Soviet Economy:

Assessment of How Well the CIA Has Estimated the Size of the Economy

NSIAD-91-274: Published: Sep 30, 1991. Publicly Released: Oct 30, 1991.

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Pursuant to a congressional request, GAO reviewed the Central Intelligence Agency's (CIA) methods for estimating the size of the Soviet Union's economy focusing, on: (1) how well the CIA has calculated the Soviet gross national product (GNP) both in rubles and as a percentage of U.S. GNP; and (2) prospects for future improvements in CIA estimates.

GAO found that: (1) CIA uses an internationally accepted method of constructing ruble-dollar purchasing power ratios to compare Soviet GNP with U.S. GNP; (2) due to the lack of consistently reliable and well-understood data on the Soviet economy, CIA methods for estimating the ruble value of Soviet GNP have reflected a considerable degree of judgment, resulting in a lower level of accuracy in estimating Soviet GNP in rubles; and (3) CIA has probably overestimated the relative size of Soviet GNP as compared with U.S. GNP due to difficulties that CIA faced in assembling its purchasing power parities and in developing its ruble estimates; (4) CIA has added to the possible error in its comparisons by not recalculating its detailed purchasing power parities for individual products and services since the late 1970s; and (5) dramatic reforms in the Soviet Union could also affect the continued need for CIA to independently compare U.S. and Soviet GNP.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Soviet Union no longer exists.

    Recommendation: If CIA continues its GNP estimating work, the Director, CIA, should direct the CIA task force to address the key research issues affecting the Agency's Soviet GNP estimates, to the extent that it has not already planned to do so.

    Agency Affected: Central Intelligence Agency

  2. Status: Closed - Not Implemented

    Comments: The Soviet Union no longer exists.

    Recommendation: If the conditions in the Soviet Union necessitate that CIA continue to estimate Soviet GNP, the Director, CIA, should present the CIA comparison estimate as a range rather than a single point estimate, and explain the criteria and methodology used to calculate the range.

    Agency Affected: Central Intelligence Agency

  3. Status: Closed - Not Implemented

    Comments: The Soviet Union no longer exists.

    Recommendation: If conditions in the Soviet Union necessitate that CIA continue to estimate Soviet GNP, the Director, CIA, should collect Soviet price data to recalculate purchasing power ratios as soon as Soviet economic conditions allow, unless CIA chooses to adopt the results of other comparison efforts, such as the ongoing United Nations-sponsored international comparison of Soviet GNP.

    Agency Affected: Central Intelligence Agency

 

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