CAVIRC.net - UNION OF SERBIA and MONTENEGRO RATINGS

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<div><span class="htmla_titolo"><span class="htmla_paragrafo"><span class="htmla_titolo"><p align="center">UNION OF SERBIA and MONTENEGRO </p><p align="center">COUNTRY RATINGS</p></span></span></span><p align="center"><strong><span class="htmla_paragrafo"><strong></strong></span></strong></p><p align="center"><strong><span class="htmla_paragrafo"><strong>STRENGTHS</strong></span></strong></p><ul><li><p>After a decade of disinvestment and conflicts, the political normalisation process and the reforms undertaken since October 2000 have permitted the country to win international financial community support and consolidate its economic and financial situation.</p></li><li><p>Foreign debt restructuring has improved the country's solvency.</p></li><li><p>The workforce is skilled and low-cost. </p></li></ul></div><div><p align="center"><span class="htmla_paragrafo"><strong>WEAKNESSES</strong></span></p></div><div><ul><li><p>The restructuring of the productive apparatus has not gone far enough with the state-owned company share in the economy still excessive. </p></li><li><p>The low productivity and lack of competitiveness of state-owned companies in conjunction with surging domestic demand have caused the current account deficit to widen. </p></li><li><p>The government has a parliamentary minority and is divided amid a deteriorated social situation, persistent challenges to the country's territorial integrity, and continued risk of drift toward nationalism. </p></li></ul></div><table bordercolor="#330066" cellspacing="1" cellpadding="2" bgcolor="#ffffff" border="1"><tbody><tr><td valign="top" width="208"><div align="center"><strong>USD millions</strong></div></td><td valign="top" width="67"><div align="center"><strong>2001</strong></div></td><td valign="top" width="67"><div align="center"><strong>2002</strong></div></td><td valign="top" width="67"><div align="center"><strong>2003</strong></div></td><td valign="top" width="67"><div align="center"><strong>2004</strong></div></td><td valign="top" width="67"><div align="center"><strong>2005(e)</strong></div></td><td valign="top" width="67"><div align="center"><strong>2006(f)</strong></div></td></tr><tr><td valign="top" width="208"><div><strong>Economic growth (%)</strong></div></td><td valign="top" width="67"><div align="center">5.5</div></td><td valign="top" width="67"><div align="center">4.0</div></td><td valign="top" width="67"><div align="center">2.1</div></td><td valign="top" width="67"><div align="center">8.0</div></td><td valign="top" width="67"><div align="center">5.0</div></td><td valign="top" width="67"><div align="center">5.0</div></td></tr><tr><td valign="top" width="208"><div><strong>Inflation (%)</strong></div></td><td valign="top" width="67"><div align="center">91.0</div></td><td valign="top" width="67"><div align="center">21.3</div></td><td valign="top" width="67"><div align="center">11.2</div></td><td valign="top" width="67"><div align="center">9.8</div></td><td valign="top" width="67"><div align="center">15.9</div></td><td valign="top" width="67"><div align="center">13.6</div></td></tr><tr><td valign="top" width="208"><div><strong>Public sector balance (%GDP)</strong></div></td><td valign="top" width="67"><div align="center">-1.4</div></td><td valign="top" width="67"><div align="center">-4.5</div></td><td valign="top" width="67"><div align="center">-3.3</div></td><td valign="top" width="67"><div align="center">-0.3</div></td><td valign="top" width="67"><div align="center">1.2</div></td><td valign="top" width="67"><div align="center">1.9</div></td></tr><tr><td valign="top" width="208"><div><strong>Unemployment (%)</strong></div></td><td valign="top" width="67"><div align="center">12.2</div></td><td valign="top" width="67"><div align="center">13.3</div></td><td valign="top" width="67"><div align="center">14.6</div></td><td valign="top" width="67"><div align="center">18.5</div></td><td valign="top" width="67"><div align="center">n/a</div></td><td valign="top" width="67"><div align="center">n/a</div></td></tr><tr><td valign="top" width="208"><div><strong>Exports</strong></div></td><td valign="top" width="67"><div align="center">2,003</div></td><td valign="top" width="67"><div align="center">2,412</div></td><td valign="top" width="67"><div align="center">3,054</div></td><td valign="top" width="67"><div align="center">4,219</div></td><td valign="top" width="67"><div align="center">5,485</div></td><td valign="top" width="67"><div align="center">6,472</div></td></tr><tr><td valign="top" width="208"><div><strong>Imports</strong></div></td><td valign="top" width="67"><div align="center">4,837</div></td><td valign="top" width="67"><div align="center">6,320</div></td><td valign="top" width="67"><div align="center">7,941</div></td><td valign="top" width="67"><div align="center">11,653</div></td><td valign="top" width="67"><div align="center">11,245</div></td><td valign="top" width="67"><div align="center">12,257</div></td></tr><tr><td valign="top" width="208"><div><strong>Trade balance</strong></div></td><td valign="top" width="67"><div align="center">-2,834</div></td><td valign="top" width="67"><div align="center">-3,908</div></td><td valign="top" width="67"><div align="center">-4,887</div></td><td valign="top" width="67"><div align="center">-7,434</div></td><td valign="top" width="67"><div align="center">-5,760</div></td><td valign="top" width="67"><div align="center">-5,785</div></td></tr><tr><td valign="top" width="208"><div><strong>Current account balance</strong></div></td><td valign="top" width="67"><div align="center">-528</div></td><td valign="top" width="67"><div align="center">-1,383</div></td><td valign="top" width="67"><div align="center">-2,005</div></td><td valign="top" width="67"><div align="center">-3,148</div></td><td valign="top" width="67"><div align="center">-1,997</div></td><td valign="top" width="67"><div align="center">-2,066</div></td></tr><tr><td valign="top" width="208"><div><strong>Current account balance (%GDP)</strong></div></td><td valign="top" width="67"><div align="center">-4.6</div></td><td valign="top" width="67"><div align="center">-8.9</div></td><td valign="top" width="67"><div align="center">-9.7</div></td><td valign="top" width="67"><div align="center">-13.1</div></td><td valign="top" width="67"><div align="center">-7.8</div></td><td valign="top" width="67"><div align="center">-7.5</div></td></tr><tr><td valign="top" width="208"><div><strong>Foreign debt (%GDP)</strong></div></td><td valign="top" width="67"><div align="center">103.2</div></td><td valign="top" width="67"><div align="center">76.2</div></td><td valign="top" width="67"><div align="center">69.2</div></td><td valign="top" width="67"><div align="center">62.0</div></td><td valign="top" width="67"><div align="center">59.3</div></td><td valign="top" width="67"><div align="center">58.4</div></td></tr><tr><td valign="top" width="208"><div><strong>Debt service (%Exports)</strong></div></td><td valign="top" width="67"><div align="center">2.1</div></td><td valign="top" width="67"><div align="center">3.0</div></td><td valign="top" width="67"><div align="center">6.1</div></td><td valign="top" width="67"><div align="center">9.1</div></td><td valign="top" width="67"><div align="center">13.9</div></td><td valign="top" width="67"><div align="center">12.7</div></td></tr><tr><td valign="top" width="208"><div><strong>Foreign exchange reserves (in months of imports)</strong></div></td><td valign="top" width="67"><div align="center">2.5</div></td><td valign="top" width="67"><div align="center">3.7</div></td><td valign="top" width="67"><div align="center">4.5</div></td><td valign="top" width="67"><div align="center">3.7</div></td><td valign="top" width="67"><div align="center">4.6</div></td><td valign="top" width="67"><div align="center">4.5</div></td></tr></tbody></table><div> </div><table bordercolor="#330066" cellspacing="1" cellpadding="3" bgcolor="#ffffff" border="1"><tbody><tr><td valign="top" width="283"><div align="center"><strong>Indicators</strong></div></td><td valign="top" width="123"><div align="center"><strong>SERBIE AND MONTENEGRO</strong></div></td><td valign="top" width="81"><div align="center"><strong>regional average</strong></div></td><td valign="top" width="88"><div align="center"><strong>emerging countries average</strong></div></td></tr><tr><td valign="top" width="283"><div align="center">GNP per capita (PPP dollars)</div></td><td valign="top" width="123"><div align="right">nd</div></td><td valign="top" width="81"><div align="right">7530</div></td><td valign="top" width="88"><div align="right">4300</div></td></tr><tr><td valign="top" width="283"><div align="center">GNP per capita</div></td><td valign="top" width="123"><div align="right">1910</div></td><td valign="top" width="81"><div align="right">2580</div></td><td valign="top" width="88"><div align="right">1280</div></td></tr><tr><td valign="top" width="283"><div align="center">Human development index</div></td><td valign="top" width="123"><div align="right">nd</div></td><td valign="top" width="81"><div align="right">0,806</div></td><td valign="top" width="88"><div align="right">0,697</div></td></tr><tr><td valign="top" width="283"><div align="center">Wealthiest 10% share of national income (%)</div></td><td valign="top" width="123"><div align="right">nd</div></td><td valign="top" width="81"><div align="right">30</div></td><td valign="top" width="88"><div align="right">33</div></td></tr><tr><td valign="top" width="283"><div align="center">Urban population percentage</div></td><td valign="top" width="123"><div align="right">52</div></td><td valign="top" width="81"><div align="right">74</div></td><td valign="top" width="88"><div align="right">43</div></td></tr><tr><td valign="top" width="283"><div align="center">Percentage under 15 years old</div></td><td valign="top" width="123"><div align="right">19,6</div></td><td valign="top" width="81"><div align="right">20</div></td><td valign="top" width="88"><div align="right">31</div></td></tr><tr><td valign="top" width="283"><div align="center">Number of telephones per 1,000 inhabitants</div></td><td valign="top" width="123"><div align="right">243</div></td><td valign="top" width="81"><div align="right">228</div></td><td valign="top" width="88"><div align="right">112</div></td></tr><tr><td valign="top" width="283"><div align="center">Number of computers per 1,000 inhabitants</div></td><td valign="top" width="123"><div align="right">27,1</div></td><td valign="top" width="81"><div align="right">48</div></td><td valign="top" width="88"><div align="right">40</div></td></tr></tbody></table><div> </div><div> </div><div><p align="center"><span class="htmla_paragrafo"><strong>RISK ASSESSMENT</strong></span></p><p>Although economic growth has slowed due to the tightening of fiscal and monetary policy and moderation of farm production after an exceptional harvest in 2004, it has remained relatively robust. In 2006, it should be buoyed by investments made by newly privatised companies, the development of services, consumption, and a slight improvement in foreign demand. <br />Sovereign risk has eased thanks to improved fiscal performance and the ongoing foreign-debt restructuring process. Major imbalances have nonetheless persisted. Inflation has reappeared and external accounts are still in a deteriorated state despite a reduced trade deficit, attributable mainly to a slowdown of imports. Those weaknesses largely derive from the still excessive share in the economy of state-owned companies lacking in financial discipline, productivity, and competitiveness. The business environment has improved, however, and foreign investors have been demonstrating renewed interest in the country. <br />The political situation has been shaky even if the government has strengthened its position by engaging in negotiations with the European Union on a stabilisation and association agreement. Challenges to the country's territorial integrity have persisted as has the risk of early elections and coming into power of populist and ultra nationalist parties. </p></div></PRE>

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