SOVIET ECONOMIC PERFORMANCE IN 1966

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A005700020005-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 16, 2016
• Document Release Date: January 6, 2005
• Sequence Number: 5
• Publication Date: March 3, 1967
• Content Type: SUMMARY

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DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Soviet Economic Performance in 1966
Secret
N2 45
3 March 1967
No. 0279/67B
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SOVIET ECONOMIC PERFORMANCE IN 1966
The Soviet economy had a good year in 1966,
due in large measure to record agricultural produc-
tion. This was principally because of favorable
weather, but increased allocations of resources and
additional incentives supplied under the Brezhnev
program for agriculture also played a significant
part. In addition, industrial output in 1966 grew
at a faster rate than in 1965 and exceeded the 1966
plan goal. Growth last year was nevertheless below
the average annual rate of increase implied by the
goals of the five-year plan (1966-70), particularly
for some fuels and basic industrial materials, as
well as certain key categories of equipment. Of
special significance was the dramatic rise in the
production of military hardware after virtual stag-
nation in 1964 and 1965.
Although total investment last year grew at
about the rate set by the planners, the portion
channeled into agriculture was well below the
planned amount. Conversely, investment in industry
and other economic sectors was considerably in ex-
cess of plan. Increases in the levels of freight
transportation and of construction were less than
in 1965. Per capita consumption rose by a substan-
tial amount, but housing construction remained a
major sore spot in the Soviet economic picture.
Gross National Product
The USSR's gross national
product (GNP) rose by an estimated
7.4 percent last year, in large
part because of the dramatic re-
covery of agriculture. (See
Table 1.) If 1965--a poor crop
year--and 1966--a good year--are
taken together, GNP grew at a
much faster rate than the average
for 1959-64 but still well below
the 1951-58 average.
The nonagricultural sectors
as a whole did not grow as rap-
idly as in 1965, except for :in-
dustry. The growth in servies
was about the same as a year
earlier, whereas construction,
transportation, communications,
and domestic trade grew at i
much slower rate.
Agriculture
Preliminary estimates in-
dicate an increase of about 10
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TABLE 1
USSR: MAJOR INDICATORS OF ECONOMIC GROWTH
Percentage Rate of Increase
1951-58*
1959-64*
1965
1966**
Gross national product
of which:
6.9
4.6
4.9
7.4
Agriculture
5.4
0.6
-1.4
10.2
Nonagricultural
sectors
7.7
6.4
7.3
6.4
Industry
8.5
7.1
6.4
7.2
Construction,
transportation,
communications,
and domestic
trade
12.3
6.6
9.7
5.8
Services
2.4
4.4
5.7
5.5
*Annual average
**Preliminary
percent in net agricultural out-
put last year. Records were set
in both the crop and livestock
components, and the crucial usable
grain crop is tentatively esti-
mated at from 135 million to 140
million metric tons (MMT). This
is less than the Soviet claim of
171 MMT, which includes excess
moisture, immature grain, and
weeds and other impurities. The
estimated amount of usable grain
includes a record harvest of
about 75 MMT of usable wheat,
enabling the USSR to rebuild its
depleted stocks. Production of
other crops was also good, and
cotton and sunflower-seed output
reached record levels. (See
Table 2.)
The increased output of
livestock products was ascrib-
able to larger herds supported
by good feed supplies in the
major livestock areas. Part of
the increase in meat production,
however, was caused by distress
slaughtering due to spot short-
ages of feed early in 1966 and
to foot-and-mouth disease in
some areas.
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TABLE 2
USSR: PRODUCTION OF MAJOR CROPS
AND LIVESTOCK PRODUCTS, 1964-70*
Million Metric Tons
1964
1965
1966
1966-70 Plan
(Annual
Average)
1970
Plan
Grain: Soviet claims
152.1
121.1
170.8
167
180
CIA estimates
120.0
100.0
135-140
Of Which
Wheat: Soviet claims
74.4
59.7
NA
NA
NA
CIA estimates
58.0
48.0
75.0
--
--
Potatoes
93.6
88.7
87.2
100
107
Sugar beets
81.2
72.3
73.8
80
82.4
Cotton
5.28
5.66
6.0
5.6 - 6.0
NA
Vegetables
19.5
17.6
17.2
NA
NA
Sunflower
Seed: Soviet claims
6.06
5.45
6.14
NA
NA
CIA estimates
5.57
5.01
5.65
--
--
Meat: Soviet claims
8.3
10.0
10.8
11.0
12.0
CIA estimates
7.3
8.8
9.5
Milk: Soviet claims
63.3
72.6
76.1
78.0
85.7
CIA estimates
59.5
68.2
71.5
Eggs**
26.7
29.1
31.4
34.0
38.7
*CIA accepts Soviet agricultural data except where otherwise noted
**Billions
NA: Not available
S EC RET
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The success of Soviet agri-
culture in 1966 was largely the
result of favorable weather.
Above-average precipitation oc-
curred in most of the important
grain areas, and the wheat crop
in the New Lands was harvested
under nearly ideal conditions.
Supplies of agricultural machin-
ery, fertilizer, pesticides, and
improved seed were also greater
than before. In addition, the
new incentives provided under the
Brezhnev program for agriculture
had a beneficial but unmeasurable
effect.
In spite of the increased
allocation of resources to the
countryside, investment in Soviet
agriculture in 1966 was behind the
schedule laid down by Brezhnev
for 1966-70. Deliveries of 10 of
the 16 major items of equipment
reported for 1966 were below de-
liveries in 1965. The production
of all types of agricultural ma-
chinery, excluding tractors and
trucks, was less than 4 per-
cent above the 1965 figure. The
five-year plan calls for an aver-
age annual increase of more than
11 percent. Although the output
of fertilizer last year was above
plan, this achievement was offset
by continued problems of quality,
packaging, and application.
The five-year plan goals for
land reclamation and rural elec-
trification were also behind
schedule in 1966. Data released
last October for the first nine
months of the year showed that
the annual plans for land rec-
lamation were only half completed
as of that time. This shortfall
is significant because the USSR
is planning to use reclaimed
land to provide a considerable
share of the projected growth in
grain production during 1966-70.
As for rural electrification,
both the rate of growth in 1966
and that planned for 1967 are
considerably below the average
annual rate implied by the
Brezhnev program.
On the other hand, the in-
centive aspects of the Brezhnev
program appear to be working.
These incentives include in-
creased prices paid by the state
for farm products, price reduc-
tions on consumer goods sold in
rural areas, and guaranteed min-
imum wages and pensions for col-
lective farm members. The re-
gime expects these benefits not
only to stimulate production but
also to slow down the migration
of the best farm workers to the
cities.
Indust.a.
Soviet industrial production
rose by an estimated 7.2 percent
last year, an increase over the
6.4 percent figure achieved in
1965, but still below the average
annual rate of 8-8.5 percent
necessary to meet the plan for
1970. Growth was greatest in
the machinery sector whereas a
year earlier industrial materials
and consumer nondurables outpaced
machinery.
According to Soviet data,
the gross value of output of the
important machine building and
metalworking industry, which
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includes the production of mili-
tary hardware, grew by 12 percent
in 1966. This figure, however,
probably overstates the true
growth rate by two or three per-
centage points, because of in-
flated reporting from subordinate
units, overpricing of new products,
and increased double counting of
output.
If the gross value of total
machinery output actually grew by
9 or 10 percent, and if the out-
put of civilian machinery rose by
8 to 9 percent--both estimates
calculated from a preliminary ex-
amination of Soviet data on the
output of producer and consumer
durables--then the output of
military hardware increased by at
least 10 percent in 1966. An
alternative analysis, based on
estimates of physical production,
suggests an 8-percent growth rate
in military hardware last year.
In any case, growth in the pro-
duction of war materiel was in
the neighborhood of 8 to 10
percent in 1966, compared with
an average annual increase
of less than 1 percent during
1964-65.
The recent output figures
for major industrial items are
shown in Table 3. Several factors
explain the slump in growth in
the fuel sector in 1966. Bottle-
necks in the supply of equipment
for the natural gas industry con-
tinued to hamper the expansion
of production, and the output of
coal has suffered from a stagna-
tion in investment combined with
an accelerated shift to cheaper
fuels. The shortfall in tne
production of electric powar ap-
parently was caused by slower
growth than planned in the major
consuming branches.
Within the food secto.f. the
9-percent increase in meat
production in 1966 came on top
of the extraordinary increase
of 26.5 percent in the previous
year and was double the rate
needed to fulfill the plan for
1966-70. In contrast, the in-
crease in the fish catch in 1966
was far below the annual rate
needed to fulfill the five-year
plan goal.
The economic reform prob-
ably had little effect on Indus-
trial performance in 1966. The
1966 plan fulfillment report
notes that only 704 industrial
enterprises with more than two
million workers--out of a total
of about 27 million--had been
transferred to the new system
of incentives and managemert.
Even in the last half of the
year, enterprises working under
the new system accounted for
less than 10 percent of the
employment and 12 percent of
the output of Soviet industry.
The regime claims that the
reformed enterprises greatly
exceeded the average rates of
growth in output and profits
for all industry. Their per-
formance does not necessarily
vindicate the success of the
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TABLE 3
USSR: OUTPUT OF IMPORTANT INDUSTRIAL COMMODITIES
Absolute Output* Percentage Rate Of Increase**
1966-70
1966 1965 1966 Plan***
METALS AND ORES:
Iron ore
Pig iron
Crude Steel
Steel pipe
FUELS AND POWER:
Electric power
Coal
Crude oil
Gas
MACHINERY:
160 MMT
70.3 MMT
97 MMT
10 MMT
545 BKH
585 MMT
265 MMT
145 BCM
5
6
7
11
10.5
4.5
8.5
17.5
4
6
6
10
8
1
9
12
7.5
7.5
7
10
10.5
3
7.5
12.5
Chemical equipment
416 MR
12
8
16
Agricultural equipment
1,510 MR
1
4
11.5
Oil refinery equipment
147 TMT
o
6
10
Instruments (including
computers)
2,374 MR
11
14
11.5
CONSUMER DURABLES:
Television sets
4,400 TU
25
21
15.5
Refrigerators
2,200 TU
47.5
32
26
Automobiles
230 TU
8.5
14
30
CONSUMER NONDURABLES:
Cotton fabrics
5.7 BSM
2.5
4
NA
Leather footwear
522 MP
2.5
7
5
Meat****
5.7 MMT
26.5
9
4.5
Fish
6 MMT
11.5
5
8.5
*MMT-million metric tons, BKH-billion kilowatt-hours, BCM-billion
cubic meters, MR-million rubles, TMT-thousand metric tons, TU-
thousand units, BSM-billion square meters, MP-million pairs.
**Rounded to nearest half percent except for 1966 data, which are
rounded to nearest full percent.
***Based on midpoint of planned ranges of output in 1970.
****Excludes production of collective farms and individual households.
NA: Not Available
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TABLE 4
USSR: MAJOR INDICATORS OF INVESTMENT ACTIVITY*
Percentage Rate of Increase
1961-65**
1966
Plan Actual
1967
Plan
1966-70 Plan**
Gross Fixed Investment
of which:
6.5
6.5
6
8
8
Industry
7
5
7***
9***
8.5
Agriculture
11.5
20
12.5
10
14
Other
4
1
2.5***
6***
5
Completed investment
Projects
of which:
6.5
NA
2.5
NA
9.,-10
Housing
-2.5
12.5
1
16.5
6.)-7.5
Stock of Productive Fixed
Capital
9.5
NA
8
NA
8.r-9
*Data are rounded to the
**Annual average
***Estimate
NA: Not available
nearest half percent
economic reforms, however, because
the firms transferred to the new
system were already above average
in efficiency.
Investment
Over-all investment in 1966
was almost up to plan, but marked
differences occurred between plan
and the actual results in major
sectors of the economy. (See
Table 4.) Agricultural invest-
ment fell far short of plan, as
previously noted, whereas indus-
trial investment was considerably
above plan. The inability to
complete investment projects on
schedule and to get newly com-
missioned plants up to capacity
level of output continues to be
a major inefficiency in the So-
viet economy. The existing huge
volume of unfinished construction
again increased by a substantial
amount in 1966.
so:tux
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TABLE 5
USSR: TRENDS IN CONSUMER WELFARE*
1965-70
Percent Rate of Increase
1965
1966
1966-70 Plan**
Per capita real income
7.5
6
5.5
Average earnings of wage
and salary workers
6
3.5
3.5
Average earnings of
collective farmers
16
16
6 - 7
Per capita consumption
of which:
4
5
5
Soft goods
1
7
6
Durable goods
7
11.5
9.5
Services
8.5
5.5
6
Food
4
3.5
4
*Data are rounded to nearest half percent
**Annual average
Consumption
A 5-percent increase in per
capita consumption in 1966 re-
flects further improvement in
the lot of the Soviet citizen.
The consumption of both soft
goods and consumer durables in-
creased at a faster rate than im-
plied by the five-year plan goals,
but the consumption of services
and food was slightly below the
five-year targets. (See Table 5.)
There was a noticeable increase
in the quality of the Soviet diet
last year, enhanced by increased
supplies of meat and milk.
Housing remained a major
problem. The completion of hous-
ing units went up by only 1 per-
cent, as compared with the planned
increase of 12.5 percent. Per-
sonal savings rose by a record
22 percent, a reflection of the
still inadequate supply of high-
quality consumer goods and serv-
ices and the steady advance in
money incomes.
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Outlook
The past year was on balance
a good beginning for the new
five-year plan period. In the
next four years, however, agri-
culture cannot be expected to
duplicate the extraordinary rate
of growth of 1966. Nonetheless,
new investment and increased in-
centives appear to have moved it
off dead center. The results of
the industrial reforms remain
to be seen. Since these make no
fundamental changes in the cen-
tralized "command" system of al-
locating resources, only small
gains are expected from them.
The old Soviet problems remain
those of delay in completing new
construction projects and diffi-
culties in applying new tech-
nology to industrial operations.
Although prospects are poor for
returning to the excellent
growth rates of the 1950s, So-
viet economic performance in
1966-70 may better the rates of
the early 1960s.
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(Prepared by the Office of Research and Reports)
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