(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R001001890002-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: January 12, 2017
• Document Release Date: August 31, 2010
• Sequence Number: 2
• Publication Date: April 25, 1984
• Content Type: REPORT

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Memorandum for:
The attached economic updates were
requested by the Office of Secretary of
Defense. They were used as briefing material
for Secretary of Defense Weinberger.
Distribution:
Orig - OSD
1 - DDI
1 - ADDI
1 - DDI Registry
1 - OD/EURA
2-- EURA Production
4 - IMC/CB
5 - EURA/WE
EURA/WE
(25April84)
EURA
Office of European Analysis
Directorate of Intelligence
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BELGIUM-LUXEMBOURG: GENERAL ECONOMIC DATA
BELG IUM
Population (1983): 9.9 Million GDP (Purchaser's Value)/Capita: $8,420
Total Output (Billion $US - 1983 Exch Rate)
1980
1981
1982
1983
GDP (Purchaser's Value - Current Prices)
68.5
71.3
77.1
83.4
GDP (Constant Prices - % Change by Year)
2.6
-1.2
0.7
0.7
Cost-of-Living Index (1980 = 100)
100
108
117
126
LUXEMBOURG
Population (1983): 0.37 Million GDP (Purchaser's Value)/Capita: $12,140
Total Output (Billion $US - 1983 Exch Rate)
1980
1981
1982
1983
GDP (Purchaser's Value - Current Prices)
3.2
3.8
4.3
4.8
GDP (Constant Prices - % Change by Year)
0.3
3.2
0.7
-0.5*
Cost-of-Living Index (1980 = 100)
100
108
118
128
25X1
The Belgian economy is emerging from the doldrums
but tougher austerit
measure
,
y
s
government and structural weaknesses will permit only slow progress. Real growth
in 1984 will probably not exceed 1.5 percent. Even this limited increase will be welc
ome,
however, because the Martens government is counting on higher revenues generated by
renewed growth to make it easier to sustain its politically controversial economic
recovery program. Although both Liberal and Social Christian members of the coalition
approved the tough new measures in mid-March after protracted negotiations, increased
social tensions are likely to test the government's resolve between now and the national
elections which must be held by fall 1985.
25X1
The principal objective of the economic recovery program is to lower the b
d
t
u
ge
deficit as a percentage of GDP from last year's 13 percent to 7-8 percent within three
years. This reduction will be accomplished almost exclusively by expenditure cuts,
including decreases in cost-of-living adjustments for wages and most social security
benefits. This continued squeeze on incomes will keep the growth of domestic consumption
to a low level, but, on the bright side, inflation is likely to decline from last year's
7.2 percent to about 6 percent, and the current account deficit will probably show further
improvement.
TRADE AND PAYMENTS (Billion $US, BOP Basis) 1980
1981
1982
1983
Exports of Goods and Services 88.9
87.3
82.6
86.0*
Imports of Goods and Services 92.6
90.1
84.4
87.0
Balance of Goods and Services -3.7
-2.8
-1.8
-1.0*
Current Account Balance -4
9
-4
0
-3
0
2
6
.
Long-Term Capital 3.3
.
4.4
.
3.8
-
.
3.8*
Total Reserves Minus Gold (yearend) 7.8
5.0
3.9
4.7
*Preliminary.
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CANADA: GENERAL ECONOMIC DATA
Population (1983): 24.9 Million GDP (Purchaser's Value)/Capita: $13,060
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 247.1 284.5 300.0 325.7
GDP (Constant Prices - % Change by Year) 1.3 2.9 -4.7 3.0
Cost-of-Living Index (1980 = 100) 100 112 125 138 25X1
,
recovery
s under way in Canad
a a
ft
er a steep drop
in economic activity in 1982. Real GNP growth of 3 percent in 1983 probably will improve
to about 4.5 percent in 1984. Consumer spending -- the driving force behind the recovery
in 1983 -- is likely to remain strong. More important, business capital spending should
begin to recover. Canadian inflation slowed considerably last year, to 5.8 percent, and
should hold at about that rate this year. Little improvement will be seen in employment,
however, as the jobless rate probably will average 10.8 percent this year.
a
er
s year and the Liberal
g
ove
r
nment
appears to be preparing a campaign emphasizing responsible management of the economy. In
his February 1984 budget, Finance Minister Lalonde declined to stimulate the economy
further; he offered only minor tax changes to encourage private investment and focused on
limiting growth in the federal deficit. Ottawa remains concerned that inflation can
easily be refueled and will be very careful not to overheat the economy. The value of the
Canadian dollar has dropped from US 80 cents to US 78 cents recently, and the Bank of
Canada will try to keep the Canadian dollar from sliding further. Despite recent
increases in the prime rate we do not expect interest rates to rise significantly in 1984.
,
consecut
ve year Canada enjo
y
ed
a c
urrent
account surplus. The healthy US economy is likely to promote Canadian exports through
1994, but this may be more than offset by a sharp increase in import demand as the 25X1
recovery continues. Canada's services deficit continues to grow, and as a result the
current account probably will move from small surplus to approximate balance this year.
Trade and Payments (Billion $US, BOP Basis)
1980
1981
1982
1983
Exports of Goods
and Services
78.1
83.9
82.2
87.8
Imports of Goods
and Services
80.1
90.0
81.0
87.2
Balance of Goods
and Services
-2.0
-6.1
1.2
0.6
Current Account
Balance
-0
9
-4
8
2
4
1
.
.
.
.3
Long-Term Capital
-4.4
-8.7
-3.2
-2.1*
Total Reserves Minus Gold (Yearend)
3.0
3.5
3.0
3.5
se
ra
e surplus -- $14
.
6 billion in 1983
-
-
f
e
ll
just short of
previous year's record
and for the second
i
*
Estimated.
A solid
sustainable economic
i
25X1
We expect a federal election in Canada l
t
thi
Canada's merchandi
t
d
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DENMARK: GENERAL ECONOMIC DATA
Population (1983): 5.1 Million GDP (Purchaser's Value)/Capita: $11,060
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 41.0 45.4 51.3 56.4
GDP (Constant Prices - % Change by Year) 1.0 0.1 3.5 2.2
Cost-of-Living Index (1980 = 100) 100 112 123 130
25X1
Economic activity rose more than expected in the second half of 1983 a
d
n
prospects
are good for a further expansion of 2.6 percent this year. The 1984 budget, passed in
February, shows a deficit of $5.4 billion, down slightly from last year, but the
improvement is largely due to many temporary measures. In view of the government's
declared policy to avoid tax increases, politically difficult budget cuts will be required
next year to obtain the programmed deficit reduction.
l 25X1
The center-right minority government, in a departure from longstandin
s
i
g
oc
a
welfare policy, has taken a tough line on government spending. It aims over the longer
term to shift demand and reallocate resources from the public to the private sector.
However, it faces a socialist opposition determined to restore funds or at least prevent
further cuts in welfare spending, especially employment programs. Reduced public
subsidies to municipalities this year likely will encourage local jurisdictions to raise
taxes and may also force some layoffs. Although unemployment fell slightly, to around
10.5 percent in 1983, it may remain at or near this high level through the end of the
decade due to imbalances in the labor force structure. On the positive side, salaries --
now deindexed through mid-1985 -- increased last year at a rate very near the government's
target of 4 percent.
Inflation slowed significantly to 5.5 percent in 1983 but its stead r d t'
y e uc ion
has stalled. Underlying developments in wholesale, raw material, and import/export price
indices could push inflation to 6 percent this year. Domestic demand and imports have
risen since the last quarter of 1983, spurred by excessive monetary expansion and lenient
consumer credit practices, and will probably contribute to a limited rise in the balance
of payments deficit, compared with a minor reduction last year. The central bank has
warned that fiscal policy must be tightened in order to curb the sharp rise in consumer
demand, and the government -- adamantly opposed to a devaluation because expectations of
such a move tend to force interest rates higher -- probably will heed the monetary
authority's advice.
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)
1980 1981 1982 1983
24.2 23.2 22.2 24.1
26.6 24.9 24.3 24.4
-2.4 -1.7 -2.1 -0.3
-2.5 -1.8 -2.2 -1.2
2.5 1.3 2.4 2.5
3.4 2.5 2.3 3.6
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FRANCE: GENERAL ECONOMIC DATA
Population (1983): 54.4 Million GDP (Purchaser's Value)/Capita: $10,870
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 363.0 407.7 465.9 509.7*
GDP (Constant Prices - % Change by Year) 1.3 0.5 1.9 0.4
Cost-of-Living Index (1980 = 100) 100 113 127 139
In March 1983 Paris tightened the austerity measures aimed at repairing the dama
e
g
done by its earlier expansionary policies. The Socialists' effort to stimulate the
.economy in 1981 -- at a time when most of France's trading partners were in recession had sent the current account deficit soaring while also boosting the inflation rate. 25X1
The austerity program began to produce results last year -- particularly in the
foreign sector, where the current account improved dramatically. In the last half of the
year inflation was down to about 8 percent at an annual rate while wage increases also
s l owed.
25X1
Although the trade balance and inflation worsened in the first two months of 1984
,
both are expected to improve for the year as a whole. Another exchange rate adjustment
will be required this year to restore the competitive balance between France and West
Germany, however. On the negative side, unemployment has been increasing over the past
several months and is expected to worsen throughout 1984.
In the past several months, the Socialists, led by President Mitterrand and by 25X1
cotes and Finance Minister Delors, have moved toward modernizing French industry by
paring down ailing smokestack industries -- such as coal, shipbuilding
and steel
They
,
.
have indicated that similar plans will be needed in other industries, including autos and
telephonics, if France is to become a world-class competitor and strengthen its high
technology industrial base. Within the EC they have even made a first step at the reform
of agriculture. These steps have caused considerable social unrest in France and have
strained relations with the Communist partners in the government.
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)
1980
1981
1982
1983
171.8
168.7
157.3
155.0*
171.8
169.3
164.8
155.0
0.0
-0.6
-7.5
0.0*
-4.2
-4.8
-12.2
-4.0
-8.5
-8.8
1.2
5.0*
27.3
22.3
16.5
19.8
* Estimated
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GREECE: GENERAL ECONOMIC DATA
Population (1983): 9.8 Million GDP (Purchaser's Value)/Capita: $3,670
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983*
GDP (Purchaser's Value - Current Prices) 19.4 23.2 28.6 36.0
GDP (Constant Prices - % Change by Year) 1.6 -0.4 0.0 -0.6
Cost-of-Living Index (1980 = 100) 100 125 151 182
The economy continues to deteriorate, as inflation hovers around 20 percent 25X1
,
unemployment is about 8 percent and rising, and GNP stagnates. The government's hostile
actions toward the private sector have the business community fearing wide-scale
nationalizations; as a result, private investment remains depressed. 25X1
The balance of payments deteriorated further in 1983
as exports fell sli
htl
and
,
g
y
tourism and shipping earnings plunged over 20 percent. Only a modest decline in imports
-- due mainly to the running down of oil stocks -- and an increase in EC payments held the
current account deficit to a little under $2 billion. Athens has financed the large
deficit by borrowing heavily, and the growing debt has bankers concerned.
25X1
The Papandreou government continues to pursue policies that
in our jud
ment
,
g
, go
against market forces and dim the outlook for the economy. For example, Athens has
relaxed its moderately restrictive incomes policy for 1984 but plans to tighten price
controls and other government restrictions. The 1984 budget projects spending increases
of nearly 20 percent. The budget deficit is thus likely to remain large, helping to
produce another year of high inflation. The current account is likely to worsen as well,
making it increasingly likely that Athens will have to turn to the IMF or the EC for
help.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1980
1981
1982
1983*
Exports of Goods and Services 8.4
9.2
7.9
7.7
Imports of Goods and Services 11.7
12.8
11.4
11.5
Balance of Goods and Services -3.3
-3.6
-3.5
-3.8
Current Account Balance -2.2
-2.4
-1.9
-1.9
Long-Term Capital 2.0
1.6
1.2
1.0
Total Reserves Minus Gold (yearend) 1.3
1.0
0.9
0.9
* Estimated
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ICELAND: GENERAL ECONOMIC DATA
Population (1983): 0.24 million GDP (Purchaser's Value)/Capita: $8,950
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 0.6 0.9 1.3 2.1
GDP (Constant Prices - % Change by Year) 3.9 1.6 -2.0 -5.4
Cost-of-Living Index (1980 = 100) 100 151 225 418
25X1
Due to a projected drop in the fish catch -- which account
f
l
s
or a
most 80 percent
of exports -- GNP this year is likely to decline 4.5 percent, continuing its downward
trend. Although the persistent recession has helped to reduce the current account
deficit, further significant improvement is not likely. While export competitiveness was
improved by two major devaluations last year, this gain is offset by poor fishing
prospects -- due mainly to overexploitation of the fish stocks.
25X1
Economic developments in 1983 were highlighted by the 20-
er
t f
ll
p
cen
a
in real
wages and the plunge in the inflation rate from over 120 percent to 30 percent at
yearend. The decreases were largely due to the center-right government's enactment last
May of a two-year suspension of wage indexation, the temporary suspension of collective
bargaining, and the subsequent maintenance of a steady exchange rate. Recently concluded
wage negotiations resulted in a modest 13-percent, 3-step salary increase for public and
private sector employees during 1984-85, just within the government's inflation target of
10-15 percent for this year. Purchasing power is expected to fall by 8 percent in 1984
while unemployment likely will rise to 2 percent, due mainly to a contraction in the
fishing industry.
p
ncome o
a
out
1
percent led to a 7
-percent
decrease in private consumption last year, while public spending was stagnant. Aside from
some small increases in investment in the shipping, aluminum, and ferro-silicon industries
-- which account for over half of non-fishing export earnings -- gross capital formation
fell 10 percent in 1983. There is little hope for any major improvement in 1984.
TRADE AND PAYMENTS (Billion $US, BOP Basis) 1980
1981
1982
1983
Exports of Goods and Services 1.21
1.22
1.05
1.14*
Imports of Goods and Services 1.29
1.36
1.31
1.25
Balance of Goods and Services -0.08
-0.14
-0.26
-0.11*
Current Account Balance -0
08
-0
14
-0
25
0
0
.
.
.
-
.
5
Long-Term Capital 0.16
0.20
0.22
0.20*
Total Reserves minus Gold (yearend) 0.17
0.23
0.15
0.15
*
Estimated.
25X1
A decline in real dis
osable i
f
b
1
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ITALY: GENERAL ECONOMIC DATA
Population (1982): 56.3 Million GDP (Purchaser's Value)/Capita: $6,320
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 223.0 264.2 309.3 351.7
GDP (Constant Prices - % Change by Year) 3.9 0.1 -0.3 -1.2
Cost-of-Living Index (1980 = 100) 100 118 137 157
Italy experienced another year of necative 25X1
the
O
ru
ECD
weaky rofit
country to do so. High interest rates, low capacity
utilizatio8, and
profits
continued to choke off investment expenditures. Consumer spending declined, while
recession in key foreign markets limited export growth. The low level of economic
activity caused unemployment to rise to nearly 10 percent, but also brought the current
account into near balance as import growth lagged export gains, resulting in a reduction
of the trade deficit of more than $4 billion.
25X1
Last June's national elections resulted in a Socialist-led five-
art
liti
p
y coa
on
government which has made fighting inflation its top economic priority. Rome hopes to
reduce inflation to 10 percent in 1984 by trimming the budget deficit and holding down
wage costs. The government is trying to hold the budget deficit to 15 percent of GDP this
year, compared to an estimated 17 percent in 1983, but already is falling short of its
tar
et M
k
g
oreover
ey pieces of revenue lilti
.,egsaon -- a tax amnesty law and a bill to
recover funds from municipal governments -- are meeting strong opposition in parliament. 25X1
Before proceeding with additional budgetary measures
Rome is tr
i
t
i
,
y
ng
o
nstitute
an incomes policy. The government issued an emergency decree law in mid-February limiting
the inflation adjustment in wages to 9 percent this year, thus breaking a deadlock in
labor-government-management negotiations. The negotiations had been at an impasse since
early December, largely because the Communist-dominated CGIL union would not accept the
government's proposals for a ceiling on indexation. In April, however, stiff opposition
in Parliament from the Communist Party -- which is using the issue to shore up its support
and convince the ruling coalition that Italy cannot be governed without Communist
acquiesence -- forced Rome to issue a weaker modified proposal. If approved, the
legislation could contribute to slowing inflation to 12-13 percent this year, down from 15
percent in 1983. Even so, this would still be the highest rate among the Big Seven.
Trade and Payments (Billion $US, BOP Basis)
1980
1981
1982
1983
Exports of Goods and Services 105.0
100.5
98.9
97.1
Imports of Goods and Services 116.0
109.9
105.5
98.9
Balance of Goods and Services -11.0
-9.4
-6.7
-1.8*
Current Account Balance 9.8
-8.6
-5.8
-0.5
Long-Term Capital 3.6
8.5
-4.9
NA
Total Reserves Minus Gold (yearend) 23.1
20.1
14.1
20.1
Estimated.
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NETHERLANDS: GENERAL ECONOMIC DATA
Population (1983): 14.3 Million GDP (Purchaser's Value)/Capita: $9,080
Total Output (Billion $US-1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 118.0 123.8 128.7 129.8
GDP (Constant Prices - % Change by Year) 0.8 -0.8 -1.5 -0.5
Cost-of-Living Index (1980 = 100) 100 107 113 116
25X1
Real Dutch GDP fell 0.5 percent in 1983
led by a decline in fix
d i
,
e
nvestment of
the same amount; consumer spending remained unchanged. Slow productivity gains, sluggish
investment, and a 3-percent cut in welfare benefits and public sector wages will keep
growth below 1 percent in 1984. The impetus for this minimal increase will come mostly
from exports. The OECD measure of unemployment grew to 13.7 percent in 1983 while the new
Dutch accounts system places the rate at over 17 percent. In any event, the figure is
expected to rise again in 1984, largely due to the government's austerity measures.
Inflation -- cut by half in 1983 to 2.5 percent -- likely will rise to about 4 percent in
1934.
25X1
The Hague faces considerable social unrest as it tries to
l
th
s
ow
e growth of the
budget deficit -- more than $13 billion in 1984, or approximately 12.7 percent of GDP --
by cutting back social welfare spending. Government plans to finance the deficit in
domestic capital markets should slow the current decline in interest rates. The sluggish
recovery will keep revenues from rebounding in 1984; indeed, the Dutch probably will have
little success in reaching even their modest targets for the deficit before 1986.
f 25X1
The current account surplus increased slightly in 1983 be
cause o
a significant
increase in energy exports and because low Dutch inflation rates have boosted export price
competitiveness. Slow economic growth will keep import demand moderate and probably will
contribute to a surplus on the trade and current account balances in 1984.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1980
1981
1982
198
3
Exports of Goods and Services 95.8
I
91.2
87.6
85.5*
mports of Goods and Services 97.6
B
l
86.7
83.1
80.8
a
ance of Goods and Services -1.8
4.5
4.5
4.7*
Current Account Balance -3.0
3.0
3.2
37
Long-Term Capital -3.2
-3.3
-3.6
-4.1*
Total Reserves Minus Gold (Yearend) 11.7
9.3
10.1
10.2
*
Estimated.
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NORWAY: GENERAL ECONOMIC DATA
Population (1983): 4.1 Million GDP (Purchaser's Value)/Capita: $13,400
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 39.1 45.3 49.7 55.0
GDP (Constant Prices - % Change by Year) 3.9 0.8 -0.6 3.3
Cost-of-Living Index (1980 = 100) 100 114 127 137
The Norwegian economy is expected to grow about 1.5 percent this year in real 25X1
terms, mainly on the strength of exports and a modest increase in consumer spending. This
performance will fall short of the 1983 recovery rate of 3.3 percent, however, since the
rapid increase in oil production from new platforms will slow this year. Nonoil exports
are expected to increase somewhat less than the 11-percent rate recorded last year when
Norway's exports of raw materials and semi-finished goods responded to foreign inventory
building in anticipation of the recovery. Expected increases in imports, in line with
private consumption growth, probably will reduce somewhat last year's $2 billion current
account surplus.
25X1
The Conservative-led government has had some success in reducing inflation and is
trying to improve international competitiveness. Consumer prices will rise about 6
percent this year as slower wage increases help to contain costs. Price competitiveness
of Norwegian goods probably will decline slightly, however, because prices and wage costs
still are rising faster than in competing countries. Wages probably will rise 6 percent,
above the government guideline of 4.5 percent needed to hold relative labor costs
constant.
Fiscal policy is somewhat more expansive than last year in order to deal with a 25X1
politically damaging unemployment rate of over 4 percent. Growth will be insufficient to
reduce unemployment significantly this year, however. The coalition's small center
parties won budget compromises for broader employment programs and a reversal of unpopular
cuts in social programs. Tax revenue from North Sea oil production will remain constant
at over $4 billion and will permit the government to pay off nearly all its external debt
this year. Oil tax revenues are key to funding government social spending without
threatening other programs such as defense. The only serious threat to the Norwegian
economy would be a sharp decline in the dollar exchange rate or a fall in oil prices.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1980
1981
1982
1983
Exports of Goods
and Services
28.3
28.7
27.3
25.2
Imports of Goods
and Services
26.6
25.8
26.0
20.9
Balance of Goods
and Services
1.6
2.9
1.3
4.3
Current Account
Balance
1.1
2.4
0.8
2.2
Long-Term Capital
-0.6
-0.7
0.2
0.4
Total Reserves Minus Gold (yearend)
6.0
6.3
6.9
6.6
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PORTUGAL: GENERAL ECONOMIC DATA
Population (1983): 10.6 Million GDP (Purchaser's Value)/Capita: $2,070
Total Output (Billion $US - 1982 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 10.9 13.0 16.7 20.7
GDP (Constant Prices - % Change by Year) 5.5 1.8 3.0 0
Cost-of-Living Index (1980 = 100) 100 120 147 134
25X1
Portugal's current account deficit improved dramaticall
la
t
f
y
s
year,
alling nearly
50 percent to $1.7 billion. Spurred by a 12-percent devaluation, merchandise exports rose
5400 million. Meanwhile, merchandise imports were down $1.4 billion, reflecting the
contraction of domestic demand and drawdowns of petroleum and food stocks. 25X1
Having met all of its IMF targets last year
Lisbon hopes to ext
t
,
rac
concessions
from the Fund on 1984 performance criteria. Concerned about the possibility that real GOP
may fall as much as 2.5 percent this year and that unemployment may reach 12.5 percent,
Portuguese officials are seeking to relax austerity measures in order to stimulate
economic growth. Although the IMF is willing to consider Lisbon's request to lower
lending rates and ease the budget deficit target, it has ruled out softening the current
account deficit target and reducing the monthly rate of escudo depreciation. The Fund has
also made it clear that any adjustment of the stabilization program must be matched by
Lisbon's effort to reform public sector enterprises. Negotiations are at a standstill,
however, because of the Soares government's reluctance to take on this difficult task. On
31 March, the IMF temporarily suspended the program and will not allow Portugal to draw
more funds until new targets are agreed.
25X1
Agreement on the targets is essential for Lisbon to maintain access to
i
l
commerc
a
oaLisbon calculates that it must borrow $1
6 billion on the inte
ti
.
rna
onal financial
market this year to meet its financing needs, but bankers are holding back on new
commitments until negotiations with the IMF are completed.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1980
1981
1982
1983
Exports of Goods
and Services
6.8
6.4
5.9
6.7*
Imports of Goods
and Services
10.9
11.9
11.8
10.4
Balance of Goods
and Services
-4.1
-5.5
-5.9
-3.9*
Current Account
Balance
-1
1
-2
6
-3
2
1
7
Long-Term Capital
.
0.7
.
1.3
.
2.2
-
.
1.2*
Total Reserves Minus Gold (yearend)
0.8
0.5
0.4
0.4
*Estimated
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SPAIN: GENERAL ECONOMIC DATA
Population (1983): 38.4 Million GDP (Purchaser's Value)/Capita: $4,730
Total Output (Billion $US - 1983 Exch Rate)
1980 1981
1982
1983
GDP (Purchaser's Value - Current Prices)
105.7 120.1
137.6
157.2
GDP (Constant Prices - % Change by Year)
1.5 0.3
1.2
2.1
Cost-of-Living Index (1980 = 100)
100 114
131
147
25X1
Spain is showing signs of a modest recovery. Last year's 2
1-percent r
l
t
f
.
ea
ra
e o
growth was the best performance in six years. Owing to the US recovery and improved
European growth rates, export volume was up about 8 percent and accounted for over half of
the growth of real GDP. Domestic demand remained sluggish as high taxes and interest
rates dampened private consumption and investment. 25X1
Despite the faster pace of growth, unemployment rose to 18
4 percent at th
d
f
.
e en
o
last year. According to government estimates, more than 2 million jobs have been lost
since 1975. The result is that Spain, with the highest rate of unemployment in Western
Europe after Turkey, has fewer people employed now than in 1952.
Facing up to Spain's fundamental economic problems
the Socialist government 25X1
,
appears determined to carry out an unpopular adjustment program. To lower inflation and
unemployment, Madrid is asking trade unions to accept a 1.4-percent real wage decline and
is planning to trim the budget deficit from 6 percent of GDP to 5.5 percent. Madrid has
also launched an ambitious industrial restructuring program that will cut capacity and
jobs in loss-making industries and promote investment in high technology.
TRADE AND PAYMENTS (Billion $US, BOP Basis) 1980 1981
1982 1983
Exports of Goods and Services 33.9 33.8
35.2 35.0*
Imports of Goods and Services 41.1 40.6
40.9 38.8
Balance of Goods and Services -7.2 -6.8
-5.7 -3.8
Current Account Balance -5.2 -5.0
-4.1 -2.5
Long-Term Capital 4.2 4.2
1.8 2.2
Total Reserves Minus Gold (yearend) 11.9 10.8
7.9 7.4
* 25X1
Estimated
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TURKEY: GENERAL ECONOMIC DATA
Population (1983): 49.2 Million GDP (Purchaser's Value)/Capita: $1040
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983*
GDP (Purchaser's Value - Current Prices) 19.2 28.5 38.1 51.0
GDP (Constant Prices - % Change by Year) -1.0 4.2 4.4 3.2
Cost-of-Living Index (1980 = 100) 100 138 183 245 25X1
Prime Minister Turgut Ozal has moved quickly to im
lement
p
measures furthering the
1980 Stabilization Program. Ozal hopes to increase the efficiency of the economy by
making it more responsive to market forces. He has eliminated many import restrictions,
abolished most foreign exchange controls, and introduced export incentives. In addition,
the National Assembly has passed a controversial law permitting the government to sell the
inefficient state enterprises.
25X1
While real GDP growth slowed to a little over 3 percent in 1983 it
h
ld
s
ou
, recover
to 4 or 5 percent this year. Unemployment, however, will remain around 20 percent.
Inflation rose to over 35 percent in 1983 and will probably stay near that level in 1984.
d 25X1
Export performance in 1983 was below expectations
but this
,
was
ue largely to
factors beyond Turkey's control. Exports to Iraq plunged because of Baghdad's financial
difficulties, while world prices for Turkey's agricultural products fell. Exports should
do better this year, aided by the new export incentives and the world recovery. This
year's trade deficit will likely remain near the 1983 level, and Ankara's improving credit
rating should enable it to finance the deficit.
25X1
Turkey remains far behind the other NATO countries economicall
d
i
y an
w
ll continue
to need large amounts of financial aid as payments on rescheduled debt start falling due
later this year and in 1985. Turkey's medium-term outlook, however, remains fairly good,
and Ozal's economic policies should help to lay the foundation for stable growth in the
future.
TRADE AND PAYMENTS (Billion $US, BOP Basis) 1980
1981
1982 198
3*
Exports of Goods and Services 3.7
5.9
7.9 8.
1
Imports of Goods and Services 9.1
B
l
10.4
10.9 12.
0
a
ance of Goods and Services -5.4
-4
5
-3
0
3
9
Current Account
Balance -3
7
.
-2
3
.
-
.
1
4
.
L
T
.
-
.
-2.
1
ong-
erm Capital 1.9
T
l
1.2
0.7 0.
8*
ota
Reserves Minus Gold (yearend) 1.3
1.3
0.9 1.
3
* Estimated
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25X1
UNITED KINGDOM: GENERAL ECONOMIC DATA
Population (1983): 55.8 Million GDP (Purchaser's Value)/Capita: $7,370
Total Output (Billion $US-1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 343.2 375.8 411.1 506.0*
GDP (Constant Prices - % Change by Year) -1.9 1250 2.1
Cost-of-Living Index (1980'= 100) 100 112 122 127
25X1
The recovery in the United Kingdom will pick up speed in 1984
ith
l
, w
rea
GDP
growth of around 3 percent. Renewed business confidence, rebounding corporate profits,
stable interest rates, and relatively low inflation -- currently in the 5-6 percent range
-- are likely to bolster investment and the economy. Unemployment, however, will remain
high at nearly 13 percent of the workforce. Thatcher's budget for the fiscal year
beginning 1 April addresses this problem indirectly by instituting reforms designed to
reduce the tax system's bias in favor of capital-intensive investment. The government
hopes that over time these measures will spur employers to hire more workers. 25X1
The 1984 budget confirms Thatcher's tight fiscal and monetary stance
Altho
h
.
ug
monetary growth continues to experience strong pressure from the budget deficit, growth
ranges have again been reduced. The budget deficit for the fiscal year just ending
probably will be slightly below the revised target of $15.0 billion, but the government is
likely to have trouble meeting its more ambitious goal of $10.9 billion for FY 1984/85.
Large compensation payments, cuts in oil taxation designed to spur exploration, and
ongoing difficulties for nationalized industries are behind the budget problems. The
Treasury, however, expects to realize nearly $3 billion during 1984 from sales of
nationalized companies to private investors.
25X1
The trade account will improve in 1984 as British exports benefit f
hi
h
rom
g
er
growth in foreign markets, while imports, which grew rapidly in 1983, level off. Although
both the trade and current account balances are in surplus, British exporters probably
will be able to do little to recapture the shares of foreign markets they have lost during
the past decade. Cost pressures on exports of manufactured goods in particular -- still
priced too high despite productivity gains and a weaker pound -- could intensify. Trade
union leaders are likely to increase pressures for larger wage boosts based on the
recovery in corporate profits. In addition, some productivity gains may be lost as less
efficient plants and machinery are utilized to meet increases in demand.
TRADE AND PAYMENTS (Billion $US, BOP Basis) 1980
1981
1982
1983
Exports of Goods and Services 167.1
157.3
147.0
136.6
Imports of Goods and Services 154.5
140.0
134.1
131.5
Balance of Goods and Services 12.6
17.6
12.9
5.1*
Current Account Balance 7
8
13
7
9
2
1
6
.
Long-Term Capital -3.3
.
-9.7
.
-4.9
.
-2.1*
Total Reserves Minus Gold (Yearend) 20.7
15.2
12.4
11.3
* Projected.
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25X1
WEST GERMANY: GENERAL ECONOMIC DATA
Population (1983): 61.3 Million GDP (Purchaser's Value)/Capita: $10,700
Total Output (Billion $US - 1983 Exch Rate) 1980 1981 1982 1983
GDP (Purchaser's Value - Current Prices) 581.9 604.3 628.4 655.4
GDP (Constant Prices - % Change by Year) 1.9 -0.3 -1.1 1.3
Cost-of-Living Index (1980 = 100) 100 106 111.5 114.8
West Germany has emerged from the economic slump that began in early 1980; real 25X1
GNP expanded 1.3 percent last year and could grow 2.5 to 3 percent in 1984. Consumer
spending -- which led the upswing in early 1983 -- has since slowed, but business
confidence remains high. Private investment, after a big jump in first half 1983, remains
strong and should be a major growth stimulant along with exports in 1984.
The upswing has not been strong enough to ease significantly the serious 25X1
unemployment problem. In early 1984 unemployment stood at 2.2 million persons -- 8.9
percent of the labor force -- and probably will remain at that level throughout the year
even given anticipated higher growth and a revival in the labor-intensive automotive and
construction industries.
Inflation fell to 3 percent in 1983, in part due to moderate wage settlements 25X1
achieved last spring, and probably will be held to that rate this year as well. The
current account surplus could reach $5 billion, compared to $4 billion last year, due to
lower oil prices and a pickup in foreign sales. The chronic West German invisibles
deficit probably will worsen slightly in 1984, after registering a slight improvement last
year, largely because of a resurgence of foreign travel -- the largest expense item in the
services account.
25X1
Chancellor Helmut Kohl wants to reduce the role of government and encourage private
enterprise. To ensure budget restraint in 1984, the ruling CDU-CSU-FDP coalition agreed
that spending increases should be limited to 2 percent and borrowing should not exceed $14
billion. To that end, the cabinet approved reductions in benefits for the unemployed and
imposed a pay freeze for public sector employees through March 1985. The only real cloud
on the horizon that would endanger the recovery, in the government's view, is labor's
demand for a 35-hour week with full pay and its threat of strikes to press the issue.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1980
1981
1982
1983
Exports of Goods
and Services
236.1
220.2
221.2
215.3
Imports of Goods
and Services
238.4
214.7
206.1
202.8
Balance of Goods
and Services
-2.3
5.5
15
1
12
4
Current Account
Balance
-15.9
-6.4
.
3.4
.
4
0
Long-Term Capital
2.7
3.8
-6.9
.
-2.9
Total Reserves Minus Gold (yearend)
48.6
43.7
44.8
42.7
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