NATO COUNTRY ECONOMIC SUMMARIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90T00114R000403950001-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: February 6, 2012
• Sequence Number: 1
• Publication Date: December 3, 1987
• Content Type: MEMO

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Central Inlelligcncc Agency
0IR
P PD 1
MEMORANDUM FOR: Mr. William M. George
Director, East-West Economic Competition
Office of the Assistant Secretary of Defense
SUBJECT: NATO Country Economic Summaries
F(~
Attached are the NATO Country Economic Summaries that you requested in
your memorandum of 28 October (1-07664/87.) Once again, we are pleased to
contribute to the briefing material being put together for the Secretary of
Defense for the fall 1987 semi-annual 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
25X1
25X1
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BELGIUM-LUXEMBOURG: GENERAL ECONOMIC DATA
BELGIUM
Population (1986): 9.9 Million GOP (Purchaser's Value)/Capita: $11,210
$US - 1986 Exch Rate)
Billi
1984
1985
1986
1987*
on
Total Output (
GDP (Purchaser's Value - Current Prices)
101.0
107.7
109.8
3
2
111.0
1
1
GDP (Constant Prices - % Change by Year)
1.5
0.9
.
142
.
144
Cost-of-Living Index (1980 = 100)
134
141
LUXEMBOURG
Population (1986): 0.4 Million GDP (Purchaser's Value)/Capita: $11,500
Total Output (Billion $US - 1986 Exch Rate) 1984 1985 1986 1987*
GDP (Purchaser's Value - Current Prices) 4.4 4.5 4.6 4.7
GDP (Constant Prices - % Change by Year) ?_ 2.388 4 4.9 141 2.5 142 2.0
240
Cost-of-Living Index (1980 = 100) 25X1
an e
g
e
the
,
ending
p
duce s
re
t
o
s
t
Dampened somewhat by effor
able to repeat the 2.3-percent GDP growth recorded last year--its best performance since
ecially to other EC members-
p
es
t
s--
ost from increased expor
b
t
o
a
th last year go
1980. Grow--as well as from lower oil prices, which helped boost investment and private
consumption. This year investment and private consumption will both grow more slowly while
government spending will actually decline in real terms, pulling GDP growth down to about 1
percent. The sluggish pace of growth will do little to reduce the high unemployment rate--
hovering above 12 percent. On the brighter side, inflation fell to 1.3 percent in 1986 and
will probably hold steady at just over 1 percent this year.
lections later this year--con
ng e
di
etaker capacity pen
in a car the budget deficit by controlling government spending. The coalition's 1987 budget is 25X1
designed to reduce the deficit from 12 percent of GDP in 1985 to 8 percent by next year.
Brussels is pledged not to increase taxes, so the deficit reduction will have to come from
lower government spending.
.
o a
t account surplus increase
n
The Belgium/Luxembourg curre
thano4lpebill. rcent ~n1jgII7?export25X1
year, up from $0.7billion
two-third8S5ofmainly wbllagrowobytmorelower
which constitute about
i
)
P B
1984
1985
1986
1987*
s
as
ADE AND PAYMENTS Billion $US BO
TR
(Belgium~Luxembourg
Exports of Goods and Services
77.4
80.8
101.9
5
97
105.9
9
101
Imports of Goods and Services
76.6
79.4
.
4
4
.
0
4
Balance of Goods and Services
0.8
1.4
.
6
3
.
2
3
Current Account Balance
-0.1
0.7
.
6
8
.
3
-4
Long-Term Capital
-2.3
-4.5
.
-
5
5
.
8
2**
Total Reserves Minus Gold (yearend)
4.6
4.8
.
.
*Projected
**August
o
c
n
ht coalition fell
ri
g
er
-
t
Prime Minister Martens--whose cen
tinues to emphasize reducing
conomy will not be
i
B
l
6 billion last
bout $3
d t
ber and is serving
t
O
i
25X1
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I I
CANADA: GENERAL ECONOMIC DATA
Population (1986): 25.4 Million GDP (Purchaser's Value)/Capita: $14,310
Total Output (Billion $US - 1986 Exch Rate) 1984 1985 1986 1987*
GDP (Purchaser's Value - Current Prices) 319.0 342.9 363.6 392.0
5.5 4.0 3.1 3.7'
GDP (Constant Prices - % Change by Year) 5535 4.0 3.1 3.7
Cost-of-Living Index (1980 = 100) 149
25X1
me
At that
orts
.
p
d ex
an
d
eman
d
next year in both consumer
slowingfueled by emerging capacity constraints and high corporate profits--will take over as the
driving force behind economic expansion. Overall, real GDP growth will slow to about 2.5
percent in 1988, while the unemployment rate probably will remain near its present level
of 8.6 percent--the lowest it has been since early 1982. Higher commodity prices, new
excise taxes, and larger wage gains are likely to push consumer prices up about 5 percent 25X1
in 1988.
.
et deficit target of
d
g
u
88 b
87
/
19
d Ottawa is likely to meet its
1981, an percent of GDP. Ottawa, however, has introduced a tax reform program that we believe will
hamper further deficit reduction because the government plans to delay an unpopular new 25X1
sales tax until 1990.
gne
reement s
g
ade a
t
r
ree-
f
Efforts to finalize the preliminary
United States will dominate Canada's trade front over the next year. The agreement, which
eliminates tariffs and reduces non-tariff barriers over a ten-year period, would increase
trade and investment between the two countries. Nonetheless, many Canadians--led by the
two opposition parties--fear Ottawa has ceded sovereignty over energy and investment
policies in return for these economic benefits. Canada's merchandise trade surplus with
the US probably will drop to $10.5 billion in 1987, and decline further as US growth slows
next year.
TRADE AND PAYMENTS (Billion SUS, BOP Basis)
1984
1985
1986
1987*
5
Exports of Goods and Services
102.4
4
100
105.0
1
106
104.5
?111.8
105.
114
0
Imports of Goods and Services
.
.
1
1
3
-7
.
Balance of Goods and Services
2.0
.
-
4
0
.
0
-6
-5.5
Current Account Balance
2.6
3
1
.
-
3
-0
.
11.6
2
-Term Capital
L
.
.
3
3
0
5**
ong
Total Reserves Minus Gold (yearend)
2.5
2.5
.
.
* Projected
**August
p
w
,
u
growth in
g
tron
d
s
e
hibit
All components of GNP have ex
business investment--
ti
rs
t revenues in the
Strong employment growth has boosted governmen
4
$22 billion or 5
ect some
e ex
b
t
1987
d recently with the
i
t half of
fi
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DENMARK: GENERAL ECONOMIC DATA
Population (1986): 5.1 Million GDP (Purchaser's Value)/Capita: $16,050
Total Output (Billion $US - 1986 Exch Rate) 1984 1985 1986 1987*
GDP (Purchaser's Value - Current Prices) 69.3 75.8 81.8 83.5
GDP (Constant Prices - % Change by Year) 3.5 3.9 3.3 -2.3-
Cost-of-Living Index (1980 = 100) 140 146 152 159
.
an
ercent in both
75
p
.
f 0
es o
n
li
P d
ec
GD
r
calling fo more pessimistic--and, in our view, more realistic--in predicting a decline of over 2
percent this year. Private consumption is falling because of government efforts to
restrict buying on credit; business investment is declining because of high interest rates
and rising wage costs; and reduced international competitiveness is keeping exports
stagnant. After falling below 8 percent last year, unemployment has been going up and is
likely to top 9 percent in 1988. The inflation picture remains a bright spot with consumer
25X1
prices likely to rise by less than 4.5 percent.
ca
ge
u
The 1988 central government
1982
.
nce
i
terms s
n real 0.2 percent of GDP, while the broader general government balance will be in surplus for the
third consecutive year. In our view the government's program helped the economy out of
difficulty earlier in the decade but the tough measures are now having a negative effect.
acco
reduce the persistent curren
t
o
t
or
s
ff
e
t
Governmen
billion, or 5.2 percent of GDP, in 1986--are beginning to have an impact. The first five
months of 1987 showed a slight surplus--compared to a $1 billion deficit a year earlier.
For the full year the current account deficit probably will be only $3 billion, with
further improvement likely in 1988. Government efforts to dampen domestic demand have kept
imports down and recent government trade measures should boost export industries.
BOP Basis)
$US
Billi
S
1984
1985
1986
1987*
,
on
(
TRADE AND PAYMENT
Exports of Goods and Services
22.4
24.1
24.9
27.3
0
2
Imports of Goods and Services
24.1
26.7
26.0
6.
3
Balance of Goods and Services
-1.7
-2.6
-1.1
1.
0
Current Account Balance
-1.6
-2.7
-4.3
-3.
8
1
Long-Term Capital
1.3
4.3
2.3
.
**
Total Reserves Minus Gold (yearend)
1.9
4.5
3.5
8.9
* Projected
**August
ish economic outlook is deteriorating, with the government's latest forecast 25X1
D
an
Th
e
Private forecasters are
d 1988
1987
g
spen
has kept governmen
y
olic
l
p
ca
ht fi
s
i
g
t
'
s
Copenhagen
lls for a deficit of only
d
t
b
virtually unchanged
din
t
unt deficit--a record $43 25X1
t
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FRANCE: GENERAL ECONOMIC DATA
Population (1986): 55.4 Million GDP (Purchaser's Value)/Capita:
$13,070
h Rate)
1986 E
1984 1985
1986
1987*
xc
Total Output (Billion $US -
GDP (Purchaser's Value - Current Prices)
630.2 677.5
724.1
0
2 2
753.4
1
1?
1
GDP (Constant Prices - % Change by Year)
Cost-of-Living Index (1980 = 100)
1.5 149 1.3 158
..0
1..
n
e
t--barely half
n
perce
1
1
.
grow only about
is expected to while inflation has picked up to about 3.5 percent. Unemployment--France's main economic
problem--has stabilized around 11 percent as a result of the government's costly job
creation and training programs for those under 25 and for the hard core unemployed.
Current projections for 1988 indicate some slight improvement in growth and a minor
slowdown in the rate of inflation. The unemployment rate is likely to increase after next
spring's presidential elections, however, as some of the government programs end.
or
er
e
ectedly large
p
x
an une
d
~ France's external accounts have suffere
a good performance in 1986. The trade deficit will more than double to about $6 billion 25X1
this year, due to continued high import demand and a slowdown in the growth of French
exports. These developments will swing the current account from a healthy $3.4 billion
surplus last year to near balance in 1987. The deterioration in the external accounts is
expected to slow considerably next year, with th a the trade deficit by another $1.5-$2
billion and the current account falling into 25X1
r
t of Prime Minister
n
During 1987, the conservative governme
ma oriented liberalization policies. Virtually all price controls have been removed,
d 23 state-owned companies have
, an
d
have been liberalize
l
es
eign exchange ru
capital and for been privatized. Up until the stock market crash in October, the privatization program was
one of the Chirac government's greatest successes. With the fall in stock prices, however,
the government had to postpone the privatization of the defense firm Matra. Chirac is
counting on the success of the program to help him in the presidential election next spring
and will be interested in having further successful sales before then.
i
)
1984
1985
1986
1987*
AND PAYMENTS
s
BOP Bas
(Billion $US
TRADE
,
Exports of Goods and Services
147.7
154.6
1
187.3
5
179
217.0
0
214
Imports of Goods and Services
145.7
151.
.
8
7
.
3
Balance of Goods and Services
2.0
3.5
9
0
.
4
3
.0
Current Account Balance
-0.9
.
.
9
6
0
-2
Long-Term Capital ?
5.2
3.8
.
-
5
31
.
8**
31
Total Reserves Minus Gold (yearend)
20.9
26.6
.
.
* Projected
**August
disappointings y.
rall
y
ne
een ge
b
's economic performance has
crease recorded in 1986-- 25X1
i
th
ac continued its
Chi
ation after
i
t
d
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GREECE: GENERAL ECONOMIC DATA
Population (1986): 10.0 Million GDP (Purchaser's Value)/Capita: $3,980
t
)
R
1984
1985
1986
1987*
e
a
Total Output (Billion $US - 1986 Exch
GDP Purchaser's Value - Current Prices)
27.2
33.0
39.8
1
3
44.0
8
-0
GDP (Constant Prices - % Change by Year)
2.7
3.0
.
315
.
362
Cost-of-Living Index (1980 = 100)
215
256
g
o
contracted this year,
y
om
econ
k
The Gree
part because Prime Minister Papandreou generally has stuck to the austerity program 25X1
initiated in late 1985, despite strong opposition from labor. The plan included a 15-
percent devaluation of the drachma, import restrictions, and changes in the Greek wage
indexation formula intended to reduce workers' real income by at least 7 percent. The
program has helped Athens to reduce the current account deficit and slow inflation--
although lower oil prices and increased EC aid were more important factors. Greece also?is
benefitting from exceptionally good earnings from tourism and shipping this year in
addition to a repayment of $260 million from the EC for overpayments it had made in
previous years. Athens has had less success in cutting the budget deficit; the 1987 public
sector borrowing requirement--at 12 percent of GDP--will exceed the government target by 25X1
percentage points.
me
r
ch this fall
e
1
In his annual economic Po icy spe
the formal end of the austerity program in 1988, but stressed the need for continued
stabilization. Abandoning much of his past socialist rhetoric, he spoke of the need to
lower taxes, reduce government intervention, boost private investment, and improve Greek
competitiveness. The speech clearly was intended to reassure businessmen because Greece 25X1
needs to reverse the ongoing slump in private investment.
rea
e
Foreign
.
nstraint
o
ce c
i
faces a debt serv
Greece also billion at the end of last year and Athens must repay $1.5 billion of medium- and long-term
debt in 1987 and roughly $1.7 billion in 1988. There should be no serious financing
problems in 1988 but if, as we expect, Papandreou eases up on stabilization as the next
election approaches, the external deficit will widen and Greece will probably have
the resources to finance both higher amortization payments and a higher
g
findin
y
cu
lt
fi
dif
current account deficit.
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
*.*August
1984
1985
1986
1987*
7.3
7.1
7.9
8.5
11.1
12.1
11.9
12.5
-3.8
-5.0
-4.0
-4.0
-2.1
-3.3
-1.7
-1.5
1.8
2.8
2.2
2.0
1.0
0.9
1.5
3.0**
sluggish growth in 1986, in large
llowin
f
Minister Papandreou announced
P
i
ched almost $18
bt
d
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I I
ICELAND: GENERAL ECONOMIC DATA
Population (1986): 0.24 million GDP (Purchaser's Value)/Capita: $16,250
h Rate) 1984 1985 1986 1987*
1986 E
xc
Total Output (Billion $US -
GDP Purchaser's Value - Current Prices) 2.0 2.7 3.9 5.4
6
3 5 .
.
GDP (Constant Prices - % Change by Year) 2.7 3.4
803 965
Cost-of-Living Index (1980 = 100) 547 722
ercent l act year to about 5 percent this year
A 3
p
-
19
in
h
e
- .... --- l Marine
and probably will decline r ur
year is a planned reduction in the cod catch, recommended by the Nationane
Institute to preserve fish stocks. In addition, the new coalition government formed in
July will tighten fiscal policy in 1988.
but probably will rise
ercent in 1987
1
l
b
i
,
p
ow
e
n
te will rema
The unemployment ra
the lower fish catch. The inflation rate--
d b
t
ff
y
e
ec
mployment is a
slightly in 1988 as ewhich plunged to single digits last year following a temporary anti-inflation package--is
back to 20 percent and likely will remain in double digits in 1988.
A ' to deficit in 1987 and 1988 because of a sharp
n
The current account shoul move i
drop in the trade surplus--a result of both the strong krona and the impact on import 25X1
demand of rapid income growth. While the reduced cod catch will hurt exports next year,
the main factor contributing to the likely current account deficits in 1987 and 1988 is
interest payments on Iceland's growing foreign debt. The new government thus hopes its
tight budget policy will prevent foreign debt from rising beyond its current level--about
50 percent of GDP. In addition, the government wants to reduce Iceland's dependence on
fishing by continuing to open the economy to more foreign competition through capital
market deregulation and amending the limits on foreign ownership of Icelandic firms.
*
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
* Projected
**August
1984
1986
1987
0.83 1.21 1.56 1.50
0.82 1.19 1.54 1.60
0.01 0.02 0.02 -0.10
-0.10 -0.12 0.03 -0.20
0.13 0.15 0.17 0.18
0.13 0.21 0.31 0.34**
25X1
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ITALY: GENERAL ECONOMIC DATA
Population (1986): 57.2 Million GDP (Purchaser's Value)/Capita: $10,490
Total Output (Billion $US - 1986 Exch Rate) 1984 1985 1986 1987*
GDP (Purchaser's Value - Current Prices) 483.7 540.7 600.2 656.0
GDP (Constant Prices - % Change by Year) 2.8 2.3 2.7 2.9?
Cost-of-Living Index (1980 = 100) 174 190 202 213 25X1
y
y w
a
in domestic demand in
ku
p
A
p
c
i
3 percent in 1987. Private consumption spending is strong because of substantial wage
increases this year and this in turn has encouraged businesses to invest more. Consumption
and investment are both likely to grow more slowly next year, reducing 1988 GDP growth to
just over 2 percent. The foreign sector will be a drag on growth both this year and next--
imports are rising much faster than exports, largely because of the strength of the lira
since 1986. 25X1
y
owth of recent years has not genera
ic
g
r
m
e econo
t
The modera
unemployment rate has risen almost two percentage points since 1984 and likely will top the
12-percent mark next year. An increase in indirect taxes and higher costs for energy and
labor likely will drive inflation over 5 percent in 1987 and 6 percent in 1988--well above
the rates in Italy's main trading partners. The continuing weakening of export
competitiveness will cut the current account surplus by more than half this year, and 25X1
probably put it into deficit in 1988.
ng pre
onomic conditions will put increas
ec
i
ng
The worsen
the huge public sector deficit--still above 12 percent of GDP. Unfortunately, political
infighting and personality clashes are seriously weakening the fragile five-party coalition
government and hampering Christian Democratic Prime Minister Goria's ability to implement
budget and labor legislation. In a move led by the Socialist party--the other major
coalition partner--the Senate Budget Committee recently rejected the government's 1988
budget proposals. The conflict between the two main coalition parties will delay final
roval of the 1988 budget, and, more generally, will weaken the governments ability to
a
pp
implement tough economic policies.
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
**August 1987
1984
1985
1986
1987*
100.1
103.3
128.4
129.0
103.9
107.9
122.1
131.0
-3.8
-4.6
6.3
-2.0
-2.3
-3.5
4.8
2.0
1.1
2.0
-3.8
-5.0
20.8
15.5
20.0
18.5**
lead to real GDP growth of nearly
ill likel
l
It
ssure on Rome to deal with
i
jobs--the
ted man
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NETHERLANDS: GENERAL ECONOMIC DATA
Population (1986): 14.5 Million
GDP (Purchaser's Value)/Capita:
$12,055
)
t
R
1984 1985 1986
1987*
t (Billion $US-1986
t
l O
e
a
Exch
pu
u
Tota
GDP (Purchaser's Value - Current Prices)
161.2 163.3 171.5
9
0 1
2
174.3
2
0'
GDP (Constant Prices - % Change by Year)
.
.
1.7
123
.
122
Cost-of-Living Index (1980 = 100)
120 123
,
y
g
tead
rowth in9uee 25X1
t
b
u
s
ow
l
The Dutch economy is likely to continue its s
~ing business investment, consumer spending, and export earnings. Job creation is
and the unemployment rate should drop
,
force
b
or
a
l
e
h
eed the growth of t
t
y p
er
e aus
t did not abandon--t
b
u
d
--
The Hague's 1987 budget relaxe
place in 1982 to bring down the public sector deficit. Progress in trimming the deficit 25X1
was hampered, however, by reduced tax revenue from gas due to the fall in world energy
prices. The 1987 budget attempted to offset the decline in gas prices through revenue
increases--including a hike in VAT rates--and expenditure cuts.
n
well last year
l
y
ng
i
i
s
The current account surplus held up surpr
declining gas export revenue. The Netherlands will continue to enjoy large current 25X1
account and trade surpluses in 1987, although these will be smaller than last year due to
the strength of the guilder.
BOP Basis)
E AND PAYMENTS (Billion $US
1984
1985
1986
1987*
,
TRAD
Exports of Goods and Services
86.4
86.5
101.9
5
95
105.2
100
Imports of Goods and Services
78.9
81.3
2
.
4
6
.1
Balance of Goods and Services
7.5
5.
.
6
4
8
3
Current Account Balance
6.6
4.2
.
9
8
.
0
-5
Long-Term Capital
-4.4
-2.9
.
-
2
11
.
2**
14
Total Reserves Minus Gold (yearend)
9.2
10.8
.
.
*Projected
**August
o exc
beginning
slightly to around 11.5 percent. The Dutch are also 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 near zero in 1986, and price
increases this year should also be negligible.
rogram put in
it
t
h
the face of
i
25X1
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` I I
NORWAY: GENERAL ECONOMIC DATA
Population (1987): 4.2 Million GDP (Purchaser's Value)/Capita:
$16,750
te)
h R
E
1984
1985
1986
1987*
a
xc
Total Output (Billion $US - 1986
t P
ices)
61.2
67.3
69.7
70.5
r
GDP Purchaser's Value - Curren
3
8
5.4
5.4
4.5
4.
1.3.
GDP (Constant Prices - % Change by Year)
Cost-of-Living Index (1980 = 100)
.
146
5
180
.
ec
ce
f the 1986 oil pr
ting the continued impact on Norway o
1988, reflec revenue from the decline--oil tax receipts fell from 20 percent of total revenues in 1985
to about 8 percent in 1987--necessitated tightened fiscal policy in 1986 and 1987. The
tighter fiscal policy led to a 2-percent decline in 1987 consumption spending and
stagnating investment spending. Surveys indicate investment may fall by 7 percent in 1988
X1
and further brake economic growth.
,
ent over the course
c
per
5
1
.
Unemployment has fallen to about
1.8 percent in 1986, due to the 1986 surge in non-oil business investment spurred by loose
credit policy. The expected slowdown in the economy through 1988 could boost the
unemployment rate above 2 percent. The inflation rate--pushed to 8 percent in 1987
because of the reduction in the workweek and the 1986 krone devaluation--could decline if
the economic slowdown and continued tightening of fiscal policy offset the effect of rapid
25X1
monetary growth during 1987.
While sluggish GDP growth in 1988 will dampen imp f i 1987,
deficit could begin to worsen again. The trade defi
c idemandedbutmrisringointerestnpayments
reflecting the devaluation as well as softened impor
on Norway's growing foreign debt will probably offset this improvement.
TRADE AND PAYMENTS (Billion $US, BOP 8asis
1984
1985
1986
Exports of Goods and Services
28.0 0
2722..3 3
7
2 26.5 5
2
Imports of Goods and Services
8
3
3
2.
4
9.1
Balance of Goods and Services
8
.
3
0
3
0
3
0
-2.6
4
Current Account Balance
.
-
.
3.
1.8
Long-Term Capital
Total Reserves Minus Gold (yearend)
.
9.4
13.9
12.8
* Projected
**August
1987*
28.1
30.1
30.1
-3.6
2.1
12.1
s
ugg
1987 and will remain s
n
i
Norwegian GDP growth slowed significantly
Loss of 25X1
line
d
i
down from
of 1987
h in
i
l
net demand the current account
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PORTUGAL: GENERAL ECONOMIC DATA
Population (1986): 10.1 Million GDP (Purchaser's Value)/Capita: $2,720
$US - 1986 Exch Rate) 1984 1985 1986 1987*
Total Output (Billion
GDP (Purchaser's Value - Current Prices) 18.8 23.6 27.5 31.2
7-
5 3
4
.
.
GDP (Constant Prices - % Change by Year) -1.6 3.3
318 348
Cost-of-Living Index (1980 = 100) 238 284
me
nves
rowth of fixed
rong g
t
han in 1986 -- thanks to s
sower t consumption. Inflation should continue its downward trend, falling to 9.4 percent from
11.8 percent in 1986, while the unemployment rate is expected to decline from 9.6 to 8.7
percent by yearend, primarily because of expanding job opportunities in the industrial and
services sectors. Strong domestic demand and the dismantling of trade barriers following
Portugal's entry into the EC last year will contribute to a worsening of the trade deficit
in 1987, although booming tourist revenues and rising worker remittances will keep the 25X1
current account in surplus.
on.
ince the 1974 revolut
s
it
y
e first single-party major
Party th program, the government promised "profound reforms," including more flexible labor laws,
more private enterprise in agriculture, and greater emphasis on private investment.
Perhaps most pressing, however, is Cavaco Silva's push for constitutional revision this
fall to allow the privatization of firms nationalized in the aftermath of the revolution.
Moves are also underway to deregulate the financial markets and encourage direct foreign
investment. 25X1
mestic demand
d
o
as
88
1
9
ercent in
7
p
.
t 2
ou
b
Real GDP probably will grow a
decelerates, leading to a stagnation in the unemployment rate. Inflation should continue
to fall because of slower real wage growth, but is likely to remain above the government's
6-percent target due to rising import prices. Rising imports will further boost the trade
deficit, more than offsetting continuing gains in invisibles earnings and pushing the
current account about $400 million into the red.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1984
1985
1986
Exports of Goods and Services
7.1
8.0
8
9
10.0
7
11
Imports of Goods and Services
9.8
.
1
8
.
7
-1
Balance of Goods and Services
-2.7
-
.
4
0
.
2
1
Current Account Balance
-0.5 1
2
.
1.0 4
.
_
2
Long-Term Capital
Total Reserves Minus Gold (yearend)
.
0.5
1.4
1.5
* Projected
**August
1987*
12.7
14.6
-1.9
0.7
-0.1
3.0**
e
rate in 1987 -- a
y
lth
ea
h
Real GDP probably will continue to expand at a
25X1
nt and private
t
i
a
oc
Cavaco Silva and his
er
t
i
s
The elections of 19 July gave Prime Min
In its four-year economic
i
l Democratic
i
S
it
lb
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I I
SPAIN: GENERAL ECONOMIC DATA
Population (1986): 39.1 Million GDP (Purchaser's Value)/Capita: $5,860
Total Output (Billion $US - 1986 Exch Rate) 1984 1985 1986 1987*
GDP Purchaser's Value - Current Prices) 179.4 198.9 229.1 249.9
GDP (Constant Prices - % Change by Year) 1.9 2.1 3.6 3.3
Cost-of-Living Index (1980 = 100) 164 178 194 205
buoyed by a 4.9 percent increase
1987
t i
n
Real GDP is expected to grow 3.3 percen
, 25X1
tion will be strong because of higher household
sum
t
p
e con
Priva
in domestic demand. disposable income; government consumption should continue apace; and fixed investment
probably will benefit from a strong recovery in public investment. Rising real wages and
money supply will likely keep inflation above the government's 5.0 percent target, although
it should fall from 8.8 percent in 1986 to 5.6 percent. Despite higher labor force
participation rates, the expected increase in jobs will reduce the unemployment rate from 25X1
21.5 to 21 percent.
tion in tariff rates following Spain's entry
d
uc
and and the re
Strong domestic dem
ercent increase in Spain's merchandise trade
75
d t
p
o a
ar contribute
into the EC last ye deficit in the first nine months of 1987. However, record tourist receipts will keep the
current account balance in surplus, albeit at a lower level than in 1986. In real terms,
imports are expected to increase 11 percent in 1987, while exports will likely rise only
four percent because of relatively sluggish OECD growth and a loss in export 25X1
competitiveness due to the appreciation of the peseta.
nu
in 1988 will con
y
olic
p
c
i
The focus of Spanish econom
economy and reducing the inflation differential between Spain and its main trading
Socialist party -- highlighted by
th
e
n
hi
t
the continuing rift wi
h
l
e
partners. Nonet
ess, the resignation in October of Socialist labor union leader Redondo from his parliamentary
seat -- may prompt Prime Minister Gonzalez to relax his conservative policies. Real GDP
growth is expected to fall below 3 percent next year, mainly because of lower investment
growth and decreasing net exports, while the lack of cooperation among government, labor,
and business in wage negotiations probably will put the government's 3-percent inflation
target in jeopardy.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1984
1985
1986
1987*
Exports of Goods and Services
36.8
38.5
46.2
2
43
55.7
9
53
Imports of Goods and Services
35.9
36.8
.
0
3
.
8
1
Balance of Goods and Services
0.9
1.7
.
2
4
.
7
2
Current Account Balance
2.0
3
3
2.9
4
-1
.
-1.6
.
-0.8
Long-Term Capital
.
0
1
.
2
11
8
14
25.2**
Total Reserves Minus Gold (yearend)
2.
.
.
* Projected
**August
e to be modernizing the
ti
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TURKEY: GENERAL ECONOMIC DATA
Population (1986): 51.8 Million GDP (Purchaser's Value)/Capita: $1,110
h Rate)
1986 E
1984
1985
1986
1987*
xc
Total Output (Billion $US -
GDP (Purchaser's Value - Current Prices)
27.0
40.8
57.7
85.2
7
5
GDP (Constant Prices - % Change by Year)
5.7
5.1
8.0
.
898
Cost-of-Living Index (1980 = 100)
352
511
665
ut--the fastest
t
p
u
n o
i
jump
t
J Turkey's economy in 1986 was marked by an 8 percen
25X1
growth of any OECD Country since 1977. Spurred by excessive government investment
expenditures, domestic demand grew more than 10 percent--too high to be sustained without
eventually causing a balance of payments crisis. Soaring demand pulled in imports and
discouraged exports, causing the current account deficit to jump by 50 percent.
Unemployment fell to an estimated 15.5 percent while lower energy costs helped reduce
inflation from 40 to 30 percent last year--but financing the government budget deficit 25X1
through money creation sowed the seeds for more inflation in 1987.
,
r
or
ticularly challenging one
r
a
een a p
b
This year has
had to balance electoral considerations against rising external debt obligations that argue
for cooling the economy. He apparently opted to ease policy and the public sector deficit
thus will rise further this year, to about 7 percent of GOP. As a result, the economy
remains overheated and 1987 GDP growth is likely to pass 7 percent against a target of 5
percent. By mid year strong demand and money supply growth had pushed inflation up to 40
percent. While the current account deficit fell in the first half--as Turkish businessmen
took advantage of generous export incentives established last December--the improvement 25X1
probably cannot be sustained because of inventory depletion.
y w
a
Ankara pro
ears
.
y
t few
e nex
h
annually for t
billion money to cover its 1987 financing needs but its creditors have begun showing signs of
increased caution. If Ozal wins the 29 November election we believe he will move quickly
to restrain demand to prevent the balance of payments problems from getting out of hand.
We are less confident that any alternative leader would take the needed action.
BOP Basis)
$US
1984
1985
1986
1987*
,
TRADE AND PAYMENTS (Billion
Exports of Goods and Services
7.4
11.4
10.8
1
3
11.6
6
14
Imports of Goods and Services
10.3
14.4
4.
.
3
0
Balance of Goods and Services
-2.9
-3.0
-3.5
.
-
3
1
Current Account Balance
-1.4
-1.0
-1.5
5
1
.
-
7
1
Long-Term Capital
0.2
-1.0
.
-
.
-
1
5**
Total Reserves Minus Gold (yearend)
1.3
-1.1
1.5
.
* Projected
**August
g
ce o
Ankara is its large debt serv
i
ng
ac
f
The biggest challenge
ill be able to borrow enough
b
bl
who has
ime Minister Ozal
P
f
ations--over $5
bli
i
13 25X1
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i 25X1
UNITED KINGDOM: GENERAL ECONOMIC DATA
Population (1986): 56.4 Million GDP (Purchaser's Value)/Capita: $9,670
Total Output (Billion $US - 1986 Exch Rate) 1984 1985 1986 1987*
GDP (Purchaser's Value - Current Prices) 467.4 513.3 545.1 589.2.
GDP (Constant Prices - % Change by Year) 2.2 3.7 2.3 3.6
Cost-of-Living Index (1980 = 100) 133 142 146 152 25X1
,
n
ra
e
-percen
5 to 4.
.
anding at a 3
p
is ex
om
y
on
ec
h
B
i
i
s
t
r
The
the Summit Seven countries. Although consumers continue to be the mainstay of
n
g
mo
a
eve
l
l
the economy, growth is better balanced than in previous years. Manufacturing output is
rising at a 6-percent annual rate and private investment is also strong. As a result of
the faster economic growth and an expanded government jobs program, unemployment has
fallen for 16 consecutive months--from 11.3 percent in June 1986 to 9.8 percent in October
1987. Inflation remains under control at 4.2 percent and is likely to pick up only
slightly in 1988. Economic growth is expected to slow to 2.5 percent next year because of
slower expansion in Britain's trading partners; it could be lower, however, if the recent
turmoil in world stock markets is protracted and leads to cutbacks in consumer and 25X1
investment spending.
ng
een swe
conomic expansion has
id
e
Th
e rap
budget deficit will fall below London's target of $6.3 billion (1.5 percent of GDP); some
forecasters are even projecting a budget surplus this year. The government probably will
use the additional revenue for modestly increasing spending on education and revitalizing
the inner cities; the Treasury may also use some of the windfall to cut tax rates in next
March's budget. The Bank of England generally has kept interest rates high to prevent the
economy from overheating; a recent lowering of rates was engineered only to keep the pound
from strengthening unduly against the dollar and the mark, which would hurt British 25X1
exports.
s w
mpor
n
fueled a large rise
ha
di
ng
s
spen
growth. The favorable level of the pound against the dollar and the mark has helped
exporters to recapture lost markets, but the recent strengthening of the currency
threatens to reverse those gains. Both the trade and current account deficits are
expected to worsen in 1988.
BOP Basis)
D PAYMENTS (Billion $US
1984
1985
1986
1987*
,
TRADE AN
Exports of Goods and Services
190.8
200.3
213.2
224.9
Imports of Goods and Services
185.7
191.0
210.0
222.6
Balance of Goods and Services
5.1
9.3
3.2
2.3
Current Account Balance
1.9
4.9
-0.2
-2,.2
2
24
Lon Term Capital
-22.4
-22.2
-22.9
.
*
Total Reserves Minus Gold (yeare
nd)
9.4
12.9
18.4
28.9
*
* Projected
**August
.
gg
e govern
e
accounts continue to
d
ra
e
t
Th
e
hile lower oil prices have held down export
t
i
i
the Treasury's coffers and the
lli
b
High consumer
est concern
ment's bi
th
b
the highest
1987
t
i
t
0
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I I
WEST GERMANY: GENERAL ECONOMIC DATA
Population (1986): 60.1 Million GOP (Purchaser's Value)/Capita:
$14,840
$US - 1986 Exch Rate)
t (Billi
T
l O
1984 1985
1986
1987*
on
ota
utpu
GDP (Purchaser's Value - Current Prices)
808.6 843.6
892.0
911.6
GOP (Constant Prices - % Change by Year)
3.0 2.5
2.4
1.7
Cost-of-Living Index (1980 = 100)
118 121
121
121
e
to expand by only 1.7 percent--down from the 2.5 percent the government forecast in
te cotsumption has held up fairly well but the sharp appreciation of the
P
va
r
i
J
anuary.
t
mark vis-a-vis the dollar has slowed the growth of investment spending and has cut ne
foreign demand. While exports are doing better than expected--up about 1 percent in real
terms--this has been more than offset by a 4-percent increase in real imports. Expressed
in dollar terms, however, West Germany's 1987 trade and current account surpluses will be
even larger than in 1986. Slower growth has dashed Bonn's hopes of reducing unemployment
further, but it has been sufficient to keep the level stable at around 8.0 percent. 25X1
e
ove
th has remained well a
ary gro
w
t
one
M
year running, arousing inflationary fears within the Bank, even though inflation currently
is almost nil. Monetary policy is not likely to tighten, however, because of concern that
this would cause the mark to appreciate even more. Nor has fiscal policy altered
appreciably during the year, although projections of rapidly rising budget deficits--due
largely to slower economic growth--caused Bonn to tighten federal spending somewhat. 25X1
,
per
ou
ut 1988 economic growth at a
p
tes
ma
es
ti
t
os
M
Kohl government reluctant to provide additional stimulus. In rebuffing international
calls for it to advance the tax cuts planned for 1990, Bonn will emphasize that $8 billion
in tax cuts are scheduled to take effect in January. One factor bound to distress West
Germany's allies, however, is that real West German export growth is projected at around
3.5.percent annually--indicating that the decline in the trade surplus will be much slower
than originally anticipated. In addition, due to inflationary fears, continued reductions
in West German interest rates can not be expected.
BOP Basis)
TS (Billion $US
E
1984
1985
1986
1987*
,
N
TRADE AND PAYM
Exports of Goods and Services
209.3
223.8
297.4
352.1
5
287
Imports of Goods and Services
190.6
197.9
246.9
.
6
Balance of Goods and Services
18.7
25.9
50.5
64.
0
Current Account Balance
8.2
15.7
37.7
48.
6
Long-Term Capital
-6.8
-3.4
15.4
.3
**
Total Reserves Minus Gold (yearend)
40.1
44.4
51.7
61.8
* Projected
**August
West German economy got off to a sluggish start this year and now is expected 25X1
Th
Bundesbank's targets for the second
th
b
a rate that makes the
cent
t 2
b
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 Declassified in Part - Sanitized Copy Approved for Release 2012/02/06: CIA-RDP90TO0114R000403950001-7 25X1
SUBJECT: NATO Country Economic Summaries
Distribution:
Original - Mr. William,M. George
Director, East-West Economic Competition
Office of the Assistant Secretary of Defense
The Pentagon
1 - D/EURA
2 - EURA Production Staff
5 - CPAS/IMC/CB
1 - MPS/PES
1 - C/EURA/WE
2 - WE
1 - EURA/WE/UK
1 - EURA/WE/FCB
1 - EURA/WE/CE
1 - EURA/WE/AGN
1 - EURA/WE/IIM
EURA/WE 13 November 1987)
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