Serbia and Montenegro

The recent political events have strongly affected - and seriously downgraded - the level of human development previously attained by FRY. As the economic situation improves, the standards of living of the entire population of the country are likely to rise again. In the meanwhile FRY has undertaken the path of a rapid democratic transition

The economy of Yugoslavia entered a prolonged decline in 1998. Exacerbated by international sanctions imposed in response to President Slobodan Milosevic's actions in Kosovo, the F.R.Y. economy's downward spiral showed no real sign of recovery until 2001. A vigorous team of economic reformers has worked to tame inflation (non-energy inflation is less than 9% in 2002, down from over 45% 3 years earlier) and rationalize the Serbia and Montenegro economy. GDP, although only half of its 1997 level, is projected to increase steadily in the near future.

Serbia and Montenegro (SaM) is a constitutional republic consisting of the relatively large Republic of Serbia and the much smaller Republic of Montenegro.* In March 2002, the two republics, with European Union (EU) mediation, negotiated the Belgrade Agreement, in which they agreed to redefine the joint state. On February 4, the Yugoslav Parliament adopted the Constitutional Charter and Implementation Law, marking the end of the Federal Republic of Yugoslavia (FRY) and the beginning of the state union of Serbia and Montenegro. In the new state, almost all authority devolved to the two republics. The state union Government has responsibilities essentially limited to the Foreign Ministry, the military (VSCG, formerly the VJ), human and minority rights, and foreign economic and commercial relations. The SaM judiciary was constituted by year's end.

FRY was born out of the ashes of the previous Socialist Federal Republic of Yugoslavia (SFRJ), the state that - within a socialist framework - pursued the design of unifying all southern slavic nations.