X1
restructure and modernize the economy by encouraging more flexibility in the labor market
and by diverting resources from consumption to investment. Disappointing its labor union
supporters, the government has authorized significant layoffs in mining, steel,
shipbuilding, and automobiles. It is also pressing nationalized firms to become more
efficient and profitable.
While Paris clearly is moving in the right direction, the problems it is 25X1
addressing are deep-seated, and positive results will continue to be slow to materialize
under the best of circumstances. Growing political activity centered on the March 1986
Assembly election will focus attention on economic policy and spark vigorous debates. If
the right wins, as now seems likely, it probably will continue the austerity program and
launch new initiatives to liberalize the domestic economy. Policy formulation could be
complicated, however, by the fact that -- for the first time under the Fifth Republic --
parliament and the presidency will be in the hands of different political groups.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
153.8
145.4
148.1
151.6
Imports of Goods and Services
161.2
146.5
145.2
148.4
Balance of Goods and Services
-7.4
-1.1
-2.9
3.2
Current Account Balance
-12.1
-4.9
-0.0
0.2
Long-Term Capital
-1.2
9.4
5.2
1.5
Total Reserves Minus Gold (yearend)
16.5
19.9
20.9
23.0**
*Estimated
**September
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GREECE: GENERAL ECONOMIC DATA
Population (1984): 9.9 Million GDP (Purchaser's Value)/Capita: $3,320
Total Output (Billion $US - 1984 Exch Rate) 1982 1983 1984 1985*
GDP Purchaser's Value - Current Prices) 22.6 27.2 33.5 40.5
GDP Constant Prices - % Change by Year) -0.1 -0.0 2.6 2.0
Cost-of-Living Index (1980 = 100) 151 181 215 256
Following his reelection in June, Prime Minister Papandreou recently adopted 25X1
austerity measures aimed at curbing a soaring current account deficit, and reducing
inflation and the large public sector deficit. The new measures include a 15-percent
devaluation of the drachma, import restrictions, and changes in the wage indexation
formula that will reduce the real incomes of workers. In addition, Papandreou imposed a
one-year tax surcharge on the self-employed and promised spending cuts and a crackdown on
tax evasion. The new policies have sparked widespread labor protests, but Papandreou
appears to be hanging tough. With the austerity program in place, Greece will have
difficulty matching this year's 2.0-percent economic growth rate in 1986. As a result,
unemployment probably will creep higher to near 9 percent while inflation is likely to
remain around 20 percent.
Greece's already large current account deficit soared nearly 54 percent in the 25X1
first seven months of this year as exports fell 8 percent while imports rose 6 percent.
The deficit is likely to reach at least $2.8 billion for all of 1985--about 8 percent of
GDP--up from $2.2 billion in 1984. On the domestic side, inflation is running in the 18
to 20 percent range, unemployment is around 8 percent and rising, and private investment
continues its six-year-long slide. The public sector borrowing requirement is expected to
reach almost 20 percent of GDP--up from 15.5 percent in 1984--due to a pre-election
spending spree.
In the short term, the new measures are likely to help reduce the trade and 25X1
current account deficits. They will also strengthen Athen's case if it turns to the EC
for a balance-of-payments loan to meet its large borrowing needs. Over the longer run,
however, the measures are insufficient to correct the structural problems of the
economy. To revive private investment and improve Greece's competitiveness, Papandreou
will need to liberalize the heavily state-dominated economy.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods
and Services
4.2
4.1
4.4
4.3
Imports of Goods
and Services
10.1
9.5
9.8
10.5
Balance of Goods
and Services
-5.9
-5.4
-5.4
-6.2
Current Account Balance
-1.9
-1.9
-2.2
-2.8
Long-Term Capital
1.2
2.1
1.8
NA
Total Reserves Minus Gold (yearend)
0.9
0.9
1.0
1.2**
*Projected
**August
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ICELAND: GENERAL ECONOMIC DATA
Population (1984): 0.24 million
GDP (Purchaser's Value)/Capita:
$9,170
Total Output (Billion $US - 1984 Exch Rate)
1982
1983
1984
1985*
GDP (Purchaser's Value - Current Prices)
1.0
1.8
2.2
2.1
GDP (Constant Prices - % Change by Year)
-0.1
-5.5
2.7
1.5
Cost-of-Living Index (1980 = 100)
225
418
547
717
percent this year because of weak domestic demand, while inflation will continue to hover
at just over 30 percent--about the same as last year but down from over 80 percent in
1983. Unemployment should fall to about 0.8 percent after reaching the relatively high
rate--by Icelandic standards--of over 1 percent last year.
rate. Despite government efforts to lower the rate, inflationary expectations remain
strong, making speculation against the krone a recurring possibility. Meanwhile, net
external debt, now over 60 percent of GDP, has become an increasing burden on the balance
of payments.
Over the longer term , Iceland will continue to be plagued by the small size of
the economy and its over-dependence on the fishing industry--which accounts for about 75
percent of export earnings and 20 percent of GDP. Domestic output and export earnings
both remain extremely vulnerable to variations in the fish catch and world fish prices.
Iceland will have to expand its efforts to diversify its economy but it will need foreign
capital to make the necessary investments. Without these structural adjustments, the
economy is likely to remain fragile for the foreseeable future.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
1.05
1.10
1.11
1.16
Imports of Goods and Services
1.31
1.15
1.24
1.29
Balance of Goods and Services
-0.26
-0.05
-0.13
-0.13
Current Account Balance
-0.26
-0.06
-0.13
-0.13
Long-Term Capital
0.21
0.09
0.11
NA
Total Reserves Minus Gold (yearend)
0.15
0.13
0.15
0.19**
*Projected
**September
Iceland's economic growth rate will decline from 2.7 percent in 1984 to 1.5
The principal short-term economic problem continues to be the high inflation
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ITALY: GENERAL ECONOMIC DATA
Population (1984): 57.0 Million GDP (Purchaser's Value)/Capita: $6,110
Total Output (Billion $US - 1984 Exch Rate) 1982 1983 1984 1985*
GDP Purchaser's Value - Current Prices) 267.8
GDP Constant Prices - % Change by Year) -0.5
Cost-of-Living Index (1980 = 100) 137
306.8 348.4 387.1
-0.4 2.6 2.2
157 174 189
Rome will continue to face several pressing economic problems in 1986 including
large udget and trade deficits, high inflation, and slow growth. Real GDP is likely to
increase slightly less than 2.0 percent next year as the investment boom--caused by rising
profits and increasing exports--tapers off. Sluggish growth will add about 0.2 percentage
point to this year's 10.6 percent unemployment rate because increased jobs in the services
sector probably will not offset the declines in industry and agriculture.
Political maneuvering to re-instate Italy's five party coalition government after 25X1
its collapse over the handling of the Achille Lauro hijacking has eclipsed economic
matters--particularly passage of the 1986 budget-at a time when strong fiscal measures
are needed. Italy's massive public sector deficit threatens to undermine confidence in
the economy and prevent further progress against inflation. The new government is likely
to be less stable than its predecessor, virtually ensuring that any expenditure-cutting
measures in the 1986 budget will fall far short of those necessary to keep the public
sector deficit from rising above 16 percent of GDP next year. After averaging 8.6 percent
for the first nine months of 1985, consumer price inflation probably will reach 9.0
percent next year.
Italy's trade deficit nearly doubled in the first half of 1985; imports rose 25X1
sharply as domestic demand outpaced production and export growth slowed due to an erosion
of Italy's international competitiveness. The deficit should improve next year as
sluggish economic growth restrains imports while the 8-percent devaluation of the lira in
July makes Italian exports more attractive. The devaluation should also boost services
exports--especially tourism earnings--cutting the current account deficit to $5.0 billion
in 1986.
Trade and Payments (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods
and Services
98.9
97.4
99.2
101.4
Imports of Goods
and Services
105.4
98.1
103.2
109.0
Balance of Goods
and Services
-6.5
-0.7
-4.0
-7.6
Current Account Balance
-5.7
0.6
-3.0
-6.6
Long-Term Capital
5.1
0.5
0.6
2.8
Total Reserves Minus Gold (yearend)
14.1
19.8
20.8
20.4**
*Projected
**September
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NETHERLANDS: GENERAL ECONOMIC DATA
Population (1984): 14.4 Million GDP (Purchaser's Value)/Capita: $8,510
Total Output (Billion $US-1984 Exch Rate) 1982 1983 1984 1985*
GDP (Purchaser's Value - Current Prices) 114.6 117.4 122.5 128.2
GDP (Constant Prices - % Change by Year) -2.0 0.8 1.7 2.2
Cost-of-Living Index (1980 = 100) 113 116 120 123
The Dutch economy is growing at an estimated 2-percent pace in 1985, and probably
will expand at about the same rate next year. Stockbuilding and exports continue to be
strong, while business investment has recovered and now is rising by about 7 percent
annually; private consumption is also beginning to expand. Job creation, however, has not
been sufficient to offset increases in the labor force, hence the unemployment rate
continues to hover around 14 percent. Part of the problem is the generous welfare system
that reduces the incentive to find work. Modest pay raises and small rises in import
prices will keep inflation at about 2.5 percent in 1985, and 1.0 to 1.5 percent next year.
The 1986 budget recently announced by the Dutch government relaxes--but does not
abandon--the austerity program in place since 1982. Expenditures are being reduced by
$2.5 billion by trimming welfare spending, public-sector wages, and allocations to various
ministries. These cuts should lower the deficit slightly, to 7.0 percent of GDP.
Additional spending reductions are unlikely because the ruling coalition faces elections
by next spring.
Although imports are growing at a healthy clip because of a surge in investment in
plant and equipment, the current account surplus is continuing to rise this year due to
even stronger export growth. The trade and current account surpluses are expected to
narrow in 1986 as export growth slows.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
Exports of Goods and Services
Imports of Goods and Services
Balance of Goods and Services
Current Account Balance
Long-Term Capital
Total Reserves Minus Gold (yearend)
*Projected
**September
1982
1983
1984
1985*
88.4
83.3
83.9
86.1
82.9
78.6
77.9
79.8
5.1
4.8
6.0
6.3
3.7
3.9
5.0
5.3
-3.3
-2.1
-3.0
-2.7
0.1
10.2
9.2
10.5**
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NORWAY: GENERAL ECONOMIC DATA
Population (1984): 4.1 Million GDP (Purchaser's Value)/Capita: $13,350
Total Output (Billion $US - 1984 Exch Rate) 1982 1983 1984 1985*
GDP (Purchaser's Value - Current Prices) 44.4 49.2 54.7 59.2
GDP (Constant Prices - % Change by Year) 0.3 3.8 3.8 2.2
Cost-of-Living Index (1980 = 100) 127 137 146 155
although the 1986 government budget--which is likely to feature a 12-percent spending
increase and only a 2-percent revenue increase--could push the rate somewhat higher next
year. In addition, investment spending, which is expected to decline this year due to a
drop in offshore energy investment, could rebound in 1986, adding to the economy's
strength. The 1985 unemployment rate will be about 2.5 percent, high by Norwegian
standards, and the Conservative-led coalition probably will give in to opposition pressure
to spend more money on employment programs.
The economy probably will grow at about a 2-percent rate in both 1985 and 1986, 25X1
Inflation this year should equal the 6-percent rate recorded in 1984. The 25X1
government projects a slight decline in inflation next year, but this forecast is over
optimistic given the expected expansion of fiscal policy. Higher spending probably will
result in the first budget deficit in seven years, and the central bank will likely follow
an accommodating monetary policy. Given the likelihood of stimulative monetary and fiscal
policies, wage demands in next year's wage negotiations will be high, pushing price
increases up even higher next year.
current accunt surplus will almost match last year's $3.2 billion. Next year's surplus
could be lower if the dollar continues to weaken and world oil prices decline further.
The current account probably will rebound later this decade because the government
recently announced plans for a 50-percent increase in oil production by 1990 to generate
more tax revenues.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods
and Services
27.3
26.6
28.0
29.4
Imports of Goods
and Services
26.0
24.0
24.2
25.2
Balance of Goods
and Services
1.3
2.8
3.8
4.2
Current Account Balance
0.7
2.0
3.2
3.0
Long-Term Capital
1.2
-1.0
-0.1
1.0
Total Reserves Minus Gold (yearend)
6.9
6.6
9.4
13.4**
*Projected
**September
With export volume increases offsetting the decline in oil prices, Norway's 1985 25X1
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PORTUGAL: GENERAL ECONOMIC DATA
Population (1984): 10.0 Million GDP (Purchaser's Value)/Capita: $1,950
Total Output (Billion $US - 1984 Exch Rate)
1982
1983
1984
1985*
GDP (Purchaser's Value - Current Prices)
12.7
15.6
19.5
24.1
GDP (Constant Prices - % Change by Year)
3.8
-0.4
-1.4
1.3
Cost-of-Living Index (1980 = 100)
147
184
238
290
The Portuguese economy began to recover slowly in 1985, with GDP growth likely to
reach 1.3 percent. Exports are leading the way and should rise about 9 percent in real
terms, while private consumption will be flat due to an expected 2-percent fall in real
wages. The deterioration in the financial condition of Portuguese firms and the
competition from the government for available credit will lead to another decline in
private investment. Total domestic demand is likely to edge up slightly, contributing to
a 5 percent increase in real imports. Exports should do somewhat better, helping to
reduce the current account deficit to $250 million. Inflation will continue to decline--
to 22 percent in 1985.
deficit--almost 20 percent of GDP in 1985. Private savings are increasingly financing the
deficit, leaving fewer resources for private sector development. Lisbon is being
pressured by the World Bank to restructure public sector firms, but probably will hold off
on any major reforms until after the presidential elections early next year because of the
political uncertainties resulting from the October legislative elections.
Portugal enters the EC on 1 January. Shifting to imports of higher priced EC cereals,
phasing out nontariff barriers, and lowering high tariffs on competitive Spanish goods
will increase imports, while a backward agricultural sector and uncompetitive industries
will slow export growth. Lisbon will probably have to arrange another IMF program in 1986
--this time with more emphasis on public sector structural reform.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
5.9
6.9
7.1
7.7
Imports of Goods and Services
11.8
10.1
9.8
10.0
Balance of Goods and Services
-5.9
-3.2
-2.7
-2.3
Current Account Balance
-3.3
-1.6
-0.5
-0.3
Long-Term Capital
2.2
1.2
1.2
1.0
Total Reserves Minus Gold (yearend)
0.5
0.4
0.5
1.2**
*Projected
**August
The principal impediment to economic recovery is Portugal's soaring government
The balance of payments situation will likely deteriorate next year because
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SPAIN: GENERAL ECONOMIC DATA
Population (1984): 38.6 Million GDP (Purchaser's Value)/Capita: $4,180
Total Output (Billion $US - 1984 Exch Rate)
1982
1983
1984
1985*
GDP Purchaser's Value - Current Prices)
123.6
141.7
161.3
178.6
GDP Constant Prices - % Change by Year)
1.0
2.4
2.3
1.8
Cost-of-Living Index (1980 = 100)
131
147
164
177
Real GDP will grow about 1.8 percent in 1985, half a percentage point below the 25X1
1984 rate. The decline mainly reflects slower growth in real exports -- the driving force
of the economy last year. Private consumption is likely to increase only marginally due
to the sluggish rise in real disposable income. Although profits are improving, high real
labor costs and uncertainties regarding EC accession continue to hold back private
investment. Weak domestic demand will help to reduce inflation below 8 percent, but at
the cost of pushing unemployment still higher--to about 21.5 percent.
Real exports are likely to expand about 4 percent in 1985 as slower growth in 25X1
Spain's markets abroad and an erosion in international competitiveness cut into export
demand. Real imports will grow about 3 percent, reflecting the slower rise in domestic
demand. The current account surplus will decline slightly to about $1.8 billion, but will
remain much improved over the large deficits recorded in the early 1980s.
Declining inflation and a solid current account surpulus will cushion Spain's 25X1
entry into the EC on 1 January 1986. The required dismantling of tariff barriers,
however, will stimulate imports, and the inflation rate--4 percentage points above the EC
average--could hurt Spanish competitiveness and partially offset the advantage of easier
access to European markets. Because the external sector probably will not contribute
greatly to GDP growth next year, Madrid is emphasizing a recovery based on the expansion
of domestic demand. Officials expect an easier monetary policy and tax cuts to stimulate
private consumption and investment. This should boost real GDP growth to about 2.3
percent in 1986--but probably will have little impact on Spain's high unemployment rate.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
34.8
33.6
37.0
38.1
Imports of Goods and Services
40.6
37.3
35.9
37.2
Balance of Goods and Services
-5.8
-3.7
1.1
0.9
Current Account Balance
-4.3
-2.5
2.1
1.8
Long-Term Capital
1.8
3.1
3.2
1.0
Total Reserves Minus Gold (yearend)
7.7
7.4
12.0
11.5**
* Projected
**August
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TURKEY: GENERAL ECONOMIC DATA
Population (1984): 50.2 Million GDP (Purchaser's Value)/Capita: $990
Total Output (Billion $US - 1984 Exch Rate)
1982
1983
1984
1985*
GDP
Purchaser's Value - Current'Prices)
23.4
31.3
49.7
73.9
GDP
Constant Prices - % Change by Year)
4.3
3.8
5.8
3.9
Cost-of-Living Index (1980 = 100)
179
235
348
500
With some exceptions Turkey is making progress in dealing with its multiple
economic problems. Inflation has slowed to 36 percent for the latest 12-month period,
down from 56 percent a year earlier, and real GDP growth is expected to be a respectable
3.9 percent in 1985. Economic growth may actually be even higher because the imposition
of the value-added tax early this year has led to underreporting of business activity.
The current account deficit also has improved significantly and for 1985 is likely to be
around $1.0 billion, down from $1.4 billion in 1984. Although the trade deficit will
deterioriate in 1985, a surge in tourism revenue and a substantial rise in worker
remittances will more than offset it.
Prime Minister Ozal is continuing with his free-market approach, although some
policy errors could create difficulties next year. The budget deficit reached about 5
percent of GDP in 1984 and Ankara has not had much success in reducing it this year--the
deficit is likely to be double the original target. Moreover, the money supply appears
out of control, soaring 58 percent for the latest 12-month period.
Rapid growth in the money supply is sure to cause Ankara to miss its inflation
target of 25 percent for 1986; prices probably will rise closer to 40 percent. GDP growth
likely will be in the 4 to 5 percent range with unemployment remaining around 20
percent. Ankara will continue to need aid from its Western allies, as well as borrowing
in the private financial markets. The grace period on previously rescheduled debt
essentially ended last year, substantially boosting Turkey's debt service burden--it will
reach about $3.5 billion this year and remain near that level through the remainder of the
decade.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
5.7
5.9
7.4
8.0
Imports of Goods and Services
8.4
8.9
10.3
10.8
Balance of Goods and Se Xices
-2.7
-3.0
-2.9
-2.8
Current Account Balance
-0.9
-1.8
-1.4
-1.0
Long-Term Capital
0.2
0.3
0.2
NA
Total Reserves Minus Gold (yearend)
0.9
1.3
1.3
1.2***
*Projected
**Before debt relief
***September
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I I
UNITED KINGDOM: GENERAL ECONOMIC DATA
Population (1984): 56.4 Million GDP (Purchaser's Value)/Capita: $7,540
Total Output (Billion $US-1984 Exch' Rate) 1982 1983 1984 1985*
GDP Purchaser's Value - Current Prices 370.1 401.8 425.4 464.5
GDP Constant Prices - % Change by Year) 1.8 3.2 1.6 3.5
Cost-of-Living Index (1980 = 100) 122 127 133 141
The United Kingdom is now in its fifth year of economic expansion with GDP 25X1
expected to grow by about 3.5 percent in 1985. Growth has been led by exports and private
investment, and the economy received an additional boost from the conclusion of the coal
miners' strike last spring. Despite improving growth, unemployment continues to be
Thatcher's chief economic problem, with the jobless rate standing at 13.1 percent in
October and showing no sign of coming down in the foreseeable future. After a surge in
inflation during the summer, retail prices are now growing at a rate of less than 6
percent and will remain in that range through next year.
London has found it difficult to meet targets set in the March budget. The 25X1
government set its 1985/86 deficit target at $9.9 billion but after only six months the
deficit has already reached $7.9 billion. The Treasury is making a renewed attempt to
control spending, but is unlikely to meet the deficit target without a tax increase--
highly unlikely for political reasons--or more sales of nationalized industries to the
private sector. The Treasury is also having difficulty meeting monetary targets. In
March, the Treasury trimmed the target range for annual money supply growth to 5-9
percent, but Sterling M3 has grown by an annual rate of 18.5 percent in the last six
months. As a result, London has recently changed its monetary policy, deemphasizing
control of the money supply. Instead, the Treasury will set interest rates at whatever
level is necessary to control inflation despite the risk that high interest rates could
cause an economic slowdown.
Britain's trade and current accounts are near balance, and may generate small
surpluses this year and next. The non-oil trade deficit is being offset by a surplus in
oil trade. Slower economic growth--probably around 2.7 percent-- and the expected
strengthening of the pound should slow import demand in 1986, while exports will continue
to recover.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
146.3
140.4
142.0
149.5
Imports of Goods and Services
134.3
132.2
138.0
144.6
Balance of Goods and Services
12.0
8.2
4.0
4.9
Current Account Balance
8.4
4.9
0.7
1.2
Long-Term Capital
-15.6
-13.8
-14.8
-13.6
Total Reserves Minus Gold (yearend)
12.4
11.3
9.4
10.9**
*Projected
**September
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WEST GERMANY: GENERAL ECONOMIC DATA
Population (1984): 61.2 Million GDP (Purchaser's Value)/Capita: $10,030
Total Output (Billion $US - 1984 Exch Rate) 1982 1983 1984 1985*
GDP Purchaser's Value - Current Prices) 561.4 585.8 612.3 640.0
GDP Constant Prices - % Change by Year) -1.1 1.3 2.6 2.5
Cost-of-Living Index (1980 = 100) 112 116 118 121
West German economic growth is continuing this 25X1
g year at about 1984's moderate 26
-
.percent pace. Exports are the driving force, as demand for West German goods remains
high. The traditional export sectors--steel, chemicals, autos, machinery, and engineering
--are all benefiting. West Germany is recording gains in its global market share, and
record trade and current account surpluses are almost certain this year; these surpluses
probably will be higher still in 1986.
Domestic demand is only now beginning to play a supporting role in the 25X1
i
econom
c
expansion. Private consumption has been weak due to slack labor market conditions but is
starting to strengthen. It should firm next year with the first installment of a modest
tax cut. Equipment investment is robust, but the flagging construction industry--hit by a
saturated housing market and a slowdown in public construction--is sapping overall
private-sector investment growth. Meanwhile, Bonn's devotion to budget-balancing has
imposed austerity on public consumption and investment.
p
s year should remain clos
t
e
1984'
o
s
2
.
4
percent--
continuing evidence of Bonn's success in taming inflation. Unemployment remains the most
intractable problem; the current 9.4-percent unemployment rate is exceptionally high by
historical standards, and only marginal improvement is in sight. The continued moderate
rate of economic growth expected for 1986--Bonn projects 3 percent--will generate new
jobs, but these will be offset by rapid growth of the labor force. The Kohl government
has no comprehensive plan to deal with unemployment, but the opposition -- preoccupied
with security and foreign policy matters -- has not effectively exploited this issue.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services 219.5
209.8
210.9
238.0
Imports of Goods and Services 204.4
B
195.3
192.4
214.0
alance of Goods and Services 15.1
C
14.5
18.5
24.0
urrent Account Balance 3.4
L
4.0
6.6
13.0
ong-Term Capital -6.7
-3.3
-4.7
-2
0
Total Reserves Minus Gold (yearend) 44.8
42.7
40.1
.
42.8**
*Projected
**September
25X1
The rise in consumer
rices thi
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SUBJECT: NATO Country Economic Summaries
Distribution:
Original - Mr. William M. George
Director, International Finance & Economic Policy
Office of the Under Secretary of Defense for
Plans & Resources
The Pentagon
1 - D/EURA
2 - EURA Production Staff
4 - IMC/CB
1 - C/WE
2 - WE (Kennedy)
1 - WE/BBC
1 - WE/CM
1 - WE/GN
1 - WE/IA
EURA/WE
(14 November 1.985)
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