CURRENT SUPPORT BRIEF EAST GERMAN ECONOMIC PLANS SHOW INCREASED CAUTION AND REALISM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001800120003-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: November 16, 2016
• Document Release Date: April 11, 2000
• Sequence Number: 3
• Publication Date: November 22, 1963
• Content Type: BRIEF

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Current Support Brief
EAST GERMAN ECONOMIC PLANS
SHOW INCREASED CAUTION AND REALISM
CIA/ RR CB 63-94
22 November 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
GROUP 1
Excluded from automatic
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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, Sees. 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 PLANS
SHOW INCREASED CAUTION AND REALISM
During 1963 the East German leadership has become still more
cautious about the short-term prospects of the economy. From recent
announcements of East German economic goals for 1964, it would
appear that the regime has lowered both its expectations for 1963 and
the preliminary goals for 1964. The change represents a shift from a
"hard" to a "soft" plan and is explained by a shift in policy from in-
sistence on maximum increases in output to greater emphasis on
quality and assortment and on profitability. An increase of only
3 percent in national income is expected for 1963, and the planned
increase in 1964 is less than 4 percent. * The rate of increase planned
for 1964 actually appears lower than that expected in 1963 if the first
quarter of both years is excluded, thus eliminating from the compari-
son the effect of the losses resulting from the exceptionally cold
weather of early 1963.
The announcement of the 1964 economic plan for East Germany
came early, in the first week of October, suggesting that the leader-
ship found it easy to agree on next year's goals. In the past, under
exceptionally difficult circumstances, the decision on the economic
plan was put off until late in the first quarter of the plan year, as,
for example, in 1961 and 1962. The timing of the 1963 plan, which
was announced last December, was more or less normal, indicating
that there was no serious disagreement or uncertainty. The announce-
ment of the 1964 plan is remarkably early -- in fact, it is the earliest
such announcement in the 14-year history of the regime. The announce-
ment probably was timed to precede the "elections" to the East German
national assembly later in October. But the early timing also is in
keeping with the "soft" character of the plan itself. A "soft" plan does
not involve the usual prolonged haggling over the feasibility of eco-
nomic goals.
For 1961-62 the increase averaged less than 3 percent; for the years
immediately preceding 1961 the increase averaged roughly 5 percent.
These and other data in this publication are official East German figures
or are estimates comparable in coverage -- that is, these figures in
some cases are not comparable in coverage with Western statistics.
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The change in view is suggested by the following remarks on the
plan made by Erich Apel, the head of the State Planning Commission:
What matters is not a tenth of a percent more
or less in the rate of growth of gross industrial
production, but the qualitatively new tasks set by
the plan to be solved by strict management in con-
nection with the purposeful application of the
system of economic levers.
And again:
Not production at any price but the more rapid
development of production in the leading branches
of the economy, production corresponding to re-
quirements, with the highest quality, with the lowest
costs, with the highest technical level, to the
greatest economic effect -- that is the task for the
year 1964.
2. Growth of Output
Most of the increases in output planned for 1964 are lower even than
those in the "realistic" plans made for the years 1961-63. What is more,
these increases are based on "plan" figures for 1963 that are signifi-
cantly lower than those in the original 1963 plan. The original plan
for 1963 was revised downward last spring to take account of the losses
caused by the severe winter of 1962-63, but the "plan" figures given as
a base for the 1964 plan are even lower. They apparently represent
estimates of the probable results for 1963.
a. Industrial Production
The regime apparently has settled, at least temporarily, for
an annual rate of industrial growth of about 5 percent compared with a
rate of nearly 7 percent in the preliminary goals of the new Seven Year
Plan (1964-70) that was announced in January 1963 and with a rate of
almost 9. 5 percent in the abandoned old Seven Year Plan (1959-65).
The expected growth in 1963 is 4. 4 percent and that planned for 1964
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is 5. 7 percent, but the difference reflects mainly the low level of output
in the first quarter of 1963. As a result of the cold winter, many
branches had to cut back production, nd Tthere was only a he following official negligible xes
increase over the first quarter of 1962. show the annual increase, in percent, for gross industrial production
in East Germany:
New
Seven Year Plan
1963
(1964-70)
1961
1962
Original
1963
1964
Annual Average
liminary)
P
Actual
Actual
Plan
Expected
Plan
re
(
5.9 6.1 6.4 4.4 5.7 6.9
The growth in industrial production planned for 1964 is in line
with or lower than recent achievements, both over-all and in the major
branches of industry, as is shown below (annual increase, in percent):
New
Seven Year Plan
1961
Actual
1962
Actual
1963
Original
Plan
1964
Plan*
(1964-70)
Annual Average
(Preliminary)-
Metallurgy
5.4
3.7
4.2
4.2
5.6
0
Chemicals
7.9
7.7
8.0
7.5
8
9.
9
4
Metalworking
7.0
9.3
10.0
.0
.
3?0
dustr
t i
4.9
5.1
2.0
2.5
y
n
Ligh
Food processing
3.9
0
3.9
3
3.0
As also suggested by these figures, the recent changes in planning have
not involved any abrupt shifts in priorities. The export industries --
chemicals and metalworking -- continue to have a high priority. Exports
The 1964 plan is calculated on the basis of expected production in 1963,
which is not available industry by industry but which in most cases would
be below the original 1963 plan. The figure for food processing.is an
estimate.
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of chemicals have been rising more rapidly than output for several
years, and the same now holds true for machinery and equipment.
As a result, product mix is changing rapidly. con-
sumer goods, there is continued emphasis on raising the output of
consumer durables; otherwise, the main emphasis is on improving
quality and assortment. In production of consumer goods, particu-
larly, the over-all production goals are of secondary importance.
b. Construction
The planned increase in construction in 1964 is 4. 7 percent.
Because of the extremely low level of output in the cold first quarter
of 1963 -- only 65 percent of plan -- as a whole probably is expected to fall below the level of 1962. 1Co
sequently, the goal for output in 1964 is little if any above output in
1962. ,
c. Agriculture
In agriculture as well the East Germans are planning cau-
tiously. The year 1962 was a very
in output of meat and dairy products. one in agriculture, especially
accepted the fact that the livestock sector could n not for atquickgime
recovery. Data on output during the first three quarters of the year
suggest a modest increase in 1963, but total output for the year will
still be below the levels in the best postwar years. It is thus note-
worthy that little further increase is expected in 1964 -- only 1 per-
cent in the value of gross agricultural production. The increases
planned in state procurement of meat and dairy products range from
2 to 3 percent. No plan data are given for crop production or yields,
but the increases must be quite small.
3. End Uses
Exports
In the allocation of output, exports still have a high priority,
as mentioned above. The foreign trade program for 1963 apparently is
This is a rough estimate. The announced goal for construction in
1964 and the 1963 base figure are not comparable with published data
for 1962.
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continuing to go fairly well. Exports, which were to increase by
15.4 percent for the year, were up 15 percent in the first three
quarters, and the prospective figure for the whole year shows an
increase of 11 percent. Imports in 1963 apparently will be held at
about the level of 1962, as planned -- or so the prospective figure
for 1963 indicates: As a result, East Germany probably will have
a small favorable trade balance for the first time in several years.
A slightly larger export surplus is indicated for 1964, as exports
are to increase by 8. 8 percent and imports by 7. 7 percent.
result, according to the regime, is that East Germany will be able
to repay some 400 million valuta DME (or US $95 million) of its
funded debt to the USSR.
b. Consumption
Some improvements in living conditions are to be expected
in 1964. The planned increase in the total supply of consumer goo es,
amounts to almost 3 percent; that in the supply of consumer se
by about 6 percent. Personal income is to show an increase of 4. 5
percent, of which part doubtless is expected to go into savings. In
more concrete terms, large increases are to be made in supplies
of tropical fruits (21 percent) and coffee (12 percent) and considerable
increases in supplies of fresh vegetables, fish, processed foods, and
necessary luxuries such as wine and brandy and tobacco products.
There also will be a small increase (2 percent) in the supply of meat
and dairy products. The biggest increases of all are promised in
supplies of some consumer durables in great
44 demand, cludingriger-
passenger cars (38 percent), motorcycles (44 percent),
ators (32 percent).
Even though the over-all increase in personal cnsumption
will not be large, there should
dissatisfaction. The gap between consumer incomes andm ailaole
goods has been greatly ecedes stiff wageecolast Z ntrols. The process is
creeping price increases
painful, but the end result is welcome: shopping is less dishearten-
ing and much easier. Consumer goods industries and trade organi-
zations, moreover, are being encouraged to show more flexibility
in scheduling production and in
retail shops retail prices.
have beenssigns hown of setting improvement in availability in
in 1963, although it,is still too early to judge whether the improve-
ment is general -- and permanent.
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c. Investment
In the field of investment the regime has for some time recog-
nized that the most urgent need is to complete major industrial projects
already under way. Among the most important of these are the oil
refineries at Schwedt and Luetzkendorf, the second major chemical
works at Leuna, and the synthetic fiber plant at
less urgent is the repair and replacement of old auil ties,,nto whg hly
a substantially increased share of funds will be devoted in 1964. The
total value of fixed capital investment plus capital repairs is to rise
ably
in 1964 by less than 4 percent over the 1963 is little if any above the comparable 1962 figure. o of the
3 base figure, which prob-
will be divided between industry and agr culture Most
There
will be little or no rise in investment in other sectors, including
housing.
4. Attitude of Leadership
East German leaders obviously take a sober view of East German
economic prospects in the near future, somewhat less discouraged over the r seectsy seem to have become ven back the plans. This attitude seems to come mainly from lthecfeelig
that they have at least got their feet on the ground. After several g
years of trying to operate within the framework of obviously unsound
economic policies and illusory expectations, they have during the
last 2 years reached a somewhat less frustrating position. There
remains distrust between the Party and the state apparatus, but
there is a considerable area of agreement on what needs to be done.
The first phase in the change in policy and attitude after the erec-
tion of the Berlin wall was the abandonment of the old Seven Year
Plan (1959-65) early in 1962. By was ready to admit that the plan had not been lwell founded technic
and had been imposed dogmatically from above. Even now, economic
experimentation is to be confined within rather narrow limits, and
many senior economic functionaries are cynical about the new program
for reform of management, prices, and incentives
has named grandiosely a "new economic sstem of~ which Ult
ment. 11
y planning and d m ht
-
The immediate question is how well the Party will policies. Party organizations at all levels have been inolved in running
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the economy to a far greater extent than in any of the other Satellites.
The Party can largely nullify the program for more efficient manage-
ment simply by continuing to throw its weight around as it has in the
past few years. Even if the Party succeeds in curbing its own activi-
ties, East German planners and management will do well to make any
visible progress in improving the efficiency of the East Germany
economy in 1964.
Analyst:
25X1A
1. Die Wirtschaft, 5 Dec 62, p. 1-4. U.
2. CIA. CIA/RR CB 63-24, East Germany Foreign Trade
Plan for 1963: An Interpretation, 7 Mar 63. S.
3. Informationsbuero West. IWE-Tagesdienst, 28 Aug 63,
p. 4-5. U.
4. Die Wirtschaft, 7 Oct 63, p. 2-15. U.
5. Presse-Informationen, 25 Oct 63, p. 2. U.
6. CIA. CIA/RR EM 63-36, East Germany Two Years After
the Wall: Economic Problems and Policies, Nov 63. C.
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