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Economy of Serbia and Montenegro

From Academic Kids

Serbia and Montenegro

The economy of Serbia and Montenegro entered a prolonged decline in 1989. Exacerbated by the economic embargo imposed during the Bosnian war, the Federal Republic of Yugoslavia (F.R.Y.) economy's downward spiral showed no real sign of recovery until 1995. GDP was nowhere near its 1991 level, but the NATO bombing in 1999 of the basic infrastructure of the country and many factories, as well as a renewed embargo caused a further huge drop in GDP in relation to the 1991 level. The first sign of an economic recovery occurred in 2001 after the removal of Milošević on 5th October 2000. A vigorous team of economic reformers has worked to tame inflation (non-energy inflation is less than 9% in 2002, down from over 120% two years earlier) and rationalize the SaM economy. GDP, although only half of its 1997 level, is projected to increase steadily in the near future. As of January 2005 GDP has "recovered" to 55-60% of its 1990 level, due to GDP growth of 8.5% in 2004.

Contents

Currency Problems

The F.R.Y.'s monetary unit, the dinar, remained volatile throughout Milošević's rule. 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.

Statistics

Gross Domestic Product

Purchasing power parity - $25.98 billion (2004 est.)
Real growth rate: 8.5%% (2004 est.)
Per capita: purchasing power parity - $2,900 (2004 est.)
Composition by sector:

Agriculture: 15.2%
Industry: 28.2%
Services: 56.6% (2004 est.)

Economic Situation

Population below poverty line: 10%
Inflation rate (consumer prices): 12-13% (2004 est.)
Labor force: 3 596 282 (2005 est.)
Budget:

Revenues: $9.773 billion
expenditures: $10.460 billion (2004 est.)

Industrial Situation

Industries:

machine building (aircraft, trucks, and automobiles; tanks and weapons; electrical equipment; agricultural machinery); metallurgy (steel, aluminum, copper, lead, zinc, chromium, antimony, bismuth, cadmium); mining (coal, bauxite, nonferrous ore, iron ore, limestone); consumer goods (textiles, footwear, foodstuffs, appliances); electronics, petroleum products, chemicals, and pharmaceuticals

Industrial production growth rate: 6.5% (2004 est.)

Electricity

Production: 31,710 GWh (2001)
Production by source (2001):

Fossil fuel: 62.9%
Hydro: 37.1%
Nuclear: 0%
Other: 0%

Consumption: 32,370 GWh (2001)
Exports: 446 GWh (2001)
Imports: 3,330 GWh (2001)

Oil

Production: 15,000 barrel/day (2,400 m³/d) 2001
Consumption: 64,000 barrel/day (10,200 m³/d) 2001
Exports: NA (2001)
Imports: NA (2001)
Proved reserves: 38.75 million barrel (6,161,000 m³) January 2002

Natural Gas

Proved reserves: 24.07 km³ (January 2002 est.)

Agricultural Produce

Cereals, fruits, vegetables, tobacco, olives; cattle, sheep, goats.

Exports

Total: $5.5 billion f.o.b. (2004 est.)(goods and services)
Commodities: manufactured goods, food and live animals, raw materials
Partners: Bosnia and Herzegovina 19%, Italy 13%, Germany 11%, Republic of Macedonia 8%, Russia 4% (2004)

Imports

Total: $11.5 billion f.o.b. (2004 est.)(goods and services)
Commodities: machinery and transport equipment, fuels and lubricants, manufactured goods, chemicals, food and live animals, raw materials
Partners: Russia 13%, Germany 13%, Italy 9%, China 5%, USA 4% (2004)

Debt

External: $12.6 billion (2004 est.)
-As a percentage of GDP: 55-60% (2004 est.)
Economic aid - recipient: $2 billion pledged in 2001 (disbursements to follow for several years)

Currency:

New Yugoslav dinar (YUM). Note - in Montenegro the euro is legal tender; in Kosovo both the euro and the Yugoslav dinar are legal (2002)
Code: YUM
Exchange rates: new Yugoslav dinars per US dollar - official rate: 60 (2004); Fiscal year: calendar year

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