Strong economic recovery in Eastern Europe in 1984 at a time of modest Soviet growth suggests that Moscow may make increased demands for imports from Eastern Europe, which western experts say could lead to strains within the Eastern Bloc.
Last year was the first in this decade in which the terms of trade between Eastern European countries and the West improved substantially, said Jan Vanous, an analyst of Eastern European economics with PlanEcon, Inc. Eastern European countries boosted their hard-currency reserves by increasing exports to western countries and credits from western banks.
In the early 1980s, Poland dragged almost all the Eastern European countries into bad credit ratings with western banks. In 1983, the debt situation of Eastern European countries slowly began to improve. After remaining virtually unchanged for nearly four years, exports from Eastern Europe to the West increased 5 percent in 1984, reaching $32.2 billion. Last year all the Soviet Bloc countries except Hungary increased their hard-currency earnings. "Western banks recognized that they had exaggerated the problems with Eastern Europe," Vanous said.
The Soviet Union outperformed only Czechoslovakia and Hungary in Eastern Europe last year in output, according to Vanous.
Western analysts say that if the trend of diverging growth rates continues, as they expect, there will be increased pressure from Moscow for imports from its allies: more sophisticated machine tools and electronic technology from East Germany and Czechoslovakia, more processed food, shoes and textiles from Hungary and Bulgaria, higher quality steel products and chemicals from all over Eastern Europe.
Economic experts here think that Moscow no longer will be willing to accept the grade of goods that its Eastern European allies have been sending in exchange for subsidized Soviet oil, gas and other essential raw materials. The increased Soviet demand for the better goods that Eastern Bloc countries have been exporting to the West, they say, will divert an important source of hard-currency earnings.
Ed Hewett, a expert on the Soviet economy at the Brookings Institution, said that for the first time in 20 years a major overhaul in the trade relations between Moscow and its allies appears to be under way. Moscow no longer will allow itself to be "a dumping ground for low-quality products from the East Bloc," Hewett said.
Increased demand from Moscow means that "the strain in Soviet-East Bloc economic relations will probably be enhanced," said John Hardt, a specialist on the Soviet economy with the Congressional Research Service.
Western economic experts say that the Soviet Union's gradually mounting effort to increase domestic industrial and agricultural output, already launched by new Soviet leader Mikhail Gorbachev, will heighten pressure for improved economic performance throughout the Soviet Bloc. The end result, said Vanous, could be increased Soviet Bloc imports from the West and increased exports to the Third World. He said Moscow's allies could begin to sell more of their low-quality goods to the Third World rather than to the Soviets.
Vanous, one of the leading specialists on Soviet Bloc economies in Washington, is a founder of PlanEcon Inc., a new Washington-based research and consulting firm of experts on the Soviet Union and Eastern Europe.
Last year Romania recorded the fastest economic growth in Eastern Europe with a surge in net material product of 7.7 percent, according to Vanous. East Germany (5.5 percent), Poland (5.1 percent), and Bulgaria (4.6 percent) followed. Among the Warsaw Pact countries, only Czechoslovakia, with a l984 growth in net material product of 2.8 percent, showed no acceleration in economic growth last year.
Net material product, commonly used as a measure of Eastern European economies, is roughly the same as gross national product but excludes depreciation and output of most services.
The Soviet Union, in contrast, reported its second slowest economic growth since World War II in l984, according to published Soviet material. Growth in Soviet net material product in 1984 was 3.1 percent, compared with 2.2 in 1979, the most sluggish year in the Soviet economy since 1945, Vanous said.
A poor Soviet harvest, caused in part by drought, was the main reason for the economic performance last year. According to Vanous, the l984 Soviet grain harvest was 13 percent below the l983 level, and 30 percent below the targeted output. "Decision-making malaise" in Moscow and possibly heightened demands by the Soviet defense establishment are further reasons for flatness in the Soviet economy, Vanous said.
Eastern Europe, in comparison, had good weather and probably its best harvest ever last year. The debt situation improved, and reform measures in the Eastern Bloc such as incentives appear to have succeeded to some extent. Some western economic experts said that steady improvements in the agricultural sector, particularly in Hungary, could be due to the greater leeway Hungarians are allowed in private farm initiatives.
In addition, Moscow did not crack down on its Soviet Bloc partners as it warned that it would in toughly worded statements at the bloc's economic summit in Moscow last June. The overall terms of trade between the Soviet Union and the bloc countries did deteriorate last year, albeit slightly. The aggregate Soviet trade surplus with the six Eastern European countries increased from $2.1 billion in 1983 to $2.7 billion in 1984.
But now that the Kremlin leadership is focusing attention on economic improvement, and the Eastern Bloc economies have picked up, analysts here expect some changes to come about in the intricate economic web that binds the Warsaw Pact countries together.
Eventually, western experts expect to see a streamlining and possibly a cutback of Soviet exports to Eastern Europe. In 1984, Soviet exports to Eastern Europe increased 11 percent. Vanous suggested that now the Soviets will reduce oil and gas subsidies for their allies, call for greater Eastern European investments in the Soviet oil and gas industry and undertake a large-scale substitution of gas for oil to the bloc countries.
Western economic experts say that the more the Soviets expect of Eastern European economies, the more economic reform may be allowed in places such as Hungary and East Germany.