Economy of Serbia and Montenegro
Encyclopedia
Serbia and Montenegro
was a confederated union which existed between 2003 and 2006. The two republics initially formed the Federal Republic of Yugoslavia in 1992.
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 (FRY) 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 5 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 SCG
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.
, remained volatile throughout Milošević's rule. Alarmed FRY 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 Agreement
s laid out the post-World War II
international exchange rate
regime.
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.
- $25.98 billion (2004 est.)<, $27.5 Billion predicted for 2005 br>
Real growth rate: 8.5% (2004 est.), 6.5% (2005 est)
Real GDP Per capita - nominal: $2900 (2004 est.), $3200 (2005 est.)
Composition by sector:
Inflation rate (consumer prices): 12-13% (2004 est.)
Labor force: 3,596,282 (2005 est.)
Budget:
Industrial production growth rate: 6.5% (2004 est.)
Production by source (2001):
Consumption: 32,370 GWh (2001)
Exports: 446 GWh (2001)
Imports: 3,330 GWh (2001)
Consumption: 64000 barrels (10,175.2 m³) 2001
Exports: NA (2001)
Imports: NA (2001)
Proved reserves: 38.75 Moilbbl January 2002
Commodities: manufactured goods, food and live animals, raw materials
Partners: Bosnia and Herzegovina 19%, Italy 12%, Germany 12%, Republic of Macedonia 8%, Russia 4% (2004)
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)
-As a percentage of GDP: 55-60% (2004 est.)
Economic aid - recipient: $2 billion pledged in 2001 (disbursements to follow for several years)
(CSD). Note - in Montenegro the euro
is legal tender; in Kosovo
both the euro and the Yugoslav dinar are legal (2002)
Code: YUM
Exchange rates: Serbian dinara per US dollar - official rate: 60 (2004);
Fiscal year: calendar year
Serbia and Montenegro
Serbia and Montenegro was a country in southeastern Europe, formed from two former republics of the Socialist Federal Republic of Yugoslavia : Serbia and Montenegro. Following the breakup of Yugoslavia, it was established in 1992 as a federation called the Federal Republic of Yugoslavia...
was a confederated union which existed between 2003 and 2006. The two republics initially formed the Federal Republic of Yugoslavia in 1992.
The economy
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
of Serbia and Montenegro
Serbia and Montenegro
Serbia and Montenegro was a country in southeastern Europe, formed from two former republics of the Socialist Federal Republic of Yugoslavia : Serbia and Montenegro. Following the breakup of Yugoslavia, it was established in 1992 as a federation called the Federal Republic of Yugoslavia...
entered a prolonged decline in 1989. Exacerbated by the economic embargo
Embargo
An embargo is the partial or complete prohibition of commerce and trade with a particular country, in order to isolate it. Embargoes are considered strong diplomatic measures imposed in an effort, by the imposing country, to elicit a given national-interest result from the country on which it is...
imposed during the Bosnian war, the Federal Republic of Yugoslavia (FRY) economy's downward spiral showed no real sign of recovery until 1995. GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
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 5 October 2000. A vigorous team of economic reformers has worked to tame inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
(non-energy inflation is less than 9% in 2002, down from over 120% two years earlier) and rationalize the SCG
Serbia and Montenegro
Serbia and Montenegro was a country in southeastern Europe, formed from two former republics of the Socialist Federal Republic of Yugoslavia : Serbia and Montenegro. Following the breakup of Yugoslavia, it was established in 1992 as a federation called the Federal Republic of Yugoslavia...
economy. GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, 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.
Currency Problems
The FRY's monetary unit, the dinarDinar
The dinar is the official currency of several countries.The history of the dinar dates to the gold dinar, an early Islamic coin corresponding to the Byzantine denarius auri...
, remained volatile throughout Milošević's rule. Alarmed FRY officials took several steps to tighten monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
in 1998, including ruling out a devaluation in the near term, increasing reserve requirements, and issuing bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
. During this period, Montenegro
Montenegro
Montenegro Montenegrin: Crna Gora Црна Гора , meaning "Black Mountain") is a country located in Southeastern Europe. It has a coast on the Adriatic Sea to the south-west and is bordered by Croatia to the west, Bosnia and Herzegovina to the northwest, Serbia to the northeast and Albania to the...
rejected the dinar and adopted the Deutsche Mark (now replaced by the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
) as its official currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
. 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 Agreement
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...
s laid out the post-World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
international exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
regime.
Stabilization Efforts
PrivatizationPrivatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
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
Belgrade
Belgrade is the capital and largest city of Serbia. It is located at the confluence of the Sava and Danube rivers, where the Pannonian Plain meets the Balkans. According to official results of Census 2011, the city has a population of 1,639,121. It is one of the 15 largest cities in Europe...
. Furthermore, international investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
is still lagging in Serbia and Montenegro
Serbia and Montenegro
Serbia and Montenegro was a country in southeastern Europe, formed from two former republics of the Socialist Federal Republic of Yugoslavia : Serbia and Montenegro. Following the breakup of Yugoslavia, it was established in 1992 as a federation called the Federal Republic of Yugoslavia...
(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.
Gross Domestic Product
Purchasing power parityPurchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
- $25.98 billion (2004 est.)<, $27.5 Billion predicted for 2005 br>
Real growth rate: 8.5% (2004 est.), 6.5% (2005 est)
Real GDP Per capita - nominal: $2900 (2004 est.), $3200 (2005 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: 15000 barrels (2,384.8 m³) 2001Consumption: 64000 barrels (10,175.2 m³) 2001
Exports: NA (2001)
Imports: NA (2001)
Proved reserves: 38.75 Moilbbl January 2002
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 12%, Germany 12%, 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
Serbian dinarSerbian dinar
The dinar is the currency of Serbia. An earlier currency also called dinar was used in Serbia between 1868 and 1918. The earliest use of the dinar date to 1214. Today's Serbian dinar is a continuation of the last Yugoslav dinar...
(CSD). Note - in Montenegro the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
is legal tender; in Kosovo
Kosovo
Kosovo is a region in southeastern Europe. Part of the Ottoman Empire for more than five centuries, later the Autonomous Province of Kosovo and Metohija within Serbia...
both the euro and the Yugoslav dinar are legal (2002)
Code: YUM
Exchange rates: Serbian dinara per US dollar - official rate: 60 (2004);
Fiscal year: calendar year
See also
- Economy of EuropeEconomy of EuropeThe economy of Europe comprises more than 731 million people in 48 different states. Like other continents, the wealth of Europe's states varies, although the poorest are well above the poorest states of other continents in terms of GDP and living standards. The difference in wealth across...
- Economy of the Socialist Federal Republic of YugoslaviaEconomy of the Socialist Federal Republic of YugoslaviaDespite common origins, the economy of the Socialist Federal Republic of Yugoslavia was much different from economies of the Soviet Union and other Eastern European socialist countries, especially after the Yugoslav-Soviet break-up of 1948. The occupation and liberation struggle in World War II...
- Economy of MontenegroEconomy of MontenegroEconomy of Montenegro is mostly a service based economy, currently in process of economic transition. Economy of this small Balkan state is recovering from impact of Yugoslav Wars, decline of industry following the breakup of SFRY, and UN economic sanctions....
- Economy of SerbiaEconomy of SerbiaSerbia's economy is based mostly on various services , industry , and agriculture . In the late 1980s, at the beginning of the process of economic transition from a planned economy to a market economy, Serbia's economy had a favorable position, but it was gravely impacted by economic sanctions from...
- Serbian dinarSerbian dinarThe dinar is the currency of Serbia. An earlier currency also called dinar was used in Serbia between 1868 and 1918. The earliest use of the dinar date to 1214. Today's Serbian dinar is a continuation of the last Yugoslav dinar...
- EuroEuroThe euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
- Central Bank of MontenegroCentral Bank of MontenegroThe Central Bank of Montenegro is the central bank of Montenegro. The mission of the central bank is to establish and maintain a sound banking system and monetary policy.-Overview:...
- National Bank of SerbiaNational Bank of SerbiaNational Bank of Serbia is the central bank of Serbia; its main responsibilities are the protection of price stability and maintenance of financial stability....