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 An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...

of Serbia and Montenegro entered a prolonged decline in 1989. Exacerbated by the economic

embargo Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. Economic sanctions are not necessarily imposed because of economic circumstances—they m ...

imposed during the Bosnian war, the

Federal Republic of Yugoslavia Serbia and Montenegro ( sr, Cрбија и Црна Гора, translit=Srbija i Crna Gora) was a country in Southeast Europe located in the Balkans that existed from 1992 to 2006, following the breakup of the Socialist Federal Republic of Yu ...

(FRY) economy's downward spiral showed no real sign of recovery until 1995.

GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...

was nowhere near its 1990 level, but the 1999

NATO bombing of Yugoslavia The North Atlantic Treaty Organization (NATO) carried out an aerial bombing campaign against the Federal Republic of Yugoslavia during the Kosovo War. The air strikes lasted from 24 March 1999 to 10 June 1999. The bombings continued until an a ...

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

overthrow of Slobodan Milošević The overthrow of Slobodan Milošević in Belgrade, Yugoslavia, began after the presidential election on 24 September and culminated in the downfall of Slobodan Milošević's government on 5 October 2000. It is sometimes referred to as the 5 Oct ...

on 5 October 2000. A vigorous team of economic reformers worked to tame

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

(non-energy inflation is less than 9% in 2002, down from over 120% two years earlier) and rationalize the Serbia and Montenegro economy. As of January 2005,

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 A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general def ...

, the dinar, remained volatile throughout Milošević's rule. Alarmed FRY officials took several steps to tighten

monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...

in 1998, including ruling out a

devaluation In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national curre ...

in the near term, increasing reserve requirements, and issuing bonds. During this period,

Montenegro ) , image_map = Europe-Montenegro.svg , map_caption = , image_map2 = , capital = Podgorica , coordinates = , largest_city = capital , official_languages = M ...

rejected the dinar and adopted the

Deutsche Mark The Deutsche Mark (; English: ''German mark''), abbreviated "DM" or "D-Mark" (), was the official currency of West Germany from 1948 until 1990 and later the unified Germany from 1990 until the adoption of the euro in 2002. In English, it was ...

(now replaced by the

euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...

) as its official

currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...

. 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 Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...

reform measures, that the dinar became convertible—a first since the

Bretton Woods Agreement The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...

s laid out the post-

World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposing ...

international exchange rate regime.

Stabilization Efforts

Privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...

efforts have not succeeded as well as macroeconomic reform. The process of privatization was not popular among workers of large socially owned companies, and many citizens appeared to believe the tendering process was overly centralized and controlled from Belgrade. Furthermore, international investment was lagging in Serbia and Montenegro, as a result of both domestic and international investment climates. Managers tended to blame the dearth of interest on the current negative business climate in Serbia and Montenegro.

Statistics

Gross Domestic Product

Purchasing power parity - $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: 2001
Consumption: 2001
Exports: NA (2001)
Imports: NA (2001)
Proved reserves: 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 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 dinar The dinar ( sr-Cyrl, динар, ; paucal: dinara / динара; abbreviation: DIN (Latin) and дин (Cyrillic); code: RSD) is the currency of Serbia. One dinar is subdivided into 100 para. The dinar was first used in Serbia in medieval times, ...

(CSD). Note - in Montenegro the

is legal tender; in

Kosovo Kosovo ( sq, Kosova or ; sr-Cyrl, Косово ), officially the Republic of Kosovo ( sq, Republika e Kosovës, links=no; sr, Република Косово, Republika Kosovo, links=no), is a partially recognised state in Southeast Euro ...

both the euro and the Yugoslav dinar are legal (2002)
Code: YUM
Exchange rates: Serbian dinars per US dollar - official rate: 60 (2004); Fiscal year: calendar year

External links

Montenegro Economy>> Financial Business and Economy News from Montenegro
{{Economic history Serbia and Montenegro Serbia and Montenegro