Already crippled by eight years of international sanctions and decades of economic mismanagement, Yugoslavia’s economy is being dismantled piece by piece by the NATO airstrikes, writes the AP-Dow Jones news agency. According to Yugoslav official estimates, $40 billion in damage has been caused since NATO began its operations on March 24. The destruction will shave at least a third off the country’s $15 billion GDP this year, according to independent Serbian economists.

Destroyed or heavily damaged so far: Yugoslavia’s two largest oil refineries, in Pancevo and Novi Sad; the October 14 plant in Krusevac (the largest heavy machinery plant in the Balkans); the Zastava auto plant in Kragujevac (which employed 38,000 workers and produced the Yugo car); as well as power stations, a domestic appliance factory, chemical factories, airports, bridges, television transmitters and stations.

Factories are working at a low capacity, and agricultural activity has virtually come to a halt. Unemployment has soared to nearly 50 percent. Some 500,000 people have been laid off since the first strike, adding to the more than 1 million previously unemployed. Schools and universities were closed shortly after the first NATO attacks, and fuel rationing has forced municipal authorities to cut public transport by half.

Yugoslavia’s economy was struggling long before the airstrikes began. In 1998 both the budget and the current account showed large deficits, and inflation had returned to high levels. The budget deficit reached about 10 percent of GDP in 1998, financed largely by monetary emissions. Wage and pension arrears were mounting, and inflation had reached an estimated 50–70 percent, up from 18.5 percent in 1997.

Exports of $2.1 billion dollars and imports of $3.5 billion during the first eight months of 1998 showed virtually no growth from the previous year. Lack of foreign capital made financing the trade deficit difficult, and foreign trade transactions were already being carried out almost exclusively on a cash or barter basis. Foreign currency reserves had fallen to about $200 million by the end of 1998.

Privatization had ground to a halt, hindered by the high level of indebtedness of large state-owned enterprises and increased uncertainty. Privatization revenues in 1998 barely reached $100 million dollars—far from the target of $1.5 billion. Meanwhile, enterprise insolvencies rose to a cumulative total of 27,888 companies, with total liabilities of more than 20 billion dinars by mid-1998 ($2.0 billion at the official exchange rate). The banking sector remained weak, and no reforms were planned. Nineteen of the 104 banks recorded losses, which totaled 460.3 million dinars ($46 million) in 1998.