Yugoslavia - Overview of economy

The Yugoslav economy is severely damaged due to more than 10 years of internal fighting and fighting among some republics that were formerly part of the federation. Prior to 1991, Serbia and Montenegro were 2 of 7 constituent republics of the Socialist Federal Republic of Yugoslavia (FRY). The disintegration of the federation in 1991-1992 and the secession (withdrawal from an organization in order to gain independence) of 4 republics, including the most prosperous ones, Slovenia and Croatia, were an economic disaster for the newly formed FRY (Serbia and Montenegro).

The republics struggled for control of the area and some, especially Serbia, mounted genocidal attacks on neighboring Kosovo. The conflicts led to market disruption, and international sanctions . Corrupt economic policies led to devastation, high inflation , and the reversal of market reforms that had started in the 1980s. Industry was almost ruined, production was cut by more than 50 percent, the gross domestic product (GDP) per capita in 2000 was half of the 1989 level, and unemployment was up by 50 percent. Liquidity, large trade and fiscal deficits, and politically based economic inefficiencies threaten economic stability.

Serbian president Slobodan Milosevic led much of the area's troubles. The international community enforced strict sanctions against the area to try to stop the fighting and, finally, in 1999, NATO began a bombing campaign to end the internal fighting.

The international community welcomed the ouster of Milosevic in October 2000, and radical institutional and economic reforms were expected in 2001. The European Union (EU) opened up its market to imports of Yugoslav industrial and agricultural goods, and sanctions were lifted as the West accepted that the only way to stabilize the country was to help reintegrate it with the rest of Europe. Before the new government turns to reforms, however, companies and institutions must first be made operational. The almost continuous conflicts in the area have destroyed much of the country's infrastructure .