Stabilization and Recession in the Eastern Countries

Economic activity in the Central and Eastern European countries declined markedly in 1990, with the government sector most severely affected. In those countries which initiated a transition to a market-based economy in 1990 (Poland, East Germany, Hungary, to some extent also the CSFR and Yugoslavia) the recession was mainly brought about by stabilization policies which dampened domestic demand. This negative effect will persist into 1991 and depress economic activity. In the other countries (USSR, Bulgaria and Romania) problems with the supply of raw materials and energy played a decisive role. In these countries, too, a continuation of the recession with high unemployment must be expected, but now as a result of the transition too market economy. Furthermore, in 1991 the whole region will suffer from the collaps of intra-CMEA trade as well as from a scarcity of external funds.