Difficult decisions have been taken to implement some structural reforms, and the economy has been substantially liberalised and stabilised. Inevitably there are risks to the hitherto positive macroeconomic developments, especially in Montenegro that has relied heavily on foreign aid. Export-led growth may suffer from the economic slowdown in Europe, Yugoslavia’s largest market.

At the same time, the economy needs to attract inflows of capital. Hence the government needs to keep up the pressure of reform in order to reshape the domestic competitive environment. It takes time for structural reforms to become effective and new institutions to take root. In due course reforms will benefit domestic firms and industry, simultaneously providing fertile ground for the foreign investment that is needed both to support the balance of payments and to help seed a wider domestic recovery.

©OECD Observer No 235, December 2002