six republics of the former Yugoslavia, Macedonia was one of the least developed economically. In 1991 its gross domestic product (GDP) per capita was about one-third that of Slovenia, the richest of the republics. GDP, which measures the value of goods and services produced in a country, fell by more than 30 percent from 1991 to 1995. The independent republic saw its first economic growth in 1996. Unemployment has been a dominant problem, with the unemployment rate topping 33 percent in 1995 and rising to 40 percent in 1998. In 1998 continued growth and a government program to create jobs began to reduce the number of unemployed workers. In 1999 the GDP was $3.5 billion.
At independence in November 1991, Macedonia was the least developed of the Yugoslav republics, producing a mere 5% of the total federal output of goods and services. The collapse of Yugoslavia ended transfer payments from the center and eliminated advantages from inclusion in a de facto free trade area. An absence of infrastructure, UN sanctions on its largest market Yugoslavia, and a Greek economic embargo hindered economic growth until 1996. GDP has subsequently increased each year, rising by 5% in 2000. Successful privatization in 2000 boosted the country's reserves to over $700 million. Also, the leadership demonstrated a continuing commitment to economic reform, free trade, and regional integration. Inflation jumped to 11% in 2000, largely due to higher oil prices.
FYROM’s economic transition was successful in some ways. Inflation, which was 1,691 percent in 1992, had dropped to 1.3 percent in mid-1998. Many firms were transferred from government control to private control. Transferring firms to private ownership so that they could operate on the basis of supply and demand was an important step in creating a free-market economy in the FYROM. The pace of such structural change was slow until the late 1990s because the process was dominated by insider privatization; that is, many firms were sold to their former managers. However, laws passed in the late 1990s to discourage insider privatization helped speed structural change. A major increase in foreign investment in FYROM firms in 1998 reinforced the trend.
