REALITY: SAME DISEASE, DIFFERENT SYMPTOMS

(What was the reaction of the economy to the economic policy and are there any signs of improvement?)

The government's moves over the past six months have resulted in what may at first sight appear as a paradoxical imbalance. Whereas final demand fell by half (retail turnover fell 50% during the 1st quarter of 1992 against the same period in 1991), production only fell 13%. How could this happen? Why didn't the plunging final demand send shockwaves all through the economy? What prevented it?

Products were produced, but there was no demand for them. Why didn't production fall as it was naturally expected to? The inflationary "overhang" was almost fully eliminated when prices shot up and enterprises had no excess of money. The usual sources of funds - budget deficit and credit expansion - were, of course, subject to tougher controls than before and the products could not be paid for at their expense.