Economical

Prior to the break-up, former Yugoslavia was the largest and fastest growing UK export market in Central and Eastern Europe.  It is estimated that Serbia and Montenegro alone accounted for 40% of all UK exports to Yugoslavia, which peaked at £253 million in 1990 (source: UK DTI).

Serbia, predominately, has inherited debt from the reign of Milosevic.  Inflation in 2000 was running at 110%, average salary dropped 7.7 times lower than in 1990, debt (EDT) to GDP ratio was 100%, debt to export ratio over 600% and GDP per capita under USD$1,000.  Post 2000 significant steps have been taken to liberalise the economic and political landscape.  While issues still remain, through co-ordinated international efforts by 2001 marked improvements included inflation reduced to 16% and foreign reserves of £1,000 million.

On 12 March 2003, reformist Serbian Prime Minister, Zorn Djindjic was assassinated in Belgrade, widely believed to be on orders of organised criminals.  2004 commenced with news that the old Milosevic nationalist parties had secured 40% of the vote in democratic elections, despite their leaders being in jail at the Hague on war-crime charges. 

It has been reported that the risks associated with Serbian Nationalist politics are reasons Montenegro is arguing for independence. It is widely claimed that Nationalism has been the core reason for the troubles since 1990 and that Nationalism itself is ensuring that Serbia and Montenegro's progress toward EU membership is more difficult than otherwise might be the case.

However, UK, EU and UN sources are keen to see Serbia and Montenegro resolve their differences and join the EU 'en-block'.  Some within the Federation also hold this view, however, the resurgence of nationalism and its potential to open old wounds is a risk.  In addition, in February 2004 Interpol refused entry for Montenegro. It is reported that money laundering and corruption are real concerns (see www.ebrd.com specifically the SEE Report of April 2004). 

This is most obvious in the property market where 'cash' transactions lead to less than sensitive developments that do little to protect the natural heritage of Montenegro and are distorting property values.

The economic and political outlook of the general population is generally positive with the significant majority looking forward to ever increasing stability and prosperity.  This said, the broad expectation is that the process may take some years for Serbia and Montenegro, regardless of the status of independence between these states, which largely share common bloodlines, language, religion and historical culture. 

It is worth noting that the EBRD SEE Report shows Serbia and Montenegro as late comers to the reform process, yet Serbia and Montenegro also show some of the most significant improvements of all states throughout the SEE, Central Europe and even when compared with the 10 new EU entrants. 

The conclusion that may be drawn from this is that while Serbia and Montenegro did enter the reform process later that others, they have demonstrated a significant political and economic will to catch up.

There is still work to be done to improve the economies in the region, specifically in Montenegro where there is little industry and it must therefore rely on tourism for its major growth prospects.  Improvements in the privatisation process will go along way to meeting this challenge, as will infrastructure improvements that are already underway.