Economy of Serbia and Montenegro

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The economy of Serbia and Montenegro entered a prolonged decline in 1998. Exacerbated by international sanctions imposed in response to President Slobodan Milosevic's actions in Kosovo, the Federal Republic of Yugoslavia (F.R.Y.) economy's downward spiral showed no real sign of recovery until 2001. A vigorous team of economic reforms has worked to tame inflation (non-energy inflation is less than 9% in 2002, down from over 45% 3 years earlier) and rationalize the SaM economy. GDP, although only half of its 1997 level, is projected to increase steadily in the near future.

Table of contents

1 Currency Problems
2 Stabilization Efforts
3 Statistics

3.1 Gross Domestic Product
3.2 Economic Situation
3.3 Industrial Situation
3.4 Electricity
3.5 Oil
3.6 Natural Gas
3.7 Agricultural Produce
3.8 Exports
3.9 Imports
3.10 Debt
3.11 Currency:

Currency Problems

The F.R.Y.'s monetary unit, the dinar, remained volatile throughout the Milosevic regime. Alarmed F.R.Y. officials took several steps to tighten monetary policy in 1998, including ruling out a devaluation in the near term, increasing reserve requirements, and issuing bonds. During this period, Montenegro rejected the dinar and adopted the Deutsche Mark (now replaced by the Euro) as its official currency. As 1999 began, the damage control operation had succeeded in returning the exchange rate to reasonable levels. However, it was not until 2002, after intense macroeconomic reform measures, that the dinar became convertible--a first since the Bretton Woods Agreements laid out the post-World War II international exchange rate regime.

Stabilization Efforts

Privatization efforts have not succeeded as well as macroeconomic reform. The process of privatization is not popular among workers of large socially owned companies, and many citizens appear to believe the tendering process is overly centralized and controlled from Belgrade. Furthermore, international investment is still lagging in Serbia and Montenegro (SaM), as a result of both domestic and international investment climates. Managers tend to blame the dearth of interest on the current negative business climate in SaM. The Kragujevac-based automobile plant--heavily damaged during the recent NATO bombing--remains the most publicly discussed large privatization candidate, but efforts to sell the plant for as little as $1 have failed.

Statistics