THE POLISH ECONOMY IN 1962: AGRICULTURE SLOWS PROGRESS

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• Document Creation Date: November 16, 2016
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• Sequence Number: 1
• Publication Date: May 2, 1963
• Content Type: BRIEF

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Current Support Brief
THE POLISH ECONOMY IN 1962:
AGRICULTURE SLOWS PROGRESS
CIA/RR CB 63 -43
2 May 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
GROUP 1
Excluded from automatic
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declassification
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This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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THE POLISH ECONOMY IN 1962:
AGRICULTURE SLOWS PROGRESS
In spite of an unusually cold winter and difficulties in agriculture
and foreign trade, the Polish economy in 1963 probably will continue to
grow fairly rapidly and without major disruptions. Popular dissatisfac-
tion is likely to increase, however, as a result of the expected stagnation
of consumption for the second successive year, and the regime conse-
quently may be forced to modify its policies in favor of the consumer.
National income in 1962 compared with 1961 increased by only one-third
of the planned rate, personal consumption per capita was almost un-
changed, output in Poland's large food-processing industry barely rose,
and exports of agricultural products and processed foods declined from
the previous year. Nevertheless, production in most branches of indus-
try other than food processing continued to grow rapidly -- in most cases
exceeding the annual plan by a substantial margin -- and investment
showed a large increase.
In their economic plan for 1963 the Poles have set more conserva-
tive goals than those for 1961 and 1962 -- in part because the regime ex-
pects that the decline in agricultural production in 1962 will continue to
hinder economic growth in 1963 and in part because conservative planning
is gaining wide acceptance in the Soviet Bloc. Although Poland probably
will have difficulties in foreign trade this year and may have trouble in-
creasing consumption even at the moderate planned rate, it is likely that
investment will again show a sizable increase and that most branches of
industry will continue to grow rapidly, probably considerably exceeding
the plan for industrial production. There appears to be general support
within the Polish communist party and government for the continuation
of existing lines of economic policy, and apart from some revision of
the 1963-65 investment program, designed to assure rapid completion
of key industrial projects and to stimulate the growth of agriculture, the
outlines of the current Five Year Plan (1961-65) will remain substantially
unchanged. The public undoubtedly is disappointed, however, by the neg-
ligible growth of consumption that took place in 1962 and that is likely to
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occur again in 1963, and popular dissatisfaction may lead the regime to
devote more effort to fulfilling its promise of a steady moderate annual
increase in consumption as called for in the Five Year Plan.
1. Performance of the Economy in 1962
Gross agricultural production in 1962, although slightly above the
average for the past few years, dropped 8. 5 percent from the record
level of 1961. Because of poorer weather in 1962, crop production was
more than 14 percent lower than in 1961, and animal production (animal
products and additions to herds) failed to increase above the level of the
previous year. Yields were fairly good for wheat, rye, barley, and rape
seed but below average for most fruits and vegetables, potatoes, and
forage crops.
The drop in agricultural production led to a decline in food process-
ing in the second half of 1962, which slowed the growth of industrial pro-
duction. Total industrial production increased by 8. 4 percent compared
with an increase of 10.5 percent in 1961 and an annual average of 10 per-
cent in 1956-60. Production in most branches of industry other than food
processing and textiles, however, increased at rates only slightly less
than the rapid rates achieved in 1961 (see Table 1*).
Poor results in the food-processing industry last year also caused
labor productivity in industry as a whole to increase only about 4 percent
compared with a planned rate of 5. 5 percent. In most branches other
than food processing, labor productivity rose about as planned. Overful-
fillment of production plans in these sectors, however, was achieved
largely by above-plan increases in employment. Although plans for pro-
duction of some construction materials were underfulfilled last year,
there is no evidence that either industrial production (other than food
processing) or investment was hindered by shortages of key materials.
The Poles did very well in executing their 1962 investment program.
Total investment outlays rose 9. 4 percent, about as planned, and indus-
trial investment was nearly 16 percent higher than in 1961. Although
* Table 1 follows on p. 3.
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C -O-N-F-I-D-E -N-T -I-A-L
Table 1
Rates of Growth in Selected Branches of Industry in Poland
1958-60, 1961, and 1962
Percentage Increase Compared with the Preceding Year
Average Annual
1958-60
1961
1962
Metallurgy
7.7
ll.4
8.0
Machine building and metal products
17.9
17.8
15.6
Chemical products and rubber
18.6
19.1
15.5
Wood processing
6.3
8.3
8.2
Textiles
7.8
6.9
3.2
Clothing
3.1
11.2
11.0
Food processing
7.1
6.9
2.4
some projects scheduled for completion in 1962 had to be carried over
into 1963, Poland's performance in completing key projects last year
was better than usual. The execution of the 1962 program required
considerable effort in the last 6 months of the year to make up for the
lag in construction caused by bad weather in the first half of the year.
As a result of the decline in agricultural production, per capita con-
sumption rose only about 1 to 2 percent in 1962 compared with a planned
increase of nearly 3 percent. Real wages of workers outside agriculture
rose only 1 to 2 percent, but there was some increase in the number of
wage earners per family, so that family incomes rose slightly more.
Rural incomes probably declined slightly. Retail sales in the socialized
trade network increased by 6. 4 percent last year, but the price of many
foodstuffs, particularly fruit and vegetables, rose during the year, cutting
the increase in sales to about 4. 5 percent in real terms. Sales of most
quality foods rose moderately in 1962, although not so much as planned.
Supplies of most nonfood consumer goods also increased, but assortments
of these goods frequently were not in accord with consumer demand, so
that, as in 1961, the population chose to put a large share of its increased
money income in savings deposits.
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Poland's foreign trade deficit increased sharply last year, amount-
ing to US $239 million. This increase was due to an increase of 19 per-
cent in imports from the Bloc compared with an increase of 10 percent
in exports to the Bloc. Poland was unable to overcome its perennial
payments problems with the developed West. Although its import sur-
plus was considerably reduced (from $83 million in 1961 to $34 million
in 1962), the improvement in Poland's trade balance fell far short of
that planned, because of the decline in agricultural output. Exports of
food and other agricultural products, most of which go to developed
Western countries, fell short of plan, and the reduced harvest neces-
sitated unexpectedly large imports of grain and fodder from the West.
New long-te.r:m credits from the US, which raised Poland's indebtedness
to the US to more than US $500 million, financed a substantial part of
the unplanned imports of grain, but Poland probably had to increase its
short-term indebtedness to balance its payments with Western Europe.
2. Plans for 1963
The goals for economic growth in 1963 are in general the most con-
servative for any year since 1960 (see Table 2*). These goals reflect
not only the expectation of the regime that some of the ill effects of last
year's decline in agricultural production will continue to be felt in 1963
but also a wider acceptance in the Bloc of a more restrained approach
to economic planning. Polish plans had been characteristically conser-
vative and greatly overfulfilled in 1957-60. In 1961-62 the Poles began
to plan for more rapid rates of growth, possibly following the example
of the more ambitious countries of the Soviet Bloc. Two of these coun-
tries, East Germany and Czechoslovakia, have encountered growing
economic difficulties, however, and consequently have adopted a con-
servative approach themselves.
The Polish plan for 1963 calls for an increase of 5. 8 percent in
agricultural output, a goal that may be difficult to achieve. Assuming
normal weather this year, the regime expects an increase of 11.6 per-
cent in crop production. Because of a shortage of fodder from last
year's harvest, however, animal production is scheduled to decline
* Table 2 follows on p. 5.
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C-O-N-F-I-D-E -N- T-I-A-L
Table 2
Indicators of Economic Growth in Poland a/
1961-63
1961 1962 1963
Planned Actual
Planned
Actual
Planned
Percentage Increase Compared
with the Preceding Year
National income
5
8
7
2.5
5.2
Net fixed investment
9.5
7.9
9.6
9.4
8.3
Total consumption
4.1
6.7
3.8
3.0
3.8
Gross industrial production
7.6
10.5
8.4
8.4
5.0
Gross agricultural production
4.3
10,9
1.2
-8.5
5.8
Exports
7.8
13.5
8.5
9.5
4.8
Imports
9.4
12.9
3.6
11.8
0.8
Million US $
Foreign trade deficit
207
183
116
239
175
a, Official Polish definitions and data are used.
about 2 percent. Even the maintenance of livestock herds and production
of meat at a point near last year's levels will require a large increase in
imports of fodder this year.
An increase of 5 percent in industrial production has been planned
for 1963, a rate below those planned and far below those realized in any
of the past 5 years. A large part of the reduction in the rate of growth
is accounted for by the very small increase planned for food-processing
output and the slight decline planned for production of textiles and leather
goods. Somewhat lower rates of growth than in 1962, however, also are
planned. this year for most other branches of industry. The reduced
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ability to export agricultural commodities and processed foods, along
with the need to import large quantities of grain, is putting a strain on
Poland's balance of payments in 1963 that the regime is trying to miti-
gate by holding down imports of some industrial raw materials. The
textile industry, whose output has been growing faster than domestic
demand in recent years, will be most affected by this restriction.
The unusually severe winter of 1963 had a heavy impact on Polish
industry, causing underfulfillment of production plans for January and
February. Difficulties in extracting and transporting coal as well as
increased household consumption led not only to a shortfall in coal ex-
ports but to shortages of coal and electric power that caused temporary
shutdowns or below-capacity operations at many industrial plants.
Although production losses for the first 2 months of 1963 may cause
underfulfillment of the annual plan in some areas, it is likely that the
increase in total industrial production this year will still be well above
the planned 5 percent. The plan for 1963 probably is based on a more
conservative appraisal of industry's capabilities for growth than was
the case in plans for 1961 and 1962. In particular it seems to rest on
minimum assumptions of Poland's ability to increase imports and to
raise labor productivity. Moreover, the regime probably believes that
by setting less demanding targets it will encourage improvements in the
quality and efficiency of production.
Total investment is to increase 8. 3 percent in 1963 and investment
in the socialized economy about 9. 6 percent. These are somewhat lower
goals than those set for 1961 and 1962, in accordance with the decreas-
ing rates of increase called for in the latter years of the Five Year Plan.
After a review of its investment program during 1962 the regime felt
that planned outlays were insufficient to carry out scheduled projects in
mining and heavy industry and to promote rapid growth in agriculture.
For this reason, total investments for 1963-65 are to be slightly higher
than originally planned, and there is to be some shift in outlays to these
priority sectors. In accordance with these revisions, the plan for 1963
calls for a much larger share of investment for agriculture than origi-
nally planned; slightly higher shares for heavy industry, construction,
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and science and education; and smaller shares for light industry, food
processing, and most nonproductive sectors. The discovery during the
recent severe winter that transport facilities were insufficient to accom-
modate heavier than normal traffic also has led the regime to plan larger
investments in transportation, particularly in rail facilities.
Most difficult to achieve will be the regime's goals for consumption.
The 1963 plan calls for a rise of 3. 8 percent in consumption, about the
same rate planned for last year. In view of the expected decline in
animal production, however, per capita consumption of meat and dairy
products probably will increase little, if at all, and it is questionable
whether the regime can rely only on nonfood goods, especially consumer
durables, to achieve the planned increase in total consumption. Even if
sufficient quantities of nonfood goods are offered, buyer resistance may
be encountered, as in the past, unless quality and assortment are im-
proved, and the regime may therefore have considerable difficulty in
balancing the consumer market during 1963. Anticipation of possible
inflationary pressures in 1963, as well as fuel shortages last winter,
may have been a reason for the recent increases in prices of coal,
electricity, gas, and other fuels for household consumption. These in-
creases, added to a continued rise in food prices since the beginning of
1962 and to a stagnation of consumption since 1961, are bound to cause
dissatisfaction and may force the government to devote more attention
to the consumer, possibly at the cost of reducing somewhat the growth
of investment.
Although Poland has experienced a number of economic difficulties
since the beginning of the current Five Year Plan period, these difficul-
ties generally have been less severe than those in other industrialized
Satellite countries. Poland's predominately private agriculture has con-
tinued to show much better results than the largely collectivized agricul-
ture of East Germany, Czechoslovakia, and Hungary. Shortcomings in
industry -- such as the continued tendency to produce items of low quality
in an inappropriate assortment and with obsolete technology -- have not
greatly reduced the rate of industrial growth in Poland as they have in
East Germany and Czechoslovakia. The Poles owe their superior per-
formance in industry not only to a more abundant labor supply and to the
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fact that they have had wider opportunities for easy gains in economic
efficiency but also to more realistic and flexible economic planning,
which prevented serious deficits in supplies and minimized the dis-
ruptive effects of nonfulfillment of plans in particular sectors. Partly
because of their milder nature, economic problems in Poland have
provoked neither the reconsideration of economic policies nor the major
revisions of plans that have taken place in East Germany and Czechoslo-
vakia. On the contrary, the Polish regime has indicated that it intends
to deal with its problems primarily on a technical level. Evidence of
this has been seen in two recent Party plenums, which have dealt with
technology in industry and with technical and organizational problems
in agriculture, avoiding any discussion of possibly controversial issues
of policy.
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Analyst:
Coord: 25X1A
Sources:
1 Trybuna ludu, 21 Feb 63. U.
2 State/Gt Brit, Warsaw. Polish News Bulletin, annex, Feb 63.
U.
3. Gospodarka planowa, no 1, 63, p. 1-11. U.
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SUBJECT: Distribution of Current Support Brief No. 63-43,
The Polish Economy in 1962: Agriculture Slows Progress
2 May 1963 (Confidential)
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