The analysis is concentrated on the problems of macroeconomic stabilization in conditions of transition to the market economy in the former CSFR, compared to Hungary and Poland in the main macroeconomic indicators (the rate of GDP's decline, its causes and issues, the rate of inflation, the development of unemployment and balance of payments' current account). The results of transformation process vary among individual East Central European (ECE) coutries. Not only the differences in the chosen ''transition scenario'' or strategy are the cause of variant results, but also different starting conditions in economic level, macroeconomic equilibrium and the extent to which preconditions for systemic changes (market institutions, enterpreneurial experience, adaptation to world prices etc.) had already been created. In many respects the economy of the former CSFR had more favourable initial preconditions (such as level of economic development, macroeconomic equilibrium, low foreign indebtedness) in comparison with other centrally-planned economies. That, however, was not true for its preparedness for systemic changes (relatively tight administrative management, minimal private sector, an extreme monopolization, a large share of CMEA trade). Structural distortions were also larger. The overdimensioned heavy industry with a great share of metallurgy and investment engineering was producing greater part for Soviet market which was broken down. The assessment of achieved results differs according to the ''weight'' given to individual goals of transformation scenario. In the official analyses low rate of inflation and exchange rate stability of CSK reached in 1991-1992 are emphasized as the first priority. In the more critical analyses, on the contrary, the unexpectedly deep economic decline is emphasized, which was achieved in spite of more favourable conditions at the beginning of the radical reform. The success in stopping inflation and the relatively favourable results in the balance of payments current account were achieved at the cost of a tendency towards ''depression''. In 1992 (compared to 1989) the decrease of GDP was 22 per cent in CSFR, 20 per cent in Poland and 18 per cent in Hungary. This was partly caused by simultaneous influence of ''transformation shock'' and external shocks (the disintegration of the CMEA market) but the influence of the latter is often exaggerated in official analyses. Our calculations show that the share of this factor was not greater than one third (in 1991). In addition a great part of export was shifted to EC countries, so that the decrease of total exports' physical volume influenced the real decrease of industrial output only in one twelfth. The related worsening of terms of trade (about 22 per cent in 1991) caused the decrease of GDP by about 7 percentage points. A significant part was and is also played by a restrictive financial policy, which reduced aggregate domestic demand being applied in mostly monopolistic environment in which the supply-side response differs from that reaction in a competitive market economy. The decline of demand on the consumer market influenced the decrease of industrial output from 60 per cent in 1991. The tendencies of demand development on individual markets in 1992 are analysed. A revival of personal consumption, which increased about 12 per cent (after its decrease by about one third in the previous year) is often characterized as an incentive of economic recovery. However its financial recources were not the wage incomes, which had stagnated, but incomes from private business and sale of foreign currency by foreign tourists and domestic population, which increase was enormous (78 per cent). To the end of 1992 also the inflation expectations connected with implementation of a new tax system (VAT) in January 1993 so as with the split of the federal state, influenced the growth of retail trade turnover. The development of investment demand is not quite evident from statistical figures, which are not consistent and comparable. As some revival was recorded in building industry, it seems that the increase of investment in the private sector could compensate its decrease in state enterprises. A great change compared to 1991 was in foreign trade, where the exports stagnated while the imports grew by about 10 per cent, so that the deficit of trade balance reached USD 1576 mil. (the deficit was compensated by the surplus in services so that the total current account surplus reached USD 226 mil.). The trade balance deficit was influenced less by economic recovery than by devaluation expectations connected with the split of common currency. The decline of GDP reached its bottom in the last quarter of 1991. From this time GDP was stagnating till the forth quarter of 1992, when it increased by about 3 per cent compared with the same period of the previous year. However the tendency to an economic recovery is not very stable and it is negatively influenced by consequences of the split of the CSFR. A tendency to growth was more evident in the service sector than in industry where the stagnation prevailed (the ''pre-privatization agony'' and expected bankruptcies could prolong the stagnation or evoke another decline in the future). The conditions of the short-term and long-term adaptation are analysed at the end. In the short-term the restructuring of industry was realized in favour of less sophisticated and more material- and energy-intensive branches the share of which in industrial output increased from one third to one half during 1989-1991. The strongly undervaluated currency supported the initial adjustment but postponed the long-term adaptation which requires more investments and retraining of labour force to overcome a profound backwardness in quality, technical and technological level and structure of production and services. According to realistic approach the difference between purchasing power parity and exchange rate of the Czech crown is expected to be reduced from high ERDI around 3 to a lower level around 1.5 (what it the actual level of Polish or Hungarian ERDI) during 5-10 years. The medium-and a long-term investment projects could not therefore be based on today's level of ERDI and low wages (around DEM 256 monthly). Large changes in relative prices and in the production structure of industry could be expected in the Czech economy.
