NATO COUNTRY ECONOMIC SUMMARIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T01017R000403930001-1
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: March 1, 2011
• Sequence Number: 1
• Publication Date: May 5, 1986
• Content Type: MEMO

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r ALE" 25X1
DATE S/
OCR 3
F1LF
DOC NO Eve M &r.) L,9
P&PD
5 MAY 1986
MEMORANDUM FOR: Mr. William M. George
Director, International Financial
and Economic Policy
Office of the Under Secretary of Defense
SUBJECT: NATO Country Economic Summaries
Attached are the NATO Country Economic Summaries that you
requested in your memorandum of 28 March (1-09266/86). We hope
Secretary Weinberger finds useful our contribution to the
briefing material you are pulling together for his attendance at
the May NATO ministerial meeting. If you have any further
questions or if we can be of further assistance, please call
Chief, West European Division
Director
European Analysis
Attachment:
As stated
EUR M 86-20069
Central Intelligence Agency
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BELGIUM-LUXEMBOURG: GENERAL ECONOMIC DATA
BELGIUM
Population (1985): 9.9 Million GDP (Purchaser's Value)/Capita: $8,060
Total Output (Billion $US - 1985 Exch Rate)
1982
1983
1984
1985
GDP (Purchaser's Value - Current Prices)
GDP
66.2
70.3
75.1
79.8
(Constant Prices - % Change by Year)
C
0.7
0.4
2.2
1.8*
ost-of-Living Index (1980 = 100)
117
126
134
140
LUXEMBOURG
Population (1985): 0.37 Million GDP (Purchaser's Value)/Capita:
$11,350
25X1
Total Output (Billion $US - 1985 Exch Rate)
1982
1983
1984
1985
GDP (Purchaser's Value - Current Prices)
3.0
3.8
4.0
4.2
GDP (Constant Prices - % Change by Year)
C
2.1
1.9
2.0
2.0*
ost-of-Living Index (1980 = 100)
118
128
136
141
y e
or
s
o reduce spending
,
the Bel
g
ian eco
nom
y con
ti
nues
o
t
grow at a slow but steady pace. Increased exports, especially to other EC members, will
pace Belgium's growth in 1986 and GDP will expand by about 2 percent -- little changed from
the last two years. Investment spending will continue to expand as interest rates fall,
while cheaper oil and low inflation will boost private consumption. The sluggish pace of
growth will do little to reduce the high unemployment rate --12.8 percent in January. On
the brighter side, inflation fell in 1985 to 4.9 percent and will fall even further this
year, to about 2.5 percent. 25X1
ens
s
sca
policy continues to em
p
hasize
d
re
uc
i
ng
th
e
b
d
u
get
eft by controlling government spending. His center-right coalition
g
overn
e
t i
m
n
s
currently developing its 1986 and 1987 budgets, which are designed to reduce the deficit
from 12 percent of GDP in 1985 to 8 percent by 1987. Brussels is pledged not to increase
taxes so any deficit reduction will have to come from lowered government spending. 25X1
g
urren
account surplus is expected to increase t
a
b
o
ou
t $1
.
3
bi
l
lion in
1986 from $0.6 billion in 1985. Belgian exports, which constitute about 70 percent of GNP,
will grow by about 4.7 percent in 1986 while lower oil prices will hold down the growth of
imports.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
(Belgium-Luxembourg)
Exports of Goods and Services
82.1
76.7
76.9
80.5
Imports of Goods and Services
B
l
83.5
76.1
75.9
80.0
a
ance of Goods and Services
C
-1.4
0.6
1.0
0.5
urrent Account Balance
L
-2.6
-0.4
0.2
0.6
ong-Term Capital
T
-3.6
-3.3
-1.9
-1.9
otal Reserves Minus Gold (yearend)
3.9
4.7
4.6
4.8
* Estimated
Dampened somewhat b
ff
t
t
Prime Minister Mart
'
fi
l
Bel
ium's c
t
25X1
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CANADA: GENERAL ECONOMIC DATA
Population (1985): 25.4 Million GDP (Purchaser's Value)/Capita: $14,380
Total Output (Billion $US - 1985 Exch Rate) 1982 1983 1984 1985
GDP (Purchaser's Value - Current Prices) 271.9 294.9 319.4 345.0
GDP (Constant Prices - % Change by Year) -4.5 3.2 5.0 4.5
Cost-of-Living Index (1980 = 100) 125 132 138 144
Ottawa is currently attempting to deal with the uncertainty surrounding the start
of trade negotiations with Washington. The government is fending off opposition attacks
that it broke an earlier pledge to exempt some areas from the talks in order to sway US
Congressional opinion. Ottawa is also being pressured to aid Western Canadian oil firms
and grain farmers, both suffering from depressed commodity prices.
25X1
25X1
The Canadian economy is expected to grow 3 percent this year, down from 4.5
percent in 1985. The slowdown is the result of lagging investment spending due to the
25X1
collapse in oil prices as well as the impact of higher taxes legislated in previous
budgets. Ottawa did manage to bring its projected fiscal 1986 budget defict under $22
billion -- in part by limiting the real growth of defense spending -- but it disappointed
the financial community by relying primarily on tax hikes to meet the goal. The
unemployment rate has fallen to 9.6 percent, the lowest level in 4 years, but is expected
to rise slightly by year end. Inflation should remain around 4 percent, with higher taxes
and a slight currency depreciation offsetting the impact of lower oil prices.
Canada registered a $15 billion trade surplus with the US last year, the only 25X1
major trading partner with which Canada had a positive trade balance. Falling oil prices
are expected to reduce this year's trade surplus by approximately $1 billion, and the
current account deficit consequently will be worse than last year's $1.9 billion. The
deterioration in the current account balance in 1985 -- which was primarily due to the
surprisingly strong growth of the Canadian economy -- combined with falling oil prices to
put intense market pressue on the Canadian dollar in early 1986. Ottawa -intervened
heavily to defend its currency, but it is nonetheless expected to depreciate slightly in
the coming months.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
82.4
87.7
101.3
102.3
Imports of Goods and Services
81.4
87.0
100.1
105.0
Balance of Goods and Services
1.0
0.7
1.2
-2.7
Current Account Balance
2.1
1.3
1.8
-1.9
Long-Term Capital
4.7
-0.1
1.3
0
Total Reserves Minus Gold (yearend)
3.0
3.5
2.5
2.5
25X1
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DENMARK: GENERAL ECONOMIC DATA
Population (1985): 5.1 Million GDP (Purchaser's Value)/Capita: $11,200
Total Output (Billion $US - 1985 Exch Rate) 1982 1983 1984 1985
GDP (Purchaser's Value - Current Prices) 43.8 48.4 53.0 57.1
GDP (Constant Prices - % Change by Year) 3.0 2.1 3.5 2.7
Cost-of-Living Index (1980 = 100) 123 132 140 146
Denmark's economy will grow about 3.5 percent this year because of strong domestic
demand. An inflation rate of under 2 percent will combine with real wage increases,
growing employment,.and a decline in household saving to boost consumption. Furthermore,
investment spending will increase about 15 percent because of high capacity utilization,
strong profitability, lower interest rates, lower labor cost growth, and a favorable
.business climate.
frustrate the center-right government. Strong import growth prompted the government last
December, and again in March, to dampen import demand by raising taxes on consumption and
energy. The measures will, however, only offset the added purchasing power from lower oil
prices. Any improvement in the current account this year thus will depend on the extent to
which the lower oil prices give a boost to Danish exports by improving conditions in
Denmark's major trading partners and the extent to which interest payments to foreign
debtors are reduced by lower interest rates. 25X1
rate during the past year, from over 10 percent to
a seasonal
ly adjusted
8 percent
y
in th
first quarter of this year. This has diminished m
uch of the
opposition'
s pressure
on th
government to stimulate the economy, which would a
current account significantly.
lmost certa
inly have w
orsened Den
mark'
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
22.2
22.5
22.4
25.1
Imports of Goods and Services
24.3
23.5
24.1
27.9
Balance of Goods and Services
-2.1
-1.0
-1.7
-2.8
Current Account Balance
-2.3
-1.2
-1.6
-2.8
Long-Term Capital
2.4
2.5
1.9
4.5
Total Reserves Minus Gold (yearend)
2.3
3.6
3.0
5.4
The persistent current account deficit -- $2.7 billion in 1985 -- continues to 25X1
Strong job creation has steadily lowered Denmark's persistently high unemplo
ment
e
e
s
25X1
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FRANCE: GENERAL ECONOMIC DATA
Population (1985): 55.1 Million GDP (Purchaser's Value)/Capita: $9,130
Total Output (Billion $US - 1985 Exch Rate)
1982
1983
1984
1985
GDP
Purchaser's Value - Current Prices)
408.2
450.3
490.0
503.1
GDP
Constant Prices - % Change by Year)
1.8
0.7
1.6
1.3
Cost-of-Living Index (1980 = 100)
127
139
149
158
25X1
The austerity program adopted by the Socialist government in 1983 continues to pay
off in reducing inflation and improving the balance of payments. Recovering from a $12
billion deficit in 1982, the current account probably registered a small surplus last year,
and is likely to improve further in 1986. On a December-to-December basis, inflation fell
to 4.7 percent in 1985 and may drop below 2.5 percent this year. More importantly, the
.inflation differential vis-a-vis France's major trading partners has been reduced to below
2 percentage points -- although further progress will be slow. Real GDP grew 1.3 percent
last year, slightly less than the increase recorded in 1984, while unemployment continues
to hover near 10.5 percent. Thanks largely to the decline in oil prices, economic growth
should pick up further this year, exceeding 2 percent for the first time since 1979.
In mid-March, France returned a conservative government to power. Prime Minister
Chirac has promised to move further toward market-oriented policies, and he has already 25X1
announced the lifting of some price and foreign exchange controls as well as measures
intended to encourage more flexibility in the labor market. In addition, the government
has unveiled a program to return much of France's nationalized industry to the private
sector over the next six years. The 1987 budget proposal, which is due in the fall, is
likely to provide tax cuts, coupled with public spending reductions aimed at reducing the
government deficit.
25X1
While Paris is clearly moving in the right direction, the structural economic
problems France must address are deep-seated, and positive results will continue to be slow
to materialize. The French political scene, moreover, is likely to remain confused for at
least the short run because the conservatives must contend with Socialist President
Mitterrand, whose term runs until 1988. This power sharing between a parliament and
president from opposing political parties is unprecedented under the Fifth Republic, and
much of the domestic political debate will center on economic issues. The actual course of
policy may depend on how far Mitterrand can stretch his powers to slow the right's program.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods
and Services
153.8
145.4
148.1
152.6
Imports of Goods
and Services
161.2
146.5
145.2
148.4
Balance of Goods
and Services
-7.4
-1.1
-2.9
4.2
Current Account Balance
-12.1
-4.9
0.0
0.3
Long-Term Capital
-1.2
9.3
5.2
1.5
Total Reserves Minus Gold (yearend)
16.5
19.9
20.9
26.6
25X1
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GREECE: GENERAL ECONOMIC DATA
Population (1985): 10.0 Million GDP (Purchaser's Value)/Capita: $3,290
Total Output (Billion $US - 1985 Exch Rate)
1982
1983
1984
1985
GDP (Purchaser's Value - Current Prices)
18.4
22.2
27.3
32.9*
GDP (Constant Prices - % Change by Year)
-0.1
-0.0
2.6
1.7*
Cost-of-Living Index (1980 = 100)
151
181
215
256
25X1
10 percent of GDP. The sharp deterioration was due to a nearly 8-percent rise in imports,
a 2.5-percent decline in exports, and a continued decline in invisibles receipts --
particularly shipping and emigrant remittances. On the domestic side, inflation was around
19 percent, unemployment reached 8.3 percent, and GDP growth slowed to an estimated 1.7
percent, down from 2.6 percent in 1984. The public sector borrowing requirement rose
,sharply, reaching 17.8 percent of GDP, up from 15.5 percent in 1984.
Despite continued labor protests, Prime Minister Papandreou is sticking to the 25X1
aus eri y program he introduced last October to combat the rapidly deteriorating balance-
of-payments situation. The measures included a 15-percent devaluation of the drachma,
import restrictions, and changes in the wage indexation formula that will reduce workers'
real incomes by an estimated 7 percent. Papandreou also imposed a one-year tax surcharge
on the self-employed and introduced new enforcement measures to combat widespread tax
evasion. The austerity program paved the way for a $1.5 billion balance-of-payments loan
from the EC, about half of which has been disbursed. The second portion will be released
early next year if Athens is on track towards meeting its economic targets, which include
reducing inflation to 15 percent by the end of 1986 and 10 percent by mid-1987, and cutting
the net public sector borrowing requirement almost in half by 1987.
he austerity program -- and the oil price decline -- should reduce the current 25X1
account deficit to about $2.4 billion in 1986. Inflation is likely to average about 23
percent because of the devaluation and price increases for public sector goods and
services; it should decline by year-end but the 15-percent target looks doubtful. Economic
growth is likely to be slightly negative and unemployment may climb to 9 percent. Over the
longer run, 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 1
983
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
-3.3
Long-Term Capital
1.2
2.1
1.8
NA
Total Reserves Minus Gold (yearend)
0.9
0.9
1.0
0.9
Greece's current account deficit soared by 50 percent last year to $3.3 billion, or
25X1
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ICELAND: GENERAL ECONOMIC DATA
Population (1985): 0.24 million GDP (Purchaser's Value)/Capita: $10,830
Total Output (Billion $US - 1985 Exch Rate) 1982 1983 1984 1985
GDP Purchaser's Value - Current Prices) 0.9 1.5 2.0 2.6
GDP Constant Prices - % Change by Year) -0.1 -5.0 3.1 2.5*
Cost-of-Living Index (1980 = 100) 225 418 547 723 25X1
Economic activity increased in 1985 for the second consecutive year. This growth
resulted from one of the best years ever for the fishing industry -- which accounts for 20
percent of GDP and about three-fourths of export earnings. Fixed investment spending
growth was virtually flat, however, because of declines in residential construction and
public sector projects, and similar results are likely in 1986.
Iceland's main short-term concern is controlling inflation
although down 25X1
which
,
,
rom the 80 percent rate of 1983, has stayed at about 30 percent for the past two years.
,A consensus among policymakers, business, and labor to implement a broad attack on
inflation resulted in a wage settlement in February that has pushed the rate down to 15
percent. The agreement, however, will turn a small budget surplus into a $50 million
deficit due to tariff cuts and increased subsidies. Meanwhile, the large current account
deficit continues, burdened by interest payments on the growing foreign debt -- now 60
percent of GDP. 25X1
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. Domestic output and exports both
remain extremely vulnerable to variations in the fish catch and world fish prices.
Iceland's economy will remain fragile for the foreseeable future unless it expands its
efforts to diversify the economy, which will require substantial increases in foreign
direct investment.
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
0.10
Total Reserves Minus Gold (yearend)
0.15
0.15
0.13
0.21
25X1
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ITALY: GENERAL ECONOMIC DATA
Population (1985): 57.1 Million GDP (Purchaser's Value)/Capita: $6,320
Total Output (Billion $US - 1985 Exch Rate) 1982 1983 1984 1985
GDP (Purchaser's Value - Current Prices) 246.4 323.3 361.0
GDP (Constant Prices - % Change by Year) -0.5 -0.4 2.8
Cost-of-Living Index (1980 = 100) 137 157 174
387.1
2.3
190
25X1
External forces -- falling oil prices, the declining value of the dollar vis-a-vis
the lira, and lower interest rates in the United States, West Germany, and Japan -- will be
the key factors behind Italian real GDP growth of 2.3 percent in 1986. A healthy private
sector also will contribute to the moderate expansion of the economy. Investment probably
will remain strong despite high domestic interest rates as record profits enable companies
to internally finance modernization projects. Unemployment, however, is likely to rise
above the 1985 level of 10.6 percent; not enough new jobs will be created to accommodate
new entrants to the labor force plus the shedding of labor in industry. 25X1
Falling oil prices will help slow inflation by nearly two percentage points to 6.5
percent in 1986, despite the government's decision to discourage increased fuel consumption
by raising gasoline taxes. Rome anticipates its energy import bill will be cut by a third
this year; this should trigger a $4.5 billion improvement in Italy's trade deficit and move
the current account into a small surplus. 25X1
The one dark cloud on the economic horizon is the public sector deficit -- which is
io exceed 16 percent of GDP this year. Heated opposition to proposed spending cuts
delayed passage of the 1986 budget by two months, and the final document contains virtually
no savings. Covering the huge public sector borrowing requirement is a significant drain
on Italy's financial resources and probably will lessen Rome's ability to bring domestic
interest rates down in line with those in other industrialized nations.
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
25X1
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I I
NETHERLANDS: GENERAL ECONOMIC DATA
ILLEGIB
Population (1985): 14.5 Million GDP (Purchaser's Value)/Capita: $8,570
Total Output (Billion $US-1985 Exch Rate) 1982 1983 1984 1985
GDP (Purchaser's Value - Current Prices) 111.1 113.9 118.9 124.3
GDP (Constant Prices - % Change by Year) -1.7 1.3 1.7 2.0
Cost-of-Living Index (1980 = 100) 113 116 120 123
fueled by rising business investment, consumer expenditure and export earnings. Job
creation has not exceeded increases in the labor force, however, and the unemployment rate
continues to hover around 14 percent. The Dutch are also just beginning to come to grips
with a generous welfare system that reduces the incentive to find work. Modest wage
settlements and small rises in import prices helped hold inflation to only 2.5 percent in
1985, and should permit a further fall to 1.0 - 1.5 percent this year.
The Hague's 1986 budget relaxes -- but does not abandon -- the austerity program
put in place in 1982 to bring down the public sector deficit. Public expenditures are
25X1
being reduced by $2.5 billion by trimming welfare spending, public-sector wages, and
allocations to various ministries. These cuts may be enough to hold the deficit to 6
percent of GDP, the same as in 1985. Additional spending reductions are being postponed
until after the national elections scheduled for May.
25X1
in 1986. Although imports may grow faster than exports in volume terms, the trade surplus
should widen marginally due to favorable movements in the terms of trade on both the
energy and non-energy accounts.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods
and Services
88.0
83.4
83.9
87.0
Imports of Goods
and Services
83.0
78.6
78.0
81.4
Balance of Goods
and Services
5.0
4.8
5.9
5.6
Current Account B
alance
3.7
3.9
4.9
4.8
Long-Term Capital
-3.2
-2.1
-3.0
-3.2
Total Reserves Mi
nus Gold (yearend)
10.1
10.2
9.2
10.8
* Estimated
The Dutch economy is expected to continue its slow but steady growth in 1986, 25X1
The Netherlands should continue to enjoy large current account and trade surpluses
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ILLEGIB
NORWAY: GENERAL ECONOMIC DATA
Population (1985): 4.1 Million GDP (Purchaser's Value)/Capita: $13,980
Total Output (Billion $US - 1985 Exch Rate) 1982 1983 1984 1985
GDP (Purchaser's Value - Current Prices) 42.1 46.7 51.9 57.3
GDP (Constant Prices - % Change by Year) 0.3 3.8 3.8 3.0 25X1
Cost-of-Living Index (1980 = 100) 127 137 146 154
Despite the sharp fall in oil prices this year, offshore development work already
underway will boost Norway's oil sector investment in both 1986 and 1987. This work is
expected to contribute to a 30-percent rise in manufacturing investment this year, but
because of inefficiencies in some sectors of the economy, this boom is not likely to
translate into GDP growth much greater than 2 percent. The major short-run impact of
lower oil prices has been to reduce the share of taxes collected from oil production from
17 percent to about 10 percent. A government effort to raise additional taxes led to a
collapse of the center-right coalition in late April. The future course of economic
policy is uncertain because the new Labor Party government is likely to be short-lived. 25X1
Despite lower oil prices, inflation could remain at about last year's 5.5 percent
rate because, despite the sharp falloff in revenues, large government spending increases
are likely even if the Labor government does not last. The central bank in turn will
probably come under strong pressure to reverse the slowdown in money supply growth it
undertook in January.
deficit because of the steep decline in oil exports -- compounded by an early spring
strike that halted oil production for nearly three weeks. Current account problems are
likely to persist under lower oil prices unless Norway undertakes long-term investments to
make its mainland industries more competitive and to boost non-oil exports.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985
Exports of Goods and Services
27.3
26.6
28.0
27.7
Imports of Goods and Services
26.0
24.0
24.2
22.9
Balance of Goods and Services
1.3
2.8
3.8
4.8
Current Account Balance
0.7
2.0
3.2
3.1
Long-Term Capital
1.2
-1.0
-0.1
1.0
Total Reserves Minus Gold (yearend)
6.9
6.6
9.4
13.9
The $3.1 billion current account surplus of 1985 may turn into a $4 billion 25X1
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PORTUGAL: GENERAL ECONOMIC DATA
Population (1985): 10.0 Million GDP (Purchaser's Value)/Capita: $2,030
Total Output (Billion $US - 1985 Exch Rate)
1982
1983
1984
1985
GDP (Purchaser's Value - Current Prices)
10.9
13.4
16.6
20.3*
GDP (Constant Prices - % Change by Year)
3.8
-0.4
-1.5
2.5*
Cost-of-Living Index (1980 = 100)
147
184
238
284
The Portuguese economy last year posted its most favorable overall results since
the mid-1970s. Buoyed by an 8.5 percent increase in real exports, real GDP grew 2.5
percent; total domestic demand edged up slightly, due to the 3-percent increase in public
consumption. Private consumption grew only marginally, however, due to sluggish real
wages, while real investment declined 5 percent. Inflation continued its downward trend,
falling to about 19 percent.
Lisbon made little progress in reducing the budget deficit
which reached 14 25X1
,
percent of GDP in 1985; total government financing requirements meanwhile rose to 18
percent of GDP. In late 1985, the new Cavaco Silva government relaxed the Soares austerity
program by boosting spending and cutting some taxes. It is also trying to reverse the
downward trend in private investment and would like to cut the cost of government subsidies
by returning some public enterprises to the private sector. The commitment to
reprivatization is welcomed by the business community although it will probably lead to
layoffs and factory closures. Cavaco Silva is also likely to have trouble removing the
consitutional barriers to privatization because of opposition from the Socialist and
Communist parties.
Healthy export growth in 1985 contributed to the first surplus on the current 25X1
account since 1973. Portugal will likely see a surge in imports in 1986, however, because
of the dismantling of tariff barriers and the shift to more expensive EC suppliers of
agricultural imports; Lisbon's new expansionary policies will also spur imports.
Consequently, although the decline in oil prices will have a favorable impact, the current
account deficit is nevertheless likely to reach $500 million.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
5.9
6.9
7.1
7.6
Imports of Goods and Services
11.8
10.1
9.8
8.4
Balance of Goods and Services
-5.9
-3.2
-2.7
-0.8
Current Account Balance
-3.3
-1.0
-0.5
0.1
Long-Term Capital
2.2
1.2
1.2
0.8
Total Reserves Minus Gold (yearend)
0.5
0.4
0.5
1.4
25X1
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SPAIN: GENERAL ECONOMIC DATA
Population (1985): 38.6 Million GDP (Purchaser's Value)/Capita: $4,310
Total Output (Billion $US - 1985 Exch Rate) 1982 1983 1984 1985
GDP (Purchaser's Value - Current Prices) 116.9 140.0 152.5 166.3*
GDP (Constant Prices - % Change by Year) 1.0 2.5 2.3 1.7*
Cost-of-Living Index (1980 = 100) 131 147 164 178
,
o
a 4-percent rate in the fourth quarter. The late improvement was helped by increased
private consumption resulting from a personal tax cut, and by heavy consumer buying in
anticipation of the introduction of the new value-added tax on 1 January 1986. Average
annual inflation fell to 8.5 percent because of a weaker dollar, lower oil prices, and
slightly slower growth in labor costs. Unemployment edged up to 22 percent, but for the
first time since the mid-1970s the total level of employment increased. 25X1
,
p
rom a
poor harvest, weak export markets and a slight deterioration in internatioal
competitiveness. Real exports grew 2.3 percent while imports increased about 3 percent. A
surplus on the invisibles balance -- primarily because of higher revenues from tourism --
contributed to a $2.5 billion current account surplus.
.
Agricultural exports will not rise greatly since high EC tariffs will only gradually
diminish over the 7- to 10-year transition period. Industrial exports are also unlikely to
expand significantly because Spanish firms are plagued with unit labor costs that are among
the highest in Europe. As Spain's industrial tariff barriers are dismantled and the
economy opened to EC competition, some firms will face bankruptcy. Madrid's efforts to
streamline traditional industries and develop the high-tech sector will eventually increase
competitiveness, but probably at the cost of higher unemployment in the near term. With
general elections scheduled for June, the Socialist government may have to back off
somewhat on its push for industrial modernization.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
1984
1985*
Exports of Goods and Services
34.8
32.7
37.1
41.0
Imports of Goods and Services
40.6
36.6
35.9
39.9
Balance of Goods and Services
-5.8
-3.9
1.2
1.1
Current Account Balance
-4.3
-2.5
2.3
2.5
Long-Term Capital
1.8
3.1
3.3
3.0
Total Reserves Minus Gold (yearend)
7.7
7.4
12.0
11.2
25X1
Although real GDP growth averaged only 1.7 percent for the year
it accelerated t
Exports made only a minor contribution to growth in 1985
as S
ain suffered f
Entry into the EC is not likely to bring any immediate benefits in 1986 25X1
25X1
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TURKEY: GENERAL ECONOMIC DATA
Population (1985): 51.3 Million GDP (Purchaser's Value)/Capita: $1,020
Total Output (Billion $US - 1985 Exch Rate)
1982
1983
1984
1985
GDP (Purchaser's Value - Current Prices)
GDP (Con
t
t P
16.4
22.0
34.9
52
5
s
an
rices - % Change by Year)
Cost-of-Li
i
I
d
4.3
3.8
5.9
.
4.9
v
ng
n
ex (1980 = 100)
179
237
352
507
Prime Minister Ozal continues to promote hi
t
i
s aus
er
ty and free-market economic
policies. He successfully implemented a value-added tax last year -- which brought in $1.9
billion, 40 percent above the target -- in addition to privatizing a few state assets, and
introducing new rules for forei
n in
t
g
ves
ment to attract sorely needed foreign capital.
Ozal's economic program continues to show "no 1t h
t
U son
e balance-of-payments
siA substantial rise in tourism revenues and a mod
t
i
era
e r
se in worker remittances and
exports more than offset an increase in imports, helping to reduce the current account
deficit to an estimated $1 billion in 1985. Ankara was also able to meet $3.7 billion in
debt service payments last year -- sharply higher than in 1984 due to the expiration of the
grace period on rescheduled debt. These payments absorbed 28 percent of foreign exchange
earnings, however, and the foreign exchange crunch led Ankara to at least temporarily
retreat from plans to make the lira fully convertible. On the domestic side, GDP growth
slowed to 4.9 percent, down from nearly 6 percent in 1984, and unemployment probably edged
above 20 percent. Inflation fell from 53 percent to 44 percent -- still substantially
above Ankara's 25-percent target. On the positive side, revenues from the value-added tax
helped to reduce the public sector deficit from 5 percent of GDP to an estimated 2.6
percent.
oo
or
986 is mixed Ank
ara is un
l
ikely to meet its 25-percent target
for inflation, but new Central Bank rules aimed at reducing the growth of the money supply
probably will lower inflation to the 35-percent range. GOP growth will likely be around 5
percent -- probably the highest rate in NATO but still not enough to prevent a slight rise
in unemployment. On the external side, lower oil prices and an 8-10 percent rise in the
dollar value of exports should reduce the current account deficit to about $800-900
million. Turkey will continue to need aid from its Western allies, as well as borrowing in
the private financial markets, if it is to meet its debt service obligations. These will
remain in $3.5-4.0 billion range through the remainder of the 1980s.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1982
1983
*
1984
1985
Exports of Goods and Services 5.7
Imports of G
d
d
5.9
7.4
8
0
oo
s an
Services 8.4
Balance of G
d
8.9
10.3
.
11
3
oo
s and Services -2.7
Current Account Balance
-3.0
-2.9
.
-3.0
Long-Term Capital -0.9
0
2
-1.8
0
-1.4
-1.0
.
Total Reserves Minus Gold
(yearend) 0.9
-
.3
1.3
0.2
1.3
1.2
* Estimated
** 1982-1984 figures exclude debt relief
The outl
k f
1
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UNITED KINGDOM: GENERAL ECONOMIC DATA
Population (1985): 56.4 Million GDP (Purchaser's Value)/Capita: $8,000
Total Output (Billion $US-1985 Exch Rate) 1982 1983 1984 1985
GDP (Purchaser's Value - Current Prices 357.8 389.0 412.4 451.1
GDP (Constant Prices - % Change by Year) 1.9 3.3 2.6 3.3
Cost-of-Living Index (1980 = 100) 122 127 133 141
expected to grow between 2.5 and 3 percent in 1986. The main impetus for growth will
shift from exports to consumer expenditure as inflation falls below 4 percent and r
al
e
earnings rise at a healthy pace. Private investment and exports will continue to
contribute to growth and Britain will be a net beneficiary from lower world oil prices.
Despite the outlook for further economic recovery, unemployment remains a critical problem
-for the Thatcher government: the jobless rate stood at 13.2 percent in March and shows no
sign of coming down in the foreseeable future.
on
on
s commitment to the relatively ti
g
ht fiscal
d
an
monetary policies pursued since Thatcher came to power in 1979. Strong personal and
corporate tax receipts and revenues from the sale of public assets more than compensated
for declining North Sea oil receipts, allowing the Treasury to undershoot its borrowing
target for fiscal 1985 by over $1 billion; the public sector borrowing requirement (PSBR)
totalled $8.3 billion or 1.6 percent of GDP. General government expenditure is projected
to remain constant in real terms for the next three years, with the PSBR remaining below 2
percent of GDP. Monetary authorities continue to emphasize control of inflation as the
most important goal of economic policy. To this end, British interest rates remain high
b
y
i
t
n
erna
ti
ona
l
standards
despite their
otential d
i
i
,
p
ampen
ng
mpact on growth. 25X1
rema
n
n substantial sur
p
lus in 1986 d
e
p
it
s
e
significantly lower net oil earnings, as non-oil exports and invisibles continue their
strong growth. The trade balance may deteriorate somewhat, however, as growing consumer
spending boosts the demand for imported goods.
TRADE AND PAYMENTS (Billion $US, BOP Basis) 1982
1983
1984
1985*
Exports of Goods and Services 204.4
185.6
190.3
201.6
Imports of Goods and Services 194.0
177.7
185.8
197.2
Balance of Goods and Services 10
4
7
9
4
5
.
.
.
4.4
Current Account Balance 6.9
4.7
1.4
4.6
Long-Term Capital -15.5
-13.3
-19.0
-16.0
Total Reserves Minus Gold (yearend) 12.4
11.3
9.4
12.9
The United Kingdom is now in its fifth 25X1
year of economic expansion with GDP
25X1
The March budget reaffirmed L
d
'
The current account balance should
i
i
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WEST GERMANY: GENERAL ECONOMIC DATA
Population (1985): 61.1 Million GDP (Purchaser's Value)/Capita: $10,160
Total Output (Billion $US - 1985 Exch Rate) 1982 1983 1984 1985
GDP (Purchaser's Value - Current Prices)
GDP (Constant Prices - % Change by Year)
Cost-of-Living Index (1980 = 100)
543.5 568.3 593.7 621.0
-1.0 1.5 2.7 2.4*
112 116 118 121 25X1
West German economic growth should spurt to 4 percent in 1986
up from 2
4
ercent
,
.
p
last year. Private consumption will be boosted by the first stage of the 1986/88 personal
income tax cuts (about $5 billion), and by real wage increases -- as West German unions
have, at least temporarily, dropped their goal of shorter working hours in favor of pay
hikes. In addition, we agree with West German estimates that the savings from cheaper oil
-- which will be largely passed on to the consumers -- will boost GOP growth about one-
half percentage point in 1986. Despite these favorable factors, the economy should begin
to slow by mid-year, as deutschemark appreciation cuts real export demand and reduced
-export earnings cause West German firms to reassess investment plans.
h 25X1
Unemployment, which soared during the 1981/82 recession and has remained hi
g
,
wi not improve very much. We expect the number of unemployed to decline by only about
60,000 this year, yielding an average 9.0 percent unemployment rate -- just slightly below
the level in late 1985. On the brighter side, currency appreciation will help lower the
inflation rate this year to about 0.8 percent
a postwar low
We also estimate that
,
.
cheaper oil will add about $5 to $7 billion to Bonn's 1986 current account surplus, which
should reach a record $29 billion.
government deficit and eradicating inflation. The Bundesbank plans to keep monetary
growth in 1986 in the 3.5 - 5.5 percent range and the West Germans are resisting
international pressures for additional cuts in central bank lending rates. The Finance
Ministry has ruled out advancing the 1988 tax cuts, and major tax reform will not be
debated until after next January's federal elections.
TRADE AND PAYMENTS (Billion $US, BOP Basis) 1982 1983 1984 1985*
Exports of Goods and Services 218.5 210.1 210.3 237.5
Imports of Goods and Services 203.7 195.4 193.2 207.2
Balance of Goods and Services 14.8 14.7 17.1 30.3
Current Account Balance 3.4 4.1 6.3 14.8
Long-Term Capital -6.1 -3.2 -5.1 -1.3
Total Reserves Minus Gold (yearend) 44.8 42.7 40.1 44.4
* Estimated
West German fiscal and monetary policy will remain directed towards reducing the
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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
1 - D/EURA
2 - EURA Production Staff
1 - C/PES
4 - IMC/CB
1 - C/WE
2 - WE
1 - WE/BBC
1 - WE/CM
1 - WE/GN
1 - WE/IA
EURA/WE~ I(05 May 86)
25X1
25X1
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