YUGOSLAVIA (SERBIA AND MONTENEGRO)

General

Serbia and Montenegro have asserted the formation of a joint independent state, but this entity has not been formally recognised as a state by the US. The US view is that the Socialist Federal Republic of Yugoslavia (SFRY) has dissolved and that none of the successor republics represents its continuation.

Economy

The swift collapse of the Yugoslav federation in 1991 has been followed by highly destructive warfare, the destabilisation of republic boundaries, and the breakup of important interrepublic trade flows. Output in Serbia and Montenegro dropped by half in 1992-1993. Like the other former Yugoslav republics, it had depended on its sister republics for large amounts of energy and manufactures. Wide differences in climate, mineral resources, and levels of technology among the republics accentuated this interdependence, as did the communist practice of concentrating much industrial output in a small number of giant plants. The breakup of many of the trade links, the sharp drop in output as industrial plants lost suppliers and markets, and the destruction of physical assets in the fighting all have contributed to the economic difficulties of the republics. One singular factor in the economic situation of Serbia is the continuation in office of a government that is primarily interested in political and military mastery, not economic reform. Hyperinflation ended with the establishment of a new currency unit in June 1993; prices were relatively stable from 1995 through 1997, but inflationary pressures resurged in 1998. Reliable statistics continue to be hard to come by, and the GDP estimate is extremely rough. The economic boom anticipated by the government after the suspension of UN sanctions in December 1995 has failed to materialise. Government mismanagement of the economy is largely to blame. Also, the Outer Wall sanctions that exclude Belgrade from international financial institutions and an investment ban and asset freeze imposed in 1998 because of Belgrade’s repressive actions in Kossovo have added to economic difficulties.