CIA Report Paints a Bleak Soviet Picture : Economy: The agency says Gorbachev’s reforms have failed to halt the slide. It throws up a caution flag on Western aid programs.

The Soviet economy will shrink by at least 10% this year and inflation will soar by as much as 100%, the CIA said Thursday in its bleakest public assessment yet of the Soviet Union’s continuing economic deterioration.

Reforms initiated by President Mikhail S. Gorbachev have failed to halt the Soviet Union’s decline, and the political and economic turmoil is expected to continue for several years, the CIA said in its annual report to the Joint Economic Committee of Congress.

At the same time, the agency flashed a caution signal to the United States and other Western governments contemplating large aid packages to help Gorbachev survive, noting that the country’s political paralysis must be resolved before economic reforms can proceed.

“A political struggle is raging . . . while the economy is floundering,” said George Kolt, director of the CIA office of Soviet analysis, in testimony to the joint committee.

Gorbachev’s perestroika program of economic reform, launched shortly after he took office in 1985, has been “hopelessly ineffective” so far in improving Soviet economic performance or living conditions, the CIA analyst said.

As a result, he said, Soviet consumers are suffering from the worst shortages since World War II, while industrial and agricultural production have fallen sharply.

“Output is declining at an accelerating rate, inflation threatens to rage out of control, inter-regional trade has broken down and the center and the republics are engaged in a fierce political struggle over the future of the multinational state,” the CIA assessment said.

“Even if reform proceeds anew, tough economic times are in store for the Soviets,” the report concludes. “If meaningful reform is not carried out, the economic future will be totally bleak.”

Other Bush Administration officials used even stronger terms to describe the Soviet economy, with one analyst terming it “a mess of epic dimensions.”

Moscow officials have acknowledged that the Soviet economy slumped by 2% last year and plunged at an annual rate of 8% during the first quarter of 1991, but the CIA analysis said that actual conditions were at least twice as bad as the official Soviet statistics indicated.

A power struggle between Gorbachev and a growing number of secession-minded Soviet republics has exacerbated the country’s economic problems, the U.S. intelligence agency noted.

“If this standoff continues, real gross national product likely would decline by 10% to 15%, and the annual inflation rate could easily exceed 100%,” the report said.

A return to a Soviet policy of stern repression would be even worse, the CIA predicted. A startling 30% decline in GNP and a 25% unemployment rate--equivalent to the Great Depression of the 1930s in the United States--could result if there were widespread resistance and bloodshed, the analysts said.

Even if that nightmare scenario never develops, the agency said, the Soviet Union faces several years of hard times as it tries to recover from decades of inefficient central planning and massive military spending.

“Most unofficial Soviet forecasts place the likely decline in output at 10% to 20% and--according to some estimates which we consider extreme--output could fall by as much as 40%,” the CIA said.

In a separate report, the Defense Intelligence Agency said that spending cutbacks in the last two years have only slightly reduced the share of the Soviet budget devoted to the military.

After adjusting for inflation, defense outlays fell by 6% in 1989 and in 1990, the agency estimated.