This will need to be preceded by progress in stabilizing the economy and in strengthening the institutional and administrative capacities, under the current program. Technical assistance is expected to make a significant contribution to this process. Achievement of a viable balance of payments position will be a challenging task. Ten years of regional conflicts, international isolation, and economic mismanagement have left a dire legacy in the Federal Republic of Yugoslavia. Output, which has only partly recovered from the economic devastation caused by the Kosovo war, stands at about 40 percent of its 1989 level.
Unemployment amounts to one half of the labor force.
The country's infrastructure is in disrepair following years of inadequate investment and the damage inflicted during the Kosovo war. About 900,000 refugees and internally displaced persons live in FRY under difficult conditions. Serious energy shortages are being somewhat alleviated with humanitarian assistance. The macroeconomic situation is very fragile, and with declining output, the ratio of external debt to GDP has risen to about 140 percent in the absence of debt servicing. The year 2000 has seen only modest output recovery and high inflation.