SOVIET ECONOMIC PERFORMANCE IN 1968 AND THE OUTLOOK FOR 1969

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000100060002-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 21, 2016
• Document Release Date: September 12, 2008
• Sequence Number: 2
• Publication Date: March 1, 1969
• Content Type: MEMO

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51
Secret
DIRECTORATE. OF
INTELLIGENCE
Intelligence Memorandum
Soviet Economic Performance in 1968
.-and the Outlook for 1969_.
Secret
ER IM 69-32
March 1969
Copy No. 118
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
March 1969
Soviet Economic Performance in 1968
and the Outlook for 1969
Summary
The Soviet economy grew at a moderate pace in
1968, but performance of the various sectors was
quite uneven. Gross national product (GNP) rose
by an estimated 5h percent, slightly below the
average of the annual rates achieved during 1966-67
(see Figure 1). Although agricultural output
reached a record level for the fifth year in a row,
industrial production registered the lowest annual
rate of growth since 1964. In general, the dis-
tribution of output among the principal end uses
continued the trend established in 1966-67 of
favoring the military and the consumer. As shown
in Figure 1, outlays for consumption and defense
in 1968 once again increased at annual rates higher
than those of 1961-65. Total investment also grew
faster. However, the fastest growing part of
investment is in sectors supplying goods and
services directly to the consumer.
Soviet industrial growth fell from 7 percent
in 1966-67 to 6 percent in 1968, reflecting the
continuation of lower rates of growth of industrial
investment and increased inefficiency in the use of
labor and capital. The drop in growth was evident
in practically all sectors of industry, with the
notable exception of the machinery sector -- the
source of producer and consumer durables and of
military equipment. The rate of increase in indus-
trial materials dropped sharply, and the rate of
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growth in the production of consumer nondurables was
down moderately. Industrial investment increased at
about the low rate of 1967., and the backlog of
unfinished construction increased by nearly 15
percent. The rate of growth in labor productivity
in both industry and construction fell. sharply.
The new incentives provided by the economic reform,
which now affects enterprises accounting for more
than 70 percent of all industrial production, have
yet to pay off in significant gains in efficiency.
Agricultural output rose 4 percent, thanks
largely to a bumper grain crop estimated at 135
million tons and to record production of potatoes
and sugar beets. The increase in livestock prod-
ucts, however, was the lowest in several years,
mainly because of insufficient supplies of'feed
in the socialized sector and a decline in output
from the private sector. The large grain harvest
will enable the USSR in 1969 to meet domestic
demand for high-quality bread, to increase grain
reserves, and to export grain. The striking suc-
cess in boosting farm output in 1966-68, however,
has contributed'to a weakened priority. for the
development of agriculture. Although total invest-
ment in'agriculture increased moderately in 1968,
the rate of growth dropped in the delivery of
mineral fertilizer, tractors, and trucks to the farms.
The consumer experienced another substantial
increase in living standards in 1968, although
the increase was smaller than in the fiftieth,
anniversary year, 1967. More appliances, clothing,
and quality foods were available, but a sharp rise
in money incomes widened the gap between supply
and demand for consumer goods, services, and
housing, and savings deposits increased by about.
20 percent. These latent inflationary pressures
were reflected in moderately rising prices in the
collective farm market, the only organized free
market in the USSR.
GNP will probably increase somewhat more
slowly in 1969 than in 1966-68 -- perhaps at about
5 percent, assuming average weather conditions
for agriculture. Current plans show no upsurge
in the growth of resource allocations either to
industry or to agriculture in 1969. Judging from
the results thus far, the timid economic reforms
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will not bring about the improvement in economic
management that is critical for raising the rate
of growth of productivity.
With respect to the allocation of resources,
the trends of the past several years seem likely
to continue in 1969. Defense and consumption
probably will again be favored; there is no in-
dication of a planned resurgence in growth-
oriented investment. Comparison of the goals
for output of civilian machinery with those for
total machinery indicates that another increase
in expenditures for military equipment seems to
be planned. The regime's intention to continue
the recent high rates of improvement in consumer
welfare is indicated by the rise of 5/ percent
planned for per capita real income. A large
boost in money incomes -- 11 billion rubles --
is scheduled to be matched by an equal rise in
consumer goods and services. As often in the
past, however, this matching may not in fact take
place, thus intensifying the existing inflationary
pressures.
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Figure 1
USSR: SELECTED INDICATORS OF ECONOMIC PERFORMANCE
Annual Rate of Growth (Percent)
0
1
2
3
4
5 6
7
8
9
1
0
Gross 1966
National
Product 67
`
`
`
'
68
:c:
~ c
,
rrn:~
r
,
Agricultural 66
Production 67
68
Industrial 66
Production 67
68
66
Defense
67
68
Estimat
ed Rang
e
Total 66
Investment 67
68
Consumption 66
(Per capital 67
68
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1. The Soviet economy expanded at a moderate
pace in 1968. GNP rose 5/ percent in real terms,
compared with an average annual increase of nearly
6 percent during 1966-67 (see Table 1). In all of
the major sectors the rates of growth were below
those of 1966-67 but, with the notable exception
of industry, were well above the rates achieved
in 1961-65. The rate of growth of industrial pro-
duction was the lowest posted since 1964.
2. The allocation of output among the prin-
cipal end uses (consumption, investment, and
defense) in 1968 continued to some degree the
policies of 1966-67, which favored the military
and consumer at the expense of growth-oriented
investment. The growth of outlays for both con-
sumption and defense, while less rapid in 1968
than in 1966-67, still was well above that in
1961-65. Although the rate of growth of total
investment remained at the relatively high level
of 1967, the fragmentary data available suggest
that the share of consumer-oriented investment
rose more rapidly than that of producer-oriented
investment as in 1966-67.* The swing in favor
of consumption that has been in progress since
1965 was designed to compensate.for the neglect
of housing, services, and consumer goods produc-
tion during 1961-64, when relatively greater
emphasis was placed on the growth of investment
in the producer-oriented sectors of the economy
(especially heavy industry, transportation, and
communications).
3. The chronic problems and inefficiencies in
the management of investment programs continued
in 1968 and in some respects apparently grew
worse. As illustrated in Table 2, gross additions
of new fixed capital and the rate of growth in
labor productivity in construction fell sharply.
In addition, the backlog of unfinished construc-
tion increased by nearly 15 percent. The recur-
rent campaigns launched during the year to reduce,
or at least to stabilize, the.vast amount of
capital tied up in uncompleted investment projects
.* Consumer-oriented investment includes investment
in agriculture, light and food industry, housing,
and services.
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(equal in value to 80 percent of the total 1968
investment program) came to naught, as have similar
campaigns in the past.
USSR: Indicators of Economic Growth
1961-68
Average Annual Rates of Growth (Percent)
1961-65
1966-67
1968
Gross national product
5.0
5.8
5.5
Producing sectors
Agricultural sector a/
3.4
4.6
4.0
Nonagricultural sectors
6.0
6.5
6.0
Industry
6.6
7.1
6'.1
Other
5.5
6.1
6.0
Principal end uses
Consumption (per capita)
2.8
5.1
4.8
Investment
6.3
7.9
8.4
Producer-oriented
7.3
5.2
N.A.
Consumer-oriented b/
5.6
10.0
N.A.
2.9
6.6
3 to 5
a. This measure of agricultural output excludes
intra-agricultural use of farm products but does
not make an adjustment for purchases by agriculture
from other sectors. Net output, or value added in
agriculture, grew by an average of 2.4 percent a
year in 1961-65 and 3.7 percent a year in 1966-67
and in 1968.
b. Consumer-oriented investment comprises invest-
ment in agriculture, light and food industry,
housing, and services.
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USSR: Indicators of Capital Formation
1961-68
Average Annual Rates
of Growth
(Percent)
Gross additions of new
fixed capital a/
6.5
7.1
8.8
6.0
Backlog of unfinished
construction b/
6.7
9.8
10.0
14.5 c/
Labor productivity
in construction
5.2
5.1
6.5
4.0
a. Gross additions of new fixed capital differs
from gross fixed investment in that it is supposed
to count only those investment projects which were
completed.
b. Some equipment installed in unfinished plants
is included in this category.
C. Estimated.
Agriculture
4. Agricultural output' rose. 4. percent in 1968,
the fifth year of increase in a row. Output in
the five years 1964-68 averaged more than one-fifth
above the level of 1959-63, when production nearly
stagnated. The relatively good performance of
Soviet agriculture in 1968 was highlighted by an
estimated increase of 5 percent in crop production.
Livestock production, however, was up only 22 per-
cent (see Table 3) .
5. The increase in total crops was due mainly
to a bumper grain harvest and record outputs of
potatoes and sugar beets. The grain crop amounting
to 135 million tons was the second largest in
history, ranking next to the record crop of 140
million tons harvested in 1966. The government
purchased 69 million tons of grain from producers
of the 1968 crop, one-fifth above' average annual
procurements in 1965-67. As a result, supplies
of grain will be, ample to meet domestic needs for
high-quality bread supplies in 1969. They will,
moreover, enable the USSR to export grain for the
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USSR: Production of Major Crops
and Livestock Products
1965-68
1965
1966
1967
1968
Annual Rates of Growth
(Percent)
Crops
-6
12
3
5
Livestock products a/
16 2
7
6
22
Major crops and
stock products
live-
b/
Grain
100
140
122
135
Potatoes
88.7
87.9
95.5
101.6
Sugar beets
72.3
74.0
87.1
93.6
Cotton
5.7
6.0
6.0
6.0
Vegetables
17.6
17.9
20.5
18.5
Meat
8.8
9.5
10.1
10.2
Milk
68.2
71.4
75.1
77.2
Eggs (billion)
29.1
31.7
33.9
35.5
a. Excluding changes in inventories of herds.
b. Estimates of production are lower than official
claims for grain, meat, and milk.
second year in succession and to increase grain
reserves. Reserve stocks of grain at the end of
the current consumption year (31 July 1969) will
probably be on the order of 20 million to 25 mil-
lion tons, equal to about one-half of the annual
consumption of grain for food. Thus the USSR is
in a relatively good position to withstand a
moderate decline in grain production in 1969 --
for example, to between 115 million and 120 mil-
lion tons --without having to import grain.
6. Relatively large crops were obtained in
1968, even though weather and growing conditions
were not uniformly favorable. Moisture condi-
tions for crops in some major regions were sub-
normal, but above-normal conditions prevailed in
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other areas. On balance, weather was slightly
more favorable in 1968 than in 1967 and thus
contributed to boosts in yields per acre of most
crops; other contributing factors were continued
improvements in tillage practices and the use of
better plant varieties and soil additives (fer-
tilizer and lime) .
7. In contrast to the large increase in out-
put of crops, the tonnage of major livestock
products produced in 1968 increased at less than
half the rate achieved in 1966-67. Meat produc-
tion increased only 1 percent and milk output rose
less than 3 percent. Livestock output was hampered
in part by a decline in farm supplies of feed
carried over from the preceding harvest, by rela-
tively poor grazing conditions during the spring
months in areas affected by drought, and by the
moderate reduction in hog numbers on collective
and state farms that occurred in 1967. The most
important factor in the sharp slowdown in the
growth of livestock production, however,.was the
absolute decline in output in the private sector.
One of the first -- and certainly the most
popular -- acts of the Brezhnev-Kosygin leadership
in 1965 was to relax Khrushchev's restrictions on
private farming. In 1965 -- the first year in
which the. more lenient policy was in operation.--
private livestock holdings spurted by 13 percent,
and in 1966 the private sector contributed more
than ,two-fifths of the total output of livestock
products. After 1966, however, the size of private
herds declined and by the end of 1968 had returned
to a level only 5 percent above that of 1964. The
reason for this phenomenon is not apparent.
8. In conjunction with other factors, the
striking success in boosting overall farm output in
1966-68 apparently has led to a serious weakening
of the commitment in the 1965 Brezhnev program to
accelerate development of agriculture. The alloca-
tion to agriculture of machinery, fertilizer, and
other industrially produced materials in 1968 either
continued at unimpressive rates of growth or declined.
Although the rate of growth of total agricultural
investment increased a little in 1968, most of the
increase represented construction activities, since
the rates of growth in deliveries of tractors and
trucks to farms fell sharply (see Table 4). The
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USSR: Planned and Actual Flow
of Resources to Agriculture
1966-70
1966-67
Actual
Plan Actual
1966-70
Plan
Average Annual Rates of Growth
(Percent)
Machinery deliveries
Tractors
9/
7
13/
Trucks
37
12/
41
Other, agricultural
machinery
3
9
Mineral fertilizer
deliveries
11/
4/
8
15
Million Acres per Year
Land reclamation a/ 2.7 2.8 2.6 4.4 b/
a. Gross. addition to irrigated and drained area.
b. The 1966-70 plan specified,gross addition of
21 million to 23 million acres for the plan period.
The supply of mineral fertilizer increased in 1968,
but its rate of growth was the lowest since 1961.
And again in 1968, little or. no progress was made
toward the goal of expanding the stock of reclaimed
(irrigated and drained) land. Annual gross addi-
tions to both irrigated and drained land remained
at about the 1966-67 level and, cumulatively for
the years 1966 through 1968, are only slightly over
one-third of the target for the 1966-70 period.
The actual stock of reclaimed land has remained
unchanged because of the withdrawal from use of
land previously reclaimed. Its average quality,
however, is now higher.
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Industry
9. Soviet industrial growth slowed in 1968
(see Table 5). This slowdown was largely attribut-
able to a sharp drop-off in the rate of growth of
output in the industrial materials sector. Growth
of output in the machinery and nondurable consumer
goods sectors continued at rates roughly approxi-
mating those achieved in 1966-67, but higher than
those for 1961-65. Total output of the machinery
sector -- the source of producers' equipment,
military equipment, and consumer durables --
increased by 8/ percent in 1968, continuing to grow
significantly faster than either of the other
sectors (see Figure 2).
USSR: Growth in Industrial Production
1961-68
Average Annual Rates of Growth (Percent)
1968
1961-65
1966
1967
(Prelim-
inary)
Industrial produc-
tion
6.6
6.9
7.2
6.1
Industrial materials
7.0
6.7
6.9
4.9
Fuels
and power
6.7
5.1
5.4
4.3
Metals
8.1
8.9
7.8
5.4
Forest
products
and paper
3.9
3.0
6.5
4.2
Construction
materials
8.1
9.9
8.0
3.6
Chemicals
10.9
9.0
9.5
8.7
Machinery
7.1
8.5
8.2
8.5
Nondurable consumer
goods
4.8
5.1
6.3
5.3
Soft goods
3.2
7.4
6.7
5.7
Processed foods
6.7
2.6
5.8
4.8
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10. The various major branches of industry
expanded at widely different rates in 1968, and
the rates of growth of many important industrial
products fell off (see Table 6). The growth of
industrial materials as a whole dropped sharply
in 1968. Coal production failed to increase as
the USSR continued to concentrate on modernizing
producing facilities rather than on increasing cur-
rent production. Although production of crude oil
and natural gas grew by 7 percent, this rate was
significantly below the rates posted in 1966-67.
In ferrous metallurgy, the rate of growth for
output of pig iron sagged and the rates for crude
steel and rolled steel dropped off sharply from
1966-67 levels. Moreover, plans to improve the
assortment of steel products, largely through
expanded production of flat rolled steel, remained
well behind schedule. The lack of the engineering
experience needed to move ahead in cold rolling of
steel, combined with delays in. completing new
capacity, is continuing to prevent a more eco-
nomical use of the huge volume of crude steel
(107 million metric tons in 1968) available.
Growth of output of construction materials -- a
key factor in Soviet investment programs -- also
dropped sharply in 1968.
11. The record of production of consumer non-
durable goods was marked by mediocre performance
in soft goods as well as in processed foods. The
increase in output of processed foods was held
down by a sharp drop in the growth of production
of industrially processed meat and vegetable oil,
especially in the second half of the year.
Stagnation of output of these two basic food com-
modities reflected a leveling off in the flows of
raw materials from agriculture. In soft goods, the
output of leather footwear increased at a somewhat
slower pace than in 1966-67. Reflecting the steady
shift away from home-sewn clothing, the output of
sewn garments increased by 15 percent, somewhat
more rapidly than in 1966-67.
V 12. The slowdown in overall industrial growth
in 1968 was the result of a drop in the growth of
inputs of labor and capital as well as of the effi-
ciency with which they were used. Productivity
growth in 1968 was slightly below the low average
of 1961-65. The near collapse of productivity
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Figure 2
USSR: GROWTH IN MAJOR SECTORS
OF INDUSTRIAL PRODUCTION
10
5
0
1961-65
Average
1961-65
Average
/Total Industrial Production
1961-65
Average
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USSR: Recent Growth of Output
of Important Products of Industry
1966-68 and Plan for 1966-70
C Average Annual Rates of Growth (Percent)
1966-70
1966-67
1968
Plan a
Fuels and power
Coal 1.5
-0.2
3.0
Crude oil 8.9
7.3
7.6
Gas 10.9
7.4
12.4
Electric power 7.7
8.6
10.6
Ferrous ores and metals
Iron ore
4.7
5.2
7.9
Pig iron
6.3
5.3
7.6
Crude steel
6.0
4.2
6.8
Rolled steel
7.4
4.0
6.5
Other basic
materials
Commercial timber
2.4
-0.4
1.2
Cement
8.2
3.2
7.2
Machinery
Trucks
7.3
9.3
10.5
Chemical equipment
5.4
4.0
16.0
a. Midpoint of range.
growth in those years was a main reason for the
launching of an economic reform by the Brezhnev-
Kosygin leadership. Despite the fact that by the
end of 1968 over 70 percent of industrial output
was produced by enterprises working under the
reform, annual productivity gains in Soviet
industry in 1966-68 were still less than half as
large as in the 1950's (see Figure 3). The
economic reform has yet to prove its worth, and
the prospects of its doing so are most unpromis-
ing.
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USSR: FACTORS CONTRIBUTING
TO THE GROWTH OF INDUSTRIAL PRODUCTION
I0
Total Industrial Production
FACTOR I PRODUCTIVITY
13. A notable development -- and a harbinger
of problems for future industrial growth -- was the
continuation in 1968 of the slackening off in the
addition of new production capacities in many
branches of industry (see Table 7). The decreases
from 1966-67 levels were particularly notable in
coal, oil and gas pipelines, rolled steel, chemical
fibers, and -- interestingly enough -- motor
vehicles. Despite much fanfare and several decrees
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about expanding capacities in the light and food
industries, meat and milk plants are being built
at the unspectacular rates of the early 1960's.
Capacities to produce shoes, on the other hand,
have increased spectacularly, perhaps because the
regime would like to stop spending scarce foreign
exchange to import them from the West. Some of
the slowdown in additions of new plants, as well
as their distribution among industries, apparently
represents cutbacks in investment and shifts in
priorities. Another major factor is the apparent
worsening of the chronic problems of construction
in the Soviet economy, resulting in abnormally
long construction times compared with experience
in the West and with the Soviet government's own
established norms.
14. During the 1960's, when annual produc-
tivity gains in industry fell far below those of
the 1950's, the USSR directed more and more
resources to civilian research and development.
In 1951-60 outlays for civilian research and
development averaged nearly $1.5 billion a year;
in the next eight years, 1961-68, outlays soared
to an average of $3 billion a year. To the extent
that the rate of growth in productivity reflects
the rate of innovation or technical progress, the
Soviet leadership could well wonder at the contrast
between the behavior of productivity and the size
of expenditures on research and development.
Consumer Welfare
15. The upward trend of recent years in the
level of living of the Soviet population continued
during 1968. According to Soviet data, real income
per capita (which includes wages, farm incomes-in-
kind, and payments from the state budget) rose
slightly more than 6 percent, about the same rate
as in 1966-67 (see Table 8). Per capita consump-
tion of goods and services, however, rose by
slightly less than the 5 percent average annual
rate of the preceding two years. Some letdown in
the rate of growth of consumption was anticipated
after an all-out effort by the regime in 1967,
occasioned by the fiftieth anniversary jubilee
year celebration, to give the consumer a better
shake. As in the past several years, consumers
continued to salt away much of their excess pur-
chasing power in saving banks. For the third
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USSR: Gross Additions of New Capacity a/
1961-68
1961-65
Unit Average
1966
1967
1968 b/
Electric power
stations
9.6
10
9.6
10.5
Coal
Million tons 16
20.6
19.6
12.5
gas pipeline
Mainline oil and
product pipelines
Thousand kilometers
2.4
1.4
2.9
1.0
Steel
Million tons 3.1
5.1
1.4
1.4
Rolled ferrous metal
fi
i
h
d
Million tons
(
n
s
e
)
1.8
4.8
2.7
0.7
Cement
Million tons 5.6
3.9
2.3
2.8
Cellulose
Thousand tons 266
533
381
343
Mineral fertilizers
Million tons 4.7
3.4
3.3
5
Chemical fibers
Thousand tons 44
47
15
15.4
Motor vehicles
Thous and 31.3
66.7
57.8
43
Turbines
Thousand kilowatts 618
760
967
710
per year
Looms (assemblies)
Thousand 10.5
12.7
9
11
Leather footwear
Million pairs 11
14
22
55
Granulated sugar
Thousand quintals 236
248
155
110
of processed
sugarbeet per day
Meat
Tons per shift 1,000
800
500
268
Whole milk products
Thousand tons of 2.5
1.6
3.1
2.0
milk per shift
a. Capacities commissioned.
b. Preliminary.
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USSR: Indicators of Changes in Consumer Welfare
1961-68
Average Annual Rates of Growth (Percent)
1961-65
1966
1967
1968
Per capita real income a/
3.6
6.0
5.8
6.1
Factors affecting the
growth of real income
Average earnings of
wage and salary
workers a/
3.6
3.8
4.2
7.5
Public consumption
funds a/ b/
8.7
8.9
8.9
11
Per capita consumption
2.8
4.9
5.3
4.8
Food
2.0
3.7
4.0
3.3
Soft goods
1.4
6.0
7.8
6.2
Durable goods
8.0
9.7
9.3
7.0
a. Soviet official data.
b. Including the financing of items such as pen-
sions, stipends, leave pay, education, and medical
services.
year in a row, savings deposits rose by 20 percent.
The rise in 1968, 5/ billion rubles, was equivalent
to approximately 40 percent of the increase in
personal income. At the end of 1968, total
deposits amounted to one-fifth of that year's
level of personal income, compared with one-
eighth in 1960.
16. The excess purchasing power was also re-
flected in rising prices in the collective farm
market, the only organized free market in the
USSR. Prices for perishable foods in Moscow
collective farm markets were up 8/ percent in the
last half of 1968, compared with the corresponding
period in 1967. Average earnings of wage and
salary workers rose by 7/ percent in 1968, com-
pared with 4 percent in 1967. The main reason
for the sharp rise in money wages during 1968 was
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the implementation of a wage reform that raised
wage rates substantially for 1.5 million machine
tool operators, increased the general minimum wage
by 50 percent (from 40 to 60 rubles a month), and
reintroduced longevity payments for workers in
remote regions. The accelerated growth of public
consumption funds was in large measure a result of
pension reforms that provide broader coverage and
higher benefits.
17. The rates of improvement in per capita
consumption differed considerably among the
various categories. Per capita consumption of
food, which comprises over half of personal con-
sumption in the USSR, increased by nearly 3/ per-
cent in 1968. As a result of the boost in farm
supplies of meat and milk in 1967 and early 1968,
the quality of the diet improved. In contrast,
the rate of growth of per capita consumption of
soft goods fell from nearly 8 percent in 1967 --
the fiftieth anniversary of the Bolshevik Revolu-
tion -- to slightly over 6 percent in 1968, while
the rate for consumer durables fell from 92 per-
cent to 7 percent. As in 1967, imports of
consumer goods from both Eastern and Western
Europe -- largely readymade clothing and shoes --
helped to compensate for inadequate domestic
production and provided goods of higher quality.
The slower expansion of sales of consumer durables
notably refrigerators and washing machines -- re-
flected a fall-off in growth of production of some
of these goods.
18. Improvement in housing conditions continued
to be minuscule. Housing completions in 1968 were
below those in 1967. These, however, permitted a
3-percent increase in the stock of available housing
and made possible a slight increase in per capita
living space, to 76 square feet -- still far short
of the official standard the Soviet authorities
themselves have set as a minimum for health and
decency (97 square feet per capita).
19. In 1968, consumers also reaped some bene-
fits from the accelerated efforts in the past
several years to modernize the grossly inadequate
domestic trade network, to expand educational and
child care facilities, and to construct public build-
ings and municipal facilities to meet the needs of
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growing urbanization. Even more welcome to con-
sumers, perhaps, was the substantial expansion
(17 percent) in the supply of state-provided
"everyday" services (ranging from barber shops
and public baths to shoe and clothing repair and
cleaning). The backlog of needs in all of these
long-neglected areas of personal and communal
services is still enormous, however.
20. Present indications are that the Soviet
economy will grow somewhat more slowly in 1969
than in 1966-68, perhaps at about 5 percent. A
critical factor, as always, will be the weather
conditions for agriculture. Even with average
weather, agricultural output probably will grow
less rapidly than in 1968 because of the small
increases in allocations of machinery, fertilizer,
and other industrial inputs to the farms that are
in prospect. In industry, the rate of growth
could drop below that of 1968. The Soviet plan
goal -- an increase of 7.3 percent -- is one of
the lowest on record. The 1968 plan was under-
fulfilled by a wide margin (8.2 percent planned
as opposed to 6.1 percent actual). Indications
are that the rate of growth of industrial plant
and equipment will be less in 1969, and manhours
are likely to grow at the rates of the past several
years. An upsurge in industrial growth, therefore,
would require an upsurge in productivity. The
factors that would bring this about in 1969 are
not apparent.
21. Available information concerning economic
plans for 1969 indicates a continuation of the
general trends of the past several.years. In the
distribution of resources, defense and consumption
probably will again be favored; there is no indica-
tion of a planned resurgence in growth-oriented
investment. Comparison of the goals for output of
civilian machinery with those for total machinery
indicates that another increase in expenditures for
military equipment seems to be planned.
22. The regime's intention to continue recent
high rates of improvement in consumer welfare is
reflected in the planned rise of 5' percent in
per capita real income. A large boost in money
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incomes -- 11 billion rubles.-- is scheduled to
be matched by an equal rise in consumer goods and
services. As often in the past, however, the
actual expansion of output of consumer goods and
services may not match the expansion of money
incomes, and the inflationary pressures already
present in the economy may be intensified. In
particular, the growth in the supply of quality
foods in the first half of 1969 may slow substan-
tially as a result of the stagnation in the pro-
duction of meat and milk in the second half of
1968.
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