YUGOSLOVIA: HARD TIMES

Created: 3/30/1983

OCR scan of the original document, errors are possible

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have been battered for several years by falling: real incomes and shortages o! consumer goods, and rising unemployment has recently been added to their list of grievances. So far. the public has confined itself mainly lo grumbling. Because of economic and financial constraints. Belgrade will not be able to resolve these problems in the near term and the

for sporadic outbreaks of violence will grow.

The Good Lift Ends

During, Belgrade stimulated the economy wiih loose monetary and credit policy and relied increasingly on foreign credits. These policies led to rapid economic growth and improved living standards.

Yugoslavs traveled abroad more frequently, bought more automobiles, and grew accustomedelatively wellstores.8 the real incomeour-person household wasercent above0 level (sect Ihe same lime Yugoslavia started to experience widening current account deficits,inflation,rowing foreign debt burd the consequences of its prodigal cconom, i

Beginning9 Belgrade tried to improve ihe situation by tightening monetary and fiscal policy. These restrictions had little remedial impaci on the problems, but helpedallercent in real income for the average family.1 lbc same household's monthly income bad fallenercent8 level. Figures2 arc not available,urther decline certainly occurred and probably erased the res! of the gains in earning power made during

Belgrade was nble to reduce the current, account deficit onlycutting imports, which led to shortages of some commodities. Coffee and crude oil imports, for eirtmple. fell byndercent, respectively,9offee almost disappeared from stores, and gasoline is now being rationed. Other

Yugoslavia: Trends In Hie Average Monthly Incomeousehold of Fnur

rt cuis include detergent.

shortages created by imf medicine, and froil.

Belgrade turned to price controls on several occasions when monetary and nedit policies lalletf In bring down the inflation rate. Even wiih tbe controls, however, the Yugoslavs could noi rocel ihejr inflation targets Inflation accelerated fromercent9 tobe inflation rale fell2 bin only toercent. Moreover, the controlsshortages of domestically produced goods.either discontinued production of unprofitable products or built inventories, anticipating higher prices aflciontrols were lifted

riiual Impacl ol Austerity

ttempt) lo slabilizc the economy have notoil groups lo (he sameSiraiiwincorrtrcneraiio.is. cihnicnd so louh arc likely io incieas.each groupto ensure its livingsiandariis. mffcr ictaixc lo the oilier grouritHV

Thee unemp'T^dthews thai ihe youngisproporiionaie share of increased unemployment. Fifty-three percent of ihe unemployed are below the age of 2i. andercent are without work experience and have been wailing one io three yearsob In addition many university graduates have unemployable skills and cannot find jobs of any kind, let alone ones lhal meei ihelioncentration of unemployment among youth, panic-ularly in urban areas, makes rising joblessnts^ poienlially explosive political and social issucj

The problems of rising unemptoymeni. fallingand growing shortages are not sharedaatong Ihe republics. VJraOToioyrneni. asihe proay rate, is much higher in -Me roe vtfor cample. Kosovo's rate isercentto lessercent in Slovenia.have hii Macedonia hardest: Iheis JO perceni as againstercent for ihe resicountry Per capita incomes varyrepublics with Sloveniajtnrr capimrKowvo'sBBp

The Response

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So far consumers hsvc only grumbled about the wersenirtg conditions. Several isolated inc-aents, how. ever, rcfleei ihe pcpalaiion's growing fiustration with shortages Sid falling real incomes. In mid-February workersextile factory in Zagreb. Croatia, stagediwo-day work sioppacc andO percent increase in wages. At the same time in Tllograd. Montenegro, consumers broke windows and looted stores after learning lhcre was nol enoughimilar Incident was ropo'ied in Ccljc. Skwcnia, laic January, as consumers queued for coffee

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Groups thst arc usually supportive of government policy arc becoming critical Thc quasi-ofT-cial Yugo. slav trade unions oppose wage controls and broadened rationing lit".nciade necessities. Unionarc sepply of some foodstuffs rs poorough the coaairyood harvest, these officials demand lhal ibe names ol thosefor the si nit ion be made public. Discussion at Last yeai's Youth Federation Congressiipror-witoiuie share of the burden for past mis lakes has fallen on the young Officials were criticired for opulent life styles while the publ> needs for housing and jobs were nol being met.'

Belgrade I' worried about the growing number of complaints, but financial difficulties force il to call for additional sacrifices. Measures introduced in October, including gasoline rationing, stiffer restrictions on electricity use, and foreign exchange controls,worsening conditions for consumers. Despite union resistance, local rationing is being introduced for some scarce consumer goods.3 economic plan callsJ-percenl fall in personal income. Large price increases were recently approvedide variety of important items and williti the cost of liWne Indexercent in the fin! quarterHV

Tbe balancc-of-payments problems will force Bel* grade lo continue austere economic policies regardless of consumer attitudes. Belgrade could opt for higher imports if itroposed financial rescue packageombination of Western governments, IMF. tbe Bank for international Settlements, and commercial banks, Bui higher imports wouldfuture international financial support and would beemporary -espite for the

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The regime cannot stop the slide in living standards but is taking somebikes, rationing, and increased imports of consumerImprove the supply situation. New CCC credits from the United States will be used to finance higher levels ofimports, and crude oil imports are to increaseercenthe government approved athat would allocate SI billion in hard currency for imports of products in short supply. These actions, however, cannot go too far without jeopardizing bat-ancc-of-payment goals. Despite Belgrade's efforts, shortages of many goods and inflation will continue to plague consumers.

Outlook

Consumers have watched the standard of living Tali for four cons ecu live years, and yet the tame economicaccount deficit and high levels ofConsumers' frustrations willto grow, and their passive acceptance of the continulna fall in living standards will become less tikcly.%^

Worsening conditions will exacerbate strains between ethnic groups and republics. Policy measures thai address Yugoslavia's economic problems willhurt one group more than another. In addition, we believe the less developed areas arc likely to suffer the most from the economic slowdown

Original document.

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