EASTERN EUROPE: ECONOMIC GROWTH HITS NEW LOW

Created: 2/4/1981

OCR scan of the original document, errors are possible

EASTERN EUROPEi Economic Growth Hits New Low

y... The *oonomic difficulties that began in easternre continuing, with the annual rate ofercent last year, the lowest in the poetMar * Poland'* economy did the worat, with overall economicfalling sharplyesult of laboroorand the general breakdown in political and eeonomic leader- Hungary, Bulgaria, and Romaniaid poorly,and Bast Germany managed to increase their rat**but onlyult* of last year point to ain the economic malaise that gripe most East European end ooneumer welfare is likely to suffer, furtherinternalrains.

V Through, -East European economise expanded at rates that were unimpressive -compared with those of the USSR and the countries belonging to the Organization of Economic Cooperation andn the, growth speeded up when most countries began to borrow in the West to finance ambitiousgrams and made minor, adjustments in outdated systems of economic management.

By the, however, every Bast European country had to restrict its trade with the West;to ome degree,"ee oil priceaused.inflation.In' the prioes of their: imports an- asost curbeduropean exports. -Efforts' at economic modernization programs failed to raise productivityfsub- >stantially, while shortages of consumer goods and/serv-V. ices caused discontent.^

Balance-of-Payments Difficulties

faced with accumulating hard currency debts, aostV^.'7

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East European countries have tried for some years to ';*

increase exports to the Went while restraining purchases

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of Western goods. Poland's deteriorating position was especially troublesome to Bast European governments and to. the USSR because of its implications-for thestability and for Westerno', lend -to Eastern Europe. .In the last few years Bulgaria, Czechoslovakia, and Hungary havo managed toheir debt positions, but'East Germany,-Romania, and Poland-have'fallen far.their hard currency current accounts. ^eemmmm*fe '

The chances of arresting the economic slide in -Eastern Europe in the next few years are slight. The forces depressing growth and causing balance-of-payments difficulties in the, are, if anything,tronger. eammV

The USSR's domestic problems will prevent it from increasing deliveries of energy and raw materials atpast rates. Eastern Europe will have to turn to the West for such imports and pay higher prices in the process. eseW

Sluggish economic performance in. the West"will keepthe Bast Buropean governments from appreciably increasing the volume of exports to hard currency countries. SSR probably vill demand large quantities of Eastpean goodB that otherwise might be sold in the West. .aV^

Domestic Constraints ,

problems also' will Impede the East European economies, in all of the countries except Romania, the increase in tbe working-age population will tail off1 Beat Buropean governments,-discouraged by the results of high Investment rates and promptedompeting consumer demands, are restraining investment, -and the stock of plant and equipment will increaselower rate.

Host Important, productivity waa unimpressive throughnd shews no sign of recovering intagnating consumption levels will tend to discourage labor from working harder, while reduced Imports of Western machinery will make technical progress more dif-ficult. Amens-

tinued

leaders believe that the, reduced goals already announced are tooeeting in Prague in early December, for'example. Easttoph reportedly;stated -that East German national income would .riseercentzechoslovak Premier Strougalsaid he did..not expect his country's'-'v* economy to growwo weeks later. Eastnd Prague announced national Income growth targetsercent, respectively.;.

eparture from previousast .Germany evidently will not issue detailed directivesvfor5 plan period at its coming partyabe uncertaintlee and strains that.

omy-faces',

The unrest in Poland, however, has darkened economic prospects in the rest of Eastern Europe. The other -Warsaw Pact partners are being pressed by the

aid Poland, and Moscow alsomay divert energy and other exports originally intended for other EastV countries to Poland. Meanwhile,:because economic reforms, that mightifference require austerity and pain- ful readjustments, they haveatered down orxcept in Hungary. aammmV' "n^ "V

Because .the forces limiting economic growth"Europe are so pervasive, living conditionsimprove much and may at times decline.. Consumerof continued improvement iu livingnot be met. Even if discontent does not turn into"unrest, the economic irritants thatfoment the conflict netween'the' workers and tbe =in Poland will be increasingly evident inEuropean countries.

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Original document.

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