Macroeconomic Situation of the Czechoslovak Economy at the End of the 1980s

Abstract

When the Czech and Slovak Republics entered the economic transition in 1990, their macroeconomic situation was relatively good and stable compared to other East European countries undertaking economic reform. They experienced almost no inflation, unemployment did not exist, and their fiscal affairs were in relatively stable condition. Of course, the situation was not as rosy as these generalizations suggest. Inflation was kept down by fixed prices and thus represented a hidden threat. Full employment was artificial and reflected massive inefficiency in state enterprises. The output of the economy stagnated in the second half of the 1980s, and, due to a very low level of investment, there were no good prospects for future growth. After the fall of the communist regime, 1990 was a preparatory year. The main task of the new government was to decide upon the strategy of economic reform, which was done by adopting the Scenario for Economic Reform in September 1990 and other significant legislative acts in that year, among the most important of which was the Transformation Act describing the possible ways for transforming state property into private ownership.