page_title: Economy of the Socialist Federal Republic of Yugoslavia
section_title: Collapse of the Yugoslav economy
hierarchical_section_title: Economy of the Socialist Federal Republic of Yugoslavia / Collapse of the Yugoslav economy
caption_attribution_description: English: Real GDP Growth in Yugoslavia from 1980-1990, according to unstats.un.org/
context_page_description: Despite common origins, the economy of the Socialist Federal Republic of Yugoslavia was significantly different from the economies of the Soviet Union and other Eastern European socialist states, especially after the Yugoslav-Soviet break-up in 1948. The occupation and liberation struggle in World War II left Yugoslavia's infrastructure devastated. Even the most developed parts of the country were largely rural and the little industry of the country was largely damaged or destroyed.
context_section_description: In the 1980s the Yugoslav economy entered a period of continuous crisis. Between 1979 and 1985 the Yugoslav dinar plunged from 15 to 1,370 to the U.S. dollar, half of the income from exports was used to service the debt, while real net personal income declined by 19.5%. Unemployment rose to 1.3 million job-seekers, and internal debt was estimated at $40 billion.
  Yugoslavia took on a number of International Monetary Fund (IMF) loans and subsequently fell into heavy debt. By 1981, it had incurred $18.9 billion in foreign debt. In fact Yugoslavia's debt was just 20.11% of GDP in 1971, which is, when compared with UK (67.95%), USA (46.64%), Germany (17.87%), Italy (41.46%), a comparatively low rate. However, Yugoslavia's main concern was unemployment. In 1980 the unemployment rate was at 13.8%, not counting around 1 million workers employed abroad. Deteriorating living conditions during the 1980s caused the Yugoslavian unemployment rate to reach 17 percent, while another 20 percent were underemployed. 60% of the unemployed were under the age of 25.
  By 1988 emigrant remittances to Yugoslavia totaled over $4.5 billion (USD), and by 1989 remittances were $6.2 billion (USD), which amounted to over 19% of the world's total. A large portion of those remittances came from Yugoslav professional and skilled workers employed by Yugoslav engineering and construction firms with contracts abroad, including large infrastructure projects in the Middle East, Africa and Europe. In the early 1980s, Yugoslav firm Energoprojekt was building dams, roads and apartment houses in Iraq, Libya and Kuwait. But during the recession of the early 1980s many oil exporting countries reduced construction projects as oil prices fell. Increased competition from countries like South Korea offering less expensive labor, also contributed to a decline in Yugoslavia's booming engineering and construction export trade.
  In 1988 Yugoslavia owed US$21 billion to Western countries, which was to increase substantially annually had the country not defaulted.
  The collapse of the Yugoslav economy was partially caused by its non-aligned stance that had resulted in access to loans from both superpower blocs on different terms. This contact with the United States and the West opened up Yugoslav markets sooner than in the rest of Central and Eastern Europe. In 1989, before the fall of the Berlin Wall, Yugoslav federal Prime Minister Ante Marković went to Washington to meet with President George H. W. Bush, to negotiate a new financial aid package. In return for assistance, Yugoslavia agreed to even more sweeping economic reforms, which included a new devalued currency, another wage freeze, sharp cuts in government spending, and the elimination of socially owned, worker-managed companies. The Belgrade nomenclature, with the assistance of western advisers, had laid the groundwork for Marković's mission by implementing beforehand many of the required reforms, including a major liberalization of foreign investment legislation.
  The country's state owned banks obligated to adjust their interest rates to the inflation, but this could not be applied to loan contracts made earlier which stipulated fixed interest rates. During this time, foreign currencies became widely circulated and accepted by businesses along with cheques; especially the German mark.
  New legislation was gradually introduced to remedy the situation, but the government mostly tried to fight the crisis by issuing more currency, which only fuelled the inflation further. Power-mongering in big industrial companies led to several large bankruptcies (mostly of large factories), which only increased the public perception that the economy is in a deep crisis. After several failed attempts to fight the inflation with various schemes, and due to mass strikes caused by austerity wage freezes, the government of Branko Mikulić was replaced by a new government in March 1989, headed by Ante Marković, a pragmatic reformist. He spent a year introducing new business legislation, which quietly dropped most of the associated labour theo
caption: Real GDP Growth in Yugoslavia from 1980-1990
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