(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T01017R000504620001-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: January 12, 2017
• Document Release Date: March 10, 2011
• Sequence Number: 1
• Publication Date: November 14, 1986
• Content Type: MEMO

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r/ -25X1
Central ant igerxe Agency
14 NOV 1986
MEMORATIDtJM FOR: Mr. William M. George
Director, International Financial
and Econccnic 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 20 October (1-09268/86). Once again, we are pleased to
contribute to the briefing material being put together for Secretary
Weinberger's attendance at the December NATO ministerial meeting. If you have
any further questions or if we can be of further assistance, please call 25X1
Chief, West European Division 25X1
Attachment:
As stated
Director
European Analysis
Fick
DATE f / l~~
DOC NO &R /1
~~-~la/yo
OIR?,3
P & PD`
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BEILGILM-LUXE BOUIG: ORAL ECONOKIC DATA
BELGIUM
Population (1985): 9.9 Million GDP (Purchaser's Value)/Capita: $8,121
Total Output (Billion $US - 1985 Exch Rate)
1983
1984
1985
1986*
GDP (Purchaser's Value - Current Prices)
70.7
75.5
80.4
87.3
GDP (Constant Prices - % Change by Year)
0.0
1.5
0.9
2.1
Cost-of-Living Index (1980 = 100)
126
134
141
143
LUXEMBOURG
Population (1985): 0.4 Million GDP (Purchaser's Value)/Capita:
$8,500
Total Output (Billion $US - 1985 Exch Rate)
1983
1984
1985
1986*
GDP (Purchaser's Value - Current Prices)
2.9
3.3
3.4
3.5
GDP (Constant Prices - % Change by Year)
1.8
2.8
4.9
2.8
Cost-of-Living Index (1980 = 100)
128
136
141
142
grow at a slow but steady pace. Increased exports, especially to other BC members, will
pace Belgium's growth in 1986 and GDP will expand by about 2 percent-up slightly 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-hovering above 12 percent. On the
brighter side, inflation fell in 1985 to 4.9 percent and will fall even further this year
to about 1.4 percent.
deficit by controlling government spending. His center-right coalition's 1987 budget-
currently before the Parliament-is 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 lowered government spending.
this year 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)
(Belgium-Luxembourg)
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)
* Estimated
**August
Dampened somewhat by efforts to reduce spending, the Belgian eoonomy continues to 25X1
Prime Minister Martens's fiscal continues to 25X1
policy emphasize reducing the budget
25X1
Belgium's current account surplus is expected to increase to about $2.2 billion
1983
1984
1985
1986*
76.1
77.4
80.5
84.2
76.1
76.6
79.8
82.1
-0.6
0.8
0.5
2.1
-0.5
-0.1
0.6
2.2
-3.3
-2.3
-4.9
-1.8
4.7
4.6
4.8
5.3**
25X1
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CANADA: GENERAL ECOtDIIC DATA
Population (1985): 25.4 Million GDP (Purchaser's Value)/Capita: $13,547
Ibtal Output (Billion $US - 1985 Exch Rate) 1983 1984 1985 1986
GDP (Purchaser's Value - Current Prices) 294.5 319.2 344.1 368.0
GDP (Constant Prices - % Change by Year) 3.2 5.0 4.5 2.7
Cost-of-Living Index (1980 = 100) 132 138 144 150
Ottawa is currently attempting to deal with recent US countervailing duty (CVD) 25X1
decisions that have hit its forestry industry and to keep the free-trade negotiations with
Washington on track. The government is fending off opposition insistence that it has
mismanaged the negotiations and that it end the talks. Zb appease producers suffering
from depressed commodity prices, Ottawa has promised Canadian grain farmers a $720-
million aid package and has rescinded certain taxes for oil companies. The Tory
government continues to trail in the polls, however, despite having achieved many of its
economic goals.
The Canadian economy is likely to grow by less than 3 percent this year
down fron25X1
,
4.5 percent in 1985. The slowdown is attributable to declining investment following the
collapse of oil prices and an accumulation of inventories at mid-year. Ottawa has missed
its budget deficit target of $21.6 billion for fiscal year 1986-87 by at least $1.8
billion, but insists that tax reforms to be proposed in early 1987 will broaden the tax
base enough to meet deficit reduction goals. The unemployment rate has fallen to a four-
year low of 9.4 percent, but is expected to reach ten percent by the end of the year.
Inflation should remain around four percent, with higher sales taxes offsetting gains from
lower oil prices.
Canada's 1985 trade surplus of $15 billion with the US will be reduced to $11 25X1
billion in 1986 by the declining value of its energy exports and the sluggish US
economy. This decline in trade with the US-the only major trading partner with which
Canada has a positive trade balance-will help push the expected current account deficit
to $6 billion.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
87.7
101.3
103.6
106.0
Imports of Goods and Services
87.0
100.2
106.2
113.0
Balance of Goods and Services
0.7
1.1
-2.6
-7.0
Current Account Balance
1.4
1.9
-1.9
-6.0
Long-Term Capital
-0.6
1.2
0.6
0.6
Total Reserves Minus Gold (yearend)
3.5
2.5
2.5
2.3**
* Estimated
**September 1986
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D N4ARK: WERAL ECONOMIC DATA
Population (1985): 5.1 Million GDP (Purchaser's Value)/Capita: $11,200
Total Output (Billion $US - 1985 Exch Rate) 1983 1984 1985 1986*
GDP (Purchaser's Value - Current Prices) 48.4 53.0 57.1 60.9
GDP (Constant Prices - % Change by Year) 2.1 3.5 2.7 3.3
Cost-of-Living Index (1980 = 100) 132 140 146 151
y
g
ou
.
- 3.5 this
year
,
spurred b
y
stron
g
domestic demand. An inflation rate of under 4 percent will combine with real wage
increases, growing employment, and a decline in household saving to boost consumption by
almost 4 percent. Furthermore, investment spending will increase about 15 percent because
of high capacity utilization, strong profitability, lower interest rates, slower labor cost
growth, and a favorable business climate. 25X1
growing at a record-setting pace--continues to frustrate the center-right government,
forcing it to consider a currency devaluation. Copenhagen announed yet another plan in
October to dampen import demand-its third in a year-by raising taxes on consumer
lending. The new measures are unlikely to lead to a significant improvement in the 1986
current account since export performance will remain weak due to the falling US dollar and
slow growth in Denmark's major trading-partner countries.
past year, from over 10 percent to 7.8 percent in August. This improvement has diminished
much of the opposition's pressure on the government to stimulate the eoonany, which would
almost certainly have significantly worsened Denmark's current account.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
22.5
22.4
24.1
24.8
Imports of Goods and Services
23.5
24.1
26.7
28.8
Balance of Goods and Services
-1.0
-1.7
-2.6
-4.0
Current Account Balance
-1.2
-1.6
-2.8
-4.2
Long-Term Capital
2.5
1.9
7.2
7.6
Total Reserves Minus Gold (yearend)
3.6
3.0
5.4
5.2**
*
Estimated
** September
25X1
Denmark's econom
will
row ab
t 3
0
The persistent current account deficit-$2.3 billion for the first half of 1986 and
25X1
Strong job creation has steadily lowered Denmark's high unemployment rate over the
25X1
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FRANCE: GENERAL ECONOMIC DATA
Population (1985): 55.1 Million GDP (Purchaser's Value)/Capita: $9,281
Total Output (Billion $US - 1985 Exch Rate)
1983
1984
1985
1986*
GDP (Purchaser's Value - Current Prices)_
437.9
476.7
511.4
536.2
GDP (Constant Prices - % Change by Year)
0.7
1.5
1.3
2.3
Cost-of-Living Index (1980 = 100)
139
149
158
162
Helped by lower oil prices and the falling US dollar, the French economy is
enjoying a relatively good year. Real GDP should increase about 2.3 percent in 1986, after
five years of virtually flat growth. Inflation is at its lowest in 20 years, with price
rises averaging about 2.3 percent over the year compared to a 5.8-percent increase in
1985. The French balance of payments is also showing its best performance since 1979. The
trade balance is expected to improve significantly from a $4.6-billion deficit in 1985 to a
$0.8 to $1.0-billion surplus this year. Likewise, the almost $1.0-billion current account
surplus France had last year will grow to around $4.0 billion in 1986.
The dark cloud in the French economic picture is unemployment, which reached a 25X1
post-war high of around 10.7 percent this fall. Given current demographic trends and the
restructuring of French industry-which is trying to cut labor costs-there is little
chance that the employment situation will improve before the presidential elections due no
later than May 1988. The end of next year will see over three million Frenchmen unemployed
compared to around_2.5.million out of work at present.
The conservative government of Prime Minister Chirac has moved toward market- 25X1
oriented policies. Price controls on all but a few selected items will be removed by the
end of the year. The government is also moving on its plans to privatize parts of the
public sector and to liberalize foreign and capital market regulations. The government
introduced a 1987 budget which, for the first time in 29 years, proposes expenditure growth
that is less than expected inflation.. The new budget envisions tax reductions and cuts in
government personnel, in subsidies, and in aid to industry. Defense spending is to grow
substantially in real terms and equipment purchase plans give priority to the modernization
of France's strategic nuclear forces.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
145.3
147.7
154.6
158.4
Imports of Goods and Services
146.6
145.7
151.1
152.4
Balance of Goods and Services
-1.3
2.0
3.5
6.0
Current Account Balance
-5.2
-0.9
0.9
3.8
Long-Term Capital.
9.3
5.2.
3.8
2.0
Total Reserves Minus Gold (yearend)
19.9
20.9
26.6
33.6**
* Estimated
** August
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GREECE: GEIIRAL ECONOMIC DATA
Population (1985): 9.9 Million GDP (Purchaser's value)/capita: $3,313
Total Output (Billion $US - 1985 Exch Rate) 1983 1984 1985 1986*
GDP (Purchaser's Value - Current Prices) 22.2 27.3 32.8 32.4
GDP (Constant Prices - % Change by Year) 0.0 2.6 2.1 -1.0
Cost-of-Living Index (1980 = 100) 181 215 256 324
25X1
Despite electoral losses, Prime Minister Papandreou is sticking to the aust
rit
e
y
program initiated at the start of the year. The plan included a 15-percent devaluation of
the drachma, import restrictions, and changes in the wage indexation formula which will
reduce worker's real income by about 7 percent. The program was aimed at curbing a soaring
current account deficit, a huge public sector borrowing requirement, and a high inflation
rate, but it has yet to show significant results in these areas. Austerity is causing the
economy to contract in 1986; real GDP will fall .5 to 1 percent and unemployment may rise
to about 9 percent.
25X1
The current account deficit for January-August decreased 39
7
erce
t t
1
.
p
n
o $
.2
billion against a deficit of $2 billion in the same period of last year, but falling oil
prices saved Greece $726 million and higher net BC payments and tourist receipts provided
$359 million and $244 million respectively. Non-oil imports for January-August have risen
14.8 percent compared to last year, while exports have only increased 1.5 percent over the
same period. Greece's 24-percent inflation rate has already eroded any benefits from the
drachma devaluation.
,
p
comp
ete pr
ce freeze until 31 Januar
y
1986. The freeze was probably instituted more for political than economic reasons, in
hopes of easing worker discontent over falling real incomes. It may well lead, however, to
shortages, a worsened current account situation, decreased investment, and greater
unemployment through business failure. Greece's best hope for relief lies with the BC.
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 is supposed to be released
if Athens makes progress in meeting its economic targets. Although Greece has little
chance of meeting those conditions, the EC is likely to go ahead with the loan after
getting Papandreou to tighten economic policy in 1987.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
4.1
4.4
4.3
4.4
Imports of Goods and Services
9.5
9.8
10.5
10.2
Balance of Goods and Services
-5.4
-5.4
-6.2
-5.6
Current Account Balance
-1.9
-2.2
-3.3
-2.0
Long-Term Capital
2.1
1.8
2.8
3.1
Total Reserves Minus Gold (yearend)
0.9
1.0
0.9
1.5**
*Estimated
**August
On November 7
Papandreou 25X1
im
lemented a
l
i
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I I
ICELAND: GENERAL ECO MIC DATA
Population (1985): 0.24 million
GDP (Purchaser's Value)/Capita:
$14,167
Total Output (Billion $US - 1985 Exch Rate)
1983
1984
1985
1986*
GDP (Purchaser's Value - Current Prices)
2.0
2.6
3.4*
4.3
,GDP (Constant Prices - % Change by Year)
-5.5
2.7
3.4*
5.0
Cost-of-Living Index (1980 = 100)
418
547
722
790
The Icelandic economy will probably achieve 5-percent growth in 1986 and should 25X1
also remain strong in 1987 due to the fall in oil prices, a sharp decline in inflation,
higher real incomes, and an increase in the fish catch-Iceland's main export. The
decline in fish exports to the US, because of the US dollar's depreciation, has been more
than offset by higher prices and strong markets in Western Europe. The weaker dollar also
will ease the burden of Iceland's foreign debt, from 55 percent to about 50 percent of
GDP.
Gross fixed investment growth will be flat in 1986 for the second consecutive 25X1
year, but private consumption remains strong following the February anti-inflation
agreement among government, business, and labor. This agreement may bring the inflation
rate down to single digits for 1986 following more than a decade of double-digit
inflation.
25X1
Iceland's unemployment rate will remain under 1 percent, although some regions may
experience cyclically higher rates because of their fishing-based economy. Improvements
in the terms of trade will help maintain strong export growth, a declining current account
deficit, and low unemployment. Over the longer term, Reykjavik realizes it will have to
continue deregulating its money and capital markets and amend its limits on foreign
ownership of industries to attract the foreign investment needed to diversify Iceland's
economy and ensure sustained growth.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
1.10
1.11
1.22
1.30
Imports of Goods and Services
1.15
1.24
1.34
1.38
Balance of Goods and Services
-0.05
-0.13
-0.12
-0.08
Current Account Balance
-0.06
-0.13
-0.12
-0.07
Long-Term Capital
0.09
0.11
0.16
0.17
Total Reserves Minus Gold (yearend)
0.15
0.13
0.21
0.23**
*
Estimated
** September
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ITALY: GENERAL ECONOMIC DATA
Population (1985): 57.1 Million GDP (Purchaser's Value)/Capita: $6,282
Total Output (Billion $US - 1985 Exch Rate) 1983 1984 1985 1986*
GDP (Purchaser's Value - Current Prices) 282.3 320.6 358.7* 397.0
GDP (Constant Prices - % Change by Year) -0.4 -2.6 2.3* 2.8
Cost-of-Living Index (1980 = 100) 157 174 190 201 25X1
External forces-falling oil prices and the declining value of the dollar-are the
key factors behind Italian real GDP growth of 2.8 percent in 1986. We believe exports will
gradually replace private consumption as the driving force behind moderately healthy (2.5-
3.0 percent) growth through the end of the decade. Increases in investment in plant and
equipment of about 3.5 percent this year and next will also contribute to growth. A large
youth population and increased participation by warren in the labor force, however, are
likely to push the unemployment rate above 11 percent in 1987. 25X1
Falling oil prices have helped reduce inflation 3.5 percentage points to 5.7
percent in 1986, despite the government's decision to discourage increased fuel consumption
by raising gasoline taxes. Consumer price inflation is likely to be reduced another
percentage point in 1987, although prices probably will begin to rise again toward the end
of the year. Cheaper energy imports will contribute to a nearly $5.5 billion improvement
in Italy's trade deficit and a current account surplus of $2.5 billion this year.
Declining export competitiveness, however, probably will put the current account back into
deficit in 1987.
Rare continues to fail in its efforts to reduce the huge public sector deficit, 25X1
which is likely to exceed 15 percent of GDP this year. The government crisis last July
delayed planning of the 1987 budget and the spending cuts finally introduced again lack any
teeth. As a consequence, Rome's 1987 deficit is likely to remain near 15 percent of GDP,
well above the 12.5-percent target projected in the budget. Covering the huge public
sector borrowing requirement is a significant drain on Italy's financial resources and
probably will keep Italian interest rates high relative to those in other industrialized
countries.
Trade and Payments (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
97.4
99.2
105.5
118.0
Imports of Goods and Services
98.1
103.2
110.8
121.0
Balance of Goods and Services
-0.7
-4.0
-5.3
-3.0
Current Account Balance
-0.6
-2.9
-4.2
-2.5
Long-Term Capital .
0.5
0.6
2.5
1.5
Total Reserves Minus Gold (yearend)
19.8
20.8
15.5
20.4**
*
Estimated
** August
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M ANDS: GENERAL ECONOMIC DATA
Population (1985): 14.5 Million GDP (Purchaser's Value)/Capita: $8,566
Zbtal Output (Billion $US-1985 Exch Rate) 1983 1984 1985 1986*
GDP (Purchaser's Value - Current Prices) 113.9 118.9 124.2 126.1
GDP (Constant Prices - % Change by Year) 1.3 1.7 2.0 1.5
Cost-of-Living Index (1980 = 100) 116 120 123 123
25X1
The Dutch economy is likely to continue its slow but steady growth in 1986
fueled
,
by rising business investment, consumer spending, and export earnings. Job creation is
beginning to exceed the growth of the labor force, and the unemployment rate should drop
slightly to around 12 percent. The Dutch are also beginning to cane 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 near zero this year.
ut 25X1
The Hague's 1986 budget relaxes-but does not abandon-the austerity
ro
ram
p
g
p
in place in 1982 to bring down the public sector deficit
Public ex
enditures are b
i
.
p
e
ng
reduced by $2.5 billion by trimming welfare spending, public-sector wages, and allocations
to various ministries. Nevertheless, the deficit is likely to rise slightly above the
1985 figure of 6 percent of GDP.
n
oy
arge current account and trade sur
p
lu
se
s
in 1986. Although imports should grow faster than exports in volume terms, the trade
surplus is likely to 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)
1983
1984
1985
1986*
Exports of Goods and Services
83.4
86.2
86.7
90.3
Imports of Goods and Services
78.9
78.7
80.3
83.8
Balance of Goods and Services
6.0
7.5
6.4
6.5
Current Account Balance
5.1
6.5
5.4
5.6
Long-Term Capital
-3.2
-4.3
-3.7
-3.9
Total Reserves Minus Gold (yearend)
10.2
9.2
10.8
11.6**
* Estimated
** September
25X1
The Netherlands will continue to e
j
l
25X1
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NORWAY: GENERAL ECONOMIC DATA
Population (1985): 4.2 Million GDP (Purchaser's Value)/Capita: $13,786
Total Output (Billion $US - 1985 Exch Rate)
1983
1984
1985
1986
GDP (Purchaser's Value - Current Prices)
46.8
52.7
57.9
60.2
GDP (Constant Prices - % Change by Year)
3.8
3.8
3.0
4.0
Cost-of-Living Index (1980 = 100)
137
146
154
166
difficulty adjusting to the 1986 collapse of oil prices. The resulting cloudy outlook for
the domestic economy and lack of confidence in the Labor government's economic policies
will probably turn the healthy 25-percent growth in investment in 1986--compared to a 22
percent fall in 1985-into a slight decline in 1987. The main short-run impact of lower
oil prices has been the sharp decline in oil production tax revenues, which have fallen
from about 20 percent of total receipts in 1985 to about 15 percent in 1986, and will
probably fall further to about 7 percent in 1987. Higher taxes that may be imposed on the
non-oil sectors to offset the shortfall will hinder the economy's adjustment and will help
slow 1987 economic growth.
prices. The kroner devaluation in May and an estimated 9-percent increase in wages have
offset a tighter monetary policy and a slowdown in consumption spending. Inflationary
pressures will continue in 1987 because of a legislated reduction in the workweek,
unaccompanied by pay cuts, and because of a probable increase in money supply growth as
the government attempts to boost the economy by reducing interest rates.
25X1
deficit in 1986 and may widen further in 1987. Exports will decline about 16 percent this
year due to the drop in energy exports, while imports have increased despite the
devaluation. The devaluation may stimulate exports somewhat next year.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
26.6
28.0
27.3
26.5
Imports of Goods and Services
24.0
24.2
22.7
29.1
Balance of Goods and Services
2.8
3.8
4.6
-2.6
Current Account Balance
2.0
3.0
3.0
-4.5
Long-Term Capital
-1.0
-0.1
1.3
1.8
Total Reserves Minus Gold (yearend)
6.6
9.4
13.9
14.6**
*
Estnated
** September
The Norwegian economy, which grew about 4 percent this year, will probably have 25X1
Norway's inflation rate has remained at over 7 percent despite the fall in oil 25X1
The $3.1-billion current account surplus in 1985 turned into a $4.5-billion
25X1
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PORTUGAL: ORAL ECONOMIC DATA
Population (1985): 10.0 Million GDP (Purchaser's value)/Capita: $2,100
Total Output (Billion $US - 1985 Exch Rate)
1983
1984
1985
1986*
GDP (Purchaser's Value - Current Prices)
13.4
17.1
21.0
24.6
GDP (Constant Prices - % Change by Year)
-0.4
-1.7
2.8
3.7
Cost-of-Living Index (1980 = 100)
184
238
284
321
The Portuguese economy my will probably grow 3.7 percent in 1986
benefittin
from
,
g
declining interest rates, lower oil and commodity prices, and a weakened US dollar.
Private consumption is likely to be the major component of growth-increasing 3.8 percent-
as nominal wage increases run 4-5 percentage points above inflation and household incomes
are boosted by strong increases in social transfers and lower taxes. Private sector
investment growth is likely to be sluggish-despite interest rate cuts and the introduction
of tax incentive measures-since business lacks confidence in the minority Cavaco Silva
government and doubts Lisbon's willingness to liberalize the economy. Inflation will
continue its downward trend, falling to about 13 percent, with unemployment remaining
around 11 percent.
The fall in oil prices is likely to provide an ample cushion against the initial 25X1
adjustment difficulties of Portugal's first year in the EC. The current account is
expected to reach a $1.3-billion surplus in 1986, despite a deteriorating trade balance.
As a result, Portugal's international credit rating is likely to improve, which will help
pave the way for the government's proposed restructuring of Portugal's $16.6 billion
foriegn debt. 25X1
Lisbon has made some progress in reducing the budget deficit
although it has been
,
due primarily to greater-than-expected revenues realized from the value added tax, savings
on external debt service, and lower oil and agricultural commodity prices. Government
expenditures are likely to rise slightly, as Lisbon increases public consumption and
investment in an attempt to stimulate the economy. The budget deficit is expected to be 11
percent of GDP this year.
TRAE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
6.9
7.1
8.0
8.5
Imports of Goods and Services
10.1
9.8
9.8
10.3
Balance of Goods and Services
-3.2
-2.7
-1.8
-1.8
Current Account Balance
-1.0
-0.5
0.4
1.3
Long-Term Capital
1.2
1.2
1.0
1.0
Total Reserves Minus Gold (yearend)
0.4
0.5
1.4
1.8**
* Estimated
**August
25X1
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SPAIN: GENERAL ECON MIC DATA
Population (1985): 38.8 Million GDP (Purchaser's Value)/Capita: $4,356
Total Output (Billion $US - 1985 Exch Rate) 1983 1984 1985 1986*
GDP (Purchaser's Value - Current Prices) 134.0 152.5 169.0 187.6
GDP (Constant Prices - % Change by Year) 2.5 2.3 2.1 2.9
Cost-of-Living Index (1980 = 100) 147 164 178 192
Real GDP is likely to grow 2.9 percent this year, mainly because of rising private25X1
sector demand. After only a moderate rise in 1985, private consumption should increase 2.5
percent, due primarily to rising real wages and lower taxes. Fixed investment is likely to
jump 7 percent in 1986, buoyed by improving company profits, declining interest rates, and
renewed corporate optimism. Inflation probably will be about 8 percent, as real wages and
the money supply continue to rise. Unemployment remains troublesome at 21 to 22 percent.
Entry into the BC is not likely to bring Spain any immediate benefits. 25X1
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 and an inflation rate still about 5 percentage points above the EC
average. Lower oil and commodity prices, a weakened US dollar, and a large increase in
tourism revenues will, nonetheless, help to mitigate the initial negative effects of EC
membership. The current account balance is expected to be a $5.8 billion surplus in 1986.
The snap elections called by the Socialists in June resulted in their retaining 25X1
power, albeit with a reduced majority. Moderate but outward-looking policies are now
likely to continue to dominate economic decisionmaking in the next year. Reducing the
budget deficit-to 4.8 percent of GDP in 1986-and the inflation rate-to 5 percent by
1987-will remain central to the government's monetary and fiscal policies.
TRADE AND PANPS (Billion $US, BOP Basis)
1983
1984
-1985
1986*
Exports of Goods and Services
32.7
37.1
38.8
40.2
Imports of Goods and Services
36.6
35.9
36.9
39.3
Balance of Goods and Services
-3.9
1.2
1.9
0.9
Current Account Balance
-2.7
2.3
3.0
5.8
Long-Term Capital
3.1
3.3
-1.4
0.5
Total Reserves Minus Gold (yearend)
7.4
12.0
11.2
14.8**
* Estimated
**August
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TURKEY: GENERAL ECONOMIC DATA
Population (1985): 51.3 Million GDP (Purchaser's Value)/Capita: $1,023
Total Output (Billion $US - 1985 Exch Rate)
1983
1984
1985
1986*
GDP (Purchaser's Value - Current Prices)
22.0
34.9
52.5
56.2
GDP (Constant Prices - % Change by Year)
3.8
5.9
4.9
7.0
Cost-of-Living Index (1980 = 100)
237
352
507
669
Turkey is making progress under Prime Minister Ozal's free-market economic program,25X1
but continues to face difficulties with inflation, unemployment, and the balance of
payments. Although prospects for the economy continue to be good, important Middle East
markets have lost their buoyancy, and Turkey will have to continue adhering closely to its
program to avoid serious problems with debt servicing as repayments peak in 1987.
Turkey's current account deficit more than doubled in the period January-June 1986 25X1
over the same period last year. The sharp deterioration is partially due to increased
imports of investment goods before the expiration of government incentives earlier this
year, but mostly to a decline in invisibles--tourism and worker's remittances--as well as
loss of export markets. On the domestic side, inflation fell to a 30-percent annual rate
in August, but it may begin rising later this year due to a burgeoning money supply and
price increases on state-produced goods. Unemployment, officially at 16.7 percent, is
unlikely to fall any time soon as growth in the labor pool is outstripping increases in
employment opportunities. Moreover, guest workers formerly employed in oil producing
states are now returning home.
The biggest challenge facing Ankara is its large debt service obligations that 25X1
began climbing last year as grace periods on previously rescheduled debt expired. In 1985
Turkey paid approximately $3.7 billion in principal and interest repayments, or about 33
percent of foreign exchange earnings. This year, Turkey will pay an estimated $4.0 to $4.2
billion. To provide the cash, Ankara has tried a succession of measures aimed at
increasing exchange earnings. The latest of these was a 2.3-percent devaluation of the
Lira against the US dollar and reforms of banking laws, aimed at encouraging banks to lend
more to exporters.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
5.9
7.4
11.4
11.0
Imports of Goods and Services
8.9
10.3
14.4
15.0
Balance of Goods and Ser
%Ices
-3.0
-2.9
-3.0
4.0
*
Current Account Balance
-1.8
-1.4
-1.0
-2.0
Long-Term Capital
-0.3
0.2
-0.6
-0.2
Total Reserves Minus Gold (yearend)
1.3
1.3
1.1
1.7**
* Estimated
**August
***1982-1984 figures exclude debt relief
25X1
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I I
UNITED KINGDOM: GENERAL EC( IIC DATA
Population (1985): 56.4 Million GDP (Purchaser's Value)/Capita: $8,018
Total Output (Billion $US-1985 Exch Rate) 1983 1984 1985 1986*
GDP (Purchaser's Value - Current Prices) 389.0 412.3 452.2 477.5
GDP (Constant Prices - % Change by Year) 3.6 2.0 3.0 2.4
Cost-of-Living Index (1980 = 100) 127 133 141 146
The United Kingdom's five-year-old economic expansion lost a great deal of steam 25X1
this year, with growth likely to be limited to between 2 and 2.5 percent. A sharp rise in
real earnings-caused by both a fall in inflation to 3 percent and high wage settlements-
has allowed consumption to be the mainstay of 1986 growth. Private investment has been
weak due to high real interest rates and depressed activity in the oil sector. Despite
the continued growth, unemployment remains a critical problem. The jobless rate, which
stood at 11.6 percent in October, shows no sign of a significant improvement in the near
future.
Pre-election politics are straining the Thatcher government's ooamitment to 25X1
cutting government spending and reducing the budget deficit. A sharp drop in North Sea
oil receipts and smaller-than-expected revenues from the sale of nationalized industries
have pushed the public sector borrowing requirement (PSBR) for fiscal year 1986 close to
its target after only six months. This year's poor budget performance and the
government's recently announced plans to increase spending will make it difficult for
London to carry through with its planned tax cut in next March's budget. Monetary policy
continues to stress control of inflation and currency stability. To that end, British
interest rates remain among the highest in the OECD.
The current account was in slight deficit for the first nine months of the year, 25X1
and the underlying trend points to a growing deficit over the next year. The trade
account is suffering a significant deficit as high consumer spending is fueling a sharp
rise in imports while oil exports have fallen sharply and non-oil exports have remained
flat.
TRADE AND PAYMENTS (Billion $US, BOP Basis) 1983 1984
Exports of Goods and Services 185.6 191.1
Imports of Goods and Services 177.7 186.0
Balance of Goods and Services 7.9 5.1
Current Account Balance 4.7 1.4
Long-Term Capital -13.7 -20.8
Total Reserves Minus Gold (yearend) 11.3 9.4
* Estimated.
** August
1985
1986*
201.3
209.4
191.5
211.2
9.8
-1.8
4.6
-0.3
-17.1
-15.0
12.9
15.0**
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WEST GEII4ANY : GENERAL EC ONC MIC DATA
Population (1985): 61.0 Million GDP (Purchaser's Value)/Capita:
$10,192
Total Output (Billion $US - 1985 Exch Rate)
1983 1984
1985
1986*
GDP (Purchaser's Value - Current Prices)
567.1 593.8
621.7
651.5
GDP (Constant Prices - % Change by Year)
-1.5 2.7
2.4
2.8
25X1
Cost-of-Living Index (1980 = 100)
116 118
121
121
driving force behind economic expansion, and west Germany will probably record real growth
of nearly 3 percent in 1986. Growth next year was also initially projected to be about 3
percent, but this expectation is now regarded as optimistic because of the effects of a
stronger deutsche mark on trade, and the belief that the current surge in domestic demand
will not last. To avert a slowdown, many experts, including West Germany's five leading
economic institutes, are now pushing Bonn either to speed up scheduled tax cuts or to
accelerate its planned tax reform. Reducing the budget deficit remains Finance Minister
Stoltenberg's top fiscal priority, however, and Bonn is unlikely to accede to these calls
unless markedly slower growth is apparent by the spring.
percent. It remains above the politically sensitive 2-million level, however, and Bonn
sees little hope of reducing it much further in the near and medium term. The German
economy is projected to produce only 250,000 jobs in 1987, 50,000 less than this year.
The inflation rate is expected to be slightly negative this year, reflecting the sharp
drop in both oil and food prices, due in part to the appreciation of the deutsche mark.
Christian Democrat Chancellor Kohl is counting on the country's relatively strong
performance on growth and inflation to offset any concern over lingering unemployment when
voters go to the polls on 25 January to elect a new national government.
largely as a result of the Bundesbank's efforts to slow the decline of the US dollar.
This excessive monetary growth has been used by the Bundesbank in recent months to
rationalize its refusal to lower the West German discount rate, thus exacerbating an
economic dispute with the United States. Washington has argued that lower German interest
rates would-among other things-alleviate West Germany's large bilateral trade surplus
with the US. This surplus reached a peak of $25 billion this year, but is expected to
decline in 1987.
TRADE AND PAYMENTS (Billion $US, BOP Basis)
1983
1984
1985
1986*
Exports of Goods and Services
208.9
209.3
223.7
276.0
Imports of Goods and Services
194.9
192.2
199.3
235.0
Balance of Goods and Services
14.0
17.1
24.4
41.0
Current Account Balance
4.2
6.8
13.8
35.0
Long-Term Capital
-3.0
-5.3
-2.2
_ 8.0
Total Reserves Minus Gold (yearend)
42.7
40.1
44.4
48.9**
* Estimated
** September
Domestic demand, led by private consumption, has replaced the trade balance as the
Unemployment has steadily dropped this year and currently stands below 8 25X1
Monetary growth will overshoot its 5.5-percent upper target range this year, 25X1
25X1
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SUBJECT: NATO Country Economic Summaries
Distribution:
Original - Mr. William M. George
Director, International Finance & Economic Policy
Office of the Under Secretary of Defense for
Plans & Resources
The Pentagon
1 - D/EURA
2 - EURA Production Staff
4 - IMC/CB
1 - C/WE
2 - WE
1 - EURA/WE/UK
1 - EURA/WE/FcB
1 - EURA/ME/CE
1 - EURM/WE/AGN
1 - EURA/WE/IIM
EURA/WEf I(13 November 1986) 25X1
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