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Yugoslavia: The Economic Reform of 1965
Country Study > Chapter 3 > The Economy > Economic History > The Economic Reform of 1965

THE ECONOMIC REFORM OF 1965


The reform of July 1965 consisted of thirty laws that formed the legislative framework for market socialism. An important goal of this framework was to allow enterprises to keep a larger share of their earned income, much of which was previously paid to the government. The five major components of the reform were: lower taxes; limited state control of investment allocations; removal of price controls and large adjustments to product prices, to bring domestic prices closer to world price levels; devaluation of the dinar and reduction of customs duties and export subsidies; and permission and credit for peasant landowners to buy farm machinery.

Economic performance in the 1950s and early 1960s was strong primarily because of consistently heavy investment policies. Between 1954 and 1965, gross material productincreased by an average of 8.4 percent per year. In the same period, gross industrial output increased at a yearly average of 12.2 percent; industrial employment, 6.6 percent; social sector employment, 5.9 percent; exports 11.7 percent; and fixed investments 9.2 percent per year. In the mid-1960s, however, these rates began to fall because the 1965 reform caused excessive demand on resources, growing inflation, continuing balance-of-payments problems, and expanded unemployment. From 1965 to 1974, average annual GMP growth dropped to 6.4 percent, gross industrial output to 7.7 percent, industrial employment to 3.3 percent, social sector employment to 2.9 percent, exports to 5.6 percent, and fixed investments to 8.2 percent per year.

Data as of December 1990




Last Updated: December 1990


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Yugoslavia was first published in 1990. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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