IV.

Economy

The wars in Bosnia and Herzegovina and in Croatia had a serious effect on the Serbian economy, but even more disastrous has been the effect of the economic sanctions imposed on Serbia (and Montenegro as a member of the FRY) by the UN because of its military support of Bosnian Serb forces in Bosnia. Formally agreed on May 30, 1992, the sanctions involved a total ban on trade, the suspension of air links, the withdrawal of diplomats, the seizure of financial assets overseas, and the cancellation of sporting and cultural exchanges. Although trade sanctions have been only partially effective, with Albania proving a remarkably porous border for both oil imports and Serbian exports, the general results have been devastating, particularly for ordinary people. Economic output declined by a third between 1991 and 1992, before the start of sanctions; by the end of 1993 hyperinflation was running at over 300,000 per cent, and the currency of the FRY, the new dinar, was pegged to the US dollar, after numerous devaluations, at 700,000 new dinars equal US$1. Unemployment was widespread and rising, and many industries were nearing collapse because of lack of raw materials.

The easing of sanctions in October 1994, in return for FRY agreement to end military support, and especially arms supplies, to Croatian and Bosnian Serbs, enabled some improvement in the economy. Hyperinflation began to be brought under control with the introduction in January 1994 of a new convertible super dinar, equivalent to 1,000 million old dinars, and linked to the value of the Deutschmark (62.40 new dinars equalled US$1; 2007). However, the degree of recovery has been hindered by the amount of the country’s economic resources that are being diverted to the military, and by the loss of many conscription-age men and professionals who have fled the country since 1991. Unemployment has remained at more than 50 per cent since mid-1993, and more than 4 million people are estimated to be living below the poverty line.

The Serbian economy is normally based on a mixture of agricultural and industrial production. Traditionally, Vojvodina has been the most important agricultural area. Major crops grown include wheat, maize, sugar beet, hemp, flax, and fruit. Cattle, sheep, and pigs are also raised. Formerly Serbia was one of the chief copper producers of Europe, and its industries were based around mineral-processing and the manufacture of textiles, chemicals, and machinery.