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Eastern and Central Europe: More Money Spent On Food

London, 17 December 1997 (RFE/RL) -- A new report says that the average household in Central and Eastern Europe is spending a bigger share of its income on food than was the case in 1989.

The report says spending on food has tended to rise across the region, except for Slovenia, where it has remained stable.

The Center for Cooperation with the Economies in Transition, which promotes links with the Paris-based Organization for Economic Cooperation and Development (OECD), issued the report.

The report says that households in region are paying a bigger slice of their income to feed their families because of higher prices for bread, meat and dairy products.

The higher prices reflect a number of factors --the removal of food subsidies and support for farmers, rising inflation, higher producer costs, and falling production of some farm commodities. But higher prices also reflect the fact that, as the purchasing power of Eastern consumers grows and demand for quality products rises, food imports from Western suppliers are soaring.

All the countries, except Bulgaria, recorded a deficit on their agro-food trade in 1996. That reflected both a bigger appetite for Western imports --dairy goods, processed vegetables, beverages, and spirits-- and falling production of some goods at home.

The report says that the 1995 recovery in farm output across the area wasn't widely sustained in 1996. The report explains that this partly reflects the fact that some transitional countries' commitment to market-based farm policies remains ambiguous.

Still, the report says, gross agricultural output increased in 1996 in all the area's countries except Bulgaria and Estonia, but in general only marginally. Production of pork, veal, beef, and milk is still down compared to 1989.

Grain production fell by about one-fifth in 1996, leaving the region's total production about one-third lower than for the 1986-1989 period --that is, before the collapse of communist administrations.

What's the reason for the big fall? The report says the main problem is falling grain production in Romania and Bulgaria. Their output of wheat alone was down by about a half last year. Causes were poor weather conditions, cuts in the use of expensive fertilizers and pesticides, and financing and irrigation problems in both countries.

Romanian and Bulgarian households bore the brunt of sharply higher food costs. These were triggered by an upsurge in inflation and higher prices for bread, meat and dairy products.

In Romania, where measures were taken to liberalize trade in 1996, retail food prices are estimated to have doubled while wages increased by no more than 40 percent. Higher inflation reflects pressures on the budget, mainly due to large public subsidies paid to inefficient state farms and energy-intensive industry.

The report concludes that the transition-economy countries can best improve the performance of their agriculture sectors by adopting rural development policies integrating market forces rather than by emphasizing subsidies to farmers.