The Soviet Economy
and Outlook8
CIA HISTORICAL REVIEW PROGRAM RELEASE IN9
The Soviet Economynd Outlook8
(Antral Initlhemct Attw Saltotol Foietgn Auriimmi Ctnlri
8
Highlights
Gross national produci increased al an average annual rateercent, aboul lhe same as the preceding five-year average. This aggregate measure, however, reflects lhe combined impactarked slowdown in industry, construction, and transportationarkedin agricultural production:
Industrialtraditional mainstay of GNP growth-slowed sharply from an average annual growth rateercentercent. Shortfalls in lhe production of key industrialihe principal causes of this slowdown. These shortfalls can be traced mainly to the increasing Soviet dependence on less accessible and lower quality ore plus past failures lo build sufficient processing capacity.
Shortages of steel impinged on machineryey source of technological progress and productivity gains. Machinerywhich accounts for one-third ofercent annuallyfter an averageercent.
In the energy sector,ajor push in West Siberia kept growth in primary energyercent, about the same as. Some gains in energy conservation were achieved last year as the slowly rising rate of energy consumption per unit of output was broughttandstill. Nevertheless, growth in energyparticularlyslowing. Furthermore, the major efforts to exploit the oil-producing fields of West Siberia over the past two years will shorten their producing lives and consequently mayharper slowdown in the years immediately ahead.
Growth of construction activity slowed sharply, and completion of new plant and equipment failed to meet the leadership's expectations:
investment grew near the rate planned, runaway growth in the backlog of uncompleted investment projects in both years sharply curtailed the increase in additions to new capacity. The leadership had been counting heavily on reducing the volume of unfinished projectsajor source of increments to new capacity, and we expected that some success would be realized in this area.
Large swings in crop productionontinued to cause annual fluctuations in net agricultural production:
After rebounding6 from the disastrous grain crophe growth of farm output fell back to its long-term trend ofercent lastsharp upturn in livestock production more thanecline in the production of crops. Some buildup in livestock inventories wns facilitatediberalized government policy toward private agricultural holdings.
Per capita meat production6 was set back to levels of theesult of the poor harvestebound in meat productionevere shortages persisted, leading to longer queues and scattered reports of protests against food shortages.
These problems are now being joinedownturn in growth of the working-age population, which will begin to be felt this year and will continue until the:
leaders arc exhorting management and labor to accelerate productivity growth in order to offset labor shortages but have failed to alter incentive systems to induce such change.
One area in which the Soviets achieved major successas in reducing the hard currency trade deficit:
trade deficit was cut3 billionS5 billion63 billion
The Soviet leadership hascenario of continuing slow growthlthough modest by Soviet standards,8 plan nevertheless will require bcttcr-than-average weather for agriculture as well as success in dealing with the problems of steel and energy. The Soviets must break the bottleneck in steel output, for example, if they are to meet their output plans for industryhole and for machinery in particular.
Prospects for economic growth through first9 are heavily dependent on developments in agriculture, which in turn is still at the mercy of the weather:
very good crop this year will stimulate industrial growth next year by providing sufficient raw materials while al the same time helping
* i
ihc nation's hard currency position by reducing the need for grain
mports.
poor crop, however, will resulturther slowing or economic growth, leading to increased spending for foreign grain and making gains in consumption even harder to achieve.
The Soviet hard currency deficit, also heavily dependent onin agriculture, probably will land betweenillion and S3 billion
Imports of machinery and equipment from the West will drop sharply, reflecting last year's decline in orders; but orders shouldomeback.
Imporls of Western grain8 probably will be In ihc neighborhood5 billion0 billion
A poor cropowever, would increase import requirements9 and possibly hard currency borrowing.
The slowdown in economic growth has been much sharper ihan Soviet leaders anticipated and meansmaller volume of goods and services is being added each year to be divided between consumption, investment, and defense. So far, investment growth appears to have borne the brunt of thisalling from an average annual raleercentoercenl. Whether this trend win conlinue remains to be seen. If il does, and Soviet plans seem io imply just lhal. lhe Soviels will find it increasingly difficult to maintain even the present pace of economic growth.
HI
CONTENTS
Highlights
Preface
Economic Performance67
Agriculture
Industry
Energy
Oil
Natural Gat
Coal
Electric Power
Energy
Other Industries
Resource Availability and Use
Labor Force
Capital Formation
Changes in Efficiency of Resource Use
From New Plant and Equipment
From Managerial Reforms
Consumer Welfare
Foreign Trade
Soviet Perceptions of Economic Problems
The Outlook8 and9
Tables
I SSR: Growth of GNP, by Sector of Origin
USSR. Growth of GNP, Factor Supplies, and Factor Productivity
USSR: Shares of GNP
4 USSR: Production of Major Crops and Livestock Products
USSR: Livestock Inventories
USSR: Industrial Production
USSR: StecJ Production
USSR: Indicators of Capital Formation
USSR: Hard Currency Balance of Payments
Machinery Orders Placed With Hard Currency Countries
USSR: Planned and Actual Growth
USSR: Industrial Growth Plans in Perspective
USSR: Aggregate Growth Performance and Plans
Graphs
1 USSR: Value of Livestock lfl privately Owned Herds
USSR: Energy Production
USSR: Hard Currency Debt and Debt Service Ratio
USSR: Selected Indicators of Economic Performance
PREFACE
This paper is the first review of current Soviet economic performance since publication of our comprehensive assessment of longer term trends and prospects for the Soviet economy through the. CIA. Soviel Economic Problems and Prospects,hich was also published by the Joint Economic Committee of the USconomic events in the USSRupport the general trends projected in our earlier study, andconclude that the central findings of the earlier study remain valid.
The Soviet Economynd Outlook8
Growth in gross national productas influenced primarilyeneral upturn in farm outputarked slowdown inconstruction, and transportation. Because of these offsets, the average annual rate of growth for the two-yearroughly the same as for the first half of7rowth was somewhat more rapid6 thaneflectingtrong recovery inecord gramthe previous year'sfailure Growth in industry, construction, and transportation was sluggish in both years (see
The slowdown in industrys only partially explained by the dislocations stemming from shortages of agricultural raw materials. In both yean, the investment program was far behind in completing new plant and equipment,ronounced adverse effect on bothmaterials and machinery production.
Also, the poor progresseflected both the relatively slow increase in the supply of
factors of production (man-hours of labor,stock, and agricultural land area) and near stagnation in overall factor productivity (seenability to raise productivity is now the key problem confronting the leadership in its quest for sustained economic growth.
Tool- 1
USSR: Growth ol GNP, by Sector of Origin '
Annuo!
Cliana
77
r tictton
UI Kin
1
.
..
l
st
'EiciwIiiiH miri-Mikgllu'al me ol firm producb and ml mallTO inim purcbisn by M'kultiitc liom other WH-ioit Value added in igrioilnireBlewTcrrrtrri'ni. andciiw"7
2
USSRt Growth of GNP, Fcclot Supplies, ond Foctor Productivity
AnnulChanae
GNP
Factor >upphe> Man-hi>ur*
Atirliullural land
PUn
S
1
i
-
Ai shown in labicbe downturn in growth of maior producing sectors of the economy has not yel affected the shares of GNP going toinvestment, and defense Each of the three major claimants is growing at about the same rale as GNP.
Growth in personal consumption slowedainly becauseetback in food availability. Demand for meat in particular far exceeded supply, resulting in long queues and scattered reports of protests against meatlate last year. Other consumer items, such as automobiles, television sets, and refrigerators, maintained their slow but steady expansion in output, sales, and cumulative inventories held by Soviet households.
Agriculture
After rebounding6 from the disastrous grain crophe growth of farm output in the USSR fell back to its long-term Irend ofercent lastecline in crop output7 offset much of the rebound in
output of livestock products after two consecutive years of decline. The record grain cropoupled with the continuation of large grain imports, assured abundant forage for livestock7 and accounted in large part for the increase in meat. milk, and wool output (seeoscow imported approximatelyillionIons of grain from Ihe Westits6 grain harvest byercent. About two-thirds was purchased from the United States.
Tool* 3
USSR: Short! of GNP
wMltneffl In plant
mnipincM
13
1
-
raeiial 'epiir.Mil ration, civil roieirch and J. velowiient.dditions to
Annual Percent Chare*
veiluck product*1
Cram 1
iceU
Sunt lover
Conon
VcecuJile*
Meal {daulhlct wviRhll
Mitt
Wool
3,6
l.
ma
..
*a
044
Million Ton*
3
K :.
Hill kin
I 3
8
no
3 ii lb
,
Set ol tevd .nd efllmaleilitliiding chmtur* inot henls
' Meunml I" -bunke-b. gianlr..m keeoekn cede
thai of olhor country iJ Arart
To maintain momentum in the growth of livestock output in the facelow recovery of this sector on stale and collective farms, the government has relaxed somewhat its restrictions on private agriculture. Ihc persistent shortage of meat anil dairy products following the5 harvest apparently was the impetus for the latest policy swing favoring private agriculturalPress articles67 not only officially sanctioned private farming bul also promised aid, including theteady supply of feed from stale sources. The Ministry of Agriculture issued an order in7 ordering local authorities tothe possibility of higher quotas for privately helduch quotas have remainedsince the
As shown innd figurehe private sector has begun to respond to these official initiatives. Inventories of all livestock8ear earlier, with private holdings actuallyain- its firstogs, for example, haveshort gestation and maturation periods andood leading indicator of the private sector's direction. The number of privately held hogi wasercent larger8 than
In addition to encouraging private farming activity, the USSR continued toelatively large share of its investment resources lo farming. Investment in agriculture increased by an averageercent annually, compared withercent for the rest of the
' The prnalc acmtiolunmere UnaM cf theout furmoulptil. includirtf more thancnmlu liveslait product* Ii i* ilmiatawnpc*ed of IndirKlval boldinft of one-half hecotrc or Im. frequently combinedibene or no head of In (dock ind imnll ftotLl ol
BecitiM lhetuffwdrml prrviu finmrtf ii be.afenor to bxuired farwrat it ui iruire pnvwc firm**miami) ert.f
r .. kmr>l> atiea Iheiderll .lt Opn
Jfricaliarnl ingainM. lhe privatee-
pressed Afier productionibe leadership rorocnirei the need for ihc additional output nf (he private tcctoi and piomoM iu
i-
ol (he fmiiauu> motlcaderiaaptj lelai karvibtbcv 1pmaieb>fimme
leaatM poke* vatIhrrepaol Cferccoi ls print* Jneiioct balding! (toe
USSRr Liveilocfc Inventories
iw: -
_
-i
Head*
_
i
.
-
S
and vUi
-
Weighted byprlra ol all producer*ianuary or lhe listed year.
USSR: Value of Livestocki
Privately Owned Herds
0
125
96
. 1 .
U
I , I '
economy. Agriculluie's share of investmentfromercent0 loercent' Deliveries of mineral fertilizers tohowever, increased onlyercent annually, comparedearly average ofercent. as new capacity for fertilizer production has been slow coming on-stream. Most of the increase in agriculture's share of investment occurred prior6 and reflects the Brezhnev regime's high priority to improving foodolicy thathas stated will continue.
industry
Industrialtraditional mainstay of Soviet economicabruptly. registering an average annual growth rateercenl. Production of annumber of commodities fell shortutput ofmaterials increased lessercent, with record low growth rates posted by ferrous metals, construction materials, electric power, and crude oil (seelthough recurrent shortages are endemic in ihe Soviet economy, theoccurring during the last two years have been unusually severe.
in drilling and prospecting work, due to insufficient drilling crews andslowed oil production
fuel allocations slowed progressroad spectrum of industries andfacilities.
in tail transportation disrupted deliveries of industrial products.
iron ore supplies and scrap shortages impeded steel output.
Energy
Total primary energy productionas sustained at abouterccnt annual rale
'TinpMriadM mwnal.W parttUK tJrmt'iMir. itit mnViiKU Impurpose* iscammikipal tad catnaaaoilsctODk. aad run! roadin jjrttalliirtercent .it IMhiiil inxiimroi Int led SiJin. ptodiidti inainnl in if ikkIIh'*ItmcrtcM ol
SSR; Industrial Production
AvengePf-ceri! Cha
production
n
materiab .
metals
Jed .
0
steel .
w .
energy
0
1)
0
Power
imtrrub ._
0
t
inotins
nondurable!
i
X
swls
B
the past decade (sec figureargely because of unrepeatable increases in gas capacity and production. Growth of oil production continued to slow down. The high priority given to raising energy exports for balancc-of-payments reasons and increasing concern about future energyled Moscow io enforce stringent energy conservation measures.
Oil. The increase in oil output7 wasarrels per day. lhe smallest absolute amount2 and the lowestgrowthercent) tn three decades. Only in the new far northern oilSiberia and Ihe Komiproduction increase substantially. In the older regions,declinedercent instead of the drop ofercent anticipated by Soviet planners.
The increase in West Siberian production7 was the highest for any year sinceproduction beganest Siberian output now equals that in the Urals-Volgalong the nation's major producer.at West Siberia's Samotlor field, the largest in the country,evel ofillion6)7 andfor almost one-fourth of national output.
USSR: Energy i,
A.e'igc an null percent chang*
Hft'OlHxtlK and
NaturalPOw*'
0.1
J
Primary energy'
M
*a '
Coal
n- 14 ti imi ri- rr titt- ft. r< H
'o it
'o*.pmi . .
field, however, should reach peak output this year, and purchase of expensive Western fas-lift equipment, which would extend itslife, currently is being negotiated.of other small West Siberian fields is lagging behind plan.. at least six lo eight new fields per year were to begin commercial production to compensaie for the leveling off of Samotlors output. However,67 only about five fields per year were added, mainly because of failure to meet schedules for massive drilling and infrastructural tasks
Meanwhile, declines in outputere recorded in the Urak-Volga region, the Caspian region, and Central Asia. Most of the Urals-Volga oil-producing fields arc in late stages ol production so lhat the decline will continue in the years ahead.'
'ninolcTMJ'the USSK lortfute lis tuiisik^ reporting onihe oil indimryiOiv-ineeiia-*praJurlMM' while outputefo. older rca-mi whtuc-ltninc lor thern* in tSa dccacc. ao
6nnual output goals for natural gas were overfulfilled,that had never happened previously.illion cubic metersa record andillion cubic meteis above plan,utputillion cubic meters. billion cubic meters6illion cubic meters above plan. Thisiwo-ycar expansion resulted primarily from iicu fields coming onstrcan: in West Siberia and the completion of pipelines lo ihe principaluropean USSR.
Maintaining such growth, however.ifficult. The cost and physical difficulty iaf developing the major untappedvcs exploitable over the ncxlnrthcrnhehe world's oil and gas Irtdunlrin and posa piublcms not prcviouslx encountered in
tiuaiicrlv or annual output figure, .cickt .Arcttiidrhan. Tmkmeni&un. and
ubic feel periilieixrftJ'i
cither the USSR or the West. Meanwhile,gas production from the country's non-West Siberian gas regions peaked7 and will begin declining this year, forcing Wot Siberia to cover increasingly large losses in na* tional output.*
Coal. Efforts to accelerate the crowth of coal outputere unsuccessful as the USSR failed to reach production targets in both years. As with oil and gas, many of the deposits in European Russia are Hearing exhaustion and are becoming more costly and difficult to work. Other major bottlenecks include rail carpoor use of the labor force, and inadequate new production capacity to offset the depletion of old mines.. for example, an average8 million tons of new capacity was put into operation annually, but5 million tons were installed64 million tonst the same lime, old mines in the Donetsk and Moscow basins were closing al an accelerating rate. Output has been declining in Ihc Moscow basin for several years,7 marked the firsl year1 that ouipul declined substantially in the Donetsk.
Electric Power. Growth in electric powerfell to an all-lime low last year, and for the first time since World War II, powergrew at the same rateercent -and below the rate uf industrial output.'
Most of ihe marked slowdown in growth of electric power use reflected some success in the conservation campaign to reduce consumption of power per unit of industrial output.horiagc of generating capacity in the European USSR appears also loroblem. electric power ouipul rosecrcenl while power plant capacity increasedercent. Ihc Minister of Power and Elcclrifica-tton noted in6 that an imbalance had reduced the reserve capacity and lowered the
' for msec deinili on ihc wnipecti ol ihc SovkiIndustry, CIASSR Or>*lopmm u' Cat Imlutfry.|
'apid ftoetih Lhe nock ol atachiacry aad ithhitirial procewe* dependent on ctccirit power, the rateincrease in electric power coniumptKin bii nor miicecded lhe annual boost in (iNPeiccnlftgc point >
reliability of power supply. Subsequentlyapacity rose byercent whereas outputercent, creating further strain on available capacity.
In addition to insufficient generating capacity, providing adequate fuel for thermal power pl,ini> is becoming more difficult in the energy-short European USSR. Consequently, Soviel planners regard nuclear power as the most promising source of growth in electricity production in this area. However, the nuclear program is lagging badly. The Soviet machinery industry has not yet been able to supply the planned volume ofand attempts to purchase nuclearfrom Western countries have borne no fruit. It will be at0 before tbe USSR can achieve the hoped-for new nuclear power plant capacity0 megawatts per hour.'
Energy Conservation. The lightening supply of energywith Moscow'sto expand exports of oil to hard currency countries in theto stringent domestic fuel allocations last year, which in turnto unusually frequcnl and widespread fuel shortages.
Recognizing thai energy resources must be conserved, ihc government has recentlyrogram of long-term energy conservation aimed at widespread areas of the economy. The new emphasis on conservation contrasts with lhe earlier Soviet line that the USSR was insulated from world energy shortages by immenseresources.
Unlike the pattern in most Western countries, energy use in the USSR has been growing more rapidly than GNP. However, energyefforts apparentlyeasurablefter increasing byercent per year, energy consumption per unit of GNP leveled offn large part, this "energy savings" reflects structural changes in ihc growth of GNP: specifically, lhe sharpin the growth of enemy-intensive branches of industry- -ferrous metals, constructionand machinery.ontinuation of this trend would further reduce energy consumption
is lively to peewit
iih thli capacity, nuclearercent uf twal energy.
6
per unit of GNP, il also wouldmaller increment to the output of producer goods for future investment and/or defense programs.
The pattern of energy consumption, which is substantially different from thai in Westerncountries, makes large energy savings through efficiency gains more difficult. Incountries, transportation and residentialuse is large, and the potential for energy savings in these uses is great. In the USSR, many of lhe techniques now being discussed in the West to save energy in industry andarc already employedide scale. Most urban space heating in the USSR, as well as large amounts of industrial process heal, isthrough oogeneration. In the West,elative handful of cogencration plantsSweden and Westthe USSR has more. The overwhelming bulk of intercity traffic in the USSR is shipped on electrified rail lines rather than by truck. As for passenger autos. the USSR has one for everyonhabitants, compared with more than one for every two inhabitants in the United States and Canada and one for every four to five in Western Europe.
Because of the consumption structure, major energy gains will have to be largely obtained by upgrading industrialvery time-consuming, capital-intensiveby major shifts away from heavy industry andlight industry andshiftto the view of dominant Soviet interest groups. Notably. Soviet output of highly energy-intensive products such as iron, steel, and cement is substantially larger than comparable USIron and steel, for example, account for nearlyercent of Soviel energy consumption, compared with onlyercent in the United Stales.
Growth of steel production fell sharply in67 (secrowth has slowed because of inadequate investment in steelmaking facilities and insufficient supplies of high-quality rawteady decline in the quality of Soviet iron ore has forced the diversion offunds io ore-mining and orc-beneficiating
Tobl* 7
USSK<rWuction
Avoiaao Annual Pmccm Chiim*
6
Crude
KinUhcd tolled 07
Steel PUT . 11
projects. Tight supplies of iron ore haveproduction of pig iron.other major steelmaking ingredient -also is in short supply.*
Inability of the Soviet steel industry to produce cold-rolled sheet, tinplale. large-diameter pipe, and even structural steel in sufficient quantities has transformed the USSRet steel importerubstantial cost in bard currency. Moscow3 billion on steel imports from the West6 and at least anotherillion
The USSR's dependence on imported siecl probably will coniinue or even increase.of new steelmaking capacity has lagged badly, and most of the potential for squeezing additional output from cxisling plants hasbeen tapped. Meanwhile, programs toresource development in the eastern regions of the country are gaining importance and will spur demand for types of sieel already in short supply.
Otho. Indvtlr**!
There arc growing signs that the shortfalls in domestic steel output, coupledardconstraint for expanding steel imports, have begun to hurl machinery production,the output of spare parts. Production ofsource of producer's equipment, defense hardware, andercent annually. down fromcrccnt average annual rate of growth in the first half of, lhe decline
1 Tlx Sovwu launchedeainpilun7 to pren ioduiirial enterprise* lo rnoei th*ir qnotai lor tutning in wrap, the premie "in v> interne tn tooir quhn' miniitn acre tnoan tu luri in scrap machinery Impelledyea rt *gn butulled or used
in freight car and diesc) locomotive production aggravated the existing bottleneck in railroad transportation,7 the Soviet press blamed freight car shortages foride spectrum of industrial materials. Bclow-plan output of generators, electric motors, machine tools, and oil equipment last year will also spawn problems of capacity expansion in the industrial materials sector
The number of mctalcutling machine tools increasedt about the planned average annual rateercent. Production of numerically controlled machine tools wasto increase byercent annually in value termsut increasedercent annually. This shortfall-causedack of critical mechanical-suggests that the Soviels continued to have problems shifting the product mix toward high-precision, automatic, and semiautomatic machinea key element in the leadership's program to modernize the industrial sector.
The Soviet computer industry is onajor new advance inew family of data-processing computer systems patterned after thes now moving into production. These RYAD-llarc faster and much more versatile than the models ihey will replace, but the need for high-grade associated software and technical manpower, as well as the ineffective employment of advanced computers at the enterprise level, will severely limit their usefulness.
Resource Availability and Uie
Labor Forte
lowdown in labor force growth this year, Soviet planners have been urging more efficient use of the work force. Despite official concern with the impending labor shortage,managers continue to ignore theappeals for introducing labor-savingcurrcni managerial "success indicators" still make ii profitable to squirrel away extra labor resources and lo avoid innovations.esult, lhe size of the industrial labor force7 already exceeded0 plan, nnd the
total number of wage and salary workers at all state-owned enterprises was only slightly below0 plan target. The rapid employment growth was made possible by the continuing expansion of the working-age population (men agesond womenn67 and by continuing transfers fromfarms to industrial and other state-owned establishments.'* This trend will change abruptly, however,arked slowdown in the growth of the overall labor supply starts taking effect this year.
To prepare for the slowdown in labor force growthoscow modified its education system to ensure that secondary school graduates would be ready for immediate entrance into the work force- In recent years, Ihc share of generul secondary school graduates admitted to full-time higher schools has declined, and increasingof secondary school graduates wereand unemployable. Many of theseenrolled in parallel secondary school systems where they spent an extra year or more and thus delayed entering the labor force.
To deal with this problem, Moscow ordered in7 that vocational training in general secondary schoolse increased from two lo four hours each week. In addition, eighth-grade graduates were to receive expanded counseling services, and local commissions would help them choose one of four alternative paths of secondary education:
Vocational technical schools with Ihrcc-ycar programs thatpecific skill butlight chance for admission to higher schools.
Secondary specialized schools wilh three- or four-year courses for technicians and otherr of ess.
secondary schools with thetwo-year program that is the path to higher education.
"Tb* *or king-age population In^uied at an avMige annual rail al cMeeeroral, and UN annual incrcmcnti inaMMa pencauit*lannun McanhiK, oaenKtrrc fire eaaptarmeatrcar5cr^ni aarail decline and about (be tame as tbe aeeriie annual declineI-7V
Schools for working youth, which provide part-time general secondary educationmostly for those in rural areas.
If effective, these changes should expedite the hiring of teenagers and increase their share of the tabor force.
Capital Formation
Problems in investment programs over the past two years are harbingers of continued poor growth performance. Despite efforts loon completion of projects already begun, the increase in gross additions of new plant andmeasure of the amount of new capacityecord lowercentrogressitllc better last year (seeeanwhile, as additions of new plant and equipment faltered, theof uncompletedin Sovietincreased by more thanercentroject completions continue to be frustrated by endemic bottlenecks in ihe supply ofa lack of incentive in construction organizations, where bonuses arc based largely on Ihe value of work completed. Basic construction workigh ruble value, but finishing work does not.
A key plank in the regimes current investment strategyalt in the growthf unfinished construction and an acceleration of completions, emphasizing projects involving more new equipment and less new construction.ontinued slide in growth of machinery output could dash the leaderships investment plans and, in turn, jeopardize needed gains in
"Ihe resuluni backlog of uncompleted projects has lied up enoimou* nnni.il investment tcsource* sod conitibutrd toa further dedine In tbe productivity of investment. The volume Of unfinished construction amounted lo more than three-fourths of toul Invert-meald Industrial investment tbe ratio of uncompleted corntiuciion to total investment in ihe USSR it about double tail for the United Stairs Soviet sources indicate lhat ihe etspsed time between project initiation and full-scale production avenge* icvcnight years lot large enterprises, comparable installations in ibr developed West avenge only ooc-hatf as much lime.f ihe Soviet! managed to hall Ibe growth in unfiniibcd oenliuctii.-e. completely, ibe addition lo lhe slock of plant acd equipment that this measure would provide0 would amountercent nfl of capital stock
Table 8
USSR: Indicators of Cophol Formation
AvcejKc Annual Percent Change
6
Total new 'A'i
Crou addition! ol new plant and
miripmejii'
Backlog of unfinished
cooanictioo1
' Estimated
' Cross additnni ot new plant ond etiulpmeot (capital (tcekl differ troin grow flied investment in that thev Include onlyovcument protects that were completed
' Some equipment installed in unfmemed plants ti Included in thii cateuoey
n addition, major investment projects arc becoming longer term and costlier, requiring large amounts of supportingbefore they can become operational. For example, the Soviets are becoming increasingly dependent on the natural resources of Siberia where transportation, housing, and otherarc lacking and where construction costs range fromercent higher to more than double those in the European areas. Therefore, the construction component of new investment likely will remain large.
Inability to bring new capacity onstrcam more rapidly will lead to continued slowdowns information. This will depress the growth of output evenif no gains are made in raising the productivity of the slock of plant and equipment. Here the Soviet record is not encouraging.
Changes in Efficiency of Resource Use
From AViv Plant and Equipment. Because the principal carrier of new technology into the production process is new machinery andSoviel planners had hoped thai by stepping up ihe rates for replacing obsolescent machinery with new machines, they would be able lo rely more heavily on productivity gains as the major source of growth. However, although the ratio of replacement of used machinery io investment in
" Mort tains in productivity result from technological advances embodied in new machinery and equipment. When introduced laio the production process, (be new machinery and equipmeol uiuilly result!itecl saving of labor and/or material* per unil of notput
9
new "green field" sites is increasing, much of ihc new equipment is technologically similar to lhat already in existence. Moreover, lhe acquisition of foreign technology and equipment has nota dramatic boost to the productivity of capital. Tbe USSR will continue to benefit from imports of Western machinery and equipment in selected areas such as chemicals, high-qualiiy steels, and oilfield equipment. Bul theshare of the USSR's producermust come from domestic production, and as long as the domestic economy remains no more capable than in the past of generating its own technical progress, productivity gains arc likely to remain small.
From Managerial Reform. Despite lipservice to economic reform by the top leadership and by prestigious economists, nosteps were taken lo focus incentivetoward more efficient production,introduction of new technology, and improved product quality. The near stagnation in productivity growtheflected al least in part the perpetuation of UMfficiencics inand management. Bonuses still dependor indirectly on gross output, encouragingiiputs and discntnajtl|of new products or production techniques.
Ath Party Congress inresident Brc/.hncv acknowledged the need for an overhaul of the incentive system but offered no specific alternatives. Thereafter, the Soviet mediaarrage of criticism against the existing incentive system and suggested that some form of "net output" succesi indicator replace "gross output."
The difficulties of successfully integrating new technology into the Soviet economy also result in large pari from perverse incentives. Hnterprisc managers resist introducing new processes or equipment because il disrupts productionthereby reducing "grossravda appealed to economists to find an incentive syslem that would speed lhe introduction of new technology because the fear of financial loss clearly deters the use of new technology. So far. however, no major changes have hcen forthcoming.
Consumer Welfare
The gap between consumer expectations and the availability of goods probablyargely because food shortages stemming from the5 harvest persisted in both years. Supplies of nonfood consumer goods and services continued lo grow alrates. Aside from agriculture, which has received an increasing share of investmentthe consumer industries have not risen from their traditionally humble position in ihc investment pecking order. Consumer-relatedimports, for example,elatively small percentage of total machinery imports from the West."
The leadership's pledge to increase the variety and quality of ihe dicl continued to be one of its most expensive and elusive goals. Increasing meat output in particular has become the key target and lhe one by which the Soviel consumer tends to measure his relative affluence. Yci over the past iwo years, despite massive feed imports. Soviet agriculture was not able to maintain meal output at5 level. Meal ouipul fell sharplyhen recoveredeaving pereat ouipul? slightl) beloweat shortages were frequent and widespread, especiallyccurring in small cities and towns as well as in major cities.
Inwith food supplies, the availability of nonfood consumer goods and servicesto improve. Nevertheless, poor quality and design, coupled with the lack of assortment, constrained lhe growth in sales of such goods, and inventories of unsold goods probably rose in the last two years.
Defeme "
Although continued worsening of thescene is likely to trigger debate in Moscow over the future levels and patterns of military expenditures, lo date lhe defense sectorhas not been affected by the changes in ihe rate of economic progress. Defense programs
"In I'-.'. '7 uirtMnrr related machinery omlilnted
2 percentill machinery imparl* from Ihi Wert
"ore dclailcd treatment of recent Soviet defence wend 'I. weiilmaied Swiftpending Trend* aiwf Fratptlt,
have great momentum as well as powerfuland bureaucratic support, and major mililary programs have been well funded.
6stimated Sovietspending in constant rubles grew at an average annual raleercent. Although this pace is slightly below the average growthercent for the past decade, it does notajor policy shift, nor is it related to economic difficulties. Rather, it reflects the fact that several major weapons procurementsuch aslass SLBM program and tactical fighter aircraft programs, are winding down.
As in earlier years, defense spendingignificant economic impact:
The defense effort consumed betweenndercent of Soviel GNP.
Defense consumed about one-third of the final product of machincbuilding and metal-working, the branch of industry thatInvestment goods as well as mililary hardware.
In addition, Ihe defense sector siphonedarge share of the economy's best scientific, technical, and managerial talent and large amounts of high-quality materials,and equipment.
Duringeriod, about one-half of total Soviet defense spending went forincludes spending for procurement of new equipment and major spare pans as well as for construction of facilities. Operatingwhich include spending for military personnel and for the operation and maintenance of military equipment anda liltJc more than one-fourth of total defense spending Slightly less lhan one-fourth of lotal defense spending went for military research, development, testing, and evaluation.
No major shifts were evident in Ihc shares of defense spending allocated among the military services. The Ground Forces and Air Forces continued io claim ihe largest shares, while ihc Strategic Rocket Forces continued lo claim ihc smallest share.
Duringeriod, Soviet uniformed military manpower, including militarizedforces and Construction andTroops, totaled morecrcenl of the total labor force. The Ground Forces claimed ihe largest share of military personnel almostercent.
Foreign Trod*
7 Moscow virtually eliminated its short-term hard currency payments problems, although hard currency debt increasedillionillion (secoviet foreign trade data7 indicateubstantial reduction in the trade deficit reduced the current account deficit lo its lowest level in three years.urrent account transactions willbe roughly in balance.
3 billion hard currency trade deficit requiring heavy borrowingstarted to tackle its balancc-of-payments problems.he Soviets reduced their bard currency trade deficit5 billion and did even belterutting it io3 billion (secoviet hard currency grain imports fellecord high6 billion6 loillion but year. Grain imports from the United States declined fromillion6 to0 millionquipment imports also grew more slowlyising by anercent2 billion."
ajor world supplier, the USSR took advantage of higher nonfarm commodity pricesil earnings rose6 billion on the strength of both higher prices and export volume. The Soviets also reaped the benefits of higher world prices for diamonds and platinum-grouphard currency earners.natural gas exports jumped6 to8 million last year, mainly because of increased volume.
Moscow's hard currency earnings from othersales, tourism, and transportationrisen substantially in recent years. Shipments of mililary equipment paid for
cludcs pureoilerii cjuiptiieni Tor the Orenburg pipeline boeiaht by Muicow eei behalf of Euurr. IWccr
II
0 millionflU'" primarily becauseecline in grain imports carried on Western ships.
These trends have reduced Moscow's hard currency debt problems, which had become worrisome by the endet borrowing has fallen fromillion5 toillion6 and to between onlyillion andillion last year.
The Soviets have also reduced their reliance on Western commercial credits in an effort to counter adverse publicity on the size of their debt and lo avoid paying what they consideredinterest rates on further bank loans. Moscow has increasingly favored government-guaranteed supplier credits and directloans, which usually contain moreterms. The Soviets stepped up gold sales, which produced4 billion in revenues in
6 billion
Soviet orders for Western machinery and equipment fell sharply7 billionhe lowest level in three years (secighly SI billion of3 billion fall in orders from6 level can be accounted for by the fact lhat the USSRajor share of its equipment orders for the Orenburg natural gas pipelinehe magnitude of the overall drop in orders abo reflects Moscow's desire to further curb future hard currency trade deficits and thus improve its balance-of-pay-menls position. The decline in Soviet imports of Western equipment expected8 would not necessarily damage short-term Soviet industrial performance; indeed, it may facilitate Moscow's efforts to reduce the backlog ufconstruction and uninsured machinery discussed above.
in hard currency probably reached SIillion in6p0 millionS. Major recipients have included Algeria. India, Iraq, Libya, and Syria. Net receipts from transportation and tourism were an estimated
The timing of orders for Orenburg (reflected in "oil and natural gas" inccounted fur almost one-half of the drop in7 orders Mctalwurking and metallurgicalalso fell sharply fromillion60 millionore than one-half the
orders for this category was madeyearend orders for West German directand pcllclizing equipment for thecombine.
InWc 9
USSR, Hard Currency Bolance of Poymcnli
US f
balance
fo b
Sale*
ind hard currencyra'
account balance .
medium end long term.
balance
dwrt-tecm credit'
and ooiUaoro' .
nr MS !
haul currency debt
16
!
ratio'
ST
Fillmated
'0 millicei uie to Middle EaMeni countno.
' Including net interest payments, net receipt* Irom touriun and IraniptHtilMin. net official liantfcrt. ar*I
amis
' Excluding medium-term borrowing bv the Internal tonal bivntmcni Hani and llin International Bant (oe KcOnoiniC CooocMtlon. which borrow on Mali ol eounlriw oi the Council tor Mutual Economic AraUuncehe extent to which the USSR hat bonowed Irani thne CEMA iurJu (il at all) it unknown.
' liicludin* Miniated triixt-term bank-to-hank hormwlne. ptviuntu detriment* obtained (rum tuopl'en, and povibte beerowinn; (rvoi Middle Earternncluding uilra-CEMA hard currency trade and ceher hard cutrenrvrincipal repayment* no medium- and kuimemi ilebt rlu. inirrnsr tiaimenit eat alltbt-Hivice paymeoti a> aol'l-nh
Table 10
USSR: Machinery Odeii Placed With Hard Currency Com tries
1
. _
which
and petrochemical
and natural gai
ami metallurgy
od
d
and purl equipment
grrati equipment
and ccratmctnn
Orders for Western chemical equipmentby0 million. New contracts were concentrated on machinery for theof (a) petrochemicals, particularlyfor the production of plastics andfibers, and (b) chemical fertilizers, which arc needed in tremendous quantities loplans for agricultural growth. Largeincluded three chemical fertilizer plants andmmonia plants0 million from Japan and two methanol plants0 million from the United Kingdom. Moscow also gave the British orders9 millionprocessing plant for tires and forillion polyethylene plant.
Soviet Perception* ol Economic Problflmt
Soviet leaders clearly have been disappointed with the economy's recent performance.Moscow anticipated some slowdown as reflected in their plans6ctual growth has fallen more sharply than they(see.
The leadership is particularly concerned about Iheir inability to gel more capital onstream quickly. They sec the continued slide of return on investment and the sharp slowdown in industry, construction, and transportation.
The economic plannnounced ineflected the tacit recognition by the Soviet leadership that key targets ofh Hve-Yearere(seec calculate thai angrowth rateercent annually would be required to meet0 goal, but8 Soviet plan called for an increase of onlyercent. More specific plan cutbacks .ire
apparent in the critical energy sector as well as in machinery production (sec.
Also inhe Centralcalled for more concentration of resources on oil and gas development in West Siberia's Tyumen Oblast, which possesses virtually all the major untapped Soviet reserves feasiblyin the next decade. This policy reflects the government's concern about (a) the peaking of the Samotlor oil and Mcdvcziiye gas fields in Tyumen, (b) the critical rundown of oil reserves becauseecade of insufficient geological exploration, and (c) the steeply rising resource costs associated with drilling wells inless productive deposits farther away from established bases of support and transportation.
Soviet responses to the CIA analysis of Soviet oil production- issued during Ihe spring and summer ofalready cicmonsiraicd that Soviel authorities were well aware of their energy difficulties. liven the mosi optimisticleaned heavily on Ihc assumption lhat Siberia holds huge stores of yet undiscovered or uncxpJoited energy resources.
According to planning officials, during the pastonths the USSR's efforts toyearnag because of serious difficulties in estimating and allocating energy resources and other raw materials. Their remarks indicated lhat the long-term economic plan was far from complete. In addiiion, public information onyear plan as well as more detailed information on the five-year plans likely lo be limited.
Meanwhile, al lhe recent July session of the Supreme Soviel, Premier Kosygin announced thai ihc Council of Ministers hasigh-
11
USSR: Plonned and Attuot Gfowlh
At Actual
Avriigc Aiir.iJ faavl("toa-th
hi
3Jt
r:
i
J
A
USSR: Selected Indicators ol Economic
AiBfage annual percent change
Agriculture
commission to "solve current questions of economic growth" nnd to check on fulfillment of (he state plan and budget. This action appears to be another indicator of the government's concern over increasingly serious economic problems
Soviet perceptions of their own economicarc necessarily reflected in their economic policies toward their allies in Eastern Europe. The latter had been told early inf the Soviel intent toil exports, clearly because of anticipated production constraints. The Soviels subsequently cased these limitations mainly because of severe hard currency short-
ages in parts of Eastern Europe, which limited its ability to purchase oil in the West. The less restrictive energy export policy, however, was conditioned on Eastern Europe's participation in resource development in the USSR.
Despite its own energy problems, the USSR plans to honor its commitments8 to supply Eastern Europe with the volume of oilfor that year in the current five-year. This is important to the Eastwho depend on Moscow for more thanercent of their oil consumption. According to an official of the Soviel oil trade organization, total
1.1
Table 12
Perspective
Average Annual Percent Cbjage
power
mculs
Heel
steet
pipe
material*
um
Si*Mil 3 Ml
IVt a
deliveries to Eastern Europe arc expected to6
Finally, decisions and activities of the Soviet leadership in first8 suggested strongly thai Moscow perceived the severity of its long-term energy problem and was developing appropriate conservationommunist Party Central Committee resolution in8 commissioned research and development institutes to step up production of technology for long-term energy saving. In the same month, Andrcy Kirilcnko, Second Secretary of theParty Secretarial,pecial conference in the Kremlin attended by other high-level parly and industry officials. He calledpeedup in "ihe creation of new. progressive types of internal-combustionthe amount of metal used in their manufacture and. above all. enhancing iheir economy of operation."
The Outlook8 and9
The economic plans8 (seerc among the lowest ever set by the USSR.the overall performance of the Sovietthis year could be better than the rate of
Table 13
U5SR. Aggrogoto Growth Performance ond Plots
Average Annul) PcKent Cl"""
4&
*
-,
..
Donation
4JS
iicat ieen
U
ti-
Calculated al faelir coil.
1 t'icliidiiiti IriUa-nricultural toe ol (arm product* ard nl miliTie an adjustment tor purchase* by agriculture from niher tolui* S'jIiic aikled lo agriculture area bvl
il in I'JTIi.ii.ni
bin Are wilted
about IVt percent posted7 if ihe USSR were able to:
Break lhe bottleneck in steel ouip-jt.
Arrest the growth of uncompleted projects for new plant and equipment.
16
substantially larger quantities of oil from West Siberian fields.
out with bcttcr-than-average weather for agriculture.
Achieve major efficiencies in the use ofresources, especially energy and metals.
Minimize disruptions caused by deficiencies in rail transport.
The Soviets are critically dependent, foron an acceleration in steel output if they arc to meet8 plan for industrialparticularly for machinery output and in construction. Even though8 target for steel outputillion tons is practically the same as7 goal, it will require an increase in production of moreillion tons since output fell so far below planned levels last year. Steel production increasedillion tons6 andillion tonsarge capacity was completed ut the endul startup problems and shortages of iron ore and scrap are likely to resultailure to reach output goals
Once again, Soviet planners arc counting heavily on maintaining growth in plant and equipment by holding down the backlog ofconstruction projects. Investments in new plant and equipment are to continue rising atthe annual rate of growthmphasis remaining on replacing obsolescent machinery and equipment. Thisback on new "green field" construction in favor of replacementandneed to be revised, however, in order to provide the supportingfor enhanced development of oil and gas resources in Siberia.
Energy production is continuing to slow. Thus farutput of both coal and oil has slowed still further, and total energy production growth is likely to be lessercent8 Based on the monthly production data released so far. wc belics'c that oil production this year is unlikely lo3. for growth ofercent.eak and subsequent
decline in oil production almost certain by theurther sharp slowdown in total energy production is likely to occur.
The most striking information in8 plan is that the Soviets expect only five of theil-producing regions to boost their outputf these five, only West Siberia is committedarge. The other four regions together arc likely to increase theirby. The USSRexpects sharp declinesumber of the older producing regions, where many deposits tapped for more thanears arc being depleted.
Such heavy dependence on West Siberia for the bulk of future increases probably means that the Samollor oilfield will have to be pushed beyond earlier planned peak output levels. Other smaller West Siberian fields also may have to be operated above maximum efficient rates ofto achieve output targets. This will result in still shorter producing lives for these fields, but the Soviets have no practical alternative until they arc able to make large new oil finds.
Output of gas8 will probably totalillion cubic meters as planned. The five-year plan calls0 outputillionillion cubic meters, and the USSR should be able to fulfill that target. However, the task will not be easy. Beginningutput of gas from all of the older producing regions (particularly the Ukraine and Central Asia) began to decline, and all of the growth had to be provided by the enormous reserves located in the far northern portion of West Siberia, where infrastructure problems and massive pipelinewill limit growth of output and sharply boost the costs of production and transport,
Coal is doing poorly. In firstoal output was unchanged from the7 output,8 annual output may not muchillion tons. Soviet spokesmen arc also less bullish on coal over the longer term, perhaps reflecting the growingof maintaining output in the old European
areas and the massive transportarge expansion of Siberian coal output.'*
Stringent goals for economizing on steel and fuel have been set for all sectors of the economy. Although few tangible figures are available, the conservation theme runs throughout the plan and budget announcements.
8 plan calls for grain productionillion tons, up fromillion tons harvested last year. This level of output has been attained only twice before and can be achieved only if ihe weather proves highly favorable.rain output fell nearlyillion tons short of the goal even with above-averagein important grain-producing areas.
Even with favorable weather for agriculture, the actual downturn in forage crop production7 could adversely affect growth in thesectorroduction of these crops-including corn for silage, fodder roots (beets, turnips, andnd4in terms of nutrient value6 levels. The reduction in forage supplies will need to be offset by additional feeding of grain. Graindown because of the7 grain crop, already are being squeezed in the socialized sector as farms comply with official directives to guarantee private owners adequate grain for their livestock holdings.
Evenecord grain crop is achieved this year, the Soviets will still have to importillion toillion tons of grain in the fiscal year8 and will almost certainly be forced to import comparablein the following years unless better-than-average weather conditions prevail. Meanwhile, the resource allocational policies in support of agriculture forlan period appear to remain intact.ajor address on long-range agricultural policy to the Central Commitice Plenum in early July, Brezhnev indicated no new initiatives in the intermediate termnd, indeed, implied continuation of recent trends in resource use ineriod. He also repeated his admonition, first voiced in
" In ibe [ad year ibe Coal Min'mcr postponed Ibe lime at which output willillion torn0 to ibe
hai greater attention andmust be given to private farm plotsconfirmed that there has been an important policyscuttling of ambitious plans for high-rise urban-type housing in thea result of renewed official inicrcsi in providing families in rural areas with separate houses surrounded by garden plots andfor livestock and poullry.
The Soviet leadership apparently expectsto make substantial gains this year. Meat output in particular is expected to do well, increasing byercentood increase in herd size, according to8 census, makes this numberif feed supplies can be maintained.
Growth intopic not covered in the planalmost certainly decline as the number of persons reachingage drops for lhe first time inears.esult, the planners are restating iheir perennial hopes for large gains in labor productivity. In this8 was named the "year of shock labor" by the planners,oreuse of labor andrimary slogan. In addition, Soviet leaders mayoost in total man-hours worked by encouraging larger holdings of crop land and livestock herds by the private sector. This is probably the least costly and most effective method of simultaneously augmenting alabor force andoost to consumption."
During the, Soviet defense spending probably will grow temporarilyower rate than the long-term averageercent. This will result primarily from theoff in procurement cycles of several major weapons systems currently in production. These procurement cycles do not, however, signal changes in resource allocation policy but rather the phasing in and out of weapons production programs.
"On balance, an expansion of labor use in prnatc agriculture will provideet fain in overall man-ham oied in economic activity. For tbe most pan, for member nf household* in both agriculture and nonagriculiure It willutntiluticn of labor for leisure rathereduction in hours in either swialiied agricultural or order cconcanic activity.
18
During ihe, wc cxpccl ihc Soviels
testing andumber ofsystems, including the nextstrategic missiles, aircraft, and ballisticattack submarines. These programscause defense spending lo increase to ain keeping with the long-term
The atmosphere in Moscow with regard lo defense and the economy will be one of concern in which lhe leadership may consider makingnoi substantial- -alterations in military force goals. Marginal alterations,would have little impact on the growth of either defense spending or GNP. For example, changes such as those envisagedALTgreement wouldavings of onlyercent of total defense spendingnd boost GNP by onlyercent.
The Soviet hard currency deficit is likely lo be between S2 billion and S3 billionecause repayments on past loans are catching up to new drawings, lhe growth in debt should be further slowed this year. Imports of Western grain are expected to be5 billion0 billion, unless the Soviet harvest falls well short of current cstimalcs. Imports of machinery and equipment are expected to decline because of ihc large drop lasl year in machinery orders.
In light of lhe sluggish economic recovery in the West, Soviet exports are noi likely lo rise as much ashe volume of hard currency
may rise only slightly ihis year ifIncreased oil exports6 andwere made possible by restrictions onof domestic oil consumption anddown of fuelurther slowinggrowth of oil production appearsthis year.
Given our estimate8 trade deficit0 billion0 billion, Moscow should noi experience any difficulty in meeting its financial obligations8 even though ihey include5 billion in debt service. The current excess liquidity in the Eurocurrency market and the high price of gold give Moscow financial flexibility. In this conicxl Ihc USSK rccenily0 million syndicated Eurocurrency
first since Julya veryinterest rate.
Soviet orders for Western machinery,oil and gas equipment, probably willomebackarge quantities ofand development equipment arc needed if Moscow expects even lo maintain current levels of oil production over the next several years. In addition, further purchases of compressors, valves, and large-diameter pipe will be required Io sustain Ihe growth in gas ouipul.
By the springhe volume of oil equipmeni orders had already exceeded ihcfull-year record due largely8 million order for the expansion of the drill bit planl at Kuybyshcv. Negotiations were under way on several large contracts, including ihc purchase of gas-liftcould reachillionive-year period for the giant Samoilor oilfield and the Fcdorovo field in West Siberia. Moscow was reportedly shopping for offshore oil equipment to be used in the Caspian Sea, the offshore areas of Sakhalin, and cvcniually ihc Barents Sea.
Orders for the metal working and metallurgy industries8 arc expected to pick up from
evels. Moscow could sign some largefor electric furnaces, continuous casting facilities, and rolling mills, all for theillion
Kursk metallurgical combine; litis equipmeni is designed to bolster Ihe production and quality of finished siccl products. In addition, lhe Soviets after several years of shopping may finally place an order1 billion aluminum planl lo be located in Sayan-Shushensk, West Siberia.
Although hard currency trade prospecisgoodhe outlook is much dimmer over ihe longer term. Wcecline in Soviet oil exports possibly as early9 and accelerating thereafter. Unless oil prices rise drastically, Moscow will be hard put to achieve more than offsetting increases in other exports. The impact of new credits on Soviel impori capacity is likely to be minimal. Repayments on past medium- and long-term borrowingise and may nearly offsethanks lo Iheir healthy balance-of-paymcnis position, lhe Soviets could borrow sub-
stantially more and thus boosl import capacityhort time, but we expect Moscow to continue its present conservative financialand thusossible repetition of its earlier heavy borrowing.
Performance of the economy in first9 will depend largely on the harvestenerally favorable spring and summer weather into August was expected toecord grain
crop, but overall crop prospects8 will remain uncertain until September-October, when harvesting ncars completion in Siberia. An above-average crop will impact favorably on the food and clothing industrieshilegrain import needs and thereby easing hard currencyoor crop, on the other hand, would depress economic growth9 and seriously exacerbate the leadership'sdifficulties.
20
Original document.
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