POLAND: MORTGAGING THE FUTURE

Created: 8/4/1982

OCR scan of the original document, errors are possible

SPECIAL ANALYSIS

POLAND: Mortgaging the Future

The regime hue for the moment halted the decline in industrial production andubstantial trade eurplue with the West by sloshing imports. These gains, however, have been achieved by sharp reductions in investment and harsh cutbacks in the consumer.sector. These are bad omens for future growth and domestic calm.

output for the first six months2 declinedercent compared to the same period last year. Production in June stagnatedlightin May. Any further Increases probably will be small andperformance will remain far below peak levels

jaruzelski's economic strategy has been to coerce enough outputattered economyostile population to ease financial problems with the West and to lay the basis for eventual recovery. His main tools have been martial law controls and massive retail price increases designed to drive down living standards, absorb excess money, and correct market disorder. To counter the effects of Western sanctions, he has sought to reorient the economy toward CEMA and has appealed for assistance from its members. |

To conserve its scarce hard currency, the government pvidently has decided to make heavier cuts in imports of machinery, equipment, and agricultural goods and fewer cuts in Imports of industrial materials. This decision probably accounts in part for the present halt in the decline of industrial production, sej

The regime plans to double grain procurementsfarmers to make up for the reduced imports. lead to serious problems with farmers, especiallygovernment moves to compulsory deliveries

10

August2

Approved for Release

Coal production, which Jumpedercent over the same period last year, is the one bright spot. Theis tho result of martial lawonger workweek, and special bonuses and benefits. The rise in production has eliminated electric power restrictions in industry, permitted additional deliveries to farmers, and made possible increased exports. ^

The government also is facing growingob vacancies and0 job seekers. The vacancies grew outiberalised early retirement program put into effect earlier this year.

Many managers now complain the retirement of large numbers of skilled workers has hurt them more thanof materials. The government also hasrowing problem of absenteeism, j

Jaruzelski's economic policies have hit the consumer hard. The government in the first five months supplied retail markets withercent fewer goods in real terras than lastpercent less food,ercent less manufactured goods, andercent less alcohol. The cost of living, meanwhile, hasercent in the first six months while workers' incomes have increased onlyercent. ^ ^

Looking to the East

Poland's efforts to get help from the USSR and from Eastern Europe have not had much impact. Polish economists have argued publicly that less thanercent of Western industrial materials could be -eplaced by the East. j

Moreover, Poland's deficit in trade with the USSR for the firstoft currency trade credit from theonlyercent of the level1 for the same period, some Polish officials have publicly complained Moscow is supplying few additional raw materials and thatercent of the productionaterxals must be shipped to the USSR for payment.

Debt. Problems

Poland has made little progress in resolving its external financial difficulties. ecord hard currency trade surplus0 million in tho first half of2 has enabled Warsaw to pay off arrearages on obligations but the regime has not begun payments onillion debt service due this year.

Private creditorswith Warsaw officials

last month, butbe complicated. The

Poles continue to seekfrom debtyear.

Outlook

economic pressure is unlikely to ease during the remainder Jaruselaki is unwilling to take the steps requiredto obtain Western credit or to satisfy the people.

The government has already warned consumers that

they may face further declines in living standards for

the rest of the year. This will make even more difficult

the regime's task of trying to find the proper balance

between relaxing controls to gain the cooperation of the

populationand minimising political trouble in the cominq months. Saeemm

Original document.

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