PERSPECTIVES FOR 1982: THE GLOBAL ECONOMY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83T00966R000100010044-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 3
• Document Creation Date: December 20, 2016
• Document Release Date: May 14, 2007
• Sequence Number: 44
• Publication Date: January 11, 1982
• Content Type: MEMO

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THE DIRECTOR OF CENTRAL INTELLIGENCE
WASHWOON, D.C. 20306
Notia-o1 Int.Nig.nc. Counca
DDT #184-82
11 January 1982
MEMORANDUM FOR: Director of Central Intelligence
VIA: Chairman, National Intelligence Council
FROM: Maurice C. Ernst
National Intelligence Officer for Economics
SUBJECT: Perspectives for 1982: The Global Economy
1. The year 1982 will see the trough of and early recovery from
unemployment will
slow current eednin the US i and d States, Western
slow markedly, , economic recession in the United remain very high. The major trade and payments problems will involve a
growing US deficit, a massive Jeucountriesa sCoemnodbtyamarketspwill
ments constraints in many less developed
be generally weak, and oil prices should fall, at least in real terms.
2. The timing of the trough of the US andecon6mithe pdicturehe
subsequent recovery is a major uncertainty in the world US economic timi Experts differ widely lly important sto the world economy this year, because
performance is unusuasua y
there is-little most other can do o
Specifically, most LDCs and Co n
primary exports and a rising debtserviburden while the ineir
demand for oil will force many oil P cee slow of
imports.
3. Another major uncertainty concerns tie price bofheil.st heechances
should will
are that the present nominal price
and decltheninesubstantiin real But increase their
Iran and yeand ar, e war will
Irann and Iraq manage to end the
oil production, Saudi Arabia, even withdsomeocooperation f aoanothereOmEC-
countries, would be hard put to cut p
ket. Should the nominal price-of oil dcline, many oil exporting countries
would soon be in serious financial trouble.
experts
4..+'1982 will be a difficult year irairanyscase Europe. Most increase in
predict very slow economic growth,
European unemployment problem is already
Th
l
e
y.
ike
like
unemployment is
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severe; political and institutional, as well as on mic factors tadjusting to
almost intractible. Western Europe is having great m
room rapid changes in the structure of costs de aandLand in aushri ding com-
petition from Japan and the newly i
reduced economic growth possibilities. Rising labor costs and inflexibil-
ity in labor markets are discouraging business from adding to employment
and are causing investment to be dilaiabor high to
building new capacity. Tax disincentives, .levels, and in many countries pervasive government controls are important
sources of inflexibility. takin 5. Dissatisfaction with slow growth and hseekSpaosyolution through
divergent political forms: Aright-win9 reaction
reduced government controls and generally enhanced economic oflexibility; a rowth left-wing reaction, such as in France, seeks increased ogon of poli-
through greater government involvement. This growing
le-
tical trends will create increasing strains withinhthegEuro nan Com fity
and with the United States. At the same
wing forces in Europe will look to expanded exports outside theinclinedcommunity
to help relieve their economic problems whie protectionist policies. currenc 6. Japan is certain to run a massivrade~hdslows substantiallyland
in 1982. This will be so even though export 9 01i
domestic economic expansion continues atafairlyehigherate based onrrising
domestic demand. The Japanese surplus will
in the US and especially Western Europe. teite r theuppoliticallye
feasible measures Japan may take in response
likely appreciation of the yen, will have much effect on the trade surplus
for 1982, although they could in 1983.
7. Many less developed countries idisruptivenimPactiofsinsurgencies
trouble in 1982. In Central America the p
and the depressive effect of weak commodity markets will continue orr y will
worsen in 1982. In much of Africa, declines
orts, due partly to low prices, have uncovereduatlegacyn of of
economic mismanagement., A growing number
have to reschedule their foreign debt obligations, but mosuppo trithe will
meet their obligations by cutting the imports the. large, newly.
industrializing politically Braziliwillahaveptoakeepsthe brakes ono the eco smrn+ o
handlerit its ieig o rea past
its economic enormous th debt pto loburd wererealeoiloprwill iceshave
and payg its
astewed
iol onoto adapt policy errorg growth
protectonism.
errors and South foreignhmarketsf andl i
protectionism. the face of weak'
8. These economic difficulties abroad will complicate achievement of e been US policy objectives. Many foreign nations benlievhighe bates paying a
price for US policies,.especially the r
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designed to achieve economic renewal in the Unowitefored Whetherlorr not eaot -
this will continue to be a major issue, and will depend in part on US economic performance, especially in the second
half of the year.
C . are bound-ti become
9. In any event, protectionist forces inheMO P, ed competition from
even stronger, because of high unemployment, i _ c Japan and newly industrializing LOCs, and ttts by some
and greater gnoVta-
bly France, to expand their economy through pump-priming
controls. European protectionism wwillmbe part a sicularlyldireciediat
-
the Far Eastern countries; in general it
andu Protection-
ditasffic
lt. of the Multilateral TradeNj9oaf Negotiations
ism will take the form mainly
ism
elaborate informal government controls on trade and investment. 10. Pursuance of the US objective of encouraging private investment
in LDCs is unlikely to get very far in
manufacturescand sdit evereabalance
protectionist reactions to LDC exports o
of payments problems. Although baS will
scale to LDCs, if only in some cases p
unlikely to expand their lending to make upnfcurrentraccount deficitsr
sources of funds or to cover any increase
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