Tough Polish Reform Plan Cuts Inflation

AFTER two months of Draconian measures, there are clear signs that the Solidarity-led Polish government has managed to lick last year's hyperinflation, which had reached an annual rate of 1,090 percent in January. Although inflation for the month of January was much higher than expected - 78 percent - it fell below 10 percent in February. The government expects inflation to be equally low in March.

More meat, fruit, and vegetables are available to buy in the shops. The zloty is a stable, convertible currency, around 9,500 zloty to the dollar. And hard currency reserves have grown by $70 million since the beginning of the year.

On the negative side, unemployment in February has trebled, to more than 150,000 people from 55,800 in January and 9,600 in December last year. Currently there are only 20,000 job vacancies.

And production has dropped by around 25 percent.

``We are monitoring the production drop closely, because while some recession was inevitable, and we expected it, we must defend ourselves from a really deep recession,'' said Leszek Balcerowicz, vice prime minister for finance, in an interview recently in a Polish paper. ``We ... shall depend largely on intuition to answer the question about when to loosen the tight grip on finance without triggering fresh inflation. We must be extremely careful here.''

The past two months have been difficult for the Poles. Still, Mr. Balcerowicz, the main architect of the reforms, and the Solidarity government continue to have the Polish population's confidence. In the latest poll, Poland's economy is now viewed more positively than any time in the past two years, although 76 percent are still critical.

For Ernst Skalski, a writer on the Polish economy at the Gazeta Wyborcza newspaper, the main worry is recession. ``The society has taken all this economic state of emergency very well up to now,'' he says, ``but it's difficult to have this go on for long.''

Real wages, for example, dropped 35 percent from September 1989 to January this year. Consequently, there is a greater balance between supply and demand. People do not have as much money as before, and lower income groups especially feel the pinch.

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