Created: 7/3/1980

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POLAND: Economic Problems

teazerday'a znnourjjement by zhe polish gcverment that it had raised tseas prioeo haa zriggered'strikes by ixrkers in itarsou and tares other ptosis. the vor< stctseges take slace against aof seven external financial strains in poland. sard our-reney financial recuirer.tr.tr to saver zhs expected current account deficit and'amortize mdiien-_and zone-tern debt orobablv otll be over s3 billion thie

eo far has responded only vith ainor changes in policy/.

Warsaw had been preparing the population for- gradual v" price rises, indicating that the so-calledstores would soon be selling one-third of all-meat as well as other food products. Yesterday's announcement"don-irmsigher share.of meat vould hecn-ercial stores, and some types of meat and poultry would only be sold there from now on.

The news of the disturbances in the wake of the. price -boosts is likely to complicate further Polish effortsaise the money. The economy has shown some aign^ ofcovering from last year's slump. Industrial production in the first quarter0ercent above that* "'of first his ma.'nlyomparison with, the very poor performance andowns of material stocks. Disruptions in the supply of vital industrial materials resulting largely froa further cuts in western* imports rule out continued high growth for the rest of this year.

-Despite bad weather in'late spring, Poland .could still have'an average harvest this year, when Viceister Jagiolski told Secretary of Commerce Klutznick that Poland expected another poor harvest, he may have been trying to influence the' OS decision on granting Poland's

Del 8

3 July0

request for additional Commodity Credit Corporationmillion this fiscal year andmill in fiscal year fMB.


most serious domestic problem the leaders face

is imbalance in the consumer goods market. Demand

aggravated by rising wagesigh level of savings-continues to outstrip supplies of consumer goods,food. Although Warsaw recently announced aInflation rateercent the real rate was at loast twice as high. The outlook appears even more bloax in view of Warsaw's recent announcement of arevision of planned industrial growth targets andhift of domestic production to the export market. fjfc

Policy ^oves '

* The government also has made limited attempts tobureaucratic efficiency by. cutting administrative costs and by reducing personnel.'1 To stimulate exoorts, the government has authorized greater autonomyforxport-oriented.enterprises.

Discussion of economic reform has revived, with th-emphasisradual approach. Changes ineduction of aubsidies, linking wages withand tighter bank control over investment and waged are being considered.

Ealance of Payments

Despite Poland's claim that it can slash its hard-currency current account deficit byillion, we believe the doficit--which includes int-rest on totalwell exceed last year's record8arsaw sharply reduced,its trade deficit with non-Communist countries in the first four months luggish growth in its Western export markets andm holding down imports make it highly doubtful, however, that Warsaw will realize its goalrade surplus, indeed, werade deficit of about SI billion. The amortisation of medium- and long-term debt will approach S6 billion, reflecting the shorterperiods on much of Poland'; recent borrowing.


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