EAST GERMAN ECONOMIC PLAN FOR 1963

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001400190001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 14
• Document Creation Date: November 16, 2016
• Document Release Date: April 6, 2000
• Sequence Number: 1
• Publication Date: December 27, 1962
• Content Type: BRIEF

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Current Support Brief
CIA/RR CB 6 2- 8 9 No. Pages 7
27 December 1962
EAST GERMAN ECONOMIC PLAN FOR 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
GROUP 1
Excluded from automatic
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declassification
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WARNING
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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EAST GERMAN ECONOMIC PLAN FOR 1963
The East German economic plan for 1963, recently announced at the
25th Session of the Peoples Chamber, reflects the continued restraining
influence of Soviet advisers and East German experts. Industry is to
grow at about the same moderate rate as in 1962, and agriculture is to
benefit from a hands -off policy in the case of private plots and private
livestock. The "hard" line on wages and consumption established after
the Berlin wall was put up will remain in effect in 1963. Only in foreign
trade, where the plan calls for a 15-percent increase in exports with no
increase in imports, do the goals appear outside the capabilities of the
economy.
Policy Background
East German policies on economic growth for 1963 are much the same
as in 1961-62. In the last 2 years the East German leadership, under pres-
sure from the USSR, has adopted conservative goals for industry, which
have for the most part been met. As a result of the disastrous harvest in
1961, the regime has postponed further socialization in agriculture. Early
in 1962 the regime quietly dropped the inflated Seven Year Plan (1959-65),
under which East Germany was to "overtake and surpass" West Germany
in output per worker, and shifted its sights from 1965 to 1970. Apparently,
1963 will be a year of transition to a new Seven Year Plan for 1964-70, now
in preparation. For this period, higher rates of growth are projected than
those of 1961-63, as well as a moderate increase in consumption, which
rose little in 1961 and actually has declined in 1962.
The 1963 plan obviously assumes that there will be no crisis over
Berlin. The change since 1961, when preparations for a Berlin crisis had
top priority, has been marked by renewed emphasis on long-term growth
and increased interest in expanding trade with the Free World, especially
West Germany. Little has been said lately about reducing East German
vulnerability to a Western trade embargo. On the contrary, the East
Germans have been seeking West German credits. Finally the 1963 plan
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indicates that East Germany no longer can trade on the Berlin crisis to
obtain economic concessions in the Soviet Bloc. Instead, the USSR ap-
parently has become insistent on the fulfillment of East German com-
mitments to the other European Satellites and East German obligations
under Bloc programs for economic aid to underdeveloped countries.
Reasonable Aims in Industry
The continuation of the current East German policy for industry is
reflected in the over-all rate of growth for 1963, the rates for specific
branches, and the planned relationship between the growth of labor pro-
ductivity and wages. The goal for industry is reasonable. In 1963, out-
put is to increase by 6. 4 percent compared with an increase of 6 percent
expected for this year. (When computed for comparability with Western
data, the 1962 rate of growth for industry, including handicrafts, will be
not more than 5 percent. ) Special emphasis again will be given to boost-
ing production in chemicals (by 8 percent) and machine building (by 10 to
11 percent), the chief export industries. Emphasis also will be put on
quality and assortment, which must be improved if there are not to be
further increases in unsold stocks, particularly of machinery and equip-
ment. The more profitable plants in chemicals and machine building will
have priority over the less profitable ones and over light industry and food
processing in general in the allocation of investment and manpower. Shift-
ing workers to the so-called "leading" branches of industry probably will
become more frequent, especially in view of the continued annual decline
of about 1 percent in industrial employment.
The leadership again is counting on a sizable increase in labor pro-
ductivity accompanied by only a slight increase in wages. During the
first 9 months of 1962, productivity in state industry reportedly increased
by about 9 percent, while wages rose by only 1 percent. The regime ap-
parently has had some success in convincing the workers that wage and
norm revisions are unavoidable, and in 1963 it intends to carry out the re-
form of work norms and wage rates systematically throughout the economy.
For the third year running, the East Germans will be centering their
investment plans on major industrial projects and cutting back in other
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areas. There probably has been little or no increase in investments this
year, but the regime apparently expects better results in 1963, when some
of its projects probably will be completed. A lag in construction, not the
availability of equipment, seems to be the main obstacle to completing in-
vestment projects, and new starts in housing and public works are being
reduced in favor of industry. New housing is to be concentrated in key
industrial areas.
Better Prospects for Meat and Dairy Products
In view of the better harvest in East Germany this year, the regime
hopes the agricultural picture will be somewhat improved in 1963. Out-
put of meat and dairy products has dropped substantially in 1962, mainly
as a result of the extremely bad harvest in 1961. With more fodder avail-
able from the 1962 harvest, the regime should be able to carry more live-
stock through the winter on the assumption that the hoof and mouth disease,
currently a problem in East Germany, is kept under control. The regime
thus hopes to increase meat production, at least in the second half of 1963.
In order to encourage increased production, the regime is going to con-
tinue the policy begun in mid-1962 of keeping hands off the private plots
and livestock of the collective farmers. Agriculture also is to receive in-
creased allocations of machinery and fertilizers.
In accord with the agricultural plans, there is to be some increase in
the per capita consumption of meat and dairy products, but not up to the
1960-61 level. Although the East Germans plan to import more meat in
1963, they have stated that the additional imports are necessary to main-
tain supplies in the first half of the year. Import restrictions, however,
will affect the supply of other quality foods. Indeed, the Peoples Chamber
resolution on the plan states that there will be no increase in 1963 in the
supply of commodities such as tropical fruits, cocoa, and coffee, which
are imported from Free World countries. Informal rationing of meat and
butter is to continue, but the leadership does promise that greater efforts
will be made to insure an equitable distribution of what is available.
The improvements promised the East German consumer in 1963 are
quite small, not only in the supply of quality foods but also in the supply
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of nonfood consumer goods and of services. Moreover, the improvements
may be illusory. The 2-percent increase planned in retail sales probably
will be more than offset by price increases, which the regime is using
along with wage controls to cut back excess purchasing power. A visible
improvement in living conditions, sufficient to affect the attitudes of the
population, is not likely to occur until after 1965.
Meanwhile it is at least as important for the regime to improve the
distribution and the assortment of goods as the total supply. Perishable
goods often go to waste because of inefficient marketing, and inventories
of unsalable industrial goods, especially shoes and clothing, have been
accumulating. The regime has been attacking both producers and the
trade network for these failures, which are much resented by the popula-
tion. But qualitative improvements in either goods or services: cannot-he
made quickly -- especially services such as repair services that are pro-
vided by the private sector, whose position is continually being undermined
by the regime.
Ambitious Foreign Trade Program
In foreign trade the East Germans announced the ambitious goal of
raising exports by 15 percent in 1963 while holding imports at about the
level of 1962. In order to fulfill the foreign trade program, a large part
of the increase in industrial production as well as some of the large ex=isting inventories of manufactured goods will have to be exported. The
hope of holding down imports presumably is based in part on the existence
of unusually high inventories of semimanufactures. This hope depends
even more, however, on the reduction of waste and on a shift toward pro-
duction of commodities with lower inputs of materials. It apparently also
assumes cuts in imports of consumer goods (except foods) and a pause in
imports of investment goods.
These extremely ambitious plans for increasing exports and holding
down imports probably have been adopted at Soviet insistence that East
Germany fulfill its obligations under Bloc trade and aid programs. Con-
trary to long-term plans adopted in 1959, there has been a noticeable, slow-
ing down during recent years in East Germany's extensions of new credits
both to the other Satellites and to the underdeveloped countries. East
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Germany has fallen far behind the other industrialized Satellites in
the
otherprogram
carrying out its commitmen~ounder
eovert1et Bloc
Sat lli es aldso have
underdeveloped countries.
l deliveries
criticized lags in East German
programs, and it is not unlikely that East Germany has been required
p
to make up these lags in 1963.
Nothing is known directly about current Soviet - East German dis-
cussions on foreign trade policy, but the above interpretation is implied
by the plan. On the one hand, East Germany is to run a considerable
export surplus in 1963, even after allowing for the usual unfavorable the balance on invisibles (such as transport ta and insurance). substantial credit
to Easther
hand, the USSR once again is extending
Germany. This credit will run at about $130 million for 1963, or close
to the average annual credit for 1962-65 implied in the commitment of
$475 million mentioned by the East Germans in May 1961. The an-
nouncement of this credit by the East Germans on 28 November does b not specify whether it includes distended Western
finance an East Gexmantimport
(as in 1961-62) probably is
surplus from the USSR. If this presumption is correct, then East
Germany expects to run a large export surplus with the rest of the
world. It may be assumed that none of this surplus will result from
trade with West Germany, which is still the main trading partner of
East Germany in the Free World. Indeed, East Germany hopes to ob-
tain substantial credits from West Germany in 1963, though not on the
scale originally requested last Western European countries to liqupdate s
may be planned for trade with any debts outstanding and to build up foreign exchange reserves. But
63fo must
most of the apparent export surplus planned
the reasons sug-
gested the Satellites and the underdeveloped countries,
above.
Evaluation
The foreign trade program is the most doubtful part of the 1963 plan.
It obviously will be difficult to increase exports by 15 Moreover, it sor e-
thing East Germany has not done for many years.
unlikely that the East rmans can increase
It
impoxtds at the pl evel f 1.962 and
maintain food consumption while holding
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27 December 1962
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is more likely that imports will rise, especially if East Germany obtains
some credits from West Germany. (On 16 December the East Germans
announced the signing of an interzonal trade agreement for 1963 without
giving any details. Substantial West German credits are involved, accord-
ing to a press dispatch.US missions in Bonn and Berlin, however, do not
confirm these reports. )
On the assumption that some increase in imports will be possible, the
goals for industry are within reach. Part of the increase achieved in 1962
was obtained by correcting lags in work norms that had existed for several
years, and there probably will be a decline in 1963 in gains from this source.
Output also was increased in 1962 by working more days than in 1961, and
these gains will not be repeated in 1963. On the other hand, in 1963 the
payoff may increase on large investment projects finally being completed
in the chemical and steel industries. The shifting of labor to more pro-
fitable enterprises, accelerated in 1962, also should show results. Con-
tinued efforts to hold down wages and consumption, though extremely un-
popular, are not inconsistent with a further increase in labor productivity.
27 December 1962 CIA/RR CB 62-89
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25X1A
Neues Deutschland, pp. 3 and 4, 30 Nov 6Z. U.
State, Bonn. Dsp 1587, 1 Jun 62. C.
tate (Outeoine to Bonn). Airgram CA-5506, 19 Nov 62. S.
State, Bonn. Dsp 1610, 19 Dec 62. OFF USE.
State, Berlin. Dsp 711, 19 Dec 62. OFF USE.
STATSPEC
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