OECD Economic Surveys : Yugoslavia 1970.

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by  OECD

. t lJI
OECD
ECONOMIC SURVEYS
YUGOSLAVIA
NOVEMBER 1970
BASIC STATISTICS OF YUGOSLAVIA
THE LAND AND THE PEOPLE
Total area (1 000 sq. km) 256 Net natural increase in population
Agricultural area (1 000 sq. km) 148 1960-1969 (1 000)
Forest area (1 000 sq. km) 89 Annual average 233
Population (1969, mid-year estima Annual average (per 1 000 inha¬
tes, 1 000) 20351 bitants) 12.1
Republics: Total paid employment (1969,
Serbia S264 1 000) 3706
' Croatia 4384 ofwhich:
Bosnia and Herzegovinia 3862 Industry 1 399
Slovenia 1 702 Building 339
Macedonia 1 597 Agriculture (social sector) 248
Montenegro 542 Active population in private agri¬
Majorcities(1966) : culture (rough estimate for 1969,
Belgrade 715 1 000) 5000
Zagreb 510 Net emigration (rough estimate for
Skopje 238 1965-1969, annual rate) 70000
Sarajevo 235
Ljubljana 190
PRODUCTION
Gross national product at factor Origin of GDP in 1968 (per cent
cost (1968, billion dinars) 120.0 ofGDP)
Gross national product per head Agriculture, forestry and fishing 19.5
(1968, US $) Mining and manufacturing 31.3
Gross fixed asset formation Building 11.2
1968 (billion dinars) 34.4 Other 38.0
1968 (per cent of GDP) 26.5
1965-1969 (per cent of GDP) 25.0
GOVERNMENT
Collective consumption (1968, per General government revenue, in
cent of GDP) 17.7 eluding extra-budgetary funds
Federal revenue, including extra- (1968, per cent of GDP) 32.6
budgetarv funds (1968, per cent
of GDP) 13.3
LIVING STANDARDS
Number of passengercarsper 1 000 Number of doctors per 1 000
inhabitants in 1969 27.6 inhabitants in 1969 1.1
Number of telephones per 1000 Dwelling space per capita in sq.
inhabitants in 1969 30.6 meters in 1969 11.7
Number of radio sets per 1000 Average monthly personal income
inhabitants in 1969 173 in the social sector in 1969
(dinars) 990
FOREIGN TRADE
Structure of Structure of
exports in 1969 imports in 1969
(per cent) (per cent)
Food, drinks, tobacco 19.6 6.9
Raw materials and
semi-finished goods 45.1 53.1
Finished manufactures 35.3 40.0
THE CURRENCY
Monetary unit : dinar Currency per US $: 12.5 dinars
OECD ECONOMIC SURVEYS
YUGOSLAVIA
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and
Development was set up under a Convention signed in
Paris on 14th December 1960 by Member countries oj the
Organisation jor European Economic Co-operation and by
Canada and the United States. This Convention provides
that the OECD shall promote policies designed:
to achieve thehighestsustainable economic growth
and employment and a rising standard oj living in
Member countries, while maintaining financial
stability, and thusto contribute to the development
ojtheworldeconomy;
to contribute to sound economic expansion in
Member as well as non-member countries in the
process oj economic development;
to contribute to the expansion oj world trade on a
multilateral, non-discriminatory basis in accord¬
ance with international obligations.
Thelegalpersonalitypossessed by the Organisationjor
European Economic Co-operation continues in the OECD,
whichcameintobeingon30thSeptember1961.
The members oj OECD are : Austria, Belgium,
Canada, Denmark,Finland, France, theFederalRepublicoj
Germany, Greece, Iceland, Ireland, Italy, lapan, Luxem¬
bourg, the Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, Turkey, the United Kingdom and the United
States.
The Socialist Federal Republic oj Yugoslavia is asso¬
ciated in certain work of the OECD, particularly that oj
theEconomicandDevelopmentReviewCommittee.
The annual review of Yugoslavia
by the OECD Economic and Development Review
Committee took place on 5th October, 1970.
CONTENTS
Introduction 5
I Theprogress ofreform 5
Aims and strategy 6
Constraints onpolicy implementation 8
Employment andregionalbalance 10
Prices andcosts 11
Thebalanceofpayments 12
Presentinstitutional structure and behaviour 12
Prices 12
Foreign trade and payments 15
The shiftingroleoftheenterprise 16
Money andcredit 18
Governmentfinance 20
Policy consequences ofthereforms 20
II Recent trends,policiesandprospects 22
Recent trends 22
Output 22
Productivity, employment andunemployment
Demand 26
Costs andprices 28
Thebalance ofpayments 31
Money and creditpolicy 34
Publicfinance 36
Action to checkthe cost/pricerise 37
Short-termprospects 38
in The 1971-1975 EconomicPlan 39
Maintargets 40
Labourforce and employment 41
Production 42
Demand 44
Balanceofpayments 44
Planimplementation 45
Conclusions 45
StatisticalAnnex 52
TABLES
In text:
1 Labour force and employment 10
2 Pre- andpost-reform price trends 13
3 Structureofindustrialproducerprices 14
4 Income distribution in socialenterprises 16
5 Production, employment and productivity 23
6 Output and expenditure 25
7 Indicators ofprivate consumption and fixed investment 27
8 Wages andprices 29
9 Totalbalanceofpayments 31
10 Growth ofselectedbank assets and liabilities 35
11 TheFederalGovernmentbudget 36
12 Consolidated account of generalgovernment 37
13 Budgetfinancing 38
14 Employmenttargets ofthe 1971-1975 Plan 42
15 MainPlan targets 15
In annex:
A Origin of gross domestic product 52
B National product and expenditure 54
C Gross fixedinvestment 55
D Agriculture 56
E National income and the household account 57
F Industrial production 58
G Labour force, employment and productivity 59
H Prices and wages 60
I Government budgets and extra-budgetary funds 61
J Balance sheet ofthebankingsystem 62
K Imports and exports by commodity groups 64
L Foreign tradebyarea 65
M Balance of payments with the convertible and the bilateral area 66
CHARTS
1 Socialproduct, employment andunemployment 7
2 Regionaldisparities inper capitaincome 8
3 Regional growth of income in selected activities 1956/58
1965/67 9
4 Financeoffixedinvestmentinthesocialsector 17
5 Mainbankresources andlending 19
6 Budgetrevenue 21
7 Industrialproduction, employment andunemployment 24
8 Indicators ofprivateconsumption 28
9 Prices andwages 30
10 Foreigntrade andthetradedeficit 32
II Commodity and areastructureofforeign trade 33
INTRODUCTION
1969 and the first half of 1970 was a favourable period for the
Yugoslav economy in most respects. Agricultural production recovered
strongly in 1969, following two bad harvests, and non-agricultural activity
expanded at a high rate. The earlier significant slack in the economy
was reduced; available plant and equipment was being more fully utilized
and strong demand for Yugoslav labour, at home and abroad, mobilized part
of the large labour reserves. Commodity exports, tourist earnings and
receipts from emigrant worker remittances were buoyant. Imports could
thus be stepped up considerably without significant adverse effects on the
balance of payments until last summer, when the trade deficit turned up
sharply, partly due to temporary factors. This relatively favourable picture
was marred, however, by the reappearance of pronounced inflationary
developments not solely related to the overall demand supply situation
and only partially influenced by special temporary factors, such as the cost
or repairing damage caused by earthquake and floods and the correction
of certain anomalies in the price structure. In money and credit policy,
emphasis has been placed on relative restraint throughout most of the
period since late 1968 and it seems that the authorities plan to continue
this policy. Short-term economic prospects are by and large favourable.
But economic expansion could be hampered by the need to secure progress
towards price/cost stability and safeguard the balance of payments under
conditions of probably less buoyant demand for Yugoslav exports, tourist
services and emigrant labour. Short-term prospects, together with recent
trends and economic policies, are discussed in Part II of the present Survey.
The process of wide-reaching reforms, starting in the mid-sixties,
has been followed in detail in earlier OECD Surveys, which have also
discussed the main transitional difficulties encountered and the more
lasting problems which seemed likely to arise under the new arrangements.
The present Survey, in Part 1, reviews the progress of reform made to date
with a view, in particular, to throwing some light on the manner in which
the new arrangements work and illustrating their main limitations. The
authorities expect that most of these shortcomings will be eased with the
further reforms foreseen in the next five-year Plan which covers the period
1971-1975. Part HI of the present Survey discusses the main aims and
targets of the Plan, as outlined in a provisional draft Plan approved by the
Federal Executive Council early in 1970.
I THE PROGRESS OF REFORM
A process of social and economic reform has now been underway in
Yugoslavia for nearly two decades. The principle of self management was
introduced and the process of decentralization of economic decision-making
OECD Economic Surveys
already begun in the early fifties. Efforts to do away with price anomalies
and foreign trade restrictions also date back to that time. However, despite
the progress made, central government influence in the mid-sixties was still
strong in manyimportant areas. The rôle of market forces remained limited
(particularly in the field of investment resource allocation), significant price
distortions continued to prevail, and only a modest start had been made
in opening up the economy to external influences. The need to maintain
external balance and reasonable cost/price stability, and to keep
unemployment at a tolerable level, had required a gradual process of
reform. As the state of economic development improved, these constraints
diminished somewhat and it was increasingly felt that the existing system
impeded efficient resource allocation. It was against this background that
a number of steps were taken, in the mid-sixties, to speed up the progress
ofreform.
Past OECD Economic Surveys of Yugoslavia have reviewed this
earlier experience and described in detail the features of the reforms. In
addition, they discussed some of the difficulties encountered, and likely to be
encountered, in making the transition to the new arrangements, as well as
pointing to some of the likely major problems in the functioning of the
reformed system. The process of reform has not yet been completed, but
the five years which have elapsed since its introduction may be a long
enough period to justify an initial evaluation of the problems which have
been encountered and of the results achieved. This evaluation essentially
hinges upon judgements concerning questions relating to the efficiency of
resource allocation, the extent to which market forces are now actually
operative, and the manner in which decentralized decision-making functions
in practice. While progress has been made on all these fronts, it is clearly
difficult to evaluate precisely how far the system as it now exists conforms
to the open socialist market economy eventually sought. Nevertheless,
some judgements are attempted in the following paragraphs. After a
brief review of the aims and techniques of the reforms and some illustrations
of the constraints on the pace of implementation, the existing arrangements
in selected principal areas are described and their implication for economic
policymakingdiscussed.
AimsandStrategy
From an economic viewpoint, the reforms aimed essentially at creating
conditions conducive to more efficient resource allocation so as to speed up
the process of modernizing and rationalizing the Yugoslav economy. It
was felt that this goal could bestbe achieved through further decentralization
of economic decision-making, opening the domestic economy to the greater
influence of market forces, and integrating the economy more closely with
foreign markets. As one step in this direction, central government influence
was to be reduced in three main areas where it was still very important:
investment resource allocation, price formation, and regulation of foreign
trade and payments. More generally, the reform emphasized the need for
further specialisation, rationalisation, and concentration of production as
well as theneed to speed up technicalprogress.
Yugoslavia
The objectives called for wide-reaching changes in the institutional
structure. Arrangements regulating government budgets and control over
money and credit were modified with a view to transferring the function of
investment resource allocation from the government to the enterprises, and
in particular to the banks. Direct government influence over prices and
foreign trade and payments was reduced. To this end a number of price
controls were removed, and the structure of those prices remaining under
control was altered in an attempt to do away with price distortions
carried over from the previous system. Devaluation, abolition of multiple
exchange rates, introduction of more liberal and simplified arrangements
for foreign trade and foreign exchange operations and for certain foreign
capital transactions were all important steps in the drive to integrate the
economy morefullywith the outsideworld.
Chart 1 Social product, employmentand unemployment
Se.-ni-loj.-.celt Indices,.7*57=700
250
Registered unemployment
/
200 -
-s%t*"r Realsocialproduct
/
150 4^(cid:9) "
Totalpaidemployment-
100
// «*/
Si-*
- /
/
/
eo
1352 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969
Source: AnnexTable Aand G.
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OECD Economic Surveys
Constraints on Policy Implementation
There is little doubt that the reforms of the mid-sixties accelerated
the process of moving towards an open socialist economy in which
resource allocation was influenced to a larger extent than before by market-
determined prices and costs. They were probably an important influence,
once the immediate period of adjustment had passed, in establishing the
basis for the recent high rates of growth of social product and productivity.
In addition, despite import liberalisation and other difficulties encountered
in the foreign sector, they helped to reduce the heavy 1964 balance of
Chart 2 Regional disparitiesin percapita income
ewrlhMlKl95!>-57-lS65'67
NationalIncome
(1960nias)
NNaamtionalln:cr£pefcapita
Population
Semi-log.seal» IInnddiicctt;s,Yugoslaviatotal-100
200
vv **SLOVFNIA i.n
(cid:9)«7.10
0M
CROATIA (cid:9)7.90 7.70
0.6S
IJ0
V0IV0DINA (cid:9)»7Ai
100 0.75 Yugoslavia U5
SERBIA
PROPER B.75*y.n
0.75
11.10
(cid:9)-MO
MONTENEGRO 1.70
IJ5
BOSNIAANn (cid:9)-4JO
r(cid:9) /\ 1.95
MACEDONIA 1(cid:9).70-7JO
1J0
\w(cid:9)
^
KBSSOVO -»J0
1*0
N
,i
0
1» 1557 IN \m 1M 1*1 1S2 1X3 I'M IKS 19K 1*7 1*1 1*W
Source: Slalisticki GodisnjakJugoslavije, SZS.
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