ECONOMY

Yugoslavia vows stability

BELGRADE – Yugoslavia’s main economic aim is to maintain macroeconomic stability in the face of a rising budget deficit and as it begins to service its foreign debt for the first time in a decade. The gap between budget revenue and expenditure was expected to rise to 5.6 percent of gross domestic product in 2002 from 1.4 percent the previous year, due to costs associated with the transition to market economy and the resumption of debt payments, Yugoslav Deputy Premier Miroljub Labus told a business forum yesterday. «Our goals for 2002 are to preserve macroeconomic stability, restructure the banking sector and achieve a viable external position,» he said. Yugoslavia hopes to attract international assistance amounting to 1 percent of GDP to cover the deficit, he said. Foreign and domestic loans and funds from the sale of state-owned companies would cover the rest. «We are determined to keep the stabilization policy firmly on track this year and hope to create a friendly environment for investments,» said Labus, a leading Yugoslav reformer. Yugoslavia is struggling to rebuild its impoverished economy after four decades of socialist rule followed by a decade of warfare during which time it stopped servicing its foreign debts. The government is forecasting real growth of 4 percent this year, down from 5 percent during the first full year of the post-Slobodan Milosevic era. Partly reflecting exchange rate movements and price liberalization as well as a reduction of the black economy, nominal GDP is expected to grow to $12.68 billion this year from $10.76 billion and per capita income to $1,130 from $1,010. But Labus said, «We are still a poor country.» Inflation was expected to fall further, with the government aiming for 20 percent at the end of the year compared with 39 percent in 2001 and more than 100 percent in 2000. Core inflation, excluding the impact of price liberalization, was forecast at 10 percent in 2002, Labus said. Exports were expected to grow by 18 percent and imports by 15 percent. «To achieve that, we need a sound exchange rate policy, designed to assist a low level of inflation and to protect the external position of the country.» «These are conflicting goals but I hope we will find a right trade-off between them,» he said, adding that the authorities would continue to pursue a moderately tight monetary policy. He said Yugoslavia’s industry sector was forecast to show 3 percent growth in 2002 but that high domestic credit costs were hindering the recovery in manufacturing. «In the past two years, there has been no industrial growth,» Labus said. «We badly need to restructure the real economy in order to attract foreign capital.» – Other positive news with charterers having to carry 50,000 tons of fertilizers from the Baltic Sea to China, with rate ideas at USD 14.50 per ton against owners USD 16.50. Charterers have chosen to wait, as the market has moved against them with owners now asking around USD 20.