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                      SERBIA AND MONTENEGRO

    Serbia's economy continues to face stringent UN sanctions
on trade and financial transfers imposed in May 1992 for
support of the war in Bosnia-Herzegovina.  In October 1994,
after Serbia agreed to seal its Bosnian border, the UN lifted
restrictions on international commercial flights and
participation in sporting and cultural exchanges; the other
sanctions remained in place.

    In January 1994, Dragoslav Avramovic, the new Governor of
the National Bank of Yugoslavia, introduced an economic
stabilization program which dramatically changed Serbia's
economic condition.  The program established a new currency,
the "super-dinar," which is formally pegged on a 1:1 basis with
the Deutsche mark.  The program also set new curbs on monetary
emissions which, according to the Belgrade Institute of
Economic Sciences, cut 1993's record hyperinflation to a
monthly level of 0.2 percent by September.  The National Bank
of Yugoslavia reported that between January and August
industrial output increased by 26 percent and maintained an
average monthly growth rate of 3.4 percent per month. 
According to some reports, wages have reached the level of
early 1992, and increased by a monthly rate of 17 percent from
June to September.  In the first six months of 1994, foreign
exchange reserves increased by over DM 600,000.  By April,
shops stocked a wide variety of Western goods which were
smuggled in despite the tight international sanctions. 
Although goods were available, questions remained as to whether
average citizens could afford them.

    Yet the sustained growth of the economy is uncertain;
cracks in the stabilization program's facade are becoming more
apparent with time.  A black market in foreign currency emerged
briefly in the spring of 1994 and threatened to reduce
confidence in the super-dinar and reignite inflation; similar
indications arose in late October 1994.  On the labor front,
the monthly wage hikes seen in 1994 may also constitute a new
inflationary factor.  The Belgrade Department of Labor reports
over 100,000 unemployed in Belgrade, and over 40 percent of
government workers placed on leave.  Discontent among workers
has resulted in several mini-strikes, and threats of major
strikes.  Over two thirds of the 1994 wheat crop could only be
sold by barter.  Holding the line on monetary emissions, the
government is running out of money with which to pay its
employees.  In July the Minister of Energy confirmed suspicions
that funds were low for necessary pre-winter maintainance and
repairs on power plants.  

    After years of economic suffering, the Montenegrin
president announced in September that for the first time in
Montenegrin history there would be a balanced budget. 
Production in the region was increasing at 0.8 percent a
month.  Tourism had returned in full swing, yet high prices
kept most of the shops empty.


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