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Afghanistan Afghanistan Afghanistan's economic outlook has improved significantly since the fall of the Taliban regime in 2001 because of the infusion of over $8 billion in international assistance, recovery of the agricultural sector and growth of the service sector, and the reestablishment of market institutions. Real GDP growth is estimated to have slowed in the last fiscal year primarily because adverse weather conditions cut agricultural production, but is expected to rebound over 2005-06 because of foreign donor reconstruction and service sector growth. Despite the progress of the past few years, Afghanistan remains extremely poor, landlocked, and highly dependent on foreign aid, farming, and trade with neighboring countries. It will probably take the remainder of the decade and continuing donor aid and attention to significantly raise Afghanistan's living standards from its current status, among the lowest in the world. Much of the population continues to suffer from shortages of housing, clean water, electricity, medical care, and jobs, but the Afghan government and international donors remain committed to improving access to these basic necessities by prioritizing infrastructure development, education, housing development, jobs programs, and economic reform over the next year. Growing political stability and continued international commitment to Afghan reconstruction create an optimistic outlook for continuing improvements in the Afghan economy in 2006. Expanding poppy cultivation and a growing opium trade may account for one-third of GDP and looms as one of Kabul's most serious policy challenges. Other long-term challenges include: boosting the supply of skilled labor, reducing vulnerability to severe natural disasters, expanding health services, and rebuilding a war torn infrastructure. Afghanistan is an extremely poor, landlocked country, highly dependent on foreign aid, farming and livestock raising (sheep and goats), and trade with neighboring countries. Economic considerations have played second fiddle to political and military upheavals during more than two decades of war, including the nearly 10-year Soviet military occupation (which ended 15 February 1989). During that conflict, one-third of the population fled the country, with Pakistan and Iran sheltering a combined peak of 4 to 6 million refugees. Gross domestic product has fallen substantially over the past 20 years because of the loss of labor and capital and the disruption of trade and transport; severe drought added to the nation's difficulties in 1998-2002. The majority of the population continues to suffer from insufficient food, clothing, housing, and medical care, and a dearth of jobs, problems exacerbated by political uncertainties and the general level of lawlessness. International efforts to rebuild Afghanistan were addressed at the Tokyo Donors Conference for Afghan Reconstruction in January 2002, when $4.5 billion was pledged, $1.7 billion for 2002. Of that approximately $900 million was directed to humanitarian aid - food, clothing, and shelter - and another $90 million for the Afghan Transitional Authority. Further World Bank and other aid came in 2003. Priority areas for reconstruction include upgrading education, health, and sanitation facilities; providing income generating opportunities; enhancing administrative and security arrangements, especially in regional areas; developing the agricultural sector; rebuilding transportation, energy, and telecommunication infrastructure; and reabsorbing 2 million returning refugees. The replacement of the opium trade - which may account for one-third of GDP - and the search for oil and gas resources in the northern region are two major long-term issues.
Akrotiri Akrotiri Economic activity is limited to providing services to the military and their families located in Akrotiri. All food and manufactured goods must be imported. -
Albania Albania Lagging behind its Balkan neighbors, Albania is making the difficult transition to a more modern open-market economy. The government has taken measures to curb violent crime and to spur economic activity and trade. The economy is bolstered by annual remittances from abroad of $600-$800 million, mostly from Greece and Italy; this helps offset the towering trade deficit. Agriculture, which accounts for about one-quarter of GDP, is held back because of frequent drought and the need to modernize equipment, to clarify property rights, and to consolidate small plots of land. Energy shortages and antiquated and inadequate infrastructure contribute to Albania's poor business environment, which make it difficult to attract and sustain foreign investment. The planned construction of a new thermal power plant near Vlore and improved transmission and distribution facilities will help relieve the energy shortages. Also, the government is moving slowly to improve the poor national road and rail network, a long-standing barrier to sustained economic growth. On the positive side: growth was strong in 2003-05 and inflation is not a problem. Poor and backward by European standards, Albania is making the difficult transition to a more modern open-market economy. The government has taken measures to curb violent crime and to spur economic activity and trade. The economy is bolstered by remittances from abroad of $400-$600 million annually, mostly from Greece and Italy; this helps offset the sizable trade deficit. Agriculture, which accounts for half of GDP, is held back because of frequent drought and the need to modernize equipment and consolidate small plots of land. Severe energy shortages are forcing small firms out of business, increasing unemployment, scaring off foreign investors, and spurring inflation. The government plans to boost energy imports to relieve the shortages. In addition, the government is moving to improve the poor national road network, a long-standing barrier to sustained economic growth.
Algeria Algeria The hydrocarbons sector is the backbone of the economy, accounting for roughly 60% of budget revenues, 30% of GDP, and over 95% of export earnings. Algeria has the seventh-largest reserves of natural gas in the world and is the second-largest gas exporter; it ranks 14th in oil reserves. Sustained high oil prices in recent years, along with macroeconomic policy reforms supported by the IMF, have helped improve Algeria's financial and macroeconomic indicators. Algeria is running substantial trade surpluses and building up record foreign exchange reserves. Real GDP has risen due to higher oil output and increased government spending. The government's continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector, however, has had little success in reducing high unemployment and improving living standards. The population is becoming increasingly restive due to the lack of jobs and housing and frequently stages protests, which have resulted in arrests and injuries, including some deaths as government forces intervened to restore order. Structural reform within the economy, such as development of the banking sector and the construction of infrastructure, moves ahead slowly hampered by corruption and bureaucratic resistance. The hydrocarbons sector is the backbone of the economy, accounting for roughly 60% of budget revenues, 30% of GDP, and over 95% of export earnings. Algeria has the fifth-largest reserves of natural gas in the world and is the second-largest gas exporter; it ranks 14th in oil reserves. Algeria's financial and economic indicators improved during the mid-1990s, in part because of policy reforms supported by the IMF and debt rescheduling from the Paris Club. Algeria's finances in 2000-03 benefited from substantial trade surpluses, record foreign exchange reserves, and reductions in foreign debt. Real GDP has risen due to higher oil output and increased government spending. The government's continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector, however, has had little success in reducing high unemployment and improving living standards.
American Samoa American Samoa American Samoa has a traditional Polynesian economy in which more than 90% of the land is communally owned. Economic activity is strongly linked to the US with which American Samoa conducts most of its foreign trade. Tuna fishing and tuna processing plants are the backbone of the private sector, with canned tuna the primary export. Transfers from the US Government add substantially to American Samoa's economic well being. Attempts by the government to develop a larger and broader economy are restrained by Samoa's remote location, its limited transportation, and its devastating hurricanes. Tourism is a promising developing sector. This is a traditional Polynesian economy in which more than 90% of the land is communally owned. Economic activity is strongly linked to the US, with which American Samoa conducts most of its foreign trade. Tuna fishing and tuna processing plants are the backbone of the private sector, with canned tuna the primary export. Transfers from the US Government add substantially to American Samoa's economic well-being. Attempts by the government to develop a larger and broader economy are restrained by Samoa's remote location, its limited transportation, and its devastating hurricanes. Tourism, a developing sector, has been held back by the recurring financial difficulties in East Asia.
Andorra Andorra Tourism, the mainstay of Andorra's tiny, well-to-do economy, accounts for more than 80% of GDP. An estimated 11.6 million tourists visit annually, attracted by Andorra's duty-free status and by its summer and winter resorts. Andorra's comparative advantage has recently eroded as the economies of neighboring France and Spain have been opened up, providing broader availability of goods and lower tariffs. The banking sector, with its partial "tax haven" status, also contributes substantially to the economy. Agricultural production is limited - only 2% of the land is arable - and most food has to be imported. The principal livestock activity is sheep raising. Manufacturing output consists mainly of cigarettes, cigars, and furniture. Andorra is a member of the EU Customs Union and is treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products. Tourism, the mainstay of Andorra's tiny, well-to-do economy, accounts for roughly 80% of GDP. An estimated 9 million tourists visit annually, attracted by Andorra's duty-free status and by its summer and winter resorts. Andorra's comparative advantage has recently eroded as the economies of neighboring France and Spain have been opened up, providing broader availability of goods and lower tariffs. The banking sector, with its "tax haven" status, also contributes substantially to the economy. Agricultural production is limited - only 2% of the land is arable - and most food has to be imported. The principal livestock activity is sheep raising. Manufacturing output consists mainly of cigarettes, cigars, and furniture. Andorra is a member of the EU Customs Union and is treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products.
Angola Angola Angola's high growth rate is driven by its oil sector, with record oil prices and rising petroleum production. Oil production and its supporting activities contribute about half of GDP and 90% of exports. Increased oil production supported 12% growth in 2004 and 19% growth in 2005. A postwar reconstruction boom and resettlement of displaced persons has led to high rates of growth in construction and agriculture as well. Much of the country's infrastructure is still damaged or undeveloped from the 27-year-long civil war. Remnants of the conflict such as widespread land mines still mar the countryside even though an apparently durable peace was established after the death of rebel leader Jonas SAVIMBI in February 2002. Subsistence agriculture provides the main livelihood for half of the population, but half of the country's food must still be imported. In 2005, the government started using a $2 billion line of credit from China to rebuild Angola's public infrastructure, and several large-scale projects are scheduled for completion by 2006. The central bank in 2003 implemented an exchange rate stabilization program using foreign exchange reserves to buy kwanzas out of circulation, a policy that was more sustainable in 2005 because of strong oil export earnings, and has significantly reduced inflation. Consumer inflation declined from 325% in 2000 to about 18% in 2005, but the stabilization policy places pressure on international net liquidity. To fully take advantage of its rich national resources - gold, diamonds, extensive forests, Atlantic fisheries, and large oil deposits - Angola will need to continue reforming government policies and to reduce corruption. The government has made sufficient progress on reforms recommended by the IMF such as promoting greater transparency in government spending but continues to be without a formal monitoring agreement with the institution. Angola has been an economy in disarray because of a quarter century of nearly continuous warfare. An apparently durable peace was established after the death of rebel leader Jonas SAVIMBI on February 22, 2002, but consequences from the conflict continue including the impact of wide-spread land mines. Subsistence agriculture provides the main livelihood for 85% of the population. Oil production and the supporting activities are vital to the economy, contributing about 45% to GDP and more than half of exports. Much of the country's food must still be imported. To fully take advantage of its rich natural resources - gold, diamonds, extensive forests, Atlantic fisheries, and large oil deposits - Angola will need to continue reforming government policies. While Angola made progress in bringing inflation down further, from 325% in 2000 to about 106% in 2002, the government has failed to make sufficient progress on reforms recommended by the IMF such as increasing foreign exchange reserves and promoting greater transparency in government spending. Increased oil production should bring about 6% GDP growth in 2003.
Anguilla Anguilla Anguilla has few natural resources, and the economy depends heavily on luxury tourism, offshore banking, lobster fishing, and remittances from emigrants. Increased activity in the tourism industry, which has spurred the growth of the construction sector, has contributed to economic growth. Anguillan officials have put substantial effort into developing the offshore financial sector, which is small, but growing. In the medium term, prospects for the economy will depend largely on the tourism sector and, therefore, on revived income growth in the industrialized nations as well as on favorable weather conditions. Anguilla has few natural resources, and the economy depends heavily on luxury tourism, offshore banking, lobster fishing, and remittances from emigrants. Increased activity in the tourism industry, which has spurred the growth of the construction sector, has contributed to economic growth. Anguillan officials have put substantial effort into developing the offshore financial sector, which is small, but growing. In the medium term, prospects for the economy will depend largely on the tourism sector and, therefore, on revived income growth in the industrialized nations as well as on favorable weather conditions.
Antarctica Antarctica Fishing off the coast and tourism, both based abroad, account for Antarctica's limited economic activity. Antarctic fisheries in 2003-04 (1 July-30 June) reported landing 136,262 metric tons (estimated fishing from the area covered by the Convention on the Conservation of Antarctic Marine Living Resources (CCAMLR), which extends slightly beyond the Antarctic Treaty area). Unregulated fishing, particularly of Patagonian toothfish, is a serious problem. The CCAMLR determines the recommended catch limits for marine species. A total of 23,175 tourists visited in the 2004-05 Antarctic summer, up from the 19,486 visitors the previous year. Nearly all of them were passengers on commercial (nongovernmental) ships and several yachts that make trips during the summer. Most tourist trips last approximately two weeks. Fishing off the coast and tourism, both based abroad, account for the limited economic activity. Antarctic fisheries in 2000-01 (1 July-30 June) reported landing 112,934 metric tons. Unregulated fishing, particularly of tooth fish, is a serious problem. Allegedly illegal fishing in antarctic waters in 1998 resulted in the seizure (by France and Australia) of at least eight fishing ships. The Convention on the Conservation of Antarctic Marine Living Resources determines the recommended catch limits for marine species. A total of 12,248 tourists visited in the 2000-01 antarctic summer, down from the 14,762 who visited the previous year. Nearly all of them were passengers on 21 commercial (nongovernmental) ships and several yachts that made trips during the summer. Most tourist trips lasted approximately two weeks.
Antigua and Barbuda Antigua and Barbuda Tourism continues to dominate the economy, accounting for more than half of GDP. Weak tourist arrival numbers since early 2000 have slowed the economy, however, and pressed the government into a tight fiscal corner. The dual-island nation's agricultural production is focused on the domestic market and constrained by a limited water supply and a labor shortage stemming from the lure of higher wages in tourism and construction. Manufacturing comprises enclave-type assembly for export with major products being bedding, handicrafts, and electronic components. Prospects for economic growth in the medium term will continue to depend on income growth in the industrialized world, especially in the US, which accounts for slightly more than one-third of tourist arrivals. Tourism continues to dominate the economy, accounting for more than half of GDP. Weak tourist arrival numbers since early 2000 have slowed the economy, however, and pressed the government into a tight fiscal corner. The dual-island nation's agricultural production is focused on the domestic market and constrained by a limited water supply and a labor shortage stemming from the lure of higher wages in tourism and construction. Manufacturing comprises enclave-type assembly for export with major products being bedding, handicrafts, and electronic components. Prospects for economic growth in the medium term will continue to depend on income growth in the industrialized world, especially in the US, which accounts for slightly more than one-third of tourist arrivals.
Arctic Ocean Arctic Ocean Economic activity is limited to the exploitation of natural resources, including petroleum, natural gas, fish, and seals. Economic activity is limited to the exploitation of natural resources, including petroleum, natural gas, fish, and seals.
Argentina Argentina Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Over the past decade, however, the country has suffered problems of inflation, external debt, capital flight, and budget deficits. Growth in 2000 was a negative 0.8%, as both domestic and foreign investors remained skeptical of the government's ability to pay debts and maintain the peso's fixed exchange rate with the US dollar. The economic situation worsened in 2001 with the widening of spreads on Argentine bonds, massive withdrawals from the banks, and a further decline in consumer and investor confidence. Government efforts to achieve a "zero deficit," to stabilize the banking system, and to restore economic growth proved inadequate in the face of the mounting economic problems. The peso's peg to the dollar was abandoned in January 2002, and the peso was floated in February. The exchange rate plunged and real GDP fell by 10.9% in 2002, but by mid-year the economy had stabilized, albeit at a lower level. GDP expanded by about 9% per year from 2003 to 2005. Growth is being led by a revival in domestic demand, solid exports, and favorable external conditions. The government boosted spending ahead of the October 2005 midterm congressional elections, but strong revenue performance allowed Argentina to maintain a budget surplus. Inflation has been rising steadily and reached 12.3 percent in 2005. Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Over the past decade, however, the country has suffered recurring economic problems of inflation, external debt, capital flight, and budget deficits. Growth in 2000 was a negative 0.8%, as both domestic and foreign investors remained skeptical of the government's ability to pay debts and maintain the peso's fixed exchange rate with the US dollar. The economic situation worsened in 2001 with the widening of spreads on Argentine bonds, massive withdrawals from the banks, and a further decline in consumer and investor confidence. Government efforts to achieve a "zero deficit," to stabilize the banking system, and to restore economic growth proved inadequate in the face of the mounting economic problems. The peso's peg to the dollar was abandoned in January 2002, and the peso was floated in February; the exchange rate plunged and inflation picked up rapidly, but by mid-2002 the economy had stabilized, albeit at a lower level. Strong demand for the peso compelled the Central Bank to intervene in foreign exchange markets to curb its appreciation in early 2003. Led by record exports, the economy began to recover with output up 5.5% in 2003, unemployment falling, and inflation sliced to 4.2% at year-end.
Armenia Armenia Under the old Soviet central planning system, Armenia had developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Since the implosion of the USSR in December 1991, Armenia has switched to small-scale agriculture away from the large agroindustrial complexes of the Soviet era. The agricultural sector has long-term needs for more investment and updated technology. The privatization of industry has been at a slower pace, but has been given renewed emphasis by the current administration. Armenia is a food importer, and its mineral deposits (copper, gold, bauxite) are small. The ongoing conflict with Azerbaijan over the ethnic Armenian-dominated region of Nagorno-Karabakh and the breakup of the centrally directed economic system of the former Soviet Union contributed to a severe economic decline in the early 1990s. By 1994, however, the Armenian Government had launched an ambitious IMF-sponsored economic liberalization program that resulted in positive growth rates in 1995-2005. Armenia joined the WTO in January 2003. Armenia also has managed to slash inflation, stabilize its currency, and privatize most small- and medium-sized enterprises. Armenia's unemployment rate, however, remains high, despite strong economic growth. The chronic energy shortages Armenia suffered in the early and mid-1990s have been offset by the energy supplied by one of its nuclear power plants at Metsamor. Armenia is now a net energy exporter, although it does not have sufficient generating capacity to replace Metsamor, which is under international pressure to close. The electricity distribution system was privatized in 2002. Armenia's severe trade imbalance has been offset somewhat by international aid, remittances from Armenians working abroad, and foreign direct investment. Economic ties with Russia remain close, especially in the energy sector. The government made some improvements in tax and customs administration in 2005, but anti-corruption measures will be more difficult to implement. Investment in the construction and industrial sectors is expected to continue in 2006 and will help to ensure annual average real GDP growth of about 13.9%. Under the old Soviet central planning system, Armenia had developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Since the implosion of the USSR in December 1991, Armenia has switched to small-scale agriculture away from the large agroindustrial complexes of the Soviet era. The agricultural sector has long-term needs for more investment and updated technology. The privatization of industry has been at a slower pace, but has been given renewed emphasis by the current administration. Armenia is a food importer, and its mineral deposits (copper, gold, bauxite) are small. The ongoing conflict with Azerbaijan over the ethnic Armenian-dominated region of Nagorno-Karabakh and the breakup of the centrally directed economic system of the former Soviet Union contributed to a severe economic decline in the early 1990s. By 1994, however, the Armenian Government had launched an ambitious IMF-sponsored economic program that has resulted in positive growth rates in 1995-2003. Armenia also has managed to slash inflation, stabilize the local currency (the dram), and privatize most small- and medium-sized enterprises. The chronic energy shortages Armenia suffered in the early and mid-1990s have been offset by the energy supplied by one of its nuclear power plants at Metsamor. Armenia is now a net energy exporter, although it does not have sufficient generating capacity to replace Metsamor, which is under international pressure to close. The electricity distribution system was privatized in 2002. Armenia's severe trade imbalance has been offset somewhat by international aid, domestic restructuring of the economy, and foreign direct investment. Economic ties with Russia remain close, especially in the energy sector.
Aruba Aruba Tourism is the mainstay of the small, open Aruban economy, with offshore banking and oil refining and storage also important. The rapid growth of the tourism sector over the last decade has resulted in a substantial expansion of other activities. Over 1.5 million tourists per year visit Aruba, with 75% of those from the US. Construction continues to boom, with hotel capacity five times the 1985 level. In addition, the reopening of the country's oil refinery in 1993, a major source of employment and foreign exchange earnings, has further spurred growth. Tourist arrivals have rebounded strongly following a dip after the 11 September 2001 attacks. The island experiences only a brief low season, and hotel occupancy in 2004 averaged 80%, compared to 68% throughout the rest of the Caribbean. The newly re-elected government has made cutting the budget and trade deficits a high priority. Tourism is the mainstay of the small, open Aruban economy, with offshore banking and oil refining and storage also important. The rapid growth of the tourism sector over the last decade has resulted in a substantial expansion of other activities. Construction has boomed, with hotel capacity five times the 1985 level. In addition, the reopening of the country's oil refinery in 1993, a major source of employment and foreign exchange earnings, has further spurred growth. Aruba's small labor force and low unemployment rate have led to a large number of unfilled job vacancies, despite sharp rises in wage rates in recent years. Tourist arrivals have declined in the aftermath of the 11 September 2001 terrorist attacks on the US. The government now must deal with a budget deficit and a negative trade balance.
Ashmore and Cartier Islands Ashmore and Cartier Islands no economic activity no economic activity
Atlantic Ocean Atlantic Ocean The Atlantic Ocean provides some of the world's most heavily trafficked sea routes, between and within the Eastern and Western Hemispheres. Other economic activity includes the exploitation of natural resources, e.g., fishing, dredging of aragonite sands (The Bahamas), and production of crude oil and natural gas (Caribbean Sea, Gulf of Mexico, and North Sea). The Atlantic Ocean provides some of the world's most heavily trafficked sea routes, between and within the Eastern and Western Hemispheres. Other economic activity includes the exploitation of natural resources, e.g., fishing, the dredging of aragonite sands (The Bahamas), and production of crude oil and natural gas (Caribbean Sea, Gulf of Mexico, and North Sea).
Australia Australia Australia has an enviable Western-style capitalist economy with a per capita GDP on par with the four dominant West European economies. Rising output in the domestic economy, robust business and consumer confidence, and rising exports of raw materials and agricultural products are fueling the economy. Australia's emphasis on reforms, low inflation, and growing ties with China are other key factors behind the economy's strength. The impact of drought, weak foreign demand, and strong import demand pushed the trade deficit up from $8 billion in 2002, to $18 billion in 2003, $13 billion in 2004, and nearly $17 billion in 2005. Housing prices probably peaked in 2005, diminishing the prospect that interest rates would be raised to prevent a speculative bubble. Conservative fiscal policies have kept Australia's budget in surplus from 2002 to 2005. Australia has a prosperous Western-style capitalist economy, with a per capita GDP on par with the four dominant West European economies. Rising output in the domestic economy has been offsetting the global slump, and business and consumer confidence remains robust. Australia's emphasis on reforms is another key factor behind the economy's strength. The stagnant economic conditions in major export partners and the impact of the worst drought in 100 years cast a shadow over prospects for 2003.
Austria Austria Austria, with its well-developed market economy and high standard of living, is closely tied to other EU economies, especially Germany's. The Austrian economy also benefits greatly from strong commercial relations, especially in the banking and insurance sectors, with central, eastern, and southeastern Europe. The economy features a large service sector, a sound industrial sector, and a small, but highly developed agricultural sector. Membership in the EU has drawn an influx of foreign investors attracted by Austria's access to the single European market and proximity to the new EU economies. The current government has successfully pursued a comprehensive economic reform program, aimed at streamlining government, creating a more competitive business environment, further strengthening Austria's attractiveness as an investment location, pursuing a balanced budget, and implementing effective pension reforms. Weak domestic consumption and slow growth in Europe have held the economy to growth rates of 0.4% in 2002, 1.4% in 2003, 2.4% in 2004, and 1.8% in 2005. To meet increased competition from both EU and Central European countries, particularly the new EU members, Austria will need to continue restructuring, emphasizing knowledge-based sectors of the economy, and encouraging greater labor flexibility and greater labor participation by its aging population. Austria, with its well-developed market economy and high standard of living, is closely tied to other EU economies, especially Germany's. Membership in the EU has drawn an influx of foreign investors attracted by Austria's access to the single European market and proximity to EU aspirant economies. Slowing growth in Germany and elsewhere in the world held the economy to only 1.2% growth in 2001, 0.6% in 2002, and 0.8% in 2003.. To meet increased competition from both EU and Central European countries, Austria will need to emphasize knowledge-based sectors of the economy, continue to deregulate the service sector, and lower its tax burden. A key issue is the encouragement of much greater participation in the labor market by its ageing population.
Azerbaijan Azerbaijan Azerbaijan's number one export is oil. Azerbaijan's oil production declined through 1997, but has registered an increase every year since. Negotiation of production-sharing arrangements (PSAs) with foreign firms, which have thus far committed $60 billion to long-term oilfield development, should generate the funds needed to spur future industrial development. Oil production under the first of these PSAs, with the Azerbaijan International Operating Company, began in November 1997. A consortium of Western oil companies is scheduled to begin pumping 1 million barrels a day from a large offshore field in early 2006, through a $4 billion pipeline it built from Baku to Turkey's Mediterranean port of Ceyhan. Economists estimate that by 2010 revenues from this project will double the country's current GDP. Azerbaijan shares all the formidable problems of the former Soviet republics in making the transition from a command to a market economy, but its considerable energy resources brighten its long-term prospects. Baku has only recently begun making progress on economic reform, and old economic ties and structures are slowly being replaced. Several other obstacles impede Azerbaijan's economic progress: the need for stepped up foreign investment in the non-energy sector, the continuing conflict with Armenia over the Nagorno-Karabakh region, and the pervasive corruption. Trade with Russia and the other former Soviet republics is declining in importance while trade is building with Turkey and the nations of Europe. Long-term prospects will depend on world oil prices, the location of new pipelines in the region, and Azerbaijan's ability to manage its oil wealth. Azerbaijan's number one export is oil. Azerbaijan's oil production declined through 1997 but has registered an increase every year since. Negotiation of production-sharing arrangements (PSAs) with foreign firms, which have thus far committed $60 billion to long-term oilfield development, should generate the funds needed to spur future industrial development. Oil production under the first of these PSAs, with the Azerbaijan International Operating Company, began in November 1997. Azerbaijan shares all the formidable problems of the former Soviet republics in making the transition from a command to a market economy, but its considerable energy resources brighten its long-term prospects. Baku has only recently begun making progress on economic reform, and old economic ties and structures are slowly being replaced. One obstacle to economic progress is the need for stepped up foreign investment in the non-energy sector. A second obstacle is the continuing conflict with Armenia over the Nagorno-Karabakh region. Trade with Russia and the other former Soviet republics is declining in importance while trade is building with Turkey and the nations of Europe. Long-term prospects will depend on world oil prices, the location of new pipelines in the region, and Azerbaijan's ability to manage its oil wealth.
Bahamas, The Bahamas, The The Bahamas is a stable, developing nation with an economy heavily dependent on tourism and offshore banking. Tourism together with tourism-driven construction and manufacturing accounts for approximately 60% of GDP and directly or indirectly employs half of the archipelago's labor force. Steady growth in tourism receipts and a boom in construction of new hotels, resorts, and residences had led to solid GDP growth in recent years, but the slowdown in the US economy and the attacks of 11 September 2001 held back growth in these sectors in 2001-03. The current government has presided over a period of economic recovery and an upturn in large-scale private sector investments in tourism. Financial services constitute the second-most important sector of the Bahamian economy, accounting for about 15% of GDP. However, since December 2000, when the government enacted new regulations on the financial sector, many international businesses have left The Bahamas. Manufacturing and agriculture together contribute approximately a tenth of GDP and show little growth, despite government incentives aimed at those sectors. Overall growth prospects in the short run rest heavily on the fortunes of the tourism sector, which depends on growth in the US, the source of more than 80% of the visitors. The Bahamas is a stable, developing nation with an economy heavily dependent on tourism and offshore banking. Tourism alone accounts for more than 60% of GDP and directly or indirectly employs half of the archipelago's labor force. Steady growth in tourism receipts and a boom in construction of new hotels, resorts, and residences had led to solid GDP growth in recent years, but the slowdown in the US economy and the attacks of 11 September 2001 held back growth in these sectors in 2002. Manufacturing and agriculture together contribute approximately a tenth of GDP and show little growth, despite government incentives aimed at those sectors. Overall growth prospects in the short run rest heavily on the fortunes of the tourism sector, which depends on growth in the US, the source of most of the visitors.
Bahrain Bahrain Petroleum production and refining account for about 60% of Bahrain's export receipts, 60% of government revenues, and 30% of GDP. With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the Gulf. A large share of exports consists of petroleum products made from refining imported crude. Construction proceeds on several major industrial projects. Unemployment, especially among the young, and the depletion of oil and underground water resources are major long-term economic problems. In 2005 Bahrain and the US ratified a Free Trade Agreement (FTA), the first FTA between the US and a Gulf state. In Bahrain, petroleum production and refining account for about 60% of export receipts, 60% of government revenues, and 30% of GDP. With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the Gulf. Bahrain is dependent on Saudi Arabia for oil granted as aid. A large share of exports consists of petroleum products made from refining imported crude. Construction proceeds on several major industrial projects. Unemployment, especially among the young, and the depletion of oil and underground water resources are major long-term economic problems.
Baker Island Baker Island no economic activity no economic activity
Bangladesh Bangladesh Despite sustained domestic and international efforts to improve economic and demographic prospects, Bangladesh remains a poor, overpopulated, and inefficiently-governed nation. Although half of GDP is generated through the service sector, nearly two-thirds of Bangladeshis are employed in the agriculture sector, with rice as the single-most-important product. Major impediments to growth include frequent cyclones and floods, inefficient state-owned enterprises, inadequate port facilities, a rapidly growing labor force that cannot be absorbed by agriculture, delays in exploiting energy resources (natural gas), insufficient power supplies, and slow implementation of economic reforms. Reform is stalled in many instances by political infighting and corruption at all levels of government. Progress also has been blocked by opposition from the bureaucracy, public sector unions, and other vested interest groups. The BNP government, led by Prime Minister Khaleda ZIA, has the parliamentary strength to push through needed reforms, but the party's political will to do so has been lacking in key areas. One encouraging note: growth has been a steady 5% for the past several years. Despite sustained domestic and international efforts to improve economic and demographic prospects, Bangladesh remains a poor, overpopulated, and ill-governed nation. Although half of GDP is generated through the service sector, nearly two-thirds of Bangladeshis are employed in the agriculture sector, with rice as the single-most-important product. Major impediments to growth include frequent cyclones and floods, inefficient state-owned enterprises, inadequate port facilities, a rapidly growing labor force that cannot be absorbed by agriculture, delays in exploiting energy resources (natural gas), insufficient power supplies, and slow implementation of economic reforms. Economic reform is stalled in many instances by political infighting and corruption at all levels of government. Progress also has been blocked by opposition from the bureaucracy, public sector unions, and other vested interest groups. The BNP government, led by Prime Minister Khaleda ZIA, has the parliamentary strength to push through needed reforms, but the party's political will to do so has been lacking in key areas.
Barbados Barbados Historically, the Barbadian economy had been dependent on sugarcane cultivation and related activities, but production in recent years has diversified into light industry and tourism. Offshore finance and information services are important foreign exchange earners. The government continues its efforts to reduce unemployment, to encourage direct foreign investment, and to privatize remaining state-owned enterprises. The economy contracted in 2002-03 mainly due to a decline in tourism. Growth was positive in 2005, as economic conditions in the US and Europe moderately improved. Historically, the Barbadian economy had been dependent on sugarcane cultivation and related activities, but production in recent years has diversified into manufacturing and tourism. Offshore finance and information services are important foreign exchange earners, and there is also a light-manufacturing sector. The government continues its efforts to reduce unemployment, to encourage direct foreign investment, and to privatize remaining state-owned enterprises. The economy contracted in 2002 mainly due to a 3% decline in tourism. Growth should be positive in 2003, the precise level largely dependent on economic conditions in the US and Europe.
Bassas da India Bassas da India no economic activity no economic activity
Belarus Belarus Belarus's economy in 2005 posted 8% growth. The government has succeeded in lowering inflation over the past several years. Trade with Russia - by far its largest single trade partner - decreased in 2005, largely as a result of a change in the way the Value Added Tax (VAT) on trade was collected. Trade with European countries increased. Belarus has seen little structural reform since 1995, when President LUKASHENKO launched the country on the path of "market socialism." In keeping with this policy, LUKASHENKO reimposed administrative controls over prices and currency exchange rates and expanded the state's right to intervene in the management of private enterprises. During 2005, the government re-nationalized a number of private companies. In addition, businesses have been subject to pressure by central and local governments, e.g., arbitrary changes in regulations, numerous rigorous inspections, retroactive application of new business regulations, and arrests of "disruptive" businessmen and factory owners. A wide range of redistributive policies has helped those at the bottom of the ladder; the Gini coefficient is among the lowest in the world. Because of these restrictive economic policies, Belarus has had trouble attracting foreign investment, which remains low. Growth has been strong in recent years, despite the roadblocks in a tough, centrally directed economy with a high, but decreasing, rate of inflation. Belarus continues to receive heavily discounted oil and natural gas from Russia. Much of Belarus' growth can be attributed to the re-export of Russian oil at market prices. Belarus has seen little structural reform since 1995, when President LUKASHENKO launched the country on the path of "market socialism." In keeping with this policy, LUKASHENKO reimposed administrative controls over prices and currency exchange rates and expanded the state's right to intervene in the management of private enterprise. In addition to the burdens imposed by high inflation and persistent trade deficits, businesses have been subject to pressure on the part of central and local governments, e.g., arbitrary changes in regulations, numerous rigorous inspections, retroactive application of new business regulations, and arrests of "disruptive" businessmen and factory owners. A wide range of redistributive policies has helped those at the bottom of the ladder. Close relations with Russia, possibly leading to reunion, color the pattern of economic developments. For the time being, Belarus remains self-isolated from the West and its open-market economies.
Belgium Belgium This modern, private-enterprise economy has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base. Industry is concentrated mainly in the populous Flemish area in the north. With few natural resources, Belgium must import substantial quantities of raw materials and export a large volume of manufactures, making its economy unusually dependent on the state of world markets. Roughly three-quarters of its trade is with other EU countries. Public debt is nearly 100% of GDP. On the positive side, the government has succeeded in balancing its budget, and income distribution is relatively equal. Belgium began circulating the euro currency in January 2002. Economic growth in 2001-03 dropped sharply because of the global economic slowdown, with moderate recovery in 2004-05. This modern private enterprise economy has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base. Industry is concentrated mainly in the populous Flemish area in the north. With few natural resources, Belgium must import substantial quantities of raw materials and export a large volume of manufactures, making its economy unusually dependent on the state of world markets. Roughly three-quarters of its trade is with other EU countries. Public debt is about 100% of GDP, and the government has succeeded in balancing its budget. Belgium, together with 11 of its EU partners, began circulating the euro currency in January 2002. Economic growth in 2001-03 dropped sharply due to the global economic slowdown. Prospects for 2004 again depend largely on recovery in the EU and the US.
Belize Belize In this small, essentially private-enterprise economy the tourism industry is the number one foreign exchange earner followed by marine products, citrus, cane sugar, bananas, and garments. The government's expansionary monetary and fiscal policies, initiated in September 1998, led to sturdy GDP growth averaging nearly 5% in 1999-2005. Major concerns continue to be the sizable trade deficit and foreign debt. A key short-term objective remains the reduction of poverty with the help of international donors. In this small, essentially private enterprise economy the tourism industry is the number one foreign exchange earner followed by cane sugar, citrus, marine products, bananas, and garments. The government's expansionary monetary and fiscal policies, initiated in September 1998, led to GDP growth of 6.5% in 1999, 10.8% in 2000, 4.6% in 2001, and 3.7% in 2002. Major concerns continue to be the sizable trade deficit and foreign debt. A key short-term objective remains the reduction of poverty with the help of international donors.
Benin Benin The economy of Benin remains underdeveloped and dependent on subsistence agriculture, cotton production, and regional trade. Growth in real output has averaged around 5% in the past six years, but rapid population growth has offset much of this increase. Inflation has subsided over the past several years. In order to raise growth still further, Benin plans to attract more foreign investment, place more emphasis on tourism, facilitate the development of new food processing systems and agricultural products, and encourage new information and communication technology. Many of these proposals are included in Benin's application to receive Millennium Challenge Account funding - for which it was a finalist in 2004-05. The 2001 privatization policy continues in telecommunications, water, electricity, and agriculture in spite of government reluctance. The Paris Club and bilateral creditors have eased the external debt situation, with Benin benefiting from a G8 debt reduction announced in July 2005, while pressing for more rapid structural reforms. Benin continues to be hurt by Nigerian trade protection that bans imports of a growing list of products from Benin and elsewhere, which has resulted in increased smuggling and criminality in the border region. The economy of Benin remains underdeveloped and dependent on subsistence agriculture, cotton production, and regional trade. Growth in real output has averaged a stable 5% in the past six years, but rapid population rise has offset much of this increase. Inflation has subsided over the past several years. In order to raise growth still further, Benin plans to attract more foreign investment, place more emphasis on tourism, facilitate the development of new food processing systems and agricultural products, and encourage new information and communication technology. The 2001 privatization policy should continue in telecommunications, water, electricity, and agriculture in spite of initial government reluctance. The Paris Club and bilateral creditors have eased the external debt situation, while pressing for speeded-up structural reforms.
Bermuda Bermuda Bermuda enjoys the highest per capita income in the world, more than 50% higher than that of the US. Its economy is primarily based on providing financial services for international business and luxury facilities for tourists. A number of reinsurance companies relocated to the island following 11 September 2001 and again after Hurricane Katrina, contributing to the expansion of an already robust international business sector. Bermuda's tourism industry - which derives over 80% of its visitors from the US - continues to struggle but remains the island's number two industry. Most capital equipment and food must be imported. Bermuda's industrial sector is small, although construction continues to be important; the average cost of a house in June 2003 had risen to $976,000. Agriculture is limited with only 20% of the land being arable. Bermuda enjoys one of the highest per capita incomes in the world, with its economy primarily based on providing financial services for international business and luxury facilities for tourists. The effects of 11 September 2001 have had both positive and negative ramifications for Bermuda. On the positive side, a number of new reinsurance companies have located on the island, contributing to the expansion of an already robust international business sector. On the negative side, Bermuda's tourism industry - which derives over 80% of its visitors from the US - has been severely hit as American tourists have chosen not to travel. Tourism rebounded somewhat in 2002, but remains below the pre-11 September level. Most capital equipment and food must be imported. Bermuda's industrial sector is small, although construction continues to be important. Agriculture is limited, only 6% of the land being arable.
Bhutan Bhutan The economy, one of the world's smallest and least developed, is based on agriculture and forestry, which provide the main livelihood for more than 90% of the population. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links and dependence on India's financial assistance. The industrial sector is technologically backward, with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Bhutan's hydropower potential and its attraction for tourists are key resources. Model education, social, and environment programs are underway with support from multilateral development organizations. Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. For example, the government, in its cautious expansion of the tourist sector, encourages visits by upscale, environmentally conscientious tourists. Detailed controls and uncertain policies in areas like industrial licensing, trade, labor, and finance continue to hamper foreign investment. The economy, one of the world's smallest and least developed, is based on agriculture and forestry, providing the main livelihood for more than 90% of the population. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links and dependence on India's financial assistance. The industrial sector is technologically backward, with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Bhutan's hydropower potential and its attraction for tourists are key resources. The government has made some progress in expanding the nation's productive base and improving social welfare. Model education, social, and environment programs are underway with support from multilateral development organizations. Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. Detailed controls and uncertain policies in areas like industrial licensing, trade, labor, and finance continue to hamper foreign investment.
Bolivia Bolivia Bolivia, long one of the poorest and least developed Latin American countries, reformed its economy after suffering a disastrous economic crisis in the early 1980s. The reforms spurred real GDP growth, which averaged 4% in the 1990s, and poverty rates fell. Economic growth, however, lagged again beginning in 1999 because of a global slowdown and homegrown factors such as political turmoil, civil unrest, and soaring fiscal deficits, all of which hurt investor confidence. In 2003, violent protests against the pro-foreign investment economic policies of President SANCHEZ DE LOZADA led to his resignation and the cancellation of plans to export Bolivia's newly discovered natural gas reserves to large northern hemisphere markets. In 2005, the government passed a controversial natural gas law that imposes on the oil and gas firms significantly higher taxes as well as new contracts that give the state control of their operations. Bolivian officials are in the process of implementing the law; meanwhile, foreign investors have stopped investing and have taken the first legal steps to secure their investments. Real GDP growth in 2003-05 - helped by increased demand for natural gas in neighboring Brazil - was positive, but still below the levels seen during the 1990s. Bolivia's fiscal position has improved in recent years, but the country remains dependent on foreign aid from multilateral lenders and foreign governments to meet budget shortfalls. In 2005, the G8 announced a $2 billion debt-forgiveness plan over the next few decades that should help reduce some fiscal pressures on the government in the near term. Bolivia, long one of the poorest and least developed Latin American countries, made considerable progress in the 1990s toward the development of a market-oriented economy. Successes under President SANCHEZ DE LOZADA (1993-97) included the signing of a free trade agreement with Mexico and becoming an associate member of the Southern Cone Common Market (Mercosur), as well as the privatization of the state airline, telephone company, railroad, electric power company, and oil company. Growth slowed in 1999, in part due to tight government budget policies, which limited needed appropriations for anti-poverty programs, and the fallout from the Asian financial crisis. In 2000, major civil disturbances held down growth to 2.5%. Bolivia's GDP failed to grow in 2001 due to the global slowdown and laggard domestic activity. Growth picked up slightly in 2002, but the first quarter of 2003 saw extensive civil riots and looting and loss of confidence in the government. Bolivia will remain highly dependent on foreign aid unless and until it can develop its substantial natural resources.
Bosnia and Herzegovina Bosnia and Herzegovina Bosnia and Herzegovina ranked next to Macedonia as the poorest republic in the old Yugoslav federation. Although agriculture is almost all in private hands, farms are small and inefficient, and the republic traditionally is a net importer of food. Industry remains greatly overstaffed, a holdover from the socialist economic structure of Yugoslavia. TITO had pushed the development of military industries in the republic with the result that Bosnia was saddled with a host of industrial firms with little commercial potential. The interethnic warfare in Bosnia caused production to plummet by 80% from 1992 to 1995 and unemployment to soar. With an uneasy peace in place, output recovered in 1996-99 at high percentage rates from a low base; but output growth slowed in 2000-02. Part of the lag in output was made up in 2003-05. National-level statistics are limited and do not capture the large share of black market activity. The konvertibilna marka (convertible mark or BAM)- the national currency introduced in 1998 - is pegged to the euro, and confidence in the currency and the banking sector has increased. Implementation of privatization, however, has been slow, and local entities only reluctantly support national-level institutions. Banking reform accelerated in 2001 as all the Communist-era payments bureaus were shut down; foreign banks, primarily from Western Europe, now control most of the banking sector. A sizeable current account deficit and high unemployment rate remain the two most serious economic problems. The country receives substantial amounts of reconstruction assistance and humanitarian aid from the international community but will have to prepare for an era of declining assistance. Bosnia and Herzegovina ranked next to The Former Yugoslav Republic of Macedonia as the poorest republic in the old Yugoslav federation. Although agriculture is almost all in private hands, farms are small and inefficient, and the republic traditionally is a net importer of food. Industry has been greatly overstaffed, one reflection of the socialist economic structure of Yugoslavia. TITO had pushed the development of military industries in the republic with the result that Bosnia hosted a number of Yugoslavia's defense plants. The bitter interethnic warfare in Bosnia caused production to plummet by 80% from 1990 to 1995, unemployment to soar, and human misery to multiply. With an uneasy peace in place, output recovered in 1996-99 at high percentage rates from a low base; but output growth slowed in 2000-02. GDP remains far below the 1990 level. Economic data are of limited use because, although both entities issue figures, national-level statistics are limited. Moreover, official data do not capture the large share of black market activity. The marka - the national currency introduced in 1998 - is now pegged to the euro, and the Central Bank of Bosnia and Herzegovina has dramatically increased its reserve holdings. Implementation of privatization, however, has been slow, and local entities only reluctantly support national-level institutions. Banking reform accelerated in 2001 as all the Communist-era payments bureaus were shut down. The country receives substantial amounts of reconstruction assistance and humanitarian aid from the international community but will have to prepare for an era of declining assistance.
Botswana Botswana Botswana has maintained one of the world's highest economic growth rates since independence in 1966. Through fiscal discipline and sound management, Botswana has transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of $10,000 in 2005. Two major investment services rank Botswana as the best credit risk in Africa. Diamond mining has fueled much of the expansion and currently accounts for more than one-third of GDP and for 70-80% of export earnings. Tourism, financial services, subsistence farming, and cattle raising are other key sectors. On the downside, the government must deal with high rates of unemployment and poverty. Unemployment officially is 23.8%, but unofficial estimates place it closer to 40%. HIV/AIDS infection rates are the second highest in the world and threaten Botswana's impressive economic gains. An expected leveling off in diamond mining production overshadows long-term prospects. Botswana has maintained one of the world's highest growth rates since independence in 1966. Through fiscal discipline and sound management, Botswana has transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of $9,500 in 2002. Two major investment services rank Botswana as the best credit risk in Africa. Diamond mining has fueled much of the expansion and currently accounts for more than one-third of GDP and for nine-tenths of export earnings. Tourism, subsistence farming, and cattle raising are other key sectors. On the downside, the government must deal with high rates of unemployment and poverty. Unemployment officially is 21%, but unofficial estimates place it closer to 40%. HIV/AIDS infection rates are the highest in the world and threaten Botswana's impressive economic gains. Long-term prospects are overshadowed by the prospects of a leveling off in diamond mining production.
Bouvet Island Bouvet Island no economic activity; declared a nature reserve no economic activity; declared a nature reserve
Brazil Brazil Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. From 2001-03 real wages fell and Brazil's economy grew, on average only 2.2% per year, as the country absorbed a series of domestic and international economic shocks. That Brazil absorbed these shocks without financial collapse is a tribute to the resiliency of the Brazilian economy and the economic program put in place by former President CARDOSO and strengthened by President LULA DA SILVA. In 2004, Brazil enjoyed more robust growth that yielded increases in employment and real wages. The three pillars of the economic program are a floating exchange rate, an inflation-targeting regime, and tight fiscal policy, all reinforced by a series of IMF programs. The currency depreciated sharply in 2001 and 2002, which contributed to a dramatic current account adjustment; in 2003 to 2005, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. Productivity gains - particularly in agriculture - also contributed to the surge in exports, and Brazil in 2005 surpassed the previous year's record export level. While economic management has been good, there remain important economic vulnerabilities. The most significant are debt-related: the government's largely domestic debt increased steadily from 1994 to 2003 - straining government finances - before falling as a percentage of GDP in 2005, while Brazil's foreign debt (a mix of private and public debt) is large in relation to Brazil's small (but growing) export base. Another challenge is maintaining economic growth over a period of time to generate employment and make the government debt burden more manageable. Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. The maintenance of large current account deficits via capital account surpluses became problematic as investors became more risk averse to emerging markets as a consequence of the Asian financial crisis in 1997 and the Russian bond default in August 1998. After crafting a fiscal adjustment program and pledging progress on structural reform, Brazil received a $41.5 billion IMF-led international support program in November 1998. In January 1999, the Brazilian Central Bank announced that the real would no longer be pegged to the US dollar. The consequent devaluation helped moderate the downturn in economic growth in 1999, and the country posted moderate GDP growth in 2000. Economic growth slowed considerably in 2001-03 - to less than 2% - because of a slowdown in major markets and the hiking of interest rates by the Central Bank to combat inflationary pressures. New president DA SILVA, who took office 1 January 2003, has given priority to reforming the complex tax code, trimming the overblown civil service pension system, and continuing the fight against inflation.
British Indian Ocean Territory British Indian Ocean Territory All economic activity is concentrated on the largest island of Diego Garcia, where joint UK-US defense facilities are located. Construction projects and various services needed to support the military installations are done by military and contract employees from the UK, Mauritius, the Philippines, and the US. There are no industrial or agricultural activities on the islands. When the Ilois return, they plan to reestablish sugarcane production and fishing. The country makes money by selling fishing licenses and postage stamps. All economic activity is concentrated on the largest island of Diego Garcia, where joint UK-US defense facilities are located. Construction projects and various services needed to support the military installations are done by military and contract employees from the UK, Mauritius, the Philippines, and the US. There are no industrial or agricultural activities on the islands. When the Ilois return, they plan to reestablish sugarcane production and fishing.
British Virgin Islands British Virgin Islands The economy, one of the most stable and prosperous in the Caribbean, is highly dependent on tourism, generating an estimated 45% of the national income. An estimated 350,000 tourists, mainly from the US, visited the islands in 1998. Tourism suffered in 2002 because of the lackluster US economy. In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate in the islands, and incorporation fees now generate substantial revenues. Roughly 400,000 companies were on the offshore registry by yearend 2000. The adoption of a comprehensive insurance law in late 1994, which provides a blanket of confidentiality with regulated statutory gateways for investigation of criminal offenses, made the British Virgin Islands even more attractive to international business. Livestock raising is the most important agricultural activity; poor soils limit the islands' ability to meet domestic food requirements. Because of traditionally close links with the US Virgin Islands, the British Virgin Islands has used the US dollar as its currency since 1959. The economy, one of the most stable and prosperous in the Caribbean, is highly dependent on tourism, generating an estimated 45% of the national income. An estimated 350,000 tourists, mainly from the US, visited the islands in 1998. Tourism suffered in 2002 because of the lackluster US economy. In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate in the islands, and incorporation fees now generate substantial revenues. Roughly 400,000 companies were on the offshore registry by yearend 2000. The adoption of a comprehensive insurance law in late 1994, which provides a blanket of confidentiality with regulated statutory gateways for investigation of criminal offenses, is expected to make the British Virgin Islands even more attractive to international business. Livestock raising is the most important agricultural activity; poor soils limit the islands' ability to meet domestic food requirements. Because of traditionally close links with the US Virgin Islands, the British Virgin Islands has used the dollar as its currency since 1959.
Brunei Brunei This small, well-to-do economy encompasses a mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village tradition. Crude oil and natural gas production account for nearly half of GDP and more than 90% of government revenues. Per capita GDP is far above most other Third World countries, and substantial income from overseas investment supplements income from domestic production. The government provides for all medical services and free education through the university level and subsidizes rice and housing. Brunei's leaders are concerned that steadily increased integration in the world economy will undermine internal social cohesion, although it became a more prominent player by serving as chairman for the 2000 APEC (Asian Pacific Economic Cooperation) forum. Plans for the future include upgrading the labor force, reducing unemployment, strengthening the banking and tourist sectors, and, in general, further widening the economic base beyond oil and gas. This small, wealthy economy encompasses a mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village tradition. Crude oil and natural gas production account for nearly half of GDP. Per capita GDP is far above most other Third World countries, and substantial income from overseas investment supplements income from domestic production. The government provides for all medical services and subsidizes rice and housing. Brunei's leaders are concerned that steadily increased integration in the world economy will undermine internal social cohesion, although it became a more prominent player by serving as chairman for the 2000 APEC (Asian Pacific Economic Cooperation) forum. Plans for the future include upgrading the labor force, reducing unemployment, strengthening the banking and tourist sectors, and, in general, further widening the economic base beyond oil and gas.
Bulgaria Bulgaria Bulgaria, a former communist country soon to enter the European Union, has experienced macroeconomic stability and strong growth since a major economic downturn in 1996 led to the fall of the then socialist government. As a result, the government became committed to economic reform and responsible fiscal planning. Minerals, including coal, copper, and zinc, play an important role in industry. In 1997, macroeconomic stability was reinforced by the imposition of a fixed exchange rate of the lev against the German D-mark - the currency is now fixed against the euro - and the negotiation of an IMF standby agreement. Low inflation and steady progress on structural reforms improved the business environment; Bulgaria has averaged 4% growth since 2000 and has begun to attract significant amounts of foreign direct investment. Corruption in the public administration, a weak judiciary, and the presence of organized crime remain the largest challenges for Bulgaria. Bulgaria, a former communist country striving to enter the European Union, has experienced macroeconomic stability and strong growth since a major economic downturn in 1996 led to the fall of the then socialist government. As a result, the government became committed to economic reform and responsible fiscal planning. A $300 million stand-by agreement negotiated with the IMF at the end of 2001 has supported government efforts to overcome high rates of poverty and unemployment.
Burkina Faso Burkina Faso One of the poorest countries in the world, landlocked Burkina Faso has few natural resources and a weak industrial base. About 90% of the population is engaged in subsistence agriculture, which is vulnerable to harsh climatic conditions. Cotton is the key crop and the government has joined with other cotton producing countries in the region to lobby for improved access to Western markets. GDP growth has largely been driven by increases in world cotton prices. Industry remains dominated by unprofitable government-controlled corporations. Following the CFA franc currency devaluation in January 1994, the government updated its development program in conjunction with international agencies; exports and economic growth have increased. The government devolved macroeconomic policy and inflation targeting to the West African regional central bank (BCEAO), but maintains control over fiscal and microeconomic policies, including implementing reforms to encourage private investment. The bitter internal crisis in neighboring Cote d'Ivoire continues to hurt trade and industrial prospects and deepens the need for international assistance. One of the poorest countries in the world, landlocked Burkina Faso has few natural resources, a fragile soil, and a highly unequal distribution of income. About 90% of the population is engaged in (mainly subsistence) agriculture, which is vulnerable to variations in rainfall. Industry remains dominated by unprofitable government-controlled corporations. Following the African franc currency devaluation in January 1994 the government updated its development program in conjunction with international agencies, and exports and economic growth have increased. Maintenance of macroeconomic progress depends on continued low inflation, reduction in the trade deficit, and reforms designed to encourage private investment. The internal crisis in neighboring Cote d'Ivoire continues to hurt trade and industrial prospects and deepens the need for international assistance.
Burma Burma Burma, a resource-rich country, suffers from pervasive government controls, inefficient economic policies, and rural poverty. The junta took steps in the early 1990s to liberalize the economy after decades of failure under the "Burmese Way to Socialism," but those efforts stalled, and some of the liberalization measures were rescinded. Burma does not have monetary or fiscal stability, so the economy suffers from serious macroeconomic imbalances - including inflation, multiple official exchange rates that overvalue the Burmese kyat, and a distorted interest rate regime. Most overseas development assistance ceased after the junta began to suppress the democracy movement in 1988 and subsequently refused to honor the results of the 1990 legislative elections. In response to the government of Burma's attack in May 2003 on AUNG SAN SUU KYI and her convoy, the US imposed new economic sanctions against Burma - including a ban on imports of Burmese products and a ban on provision of financial services by US persons. A poor investment climate further slowed the inflow of foreign exchange. The most productive sectors will continue to be in extractive industries, especially oil and gas, mining, and timber. Other areas, such as manufacturing and services, are struggling with inadequate infrastructure, unpredictable import/export policies, deteriorating health and education systems, and corruption. A major banking crisis in 2003 shuttered the country's 20 private banks and disrupted the economy. As of December 2005, the largest private banks operate under tight restrictions limiting the private sector's access to formal credit. Official statistics are inaccurate. Published statistics on foreign trade are greatly understated because of the size of the black market and unofficial border trade - often estimated to be as large as the official economy. Burma's trade with Thailand, China, and India is rising. Though the Burmese government has good economic relations with its neighbors, better investment and business climates and an improved political situation are needed to promote foreign investment, exports, and tourism. Burma is a resource-rich country that suffers from abject rural poverty. The military regime took steps in the early 1990s to liberalize the economy after decades of failure under the "Burmese Way to Socialism", but those efforts have since stalled. Burma has been unable to achieve monetary or fiscal stability, resulting in an economy that suffers from serious macroeconomic imbalances - including a steep inflation rate and an official exchange rate that overvalues the Burmese kyat by more than 100 times the market rate. In addition, most overseas development assistance ceased after the junta suppressed the democracy movement in 1988 and subsequently ignored the results of the 1990 election. Burma is data poor, and official statistics are often dated and inaccurate. Published estimates of Burma's foreign trade are greatly understated because of the size of the black market and border trade - often estimated to be one to two times the official economy.
Burundi Burundi Burundi is a landlocked, resource-poor country with an underdeveloped manufacturing sector. The economy is predominantly agricultural with more than 90% of the population dependent on subsistence agriculture. Economic growth depends on coffee and tea exports, which account for 90% of foreign exchange earnings. The ability to pay for imports, therefore, rests primarily on weather conditions and international coffee and tea prices. The Tutsi minority, 14% of the population, dominates the government and the coffee trade at the expense of the Hutu majority, 85% of the population. An ethnic-based war that lasted for over a decade resulted in more than 200,000 deaths, forced more than 48,000 refugees into Tanzania, and displaced 140,000 others internally. Only one in two children go to school, and approximately one in 10 adults has HIV/AIDS. Food, medicine, and electricity remain in short supply. Political stability and the end of the civil war have improved aid flows and economic activity has increased, but underlying weaknesses - a high poverty rate, poor education rates, a weak legal system, and low administrative capacity - risk undermining planned economic reforms. Burundi is a landlocked, resource-poor country with an underdeveloped manufacturing sector. The economy is predominantly agricultural with roughly 90% of the population dependent on subsistence agriculture. Economic growth depends on coffee and tea exports, which account for 90% of foreign exchange earnings. The ability to pay for imports, therefore, rests primarily on weather conditions and international coffee and tea prices. The Tutsi minority, 14% of the population, dominates the government and the coffee trade at the expense of the Hutu majority, 85% of the population. Since October 1993 an ethnic-based war has resulted in the death of over 200,000 persons, sent 800,000 refugees into Tanzania, and displaced 525,000 others internally. Doubts about the prospects for sustainable peace continue to impede development. Only one in two children go to school, and approximately one in ten adults has HIV/AIDS. Food, medicine, and electricity remain in short supply.
Cambodia Cambodia In 1999, the first full year of peace in 30 years, the government made progress on economic reforms. The US and Cambodia signed a Bilateral Textile Agreement, which gave Cambodia a guaranteed quota of US textile imports and established a bonus for improving working conditions and enforcing Cambodian labor laws and international labor standards in the industry. From 2001 to 2004, the economy grew at an average rate of 6.4%, driven largely by an expansion in the garment sector and tourism. With the January 2005 expiration of a WTO Agreement on Textiles and Clothing, Cambodia-based textile producers were forced to compete directly with lower-priced producing countries such as China and India. Although initial 2005 GDP growth estimates were less than 3%, better-than-expected garment sector performance led the IMF to forecast 6% growth in 2005. Faced with the possibility that its vibrant garment industry, with more than 200,000 jobs, could be in serious danger, the Cambodian government has committed itself to a policy of continued support for high labor standards in an attempt to maintain favor with buyers. The tourism industry continues to grow rapidly, with foreign visitors surpassing 1 million for the year by September 2005. In 2005, exploitable oil and natural gas deposits were found beneath Cambodia's territorial waters, representing a new revenue stream for the government once commercial extraction begins in the coming years. The long-term development of the economy remains a daunting challenge. The Cambodian government continues to work with bilateral and multilateral donors, including the World Bank and IMF, to address the country's many pressing needs. In December 2004, official donors pledged $504 million in aid for 2005 on the condition that the Cambodian government implement steps to reduce corruption. The major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia's demographic imbalance. More than 50% of the population is 20 years or younger. The population lacks education and productive skills, particularly in the poverty-ridden countryside, which suffers from an almost total lack of basic infrastructure. Fully 75% of the population remains engaged in subsistence farming. Cambodia's economy slowed dramatically in 1997-1998 due to the regional economic crisis, civil violence, and political infighting. Foreign investment and tourism fell off. In 1999, the first full year of peace in 30 years, progress was made on economic reforms and growth resumed at 5.0%. Despite severe flooding, GDP grew at 5.0% in 2000, 6.3% in 2001, and 5.2% in 2002. Tourism was Cambodia's fastest growing industry, with arrivals up 34% in 2000 and up another 40% in 2001 before the September 11, 2001 terrorist attacks in the US. Even given these stout growth estimates, the long-term development of the economy after decades of war remains a daunting challenge. The population lacks education and productive skills, particularly in the poverty-ridden countryside, which suffers from an almost total lack of basic infrastructure. Fear of renewed political instability and corruption within the government discourage foreign investment and delay foreign aid. The government is addressing these issues with assistance from bilateral and multilateral donors.
Cameroon Cameroon Because of its oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa. Still, it faces many of the serious problems facing other underdeveloped countries, such as a top-heavy civil service and a generally unfavorable climate for business enterprise. Since 1990, the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalize the nation's banks. In June 2000, the government completed an IMF-sponsored, three-year structural adjustment program; however, the IMF is pressing for more reforms, including increased budget transparency, privatization, and poverty reduction programs. International oil and cocoa prices have considerable impact on the economy. Because of its oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa. Still, it faces many of the serious problems facing other underdeveloped countries, such as a top-heavy civil service and a generally unfavorable climate for business enterprise. Since 1990, the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalize the nation's banks. In June 2000, the government completed an IMF-sponsored, three-year structural adjustment program; however, the IMF is pressing for more reforms, including increased budget transparency, privatization, and poverty reduction programs. International oil and cocoa prices have considerable impact on the economy.
Canada Canada As an affluent, high-tech industrial society in the trillion dollar class, Canada resembles the US in its market-oriented economic system, pattern of production, and affluent living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban. The 1989 US-Canada Free Trade Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA) (which includes Mexico) touched off a dramatic increase in trade and economic integration with the US. Given its great natural resources, skilled labor force, and modern capital plant, Canada enjoys solid economic prospects. Top-notch fiscal management has produced consecutive balanced budgets since 1997, although public debate continues over how to manage the rising cost of the publicly funded healthcare system. Exports account for roughly a third of GDP. Canada enjoys a substantial trade surplus with its principal trading partner, the US, which absorbs more than 85% of Canadian exports. Canada is the US' largest foreign supplier of energy, including oil, gas, uranium, and electric power. As an affluent, high-tech industrial society, Canada today closely resembles the US in its market-oriented economic system, pattern of production, and high living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban. The 1989 US-Canada Free Trade Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA) (which includes Mexico) touched off a dramatic increase in trade and economic integration with the US. As a result of the close cross-border relationship, the economic sluggishness in the United States in 2001-02 had a negative impact on the Canadian economy. Real growth averaged nearly 3% during 1993-2000, but declined in 2001, with moderate recovery in 2002. Unemployment is up, with contraction in the manufacturing and natural resource sectors. Nevertheless, given its great natural resources, skilled labor force, and modern capital plant Canada enjoys solid economic prospects. Two shadows loom, the first being the continuing constitutional impasse between English- and French-speaking areas, which has been raising the specter of a split in the federation. Another long-term concern is the flow south to the US of professionals lured by higher pay, lower taxes, and the immense high-tech infrastructure. A key strength in the economy is the substantial trade surplus.
Cape Verde Cape Verde This island economy suffers from a poor natural resource base, including serious water shortages exacerbated by cycles of long-term drought. The economy is service-oriented, with commerce, transport, tourism, and public services accounting for 66% of GDP. Although nearly 70% of the population lives in rural areas, the share of agriculture in GDP in 2004 was only 12%, of which fishing accounted for 1.5%. About 82% of food must be imported. The fishing potential, mostly lobster and tuna, is not fully exploited. Cape Verde annually runs a high trade deficit, financed by foreign aid and remittances from emigrants; remittances supplement GDP by more than 20%. Economic reforms are aimed at developing the private sector and attracting foreign investment to diversify the economy. Future prospects depend heavily on the maintenance of aid flows, the encouragement of tourism, remittances, and the momentum of the government's development program. This island economy suffers from a poor natural resource base, including serious water shortages exacerbated by cycles of long-term drought. The economy is service-oriented, with commerce, transport, tourism, and public services accounting for 72% of GDP. Although nearly 70% of the population lives in rural areas, the share of agriculture in GDP in 2001 was only 11%, of which fishing accounts for 1.5%. About 82% of food must be imported. The fishing potential, mostly lobster and tuna, is not fully exploited. Cape Verde annually runs a high trade deficit, financed by foreign aid and remittances from emigrants; remittances supplement GDP by more than 20%. Economic reforms are aimed at developing the private sector and attracting foreign investment to diversify the economy. Prospects for 2003 depend heavily on the maintenance of aid flows, tourism, remittances, and the momentum of the government's development program.
Cayman Islands Cayman Islands With no direct taxation, the islands are a thriving offshore financial center. More than 40,000 companies were registered in the Cayman Islands as of 1998, including almost 600 banks and trust companies; banking assets exceed $500 billion. A stock exchange was opened in 1997. Tourism is also a mainstay, accounting for about 70% of GDP and 75% of foreign currency earnings. The tourist industry is aimed at the luxury market and caters mainly to visitors from North America. Total tourist arrivals exceeded 1.2 million in 1997, with 600,000 from the US. About 90% of the islands' food and consumer goods must be imported. The Caymanians enjoy one of the highest outputs per capita and one of the highest standards of living in the world. With no direct taxation, the islands are a thriving offshore financial center. More than 40,000 companies were registered in the Cayman Islands as of 1998, including almost 600 banks and trust companies; banking assets exceed $500 billion. A stock exchange was opened in 1997. Tourism is also a mainstay, accounting for about 70% of GDP and 75% of foreign currency earnings. The tourist industry is aimed at the luxury market and caters mainly to visitors from North America. Total tourist arrivals exceeded 1.2 million in 1997, with 600,000 from the US. About 90% of the islands' food and consumer goods must be imported. The Caymanians enjoy one of the highest outputs per capita and one of the highest standards of living in the world.
Central African Republic Central African Republic Subsistence agriculture, together with forestry, remains the backbone of the economy of the Central African Republic (CAR), with more than 70% of the population living in outlying areas. The agricultural sector generates half of GDP. Timber has accounted for about 16% of export earnings and the diamond industry, for 40%. Important constraints to economic development include the CAR's landlocked position, a poor transportation system, a largely unskilled work force, and a legacy of misdirected macroeconomic policies. Factional fighting between the government and its opponents remains a drag on economic revitalization, with GDP growth at only 0.5% in 2004 and 2.5% in 2005. Distribution of income is extraordinarily unequal. Grants from France and the international community can only partially meet humanitarian needs. Subsistence agriculture, together with forestry, remains the backbone of the economy of the Central African Republic (CAR), with more than 70% of the population living in outlying areas. The agricultural sector generates half of GDP. Timber has accounted for about 16% of export earnings and the diamond industry for 54%. Important constraints to economic development include the CAR's landlocked position, a poor transportation system, a largely unskilled work force, and a legacy of misdirected macroeconomic policies. Factional fighting between the government and its opponents remains a drag on economic revitalization, with GDP growth likely to be no more than 1.3% in 2003. Distribution of income is extraordinarily unequal. Grants from France and the international community can only partially meet humanitarian needs.
Chad Chad Chad's primarily agricultural economy will continue to be boosted by major foreign direct investment projects in the oil sector that began in 2000. Over 80% of Chad's population relies on subsistence farming and livestock raising for its livelihood. Chad's economy has long been handicapped by its landlocked position, high energy costs, and a history of instability. Chad relies on foreign assistance and foreign capital for most public and private sector investment projects. A consortium led by two US companies has been investing $3.7 billion to develop oil reserves - estimated at 1 billion barrels - in southern Chad. The nation's total oil reserves has been estimated to be 2 billion barrels. Oil production came on stream in late 2003. Chad began to export oil in 2004. Cotton, cattle, and gum arabic provide the bulk of Chad's non-oil export earnings. Chad's primarily agricultural economy will continue to be boosted by major oilfield and pipeline projects that began in 2000. Over 80% of Chad's population relies on subsistence farming and stock raising for its livelihood. Cotton, cattle, and gum arabic provide the bulk of Chad's export earnings, but Chad will begin to export oil in 2004. Chad's economy has long been handicapped by its landlocked position, high energy costs, and a history of instability. Chad relies on foreign assistance and foreign capital for most public and private sector investment projects. A consortium led by two US companies has been investing $3.7 billion to develop oil reserves estimated at 1 billion barrels in southern Chad. Oil production is scheduled to come on stream in late 2003.
Chile Chile Chile has a market-oriented economy characterized by a high level of foreign trade. During the early 1990s, Chile's reputation as a role model for economic reform was strengthened when the democratic government of Patricio AYLWIN - which took over from the military in 1990 - deepened the economic reform initiated by the military government. Growth in real GDP averaged 8% during 1991-97, but fell to half that level in 1998 because of tight monetary policies implemented to keep the current account deficit in check and because of lower export earnings - the latter a product of the global financial crisis. A severe drought exacerbated the recession in 1999, reducing crop yields and causing hydroelectric shortfalls and electricity rationing, and Chile experienced negative economic growth for the first time in more than 15 years. Despite the effects of the recession, Chile maintained its reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. By the end of 1999, exports and economic activity had begun to recover, and growth rebounded to 4.2% in 2000. Growth fell back to 3.1% in 2001 and 2.1% in 2002, largely due to lackluster global growth and the devaluation of the Argentine peso. Chile's economy began a slow recovery in 2003, growing 3.2%, and accelerated to 6.1% in 2004-05, while Chile maintained a low rate of inflation. GDP growth benefited from high copper prices, solid export earnings (particularly forestry, fishing, and mining), and stepped-up foreign direct investment. Unemployment, however, remains stubbornly high. Chile deepened its longstanding commitment to trade liberalization with the signing of a free trade agreement with the US, which took effect on 1 January 2004. Chile signed a free trade agreement with China in November 2005, and it already has several trade deals signed with other nations and blocs, including the European Union, Mercosur, South Korea, and Mexico. Record-high copper prices helped to strengthen the peso to a 5½-year high, as of December 2005, and will boost GDP in 2006. Chile has a market-oriented economy characterized by a high level of foreign trade. During the early 1990s, Chile's reputation as a role model for economic reform was strengthened when the democratic government of Patricio AYLWIN - which took over from the military in 1990 - deepened the economic reform initiated by the military government. Growth in real GDP averaged 8% during 1991-97, but fell to half that level in 1998 because of tight monetary policies implemented to keep the current account deficit in check and because of lower export earnings - the latter a product of the global financial crisis. A severe drought exacerbated the recession in 1999, reducing crop yields and causing hydroelectric shortfalls and electricity rationing, and Chile experienced negative economic growth for the first time in more than 15 years. Despite the effects of the recession, Chile maintained its reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. By the end of 1999, exports and economic activity had begun to recover, and growth rebounded to 4.4% in 2000. Growth fell back to 2.8% in 2001 and 1.8% in 2002, largely due to lackluster global growth and the devaluation of the Argentine peso. Unemployment remains stubbornly high, putting pressure on President LAGOS to improve living standards. One bright spot was the signing of a free trade agreement with the US, which will take effect on 1 January 2004.
China China China's economy during the last quarter century has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy. Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment. China has generally implemented reforms in a gradualist or piecemeal fashion. The process continues with key moves in 2005 including the sale of equity in China's largest state banks to foreign investors and refinements in foreign exchange and bond markets. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis, China in 2005 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income and 150 million Chinese fall below international poverty lines. Economic development has generally been more rapid in coastal provinces than in the interior, and there are large disparities in per capita income between regions. The government has struggled to: (a) sustain adequate job growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force; (b) reduce corruption and other economic crimes; and (c) contain environmental damage and social strife related to the economy's rapid transformation. From 100 to 150 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time, low-paying jobs. One demographic consequence of the "one child" policy is that China is now one of the most rapidly aging countries in the world. Another long-term threat to growth is the deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the north. China continues to lose arable land because of erosion and economic development. China has benefited from a huge expansion in computer Internet use, with more than 100 million users at the end of 2005. Foreign investment remains a strong element in China's remarkable expansion in world trade and has been an important factor in the growth of urban jobs. In July 2005, China revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. Reports of shortages of electric power in the summer of 2005 in southern China receded by September-October and did not have a substantial impact on China's economy. More power generating capacity is scheduled to come on line in 2006 as large scale investments are completed. Thirteen years in construction at a cost of $24 billion, the immense Three Gorges Dam across the Yangtze River will be essentially completed in 2006 and will revolutionize electrification and flood control in the area. The Central Committee of the Chinese Communist Party in October 2005 approved the draft 11th Five-Year Plan and the National People's Congress is expected to give final approval in March 2006. The plan calls for a 20% reduction in energy consumption per unit of GDP by 2010 and an estimated 45% increase in GDP by 2010. The plan states that conserving resources and protecting the environment are basic goals, but it lacks details on the policies and reforms necessary to achieve these goals. In late 1978 the Chinese leadership began moving the economy from a sluggish, Soviet-style centrally planned economy to a more market-oriented system. Whereas the system operates within a political framework of strict Communist control, the economic influence of non-state organizations and individual citizens has been steadily increasing. The authorities switched to a system of household and village responsibility in agriculture in place of the old collectivization, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprises in services and light manufacturing, and opened the economy to increased foreign trade and investment. The result has been a quadrupling of GDP since 1978. In 2003, with its 1.3 billion people but a GDP of just $5,000 per capita, China stood as the second-largest economy in the world after the US (measured on a purchasing power parity basis). Agriculture and industry have posted major gains, especially in coastal areas near Hong Kong and opposite Taiwan, where foreign investment has helped spur output of both domestic and export goods. The leadership, however, often has experienced - as a result of its hybrid system - the worst results of socialism (bureaucracy and lassitude) and of capitalism (windfall gains and growing income disparities). China thus has periodically backtracked, retightening central controls at intervals. The government has struggled to (a) collect revenues due from provinces, businesses, and individuals; (b) reduce corruption and other economic crimes; and (c) keep afloat the large state-owned enterprises, many of which had been shielded from competition by subsidies and had been losing the ability to pay full wages and pensions. From 80 to 120 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time low-paying jobs. Popular resistance, changes in central policy, and loss of authority by rural cadres have weakened China's population control program, which is essential to maintaining long-term growth in living standards. Another long-term threat to growth is the deterioration in the environment, notably air pollution, soil erosion, and the steady fall of the water table especially in the north. China continues to lose arable land because of erosion and economic development. Beijing says it will intensify efforts to stimulate growth through spending on infrastructure - such as water control and power grids - and poverty relief and through rural tax reform aimed at eliminating arbitrary local levies on farmers. Accession to the World Trade Organization helps strengthen China's ability to maintain strong growth rates but at the same time puts additional pressure on the hybrid system of strong political controls and growing market influences. China has benefited from a huge expansion in computer internet use. Foreign investment remains a strong element in China's remarkable economic growth.
Christmas Island Christmas Island Phosphate mining had been the only significant economic activity, but in December 1987 the Australian Government closed the mine. In 1991, the mine was reopened. With the support of the government, a $34 million casino opened in 1993. The casino closed in 1998. The Australian Government in 2001 agreed to support the creation of a commercial space-launching site on the island, projected to begin operations in the near future. Phosphate mining had been the only significant economic activity, but in December 1987 the Australian Government closed the mine. In 1991, the mine was reopened. With the support of the government, a $34 million casino opened in 1993. The casino closed in 1998. The Australian Government in 2001 agreed to support the creation of a commercial space-launching site on the island, slated to begin operation in 2003.
Clipperton Island Clipperton Island Although 115 species of fish have been identified in the territorial waters of Clipperton Island, the only economic activity is tuna fishing. Although 115 species of fish have been identified in the territorial waters of Clipperton Island, the only economic activity is tuna fishing.
Cocos (Keeling) Islands Cocos (Keeling) Islands Grown throughout the islands, coconuts are the sole cash crop. Small local gardens and fishing contribute to the food supply, but additional food and most other necessities must be imported from Australia. There is a small tourist industry. Grown throughout the islands, coconuts are the sole cash crop. Small local gardens and fishing contribute to the food supply, but additional food and most other necessities must be imported from Australia. There is a small tourist industry.
Colombia Colombia Colombia's economy has been on a recovery trend during the past two years despite a serious armed conflict. The economy continues to improve thanks to austere government budgets, focused efforts to reduce public debt levels, an export-oriented growth strategy, and an improved security situation in the country. Ongoing economic problems facing President URIBE range from reforming the pension system to reducing high unemployment. New exploration is needed to offset declining oil production. On the positive side, several international financial institutions have praised the economic reforms introduced by URIBE, which succeeded in reducing the public-sector deficit below 1.5% of GDP. The government's economic policy and democratic security strategy have engendered a growing sense of confidence in the economy, particularly within the business sector. Coffee prices have recovered from previous lows as the Colombian coffee industry pursues greater market shares in developed countries such as the United States. Colombia's economy suffers from weak domestic and foreign demand, austere government budgets, and serious internal armed conflict. Other economic problems facing the new president URIBE range from reforming the pension system to reducing high unemployment. Two of Colombia's leading exports, oil and coffee, face an uncertain future; new exploration is needed to offset declining oil production, while coffee harvests and prices are depressed. Colombian business leaders are calling for greater progress in solving the conflict with insurgent groups. On the positive side, several international financial institutions have praised the economic reforms introduced by President URIBE and have pledged enough funding to cover Colombia's debt servicing costs in 2003.
Comoros Comoros One of the world's poorest countries, Comoros is made up of three islands that have inadequate transportation links, a young and rapidly increasing population, and few natural resources. The low educational level of the labor force contributes to a subsistence level of economic activity, high unemployment, and a heavy dependence on foreign grants and technical assistance. Agriculture, including fishing, hunting, and forestry, contributes 40% to GDP, employs 80% of the labor force, and provides most of the exports. The country is not self-sufficient in food production; rice, the main staple, accounts for the bulk of imports. The government - which is hampered by internal political disputes - is struggling to upgrade education and technical training, privatize commercial and industrial enterprises, improve health services, diversify exports, promote tourism, and reduce the high population growth rate. Increased foreign support is essential if the goal of 4% annual GDP growth is to be met. Remittances from 150,000 Comorans abroad help supplement GDP. One of the world's poorest countries, Comoros is made up of three islands that have inadequate transportation links, a young and rapidly increasing population, and few natural resources. The low educational level of the labor force contributes to a subsistence level of economic activity, high unemployment, and a heavy dependence on foreign grants and technical assistance. Agriculture, including fishing, hunting, and forestry, contributes 40% to GDP, employs 80% of the labor force, and provides most of the exports. The country is not self-sufficient in food production; rice, the main staple, accounts for the bulk of imports. The government - which is hampered by internal political disputes - is struggling to upgrade education and technical training, to privatize commercial and industrial enterprises, to improve health services, to diversify exports, to promote tourism, and to reduce the high population growth rate. Increased foreign support is essential if the goal of 4% annual GDP growth is to be met. Remittances from 150,000 Comorans abroad help supplement GDP.
Congo, Democratic Republic of the Congo, Democratic Republic of the The economy of the Democratic Republic of the Congo - a nation endowed with vast potential wealth - has declined drastically since the mid-1980s. The war, which began in August 1998, dramatically reduced national output and government revenue, increased external debt, and resulted in the deaths of perhaps 3.5 million people from violence, famine, and disease. Foreign businesses curtailed operations due to uncertainty about the outcome of the conflict, lack of infrastructure, and the difficult operating environment. Conditions improved in late 2002 with the withdrawal of a large portion of the invading foreign troops. The transitional government has reopened relations with international financial institutions and international donors, and President KABILA has begun implementing reforms. Much economic activity lies outside the GDP data. Economic stability improved in 2003-05, although an uncertain legal framework, corruption, and a lack of openness in government policy continues to hamper growth. In 2005, renewed activity in the mining sector, the source of most exports, boosted Kinshasa's fiscal position and GDP growth. Business and economic prospects are expected to improve once a new government is installed after elections. The economy of the Democratic Republic of the Congo - a nation endowed with vast potential wealth - has declined drastically since the mid-1980s. The war, which began in August 1998, has dramatically reduced national output and government revenue, has increased external debt, and has resulted in the deaths from war, famine, and disease of perhaps 3.5 million people. Foreign businesses have curtailed operations due to uncertainty about the outcome of the conflict, lack of infrastructure, and the difficult operating environment. The war has intensified the impact of such basic problems as an uncertain legal framework, corruption, inflation, and lack of openness in government economic policy and financial operations. Conditions improved in late 2002 with the withdrawal of a large portion of the invading foreign troops. A number of IMF and World Bank missions have met with the government to help it develop a coherent economic plan, and President KABILA has begun implementing reforms. Much economic activity lies outside the GDP data.
Congo, Republic of the Congo, Republic of the The economy is a mixture of village agriculture and handicrafts, an industrial sector based largely on oil, support services, and a government characterized by budget problems and overstaffing. Oil has supplanted forestry as the mainstay of the economy, providing a major share of government revenues and exports. In the early 1980s, rapidly rising oil revenues enabled the government to finance large-scale development projects with GDP growth averaging 5% annually, one of the highest rates in Africa. The government has mortgaged a substantial portion of its oil earnings through oil-backed loans that have contributed to a growing debt burden and chronic revenue shortfalls. Economic reform efforts have been undertaken with the support of international organizations, notably the World Bank and the IMF. However, the reform program came to a halt in June 1997 when civil war erupted. Denis SASSOU-NGUESSO, who returned to power when the war ended in October 1997, publicly expressed interest in moving forward on economic reforms and privatization and in renewing cooperation with international financial institutions. Economic progress was badly hurt by slumping oil prices and the resumption of armed conflict in December 1998, which worsened the republic's budget deficit. The current administration presides over an uneasy internal peace and faces difficult economic challenges of stimulating recovery and reducing poverty. Recovery of oil prices has boosted the economy's GDP and near-term prospects. The Republic of Congo may be eligible for an IMF-World Bank heavily indebted poor countries (HIPC) initiative in early 2006, provided it meets the strict fiscal and monetary targets set out for it under a new three-year Poverty Reduction and Growth Facility (PRGF) with the IMF. The economy is a mixture of village agriculture and handicrafts, an industrial sector based largely on oil, support services, and a government characterized by budget problems and overstaffing. Oil has supplanted forestry as the mainstay of the economy, providing a major share of government revenues and exports. In the early 1980s, rapidly rising oil revenues enabled the government to finance large-scale development projects with GDP growth averaging 5% annually, one of the highest rates in Africa. The government has mortgaged a substantial portion of its oil earnings, contributing to a shortage of revenues. The 12 January 1994 devaluation of Franc Zone currencies by 50% resulted in inflation of 61% in 1994, but inflation has subsided since. Economic reform efforts continued with the support of international organizations, notably the World Bank and the IMF. The reform program came to a halt in June 1997 when civil war erupted. Denis SASSOU-NGUESSO, who returned to power when the war ended in October 1997, publicly expressed interest in moving forward on economic reforms and privatization and in renewing cooperation with international financial institutions. However, economic progress was badly hurt by slumping oil prices and the resumption of armed conflict in December 1998, which worsened the republic's budget deficit. The current administration presides over an uneasy internal peace and faces difficult economic problems of stimulating recovery and reducing poverty.
Cook Islands Cook Islands Like many other South Pacific island nations, the Cook Islands' economic development is hindered by the isolation of the country from foreign markets, the limited size of domestic markets, lack of natural resources, periodic devastation from natural disasters, and inadequate infrastructure. Agriculture, employing about 70% of the working population, provides the economic base with major exports made up of copra and citrus fruit. Black pearls are the Cook Island's leading export. Manufacturing activities are limited to fruit processing, clothing, and handicrafts. Trade deficits are offset by remittances from emigrants and by foreign aid, overwhelmingly from New Zealand. In the 1980s and 1990s, the country lived beyond its means, maintaining a bloated public service and accumulating a large foreign debt. Subsequent reforms, including the sale of state assets, the strengthening of economic management, the encouragement of tourism, and a debt restructuring agreement, have rekindled investment and growth. Like many other South Pacific island nations, the Cook Islands' economic development is hindered by the isolation of the country from foreign markets, the limited size of domestic markets, lack of natural resources, periodic devastation from natural disasters, and inadequate infrastructure. Agriculture provides the economic base with major exports made up of copra and citrus fruit. Manufacturing activities are limited to fruit processing, clothing, and handicrafts. Trade deficits are offset by remittances from emigrants and by foreign aid, overwhelmingly from New Zealand. In the 1980s and 1990s, the country lived beyond its means, maintaining a bloated public service and accumulating a large foreign debt. Subsequent reforms, including the sale of state assets, the strengthening of economic management, the encouragement of tourism, and a debt restructuring agreement, have rekindled investment and growth.
Coral Sea Islands Coral Sea Islands no economic activity no economic activity
Costa Rica Costa Rica Costa Rica's basically stable economy depends on tourism, agriculture, and electronics exports. Poverty has been substantially reduced over the past 15 years, and a strong social safety net has been put into place. Foreign investors remain attracted by the country's political stability and high education levels, and tourism continues to bring in foreign exchange. Low prices for coffee and bananas have hurt the agricultural sector. The government continues to grapple with its large internal and external deficits and sizable internal debt. The reduction of inflation remains a difficult problem because of rises in the price of imports, labor market rigidities, and fiscal deficits. The country also needs to reform its tax system and its pattern of public expenditure. Costa Rica is the only signatory to the US-Central American Free Trade Agreement (CAFTA) that has not ratified it. CAFTA implementation would result in economic reforms and an improved investment climate. Costa Rica's basically stable economy depends on tourism, agriculture, and electronics exports. Poverty has been substantially reduced over the past 15 years, and a strong social safety net has been put into place. At the same time, distribution of income remains severely unequal. Foreign investors remain attracted by the country's political stability and high education levels, and tourism continues to bring in foreign exchange. However, traditional export sectors have not kept pace. Low coffee prices and an overabundance of bananas have hurt the agricultural sector. The government continues to grapple with its large deficit and massive internal debt, with the need to modernize the state-owned electricity and telecommunications sector, and with the problem of bringing down inflation.
Cote d'Ivoire Cote d'Ivoire Cote d'Ivoire is among the world's largest producers and exporters of coffee, cocoa beans, and palm oil. Consequently, the economy is highly sensitive to fluctuations in international prices for these products and weather conditions. Despite government attempts to diversify the economy, it is still heavily dependent on agriculture and related activities, engaging roughly 68% of the population. Growth was negative in 2000-03 because of the difficulty of meeting the conditions of international donors, continued low prices of key exports, and severe civil war. In November 2004, the situation deteriorated when President GBAGBO's troops attacked and killed nine French peacekeeping forces, and the UN imposed an arms embargo. Political turmoil damaged the economy in 2005, with fear among Ivorians spreading, foreign investment shriveling, French businesses and expats fleeing, travel within the country falling, and criminal elements that traffic in weapons and diamonds gaining ground. The government will continue to survive financially off of the sale of cocoa, which represents 90% of foreign exchange earnings. Though the 2005 harvest was largely unaffected by past fighting, the government will likely lose between 10% and 20% of its cocoa harvest to northern rebels, who smuggle the cocoa they control to neighboring countries where cocoa prices are higher. The government remains hopeful that ongoing exploration of Cote d'Ivoire's offshore oil reserves will result in significant production that could boost daily crude output from roughly 33,000 barrels per day (b/d) to over 200,000 b/d by the end of the decade. Cote d'Ivoire is among the world's largest producers and exporters of coffee, cocoa beans, and palm oil. Consequently, the economy is highly sensitive to fluctuations in international prices for these products and to weather conditions. Despite government attempts to diversify the economy, it is still largely dependent on agriculture and related activities, which engage roughly 68% of the population. After several years of lagging performance, the Ivorian economy began a comeback in 1994, due to the 50% devaluation of the CFA franc and improved prices for cocoa and coffee, growth in nontraditional primary exports such as pineapples and rubber, limited trade and banking liberalization, offshore oil and gas discoveries, and generous external financing and debt rescheduling by multilateral lenders and France. Moreover, government adherence to donor-mandated reforms led to a jump in growth to 5% annually during 1996-99. Growth was negative in 2000-02 because of the difficulty of meeting the conditions of international donors, continued low prices of key exports, and severe civil war fighting.
Croatia Croatia Before the dissolution of Yugoslavia, the Republic of Croatia, after Slovenia, was the most prosperous and industrialized area with a per capita output perhaps one-third above the Yugoslav average. The economy emerged from a mild recession in 2000 with tourism, banking, and public investments leading the way. Unemployment remains high, at about 18%, with structural factors slowing its decline. While macroeconomic stabilization has largely been achieved, structural reforms lag because of deep resistance on the part of the public and lack of strong support from politicians. Growth, while impressive at about 3% to 4% for the last several years, has been stimulated, in part, through high fiscal deficits and rapid credit growth. The EU accession process should accelerate fiscal and structural reform. Before the dissolution of Yugoslavia, the Republic of Croatia, after Slovenia, was the most prosperous and industrialized area, with a per capita output perhaps one-third above the Yugoslav average. The economy emerged from its mild recession in 2000 with tourism the main factor, but massive structural unemployment remains a key negative element. The government's failure to press the economic reforms needed to spur growth is largely the result of coalition politics and public resistance, particularly from the trade unions. Opponents fear reforms would cut jobs, wages, and social benefits. The government has a heavy backload of civil cases, many involving tenure land. The country is likely to experience only moderate growth without disciplined fiscal and structural reform.
Cuba Cuba The government continues to balance the need for economic loosening against a desire for firm political control. It has rolled back limited reforms undertaken in the 1990s to increase enterprise efficiency and alleviate serious shortages of food, consumer goods, and services. The average Cuban's standard of living remains at a lower level than before the downturn of the 1990s, which was caused by the loss of Soviet aid and domestic inefficiencies. The government in 2005 strengthened its controls over dollars coming into the economy from tourism, remittances, and trade. External financing has helped growth in the mining, oil, construction, and tourism sectors. The government continues to balance the need for economic loosening against a desire for firm political control. It has undertaken limited reforms in recent years to increase enterprise efficiency and alleviate serious shortages of food, consumer goods, and services but is unlikely to implement extensive changes. A major feature of the economy is the dichotomy between relatively efficient export enclaves and inefficient domestic sectors. The average Cuban's standard of living remains at a lower level than before the severe economic depression of the early 1990s, which was caused by the loss of Soviet aid and domestic inefficiencies. High oil import prices, recessions in key export markets, damage from Hurricanes Isidore and Lili, and the tourist slump after 11 September 2001 hampered growth in 2002.
Cyprus Cyprus The Republic of Cyprus has a market economy dominated by the service sector, which accounts for 76% of GDP. Tourism and financial services are the most important sectors; erratic growth rates over the past decade reflect the economy's reliance on tourism, which often fluctuates with political instability in the region and economic conditions in Western Europe. Nevertheless, the economy grew a healthy 3.7% per year in 2004 and 2005, well above the EU average. Cyprus joined the European Exchange Rate Mechanism (ERM2) in May 2005. The government has initiated an aggressive austerity program, which has cut the budget deficit to below 3% but continued fiscal discipline is necessary if Cyprus is to meet its goal of adopting the euro on 1 January 2008. As in the area administered by Turkish Cypriots, water shortages are a perennial problem; a few desalination plants are now on line. After 10 years of drought, the country received substantial rainfall from 2001-03 alleviating immediate concerns. The Turkish Cypriot economy has roughly one-third of the per capita GDP of the south, and economic growth tends to be volatile, given north Cyprus's relative isolation, bloated public sector, reliance on the Turkish lira, and small market size. The Turkish Cypriot economy grew 15.4% in 2004, fueled by growth in the construction and education sectors, as well as increased employment of Turkish Cypriots in the Republic of Cyprus. The Turkish Cypriots are heavily dependent on transfers from the Turkish Government. Under the 2003-06 economic protocol, Ankara plans to provide around $550 million to the "TRNC." Agriculture and services, together, employ more than half of the work force. The Greek Cypriot economy is prosperous but highly susceptible to external shocks. Erratic growth rates over the past decade reflect the economy's vulnerability to swings in tourist arrivals, caused by political instability in the region and fluctuations in economic conditions in Western Europe. Economic policy is focused on meeting the criteria for admission to the EU. As in the Turkish sector, water shortages are a perennial problem; a few desalination plants are now online. The Turkish Cypriot economy has roughly one-third of the per capita GDP of the south. Because it is recognized only by Turkey, it has had much difficulty arranging foreign financing and investment. It remains heavily dependent on agriculture and government service, which together employ about half of the work force. To compensate for the economy's weakness, Turkey provides grants and loans to support economic development. Ankara provided $200 million in 2002 and pledged $450 million for the 2003-05 period. Future events throughout the island will be highly influenced by the outcome of negotiations on the UN-sponsored agreement to unite the Greek and Turkish areas and by the arrangements under which the island joins the EU.
Czech Republic Czech Republic The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Growth in 2000-05 was supported by exports to the EU, primarily to Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. The current account deficit has declined to around 3% of GDP as demand for Czech products in the European Union has increased. Inflation is under control. Recent accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the Value Added Tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult pension and healthcare reforms will have to wait until after the next elections. Privatization of the state-owned telecommunications firm Cesky Telecom took place in 2005. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth. One of the most stable and prosperous of the post-Communist states, the Czech Republic has been recovering from recession since mid-1999. Growth in 2000-03 was supported by exports to the EU, primarily to Germany, and a near doubling of foreign direct investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. High current account deficits - averaging around 5% of GDP in the last several years - could be a persistent problem. Inflation is under control. The EU put the Czech Republic just behind Poland and Hungary in preparations for accession, which will give further impetus and direction to structural reform. Moves to complete banking, telecommunications, and energy privatization will encourage additional foreign investment, while intensified restructuring among large enterprises and banks and improvements in the financial sector should strengthen output growth. But revival in the European economies remains essential to stepped-up growth.
Denmark Denmark This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, a stable currency, and high dependence on foreign trade. Denmark is a net exporter of food and energy and enjoys a comfortable balance of payments surplus. Government objectives include streamlining the bureaucracy and further privatization of state assets. The government has been successful in meeting, and even exceeding, the economic convergence criteria for participating in the third phase (a common European currency) of the European Economic and Monetary Union (EMU), but Denmark has decided not to join 12 other EU members in the euro. Nonetheless, the Danish krone remains pegged to the euro. Economic growth gained momentum in 2004 and the upturn accelerated through 2005. Because of high GDP per capita, welfare benefits, a low Gini index, and political stability, the Danish people enjoy living standards topped by no other nation. A major long-term issue will be the sharp decline in the ratio of workers to retirees. This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, a stable currency, and high dependence on foreign trade. Denmark is a net exporter of food and energy and enjoys a comfortable balance of payments surplus. Government objectives include streamlining the bureaucracy and further privatization of state assets. The government has been successful in meeting, and even exceeding, the economic convergence criteria for participating in the third phase (a common European currency) of the European Economic and Monetary Union (EMU), but Denmark has decided not to join the 12 other EU members in the euro; even so, the Danish Krone remains pegged to the euro. Given the sluggish state of the European economy, growth in 2003 was a mere 1.1%.
Dhekelia Dhekelia Economic activity is limited to providing services to the military and their families located in Dhekelia. All food and manufactured goods must be imported. -
Djibouti Djibouti The economy is based on service activities connected with the country's strategic location and status as a free trade zone in northeast Africa. Two-thirds of the inhabitants live in the capital city; the remainder are mostly nomadic herders. Scanty rainfall limits crop production to fruits and vegetables, and most food must be imported. Djibouti provides services as both a transit port for the region and an international transshipment and refueling center. Djibouti has few natural resources and little industry. The nation is, therefore, heavily dependent on foreign assistance to help support its balance of payments and to finance development projects. An unemployment rate of at least 50% continues to be a major problem. While inflation is not a concern, due to the fixed tie of the Djiboutian franc to the US dollar, the artificially high value of the Djiboutian franc adversely affects Djibouti's balance of payments. Per capita consumption dropped an estimated 35% over the last seven years because of recession, civil war, and a high population growth rate (including immigrants and refugees). Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors. The economy is based on service activities connected with the country's strategic location and status as a free trade zone in northeast Africa. Two-thirds of the inhabitants live in the capital city, the remainder being mostly nomadic herders. Scanty rainfall limits crop production to fruits and vegetables, and most food must be imported. Djibouti provides services as both a transit port for the region and an international transshipment and refueling center. It has few natural resources and little industry. The nation is, therefore, heavily dependent on foreign assistance to help support its balance of payments and to finance development projects. An unemployment rate of 50% continues to be a major problem. Inflation is not a concern, however, because of the fixed tie of the franc to the US dollar. Per capita consumption dropped an estimated 35% over the last seven years because of recession, civil war, and a high population growth rate (including immigrants and refugees). Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors. Another factor limiting growth is the negative impact on port activity now that Ethiopia has more trade route options.
Dominica Dominica The Dominican economy depends on agriculture, primarily bananas, and remains highly vulnerable to climatic conditions and international economic developments. Production of bananas dropped precipitously in 2003, a major reason for the 1% decline in GDP. Tourism increased in 2003 as the government sought to promote Dominica as an "ecotourism" destination. Development of the tourism industry remains difficult, however, because of the rugged coastline, lack of beaches, and the absence of an international airport. The government began a comprehensive restructuring of the economy in 2003 - including elimination of price controls, privatization of the state banana company, and tax increases - to address Dominica's economic crisis and to meet IMF targets. In order to diversify the island's production base, the government is attempting to develop an offshore financial sector and is planning to construct an oil refinery on the eastern part of the island. The Dominican economy depends on agriculture, primarily bananas, and remains highly vulnerable to climatic conditions and international economic developments. Hurricane Luis devastated the country's banana crop in 1995 after tropical storms wiped out a quarter of the 1994 crop. The economy subsequently has been fueled by increases in construction, soap production, and tourist arrivals. Development of the tourism industry remains difficult however, because of the rugged coastline, lack of beaches, and the absence of an international airport. Economic growth is sluggish, and unemployment is greater than 20%. The government has been attempting to develop an offshore financial sector in order to diversify the island's production base.
Dominican Republic Dominican Republic The Dominican Republic is a Caribbean representative democracy that enjoyed strong GDP growth until 2003. Although the country has long been viewed primarily as an exporter of sugar, coffee, and tobacco, in recent years the service sector has overtaken agriculture as the economy's largest employer due to growth in tourism and free trade zones. Growth turned negative in 2003 with reduced tourism, a major bank fraud, and limited growth in the US economy (the source of about 80% of export revenues), but recovered in 2004 and 2005. With the help of strict fiscal targets agreed in the 2004 renegotiation of an IMF standby loan, President FERNANDEZ has stabilized the country's financial situation. Although the economy continues to grow at a respectable rate, unemployment remains an important challenge. The country suffers from marked income inequality; the poorest half of the population receives less than one-fifth of GNP, while the richest 10% enjoys nearly 40% of national income. The Dominican Republic's development prospects improved with the ratification of the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) in September 2005. The Dominican Republic's economy experienced dramatic growth over the last decade, even though the economy was hit hard by Hurricane Georges in 1998. Although the country has long been viewed primarily as an exporter of sugar, coffee, and tobacco, in recent years the service sector has overtaken agriculture as the economy's largest employer, due to growth in tourism and free trade zones. The country suffers from marked income inequality; the poorest half of the population receives less than one-fifth of GNP, while the richest 10% enjoy nearly 40% of national income. Growth probably will slow in 2003 with reduced tourism and expected low growth in the US economy, the source of 87% of export revenues.
East Timor East Timor In late 1999, about 70% of the economic infrastructure of East Timor was laid waste by Indonesian troops and anti-independence militias, and 300,000 people fled westward. Over the next three years, however, a massive international program, manned by 5,000 peacekeepers (8,000 at peak) and 1,300 police officers, led to substantial reconstruction in both urban and rural areas. By the end of 2005, all refugees either returned or resettled in Indonesia. Non-petroleum GDP growth was held back in 2003 by extensive drought and the gradual winding down of the international presence but recovered somewhat in 2004. The country faces great challenges in continuing the rebuilding of infrastructure, strengthening the infant civil administration, and generating jobs for young people entering the work force. The development of oil and gas resources in nearby waters has begun to supplement government revenues ahead of schedule and above expectations - the result of high petroleum prices - but the technology-intensive industry does little to create jobs for the unemployed, because there are no production facilities in Timor and the gas is piped to Australia. The parliament in June 2005 unanimously approved the creation of a Petroleum Fund to serve as a repository for all petroleum revenues and preserve the value of East Timor's petroleum wealth for future generations. In late 1999, about 70% of the economic infrastructure of East Timor was laid waste by Indonesian troops and anti-independence militias, and 260,000 people fled westward. Over the next three years, however, a massive international program, manned by 5,000 peacekeepers (8,000 at peak) and 1,300 police officers, led to substantial reconstruction in both urban and rural areas. By mid-2002, all but about 50,000 of the refugees had returned. The country faces great challenges in continuing the rebuilding of infrastructure and the strengthening of the infant civil administration. One promising long-term project is the planned development of oil resources in nearby waters.
Ecuador Ecuador Ecuador has substantial petroleum resources, which have accounted for 40% of the country's export earnings and one-third of central government budget revenues in recent years. Consequently, fluctuations in world market prices can have a substantial domestic impact. In the late 1990s, Ecuador suffered its worst economic crisis, with natural disasters and sharp declines in world petroleum prices driving Ecuador's economy into free fall in 1999. Real GDP contracted by more than 6%, with poverty worsening significantly. The banking system also collapsed, and Ecuador defaulted on its external debt later that year. The currency depreciated by some 70% in 1999, and, on the brink of hyperinflation, the MAHAUD government announced it would dollarize the economy. A coup, however, ousted MAHAUD from office in January 2000, and after a short-lived junta failed to garner military support, Vice President Gustavo NOBOA took over the presidency. In March 2000, Congress approved a series of structural reforms that also provided the framework for the adoption of the US dollar as legal tender. Dollarization stabilized the economy, and growth returned to its pre-crisis levels in the years that followed. Under the administration of Lucio GUTIERREZ - January 2003 to April 2005 - Ecuador benefited from higher world petroleum prices. However, the government under Alfredo PALACIO has reversed economic reforms that reduced Ecuador's vulnerability to petroleum price swings and financial crises, allowing the central government greater access to oil windfalls and disbursing surplus retirement funds. Ecuador has substantial oil resources and rich agricultural areas. Because the country exports primary products such as oil, bananas, and shrimp, fluctuations in world market prices can have a substantial domestic impact. Ecuador joined the World Trade Organization (WTrO) in 1996, but has failed to comply with many of its accession commitments. The aftermath of El Nino and depressed oil market of 1997-98 drove Ecuador's economy into a free-fall in 1999. The beginning of 1999 saw the banking sector collapse, which helped precipitate an unprecedented default on external loans later that year. Continued economic instability drove a 70% depreciation of the currency throughout 1999, which forced a desperate government to "dollarize" the currency regime in 2000. The move stabilized the currency, but did not stave off the ouster of the government. Gustavo NOBOA, who assumed the presidency in January 2000, has managed to pass substantial economic reforms and mend relations with international financial institutions. Ecuador completed its first standby agreement since 1986 when the IMF Board approved a 10 December 2001 disbursement of $96 million, the final installment of a $300 million standby credit agreement. In February 2003, newly installed president Lucio GUTIERREZ faced a budget gap and massive foreign debt. He has pledged to use oil revenues to pay off debt and is seeking additional IMF support.
Egypt Egypt Occupying the northeast corner of the African continent, Egypt is bisected by the highly fertile Nile valley, where most economic activity takes place. In the last 30 years, the government has reformed the highly centralized economy it inherited from President NASSER. In 2005, Prime Minister Ahmed NAZIF reduced personal and corporate tax rates, reduced energy subsidies, and privatized several enterprises. The stock market boomed, and GDP grew nearly 5%. Despite these achievements, the government has failed to raise living standards for the average Egyptian, and has had to continue providing subsidies for basic necessities. The subsidies have contributed to a growing budget deficit - more than 8% of GDP in 2005 - and represent a significant drain on the economy. Foreign direct investment remains low. To achieve higher GDP growth the NAZIF government will need to continue its aggressive pursuit of reform, especially in the energy sector. Egypt's export sectors - particularly natural gas - have bright prospects. Egypt improved its macroeconomic performance throughout most of the last decade by following IMF advice on fiscal, monetary, and structural reform policies. As a result, Egypt managed to tame inflation, slash budget deficits, and attract more foreign investment. In the past four years, however, the pace of reform has slackened, and excessive spending on national infrastructure projects has widened budget deficits again. Lower foreign exchange earnings since 1998 resulted in pressure on the Egyptian pound and periodic dollar shortages. Monetary pressures have increased since 11 September 2001 because of declines in tourism and Suez Canal tolls, and Egypt has devalued the pound several times in the past year. The development of a gas export market is a major bright spot for future growth prospects. In the short term, regional tensions will continue to affect tourism and hold back prospects for economic expansion.
El Salvador El Salvador The smallest country in Central America, El Salvador has the third largest economy, but growth has been minimal in recent years. Hoping to stimulate the sluggish economy, the government is striving to open new export markets, encourage foreign investment, and modernize the tax and healthcare systems. Implementation in 2006 of the Central America-Dominican Republic Free Trade Agreement, which El Salvador was the first to ratify, is viewed as a key policy to help achieve these objectives. The trade deficit has been offset by annual remittances from Salvadorans living abroad - 16.6% of GDP in 2005 - and external aid. With the adoption of the US dollar as its currency in 2001, El Salvador has lost control over monetary policy and must concentrate on maintaining a disciplined fiscal policy. In recent years, this Central American economy has been suffering from a weak tax collection system, factory closings, the aftermaths of Hurricane Mitch of 1998 and the devastating earthquakes of early 2001, and weak world coffee prices. On the bright side, inflation has fallen to single digit levels, and total exports have grown substantially. The trade deficit has been offset by annual remittances of almost $2 billion from Salvadorans living abroad and by external aid. The US dollar is now the legal tender. Because competitor countries have fluctuating exchange rates, El Salvador must face the challenge of raising productivity and lowering costs.
Equatorial Guinea Equatorial Guinea The discovery and exploitation of large oil reserves have contributed to dramatic economic growth in recent years. Forestry, farming, and fishing are also major components of GDP. Subsistence farming predominates. Although pre-independence Equatorial Guinea counted on cocoa production for hard currency earnings, the neglect of the rural economy under successive regimes has diminished potential for agriculture-led growth (the government has stated its intention to reinvest some oil revenue into agriculture). A number of aid programs sponsored by the World Bank and the IMF have been cut off since 1993, because of corruption and mismanagement. No longer eligible for concessional financing because of large oil revenues, the government has been trying to agree on a "shadow" fiscal management program with the World Bank and IMF. Businesses, for the most part, are owned by government officials and their family members. Undeveloped natural resources include titanium, iron ore, manganese, uranium, and alluvial gold. Growth remained strong in 2005, led by oil. Equatorial Guinea now has the second highest per capita income in the world, after Luxembourg. The discovery and exploitation of large oil reserves have contributed to dramatic economic growth in recent years. Forestry, farming, and fishing are also major components of GDP. Subsistence farming predominates. Although pre-independence Equatorial Guinea counted on cocoa production for hard currency earnings, the neglect of the rural economy under successive regimes has diminished potential for agriculture-led growth (the government has stated its intention to reinvest some oil revenue into agriculture). A number of aid programs sponsored by the World Bank and the IMF have been cut off since 1993 because of corruption and mismanagement. No longer eligible for concessional financing because of large oil revenues, the government has been unsuccessfully trying to agree on a "shadow" fiscal management program with the World Bank and IMF. Businesses, for the most part, are owned by government officials and their family members. Undeveloped natural resources include titanium, iron ore, manganese, uranium, and alluvial gold. Growth will remain strong in 2003, led by oil.
Eritrea Eritrea Since independence from Ethiopia in 1993, Eritrea has faced the economic problems of a small, desperately poor country. Like the economies of many African nations, the economy is largely based on subsistence agriculture, with 80% of the population involved in farming and herding. The Ethiopian-Eritrea war in 1998-2000 severely hurt Eritrea's economy. GDP growth fell to zero in 1999 and to -12.1% in 2000. The May 2000 Ethiopian offensive into northern Eritrea caused some $600 million in property damage and loss, including losses of $225 million in livestock and 55,000 homes. The attack prevented planting of crops in Eritrea's most productive region, causing food production to drop by 62%. Even during the war, Eritrea developed its transportation infrastructure, asphalting new roads, improving its ports, and repairing war-damaged roads and bridges. Since the war ended, the government has maintained a firm grip on the economy, expanding the use of the military and party-owned businesses to complete Eritrea's development agenda. Erratic rainfall and the delayed demobilization of agriculturalists from the military kept cereal production well below normal, holding down growth in 2002-05. Eritrea's economic future depends upon its ability to master social problems such as illiteracy, unemployment, and low skills, as well as the willingness to open its economy to private enterprise so that the diaspora's money and expertise can foster economic growth. Since independence from Ethiopia on 24 May 1993, Eritrea has faced the economic problems of a small, desperately poor country. Like the economies of many African nations, the economy is largely based on subsistence agriculture, with 80% of the population involved in farming and herding. The Ethiopian-Eritrea war in 1998-2000 severely hurt Eritrea's economy. GDP growth fell to zero in 1999 and to -1% in 2000. The May 2000 Ethiopian offensive into northern Eritrea caused some $600 million in property damage and loss, including losses of $225 million in livestock and 55,000 homes. The attack prevented planting of crops in Eritrea's most productive region, causing food production to drop by 62%. Even during the war, Eritrea developed its transportation infrastructure, asphalting new roads, improving its ports, and repairing war damaged roads and bridges. Since the war ended, the government has maintained a firm grip on the economy, expanding the use of the military and party-owned businesses to complete Eritrea's development agenda. Erratic rainfall and the delayed demobilization of agriculturalists from the military kept cereal production well below normal, holding down growth in 2002. Eritrea's economic future depends upon its ability to master social problems such as illiteracy, unemployment, and low skills, and to open its economy to private enterprise so the diaspora's money and expertise can foster economic growth.
Estonia Estonia Estonia, as a new member of the World Trade Organization and the European Union, has transitioned effectively to a modern market economy with strong ties to the West, including the pegging of its currency to the euro. The economy benefits from strong electronics and telecommunications sectors and is greatly influenced by developments in Finland, Sweden, and Germany, three major trading partners. The current account deficit remains high; however, the state budget is essentially in balance, and public debt is low. Estonia, as a new member of the World Trade Organization, is steadily moving toward a modern market economy with increasing ties to the West, including the pegging of its currency to the euro. The economy benefits from strong electronics and telecoms sectors. A major goal is accession to the EU, possibly by 2004. The economy is greatly influenced by developments in Finland, Sweden, and Germany, three major trading partners. The high current account deficit remains a concern.
Ethiopia Ethiopia Ethiopia's poverty-stricken economy is based on agriculture, accounting for half of GDP, 60% of exports, and 80% of total employment. The agricultural sector suffers from frequent drought and poor cultivation practices. Coffee is critical to the Ethiopian economy with exports of some $156 million in 2002, but historically low prices have seen many farmers switching to qat to supplement income. The war with Eritrea in 1998-2000 and recurrent drought have buffeted the economy, in particular coffee production. In November 2001, Ethiopia qualified for debt relief from the Highly Indebted Poor Countries (HIPC) initiative, and in December 2005 the International Monetary Fund voted to forgive Ethiopia's debt to the body. Under Ethiopia's land tenure system, the government owns all land and provides long-term leases to the tenants; the system continues to hamper growth in the industrial sector as entrepreneurs are unable to use land as collateral for loans. Drought struck again late in 2002, leading to a 2% decline in GDP in 2003. Normal weather patterns late in 2003 helped agricultural and GDP growth recover in 2004-05. Ethiopia's poverty-stricken economy is based on agriculture, which accounts for half of GDP, 85% of exports, and 80% of total employment. The agricultural sector suffers from frequent drought and poor cultivation practices. Coffee is critical to the Ethiopian economy with exports of some $270 million in 2000/01, but historically low prices have seen many farmers switching to qat to supplement their income. The war with Eritrea in 1999-2000 and recurrent drought have buffeted the economy, in particular coffee production. In November 2001 Ethiopia qualified for debt relief from the Highly Indebted Poor Countries (HIPC) initiative. Under Ethiopia's land tenure system, the government owns all land and provides long-term leases to the tenants; the system continues to hamper growth in the industrial sector as entrepreneurs are unable to use land as collateral for loans. Strong growth in 2002 resulted from good rainfall early in the year, the cessation of hostilities, and renewed foreign aid and debt relief. But drought struck again late in 2002, and the World Food Program (WFP) estimates 14 million Ethiopians need food immediately to survive into 2003. The government estimates than annual growth of 7% is needed to reduce poverty, yet the maintenance of 5% in 2003 will be quite difficult (one estimate is for 1.5% growth).
Europa Island Europa Island no economic activity no economic activity
European Union European Union Domestically, the European Union attempts to lower trade barriers, adopt a common currency, and move toward convergence of living standards. Internationally, the EU aims to bolster Europe's trade position and its political and economic power. Because of the great differences in per capita income (from $15,000 to $56,000) and historic national animosities, the European Community faces difficulties in devising and enforcing common policies. For example, since 2003 Germany and France have flouted the member states' treaty obligation to prevent their national budgets from running more than a 3% deficit. In 2004, the EU admitted 10 central and eastern European countries that are, in general, less advanced technologically and economically than the other 15. Twelve EU member states introduced the euro as their common currency on 1 January 1999, but the UK, Sweden, and Denmark do not participate. The 10 new member states may choose to adopt the euro when they meet the EU's fiscal and monetary criteria and the other euro states so agree. -
Falkland Islands (Islas Malvinas) Falkland Islands (Islas Malvinas) The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987 the government began selling fishing licenses to foreign trawlers operating within the Falkland Islands' exclusive fishing zone. These license fees total more than $40 million per year, which goes to support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defense. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date, no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost. The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987 the government began selling fishing licenses to foreign trawlers operating within the Falklands exclusive fishing zone. These license fees total more than $40 million per year, which goes to support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defense. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.
Faroe Islands Faroe Islands The Faroese economy has had a strong performance since 1994, mostly as a result of increasing fish landings and high and stable export prices. Unemployment is minimal and there are signs of labor shortages in several sectors. The positive economic development has helped the Faroese Home Rule Government produce increasing budget surpluses, which in turn have helped reduce the large public debt, most of it owed to Denmark. However, the total dependence on fishing makes the Faroese economy extremely vulnerable, and the present fishing efforts appear in excess of what is a sustainable level of fishing in the long term. Oil finds close to the Faroese area give hope for deposits in the immediate Faroese area, which may eventually lay the basis for a more diversified economy and thus lessen dependence on Danish economic assistance. Aided by a substantial annual subsidy (about 15% of GDP) from Denmark, the Faroese have a standard of living not far below the Danes and other Scandinavians. The Faroese economy has had a strong performance since 1994, mostly as a result of increasing fish landings and high and stable export prices. Unemployment is falling and there are signs of labor shortages in several sectors. The positive economic development has helped the Faroese Home Rule Government produce increasing budget surpluses, which in turn help to reduce the large public debt, most of it owed to Denmark. However, the total dependence on fishing makes the Faroese economy extremely vulnerable, and the present fishing efforts appear in excess of what is a sustainable level of fishing in the long term. Oil finds close to the Faroese area give hope for deposits in the immediate Faroese area, which may eventually lay the basis for a more diversified economy and thus lessen dependence on Danish economic assistance. Aided by a substantial annual subsidy (15% of GDP) from Denmark, the Faroese have a standard of living not far below the Danes and other Scandinavians.
Fiji Fiji Fiji, endowed with forest, mineral, and fish resources, is one of the most developed of the Pacific island economies, though still with a large subsistence sector. Sugar exports, remittances from Fijians working abroad, and a growing tourist industry - with 300,000 to 400,000 tourists annually - are the major sources of foreign exchange. Fiji's sugar has special access to European Union markets, but will be harmed by the EU's decision to cut sugar subsidies. Sugar processing makes up one-third of industrial activity but is not efficient. Long-term problems include low investment, uncertain land ownership rights, and the government's ability to manage its budget. Yet, because of a tourist boom, short-run economic prospects are good, provided tensions do not again erupt between indigenous Fijians and Indo-Fijians. Overseas remittances from Fijians working in Kuwait and Iraq have increased significantly. Fiji, endowed with forest, mineral, and fish resources, is one of the most developed of the Pacific island economies, though still with a large subsistence sector. Sugar exports and a growing tourist industry - with 300,000 to 400,000 tourists annually - are the major sources of foreign exchange. Sugar processing makes up one-third of industrial activity. Long-term problems include low investment, uncertain land ownership rights, and the government's ability to manage its budget.
Finland Finland Finland has a highly industrialized, largely free-market economy with per capita output roughly that of the UK, France, Germany, and Italy. Its key economic sector is manufacturing - principally the wood, metals, engineering, telecommunications, and electronics industries. Trade is important; exports equal two-fifths of GDP. Finland excels in high-tech exports, e.g., mobile phones. Except for timber and several minerals, Finland depends on imports of raw materials, energy, and some components for manufactured goods. Because of the climate, agricultural development is limited to maintaining self-sufficiency in basic products. Forestry, an important export earner, provides a secondary occupation for the rural population. Rapidly increasing integration with Western Europe - Finland was one of the 12 countries joining the European Economic and Monetary Union (EMU) - will dominate the economic picture over the next several years. High unemployment remains a persistent problem. Finland has a highly industrialized, largely free-market economy, with per capita output roughly that of the UK, France, Germany, and Italy. Its key economic sector is manufacturing - principally the wood, metals, engineering, telecommunications, and electronics industries. Trade is important, with exports equaling almost one-third of GDP. Except for timber and several minerals, Finland depends on imports of raw materials, energy, and some components for manufactured goods. Because of the climate, agricultural development is limited to maintaining self-sufficiency in basic products. Forestry, an important export earner, provides a secondary occupation for the rural population. Rapidly increasing integration with Western Europe - Finland was one of the 11 countries joining the European Economic and Monetary Union (EMU) on 1 January 1999 - will dominate the economic picture over the next several years. Growth in 2003 was held back by the global slowdown but will pick up in 2004 provided the world economy suffers no further blows.
France France France is in the midst of transition from a well-to-do modern economy that has featured extensive government ownership and intervention to one that relies more on market mechanisms. The government has partially or fully privatized many large companies, banks, and insurers. It retains controlling stakes in several leading firms, including Air France, France Telecom, Renault, and Thales, and is dominant in some sectors, particularly power, public transport, and defense industries. The telecommunications sector is gradually being opened to competition. France's leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that reduce income disparity and the impact of free markets on public health and welfare. The government has lowered income taxes and introduced measures to boost employment and reform the pension system. In addition, it is focusing on the problems of the high cost of labor and labor market inflexibility resulting from the 35-hour workweek and restrictions on lay-offs. The tax burden remains one of the highest in Europe (nearly 50% of GDP in 2005). The lingering economic slowdown and inflexible budget items have pushed the budget deficit above the eurozone's 3%-of-GDP limit; unemployment stands at 10%. France is in the midst of transition, from a well-to-do modern economy that has featured extensive government ownership and intervention to one that relies more on market mechanisms. The Socialist-led government has partially or fully privatized many large companies, banks, and insurers, but still retains controlling stakes in several leading firms, including Air France, France Telecom, Renault, and Thales, and remains dominant in some sectors, particularly power, public transport, and defense industries. The telecommunications sector is gradually being opened to competition. France's leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that reduce income disparity and the impact of free markets on public health and welfare. The current government has lowered income taxes and introduced measures to boost employment. At the end of 2002 the government was focusing on the problems of the high cost of labor and labor market inflexibility resulting from the 35-hour workweek and restrictions on lay-offs. The government was also pushing for pension reforms and simplification of administrative procedures. The tax burden remains one of the highest in Europe. The current economic slowdown and inflexible budget items have pushed the deficit above the EU's 3% debt limit. Business investment remains listless because of low rates of capital utilization, high debt, and the steep cost of capital.
French Guiana French Guiana The economy is tied closely to the much larger French economy through subsidies and imports. Besides the French space center at Kourou (which accounts for 25% of GDP), fishing and forestry are the most important economic activities. Forest and woodland cover 90% of the country. The large reserves of tropical hardwoods, not fully exploited, support an expanding sawmill industry that provides sawn logs for export. Cultivation of crops is limited to the coastal area, where the population is largely concentrated; rice and manioc are the major crops. French Guiana is heavily dependent on imports of food and energy. Unemployment is a serious problem, particularly among younger workers. The economy is tied closely to the larger French economy through subsidies and imports. Besides the French space center at Kourou (which accounts for 25% of GDP), fishing and forestry are the most important economic activities. Forest and woodland cover 90% of the country. The large reserves of tropical hardwoods, not fully exploited, support an expanding sawmill industry that provides sawn logs for export. Cultivation of crops is limited to the coastal area, where the population is largely concentrated; rice and manioc are the major crops. French Guiana is heavily dependent on imports of food and energy. Unemployment is a serious problem, particularly among younger workers.
French Polynesia French Polynesia Since 1962, when France stationed military personnel in the region, French Polynesia has changed from a subsistence agricultural economy to one in which a high proportion of the work force is either employed by the military or supports the tourist industry. With the halt of French nuclear testing in 1996, the military contribution to the economy fell sharply. Tourism accounts for about one-fourth of GDP and is a primary source of hard currency earnings. Other sources of income are pearl farming and deep-sea commercial fishing. The small manufacturing sector primarily processes agricultural products. The territory benefits substantially from development agreements with France aimed principally at creating new businesses and strengthening social services. Since 1962, when France stationed military personnel in the region, French Polynesia has changed from a subsistence agricultural economy to one in which a high proportion of the work force is either employed by the military or supports the tourist industry. With the halt of French nuclear testing in 1996, the military contribution to the economy fell sharply. Tourism accounts for about one-fourth of GDP and is a primary source of hard currency earnings. Other sources of income are pearl farming and deep-sea commercial fishing. The small manufacturing sector primarily processes agricultural products. The territory benefits substantially from development agreements with France aimed principally at creating new businesses and strengthening social services.
French Southern and Antarctic Lands French Southern and Antarctic Lands Economic activity is limited to servicing meteorological and geophysical research stations and French and other fishing fleets. The fish catches landed on Iles Kerguelen by foreign ships are exported to France and Reunion. Economic activity is limited to servicing meteorological and geophysical research stations and French and other fishing fleets. The fish catches landed on Iles Kerguelen by foreign ships are exported to France and Reunion.
Gabon Gabon Gabon enjoys a per capita income four times that of most of sub-Saharan African nations. This has supported a sharp decline in extreme poverty; yet, because of high income inequality, a large proportion of the population remains poor. Gabon depended on timber and manganese until oil was discovered offshore in the early 1970s. The oil sector now accounts for 50% of GDP. Gabon continues to face fluctuating prices for its oil, timber, and manganese exports. Despite the abundance of natural wealth, poor fiscal management hobbles the economy. Devaluation of its currency by 50% in January 1994 sparked a one-time inflationary surge, to 35%; the rate dropped to 6% in 1996. The IMF provided a one-year standby arrangement in 1994-95, a three-year Enhanced Financing Facility (EFF) at near commercial rates beginning in late 1995, and stand-by credit of $119 million in October 2000. Those agreements mandated progress in privatization and fiscal discipline. France provided additional financial support in January 1997 after Gabon met IMF targets for mid-1996. In 1997, an IMF mission to Gabon criticized the government for overspending on off-budget items, overborrowing from the central bank, and slipping on its schedule for privatization and administrative reform. The rebound of oil prices in 1999-2000 helped growth, but drops in production hampered Gabon from fully realizing potential gains. In December 2000, Gabon signed a new agreement with the Paris Club to reschedule its official debt. A follow-up bilateral repayment agreement with the US was signed in December 2001. Gabon signed a 14-month Stand-By Arrangement with the IMF in May 2004, and received Paris Club debt rescheduling later that year. Short-term progress depends on an upbeat world economy and fiscal and other adjustments in line with IMF policies. Gabon enjoys a per capita income four times that of most nations of sub-Saharan Africa. This has supported a sharp decline in extreme poverty; yet because of high income inequality a large proportion of the population remains poor. Gabon depended on timber and manganese until oil was discovered offshore in the early 1970s. The oil sector now accounts for 50% of GDP. Gabon continues to face fluctuating prices for its oil, timber, and manganese exports. Despite the abundance of natural wealth, poor fiscal management hobbles the economy. Devaluation of its Francophone currency by 50% on 12 January 1994 sparked a one-time inflationary surge, to 35%; the rate dropped to 6% in 1996. The IMF provided a one-year standby arrangement in 1994-95, a three-year Enhanced Financing Facility (EFF) at near commercial rates beginning in late 1995, and stand-by credit of $119 million in October 2000. Those agreements mandate progress in privatization and fiscal discipline. France provided additional financial support in January 1997 after Gabon had met IMF targets for mid-1996. In 1997, an IMF mission to Gabon criticized the government for overspending on off-budget items, overborrowing from the central bank, and slipping on its schedule for privatization and administrative reform. The rebound of oil prices in 1999-2000 helped growth, but drops in production hampered Gabon from fully realizing potential gains. In December 2000, Gabon signed a new agreement with the Paris Club to reschedule its official debt. A follow-up bilateral repayment agreement with the US was signed in December 2001. Short-term progress depends on an upbeat world economy and fiscal and other adjustments in line with IMF policies.
Gambia, The Gambia, The The Gambia has no significant mineral or natural resource deposits and has a limited agricultural base. About 75% of the population depends on crops and livestock for its livelihood. Small-scale manufacturing activity features the processing of peanuts, fish, and hides. Reexport trade normally constitutes a major segment of economic activity, but a 1999 government-imposed preshipment inspection plan, and instability of the Gambian dalasi (currency) have drawn some of the reexport trade away from The Gambia. The government's 1998 seizure of the private peanut firm Alimenta eliminated the largest purchaser of Gambian groundnuts. Despite an announced program to begin privatizing key parastatals, no plans have been made public that would indicate that the government intends to follow through on its promises. Unemployment and underemployment rates remain extremely high; short-run economic progress depends on sustained bilateral and multilateral aid, on responsible government economic management, on continued technical assistance from the IMF and bilateral donors, and on expected growth in the construction sector. The Gambia has no important mineral or other natural resources and has a limited agricultural base. About 75% of the population depends on crops and livestock for its livelihood. Small-scale manufacturing activity features the processing of peanuts, fish, and hides. Reexport trade normally constitutes a major segment of economic activity, but a 1999 government-imposed preshipment inspection plan, and instability of the Gambian dalasi (currency) have drawn some of the reexport trade away from The Gambia. The government's 1998 seizure of the private peanut firm Alimenta eliminated the largest purchaser of Gambian groundnuts; the following two marketing seasons have seen substantially lower prices and sales. A decline in tourism in 2000 has also held back growth. Unemployment and underemployment rates are extremely high. Shortrun economic progress remains highly dependent on sustained bilateral and multilateral aid, on responsible government economic management as forwarded by IMF technical help and advice, and on expected growth in the construction sector.
Gaza Strip Gaza Strip High population density, limited land access, and strict internal and external controls have kept economic conditions in the Gaza Strip - the smaller of the two areas under the Palestinian Authority (PA)- even more degraded than in the West Bank. The beginning of the second intifadah in September 2000 sparked an economic downturn, largely the result of Israeli closure policies; these policies, which were imposed in response to security interests in Israel, disrupted labor and commodity relationships with the Gaza Strip. In 2001, and even more severely in 2003, Israeli military measures in PA areas resulted in the destruction of much capital plant, the disruption of administrative structure, and widespread business closures. Including the West Bank, the UN estimates that more than 100,000 Palestinians out of the 125,000 who used to work in Israel or in joint industrial zones have lost their jobs. Half the labor force is unemployed. Israeli withdrawal from the Gaza Strip in September 2005 offers some medium-term opportunities for economic growth, especially given the removal of restrictions on internal movement. In addition, recent agreements and continuing negotiations on the administration of Gaza's border crossings increase the prospects for trade. Economic output in the Gaza Strip - under the responsibility of the Palestinian Authority since the Cairo Agreement of May 1994 - declined by about one-third between 1992 and 1996. The downturn was largely the result of Israeli closure policies - the imposition of generalized border closures in response to security incidents in Israel - which disrupted previously established labor and commodity market relationships between Israel and the WBGS (West Bank and Gaza Strip). The most serious negative social effect of this downturn was the emergence of high unemployment; unemployment in the WBGS during the 1980s was generally under 5%; by 1995 it had risen to over 20%. Israel's use of comprehensive closures decreased during the next few years and, in 1998, Israel implemented new policies to reduce the impact of closures and other security procedures on the movement of Palestinian goods and labor. These changes fueled an almost three-year-long economic recovery in the West Bank and Gaza Strip; real GDP grew by 5% in 1998 and 6% in 1999. Recovery was upended in the last quarter of 2000 with the outbreak of violence, triggering tight Israeli closures of Palestinian self-rule areas and a severe disruption of trade and labor movements. In 2001, and even more severely in 2002, Israeli military measures in Palestinian Authority areas resulted in the destruction of capital plant and administrative structure, widespread business closures, and a sharp drop in GDP. Another major loss has been the decline in income earned by Palestinian workers in Israel. International aid of $2 billion in 2001-02 to the Gaza Strip and West Bank have prevented the complete collapse of the economy.
Georgia Georgia Georgia's main economic activities include the cultivation of agricultural products such as grapes, citrus fruits, and hazelnuts; mining of manganese and copper; and output of a small industrial sector producing alcoholic and nonalcoholic beverages, metals, machinery, and chemicals. The country imports the bulk of its energy needs, including natural gas and oil products. It has sizeable but underdeveloped hydropower capacity. Despite the severe damage the economy has suffered due to civil strife, Georgia, with the help of the IMF and World Bank, has made substantial economic gains since 2000, achieving positive GDP growth and curtailing inflation. Georgia had suffered from a chronic failure to collect tax revenues; however, the new government is making progress and has reformed the tax code, improved tax administration, increased tax enforcement, and cracked down on corruption. In addition, the reinvigorated privatization process has met with success, supplementing government expenditures on infrastructure, defense, and poverty reduction. Despite customs and financial (tax) enforcement improvements, smuggling is a drain on the economy. Georgia also suffers from energy shortages due to aging and badly maintained infrastructure, as well as poor management. Due to concerted reform efforts, collection rates have improved considerably to roughly 60%, both in T'bilisi and throughout the regions. Continued reform in the management of state-owned power entities is essential to successful privatization and onward sustainability in this sector. The country is pinning its hopes for long-term growth on its role as a transit state for pipelines and trade. The construction on the Baku-T'bilisi-Ceyhan oil pipeline and the Baku-T'bilisi-Erzerum gas pipeline have brought much-needed investment and job opportunities. Nevertheless, high energy prices in 2006 will compound the pressure on the country's inefficient energy sector. Restructuring the sector and finding energy supply alternatives to Russia remain major challenges. Georgia's main economic activities include the cultivation of agricultural products such as citrus fruits, tea, hazelnuts, and grapes; mining of manganese and copper; and output of a small industrial sector producing alcoholic and nonalcoholic beverages, metals, machinery, and chemicals. The country imports the bulk of its energy needs, including natural gas and oil products. Its only sizable internal energy resource is hydropower. Despite the severe damage the economy has suffered due to civil strife, Georgia, with the help of the IMF and World Bank, has made substantial economic gains since 1995, achieving positive GDP growth and curtailing inflation. However, the Georgian Government suffers from limited resources due to a chronic failure to collect tax revenues. Georgia also suffers from energy shortages; it privatized the T'bilisi distribution network in 1998, but collection rates are low, making the venture unprofitable. The country is pinning its hopes for long-term growth on its role as a transit state for pipelines and trade. The start of construction on the Baku-T'bilisi-Ceyhan oil pipeline and the Baku-T'bilisi-Erzerum gas pipeline will bring much-needed investment and job opportunities.
Germany Germany Germany's affluent and technologically powerful economy - the fifth largest in the world - has become one of the slowest growing economies in the euro zone. A quick turnaround is not in the offing in the foreseeable future. Growth in 2001-03 fell short of 1%, rising to 1.7% in 2004 before falling back to 0.9% in 2005. The modernization and integration of the eastern German economy continues to be a costly long-term process, with annual transfers from west to east amounting to roughly $70 billion. Germany's aging population, combined with high unemployment, has pushed social security outlays to a level exceeding contributions from workers. Structural rigidities in the labor market - including strict regulations on laying off workers and the setting of wages on a national basis - have made unemployment a chronic problem. Corporate restructuring and growing capital markets are setting the foundations that could allow Germany to meet the long-term challenges of European economic integration and globalization, particularly if labor market rigidities are further addressed. In the short run, however, the fall in government revenues and the rise in expenditures have raised the deficit above the EU's 3% debt limit. Germany's affluent and technologically powerful economy has turned in a weak performance throughout much of the 1990s and early 2000s. The modernization and integration of the eastern German economy continues to be a costly long-term problem, with annual transfers from west to east amounting to roughly $70 billion. Germany's ageing population, combined with high unemployment, has pushed social security outlays to a level exceeding contributions from workers. Structural rigidities in the labor market - including strict regulations on laying off workers and the setting of wages on a national basis - have made unemployment a chronic problem. Growth in 2002 and 2003 fell short of 1%. Corporate restructuring and growing capital markets are setting the foundations that could allow Germany to meet the long-term challenges of European economic integration and globalization, particularly if labor market rigidities are further addressed. In the short run, however, the fall in government revenues and the rise in expenditures have raised the deficit above the EU's 3% debt limit.
Ghana Ghana Well endowed with natural resources, Ghana has roughly twice the per capita output of the poorer countries in West Africa. Even so, Ghana remains heavily dependent on international financial and technical assistance. Gold, timber, and cocoa production are major sources of foreign exchange. The domestic economy continues to revolve around subsistence agriculture, which accounts for 34% of GDP and employs 60% of the work force, mainly small landholders. Ghana opted for debt relief under the Heavily Indebted Poor Country (HIPC) program in 2002, but was included in a G-8 debt relief program decided upon at the Gleneagles Summit in July 2005. Priorities under its current $38 million Poverty Reduction and Growth Facility (PRGF) include tighter monetary and fiscal policies, accelerated privatization, and improvement of social services. Receipts from the gold sector helped sustain GDP growth in 2005 along with record high prices for Ghana's largest cocoa crop to date. Inflation should ease but remains a major internal problem. Ghana also remains a candidate country to benefit from Millennium Challenge Corporation (MCC) funding that could assist in transforming Ghana's agricultural export sector. A final decision on its MCC bid is expected in spring 2006. Well endowed with natural resources, Ghana has roughly twice the per capita output of the poorer countries in West Africa. Even so, Ghana remains heavily dependent on international financial and technical assistance. Gold, timber, and cocoa production are major sources of foreign exchange. The domestic economy continues to revolve around subsistence agriculture, which accounts for 36% of GDP and employs 60% of the work force, mainly small landholders. Ghana opted for debt relief under the Heavily Indebted Poor Country (HIPC) program in 2002. Policy priorities include tighter monetary and fiscal policies, accelerated privatization, and improvement of social services.
Gibraltar Gibraltar Self-sufficient Gibraltar benefits from an extensive shipping trade, offshore banking, and its position as an international conference center. The British military presence has been sharply reduced and now contributes about 7% to the local economy, compared with 60% in 1984. The financial sector, tourism (almost 5 million visitors in 1998), shipping services fees, and duties on consumer goods also generate revenue. The financial sector, the shipping sector, and tourism each contribute 25%-30% of GDP. Telecommunications accounts for another 10%. In recent years, Gibraltar has seen major structural change from a public to a private sector economy, but changes in government spending still have a major impact on the level of employment. Gibraltar benefits from an extensive shipping trade, offshore banking, and its position as an international conference center. The British military presence has been sharply reduced and now contributes about 7% to the local economy, compared with 60% in 1984. The financial sector, tourism (almost 5 million visitors in 1998), shipping services fees, and duties on consumer goods also generate revenue. The financial sector, the shipping sector, and tourism each contribute 25%-30% of GDP. Telecommunications accounts for another 10%. In recent years, Gibraltar has seen major structural change from a public to a private sector economy, but changes in government spending still have a major impact on the level of employment.
Glorioso Islands Glorioso Islands no economic activity no economic activity
Greece Greece Greece has a capitalist economy with the public sector accounting for about 40% of GDP and with per capita GDP at least 75% of the leading euro-zone economies. Tourism provides 15% of GDP. Immigrants make up nearly one-fifth of the work force, mainly in menial jobs. Greece is a major beneficiary of EU aid, equal to about 3.3% of annual GDP. The Greek economy grew by about 4.0% for the between 2003 and 2005, largely because of an investment boom and infrastructure upgrades for the 2004 Athens Olympic Games. Economic growth slowed to about 3% in 2005. Greece has not met the EU's Growth and Stability Pact budget deficit criteria of 3% of GDP since 2000. Public debt, inflation, and unemployment are above the euro-zone average. To overcome these challenges, the Greek Government is expected to continue cutting government spending, reducing the size of the public sector, and reforming the labor and pension systems. Greece has a mixed capitalist economy with the public sector accounting for half of GDP and with per capita GDP 70% of the leading euro-zone economies. Tourism provides 15% of GDP. Immigrants make up nearly one-fifth of the work force, mainly in menial jobs. Greece is a major beneficiary of EU aid, equal to about 3.3% of GDP. The economy has improved steadily with economic growth averaging 4% since 1997, exceeding EU growth by more than 1 percentage point. Remaining challenges include the reduction of the public debt, inflation, and unemployment; and further restructuring of the economy, including privatizing several state enterprises, undertaking pension and other reforms, and minimizing bureaucratic inefficiencies. The Olympic Games will be held in Athens in mid-2004.
Greenland Greenland The economy remains critically dependent on exports of fish and substantial support from the Danish Government, which supplies about half of government revenues. The public sector, including publicly-owned enterprises and the municipalities, plays the dominant role in the economy. Despite several interesting hydrocarbon and mineral exploration activities, it will take a number of years before production can materialize. Tourism is the only sector offering any near-term potential, and even this is limited due to a short season and high costs. The economy remains critically dependent on exports of fish and substantial support from the Danish Government, which supplies about half of government revenues. The public sector, including publicly owned enterprises and the municipalities, plays the dominant role in the economy. Despite several interesting hydrocarbon and minerals exploration activities, it will take several years before production can materialize. Tourism is the only sector offering any near-term potential, and even this is limited due to a short season and high costs.
Grenada Grenada Grenada relies on tourism as its main source of foreign exchange, especially since the construction of an international airport in 1985. Strong performances in construction and manufacturing, together with the development of an offshore financial industry, have also contributed to growth in national output. Grenada relies on tourism as its main source of foreign exchange, especially since the construction of an international airport in 1985. Strong performances in construction and manufacturing, together with the development of an offshore financial industry, have also contributed to growth in national output.
Guadeloupe Guadeloupe This Caribbean economy depends on agriculture, tourism, light industry, and services. It also depends on France for large subsidies and imports. Tourism is a key industry, with most tourists from the US; an increasingly large number of cruise ships visit the islands. The traditional sugarcane crop is slowly being replaced by other crops, such as bananas (which now supply about 50% of export earnings), eggplant, and flowers. Other vegetables and root crops are cultivated for local consumption, although Guadeloupe is still dependent on imported food, mainly from France. Light industry features sugar and rum production. Most manufactured goods and fuel are imported. Unemployment is especially high among the young. Hurricanes periodically devastate the economy. The Caribbean economy depends on agriculture, tourism, light industry, and services. It also depends on France for large subsidies and imports. Tourism is a key industry, with most tourists from the US; an increasingly large number of cruise ships visit the islands. The traditional sugarcane crop is slowly being replaced by other crops, such as bananas (which now supply about 50% of export earnings), eggplant, and flowers. Other vegetables and root crops are cultivated for local consumption, although Guadeloupe is still dependent on imported food, mainly from France. Light industry features sugar and rum production. Most manufactured goods and fuel are imported. Unemployment is especially high among the young. Hurricanes periodically devastate the economy.
Guam Guam The economy depends largely on US military spending and tourism. Total US grants, wage payments, and procurement outlays amounted to $1.3 billion in 2004. Over the past 30 years, the tourist industry has grown to become the largest income source following national defense. The Guam economy continues to experience expansion in both its tourism and military sectors. The economy depends on US military spending, tourism, and the export of fish and handicrafts. Total US grants, wage payments, and procurement outlays amounted to $1 billion in 1998. Over the past 20 years, the tourist industry has grown rapidly, creating a construction boom for new hotels and the expansion of older ones. More than 1 million tourists visit Guam each year. The industry has recently suffered setbacks because of the continuing Japanese slowdown; the Japanese normally make up almost 90% of the tourists. Most food and industrial goods are imported. Guam faces the problem of building up the civilian economic sector to offset the impact of military downsizing.
Guatemala Guatemala Guatemala is the largest and most populous of the Central American countries with a GDP per capita roughly one-half that of Brazil, Argentina, and Chile. The agricultural sector accounts for about one-fourth of GDP, two-thirds of exports, and half of the labor force. Coffee, sugar, and bananas are the main products. The 1996 signing of peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment, but widespread political violence and corruption scandals continue to dampen investor confidence. The distribution of income remains highly unequal with perhaps 75% of the population below the poverty line. Other ongoing challenges include increasing government revenues, negotiating further assistance from international donors, upgrading both government and private financial operations, curtailing drug trafficking, and narrowing the trade deficit. The agricultural sector accounts for about one-fourth of GDP, two-thirds of exports, and half of the labor force. Coffee, sugar, and bananas are the main products. Former President ARZU (1996-2000) worked to implement a program of economic liberalization and political modernization. President PORTILLO has continued the liberalization program but with more sporadic results. The 1996 signing of the peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment, but numerous corruption scandals associated with the PORTILLO administration have dampened investor confidence. The distribution of income remains highly unequal, with perhaps 75% of the population below the poverty line. Ongoing challenges include increasing the government revenues, negotiating further assistance from international donors, upgrading both government and private financial operations, and narrowing the trade deficit. A free trade agreement between the US and Central American countries promises greater access to US and neighboring markets.
Guernsey Guernsey Financial services - banking, fund management, insurance - account for about 55% of total income in this tiny, prosperous Channel Island economy. Tourism, manufacturing, and horticulture, mainly tomatoes and cut flowers, have been declining. Light tax and death duties make Guernsey a popular tax haven. The evolving economic integration of the EU nations is changing the environment under which Guernsey operates. Financial services - banking, fund management, insurance, etc. - account for about 55% of total income in this tiny Channel Island economy. Tourism, manufacturing, and horticulture, mainly tomatoes and cut flowers, have been declining. Light tax and death duties make Guernsey a popular tax haven. The evolving economic integration of the EU nations is changing the rules of the game under which Guernsey operates.
Guinea Guinea Guinea possesses major mineral, hydropower, and agricultural resources, yet remains an underdeveloped nation. The country possesses almost half of the world's bauxite reserves and is the second-largest bauxite producer. The mining sector accounted for over 70% of exports in 2004. Long-run improvements in government fiscal arrangements, literacy, and the legal framework are needed if the country is to move out of poverty. Fighting along the Sierra Leonean and Liberian borders, as well as refugee movements, have caused major economic disruptions, aggravating a loss in investor confidence. Panic buying has created food shortages and inflation and caused riots in local markets. Guinea is not receiving multilateral aid; the IMF and World Bank cut off most assistance in 2003. Growth rose slightly in 2005, primarily due to increases in global demand and commodity prices on world markets. Guinea possesses major mineral, hydropower, and agricultural resources, yet remains an underdeveloped nation. The country possesses over 30% of the world's bauxite reserves and is the second-largest bauxite producer. The mining sector accounted for about 75% of exports in 1999. Long-run improvements in government fiscal arrangements, literacy, and the legal framework are needed if the country is to move out of poverty. The government made encouraging progress in budget management in 1997-99, and reform progress was praised in the World Bank/IMF October 2000 assessment. However, fighting along the Sierra Leonean and Liberian borders has caused major economic disruptions. In addition to direct defense costs, the violence has led to a sharp decline in investor confidence. Foreign mining companies have reduced expatriate staff, while panic buying has created food shortages and inflation in local markets. Multilateral aid - including Heavily Indebted Poor Countries (HIPC) debt relief - and single digit inflation permitted moderate 3.7% growth in 2002. Growth should strengthen in 2003 because of a slowly improving security situation and increased investor confidence.
Guinea-Bissau Guinea-Bissau One of the 10 poorest countries in the world, Guinea-Bissau depends mainly on farming and fishing. Cashew crops have increased remarkably in recent years, and the country now ranks sixth in cashew production. Guinea-Bissau exports fish and seafood along with small amounts of peanuts, palm kernels, and timber. Rice is the major crop and staple food. However, intermittent fighting between Senegalese-backed government troops and a military junta destroyed much of the country's infrastructure and caused widespread damage to the economy in 1998; the civil war led to a 28% drop in GDP that year, with partial recovery in 1999-2002. Before the war, trade reform and price liberalization were the most successful part of the country's structural adjustment program under IMF sponsorship. The tightening of monetary policy and the development of the private sector had also begun to reinvigorate the economy. Because of high costs, the development of petroleum, phosphate, and other mineral resources is not a near-term prospect. However, offshore oil prospecting has begun and could lead to much-needed revenue in the long run. The inequality of income distribution is one of the most extreme in the world. The government and international donors continue to work out plans to forward economic development from a lamentably low base. In December 2003, the World Bank, IMF, and UNDP were forced to step in to provide emergency budgetary support in the amount of $107 million for 2004, representing over 80% of the total national budget. Government drift and indecision, however, have resulted in continued low growth in 2002-05. One of the 10 poorest countries in the world, Guinea-Bissau depends mainly on farming and fishing. Cashew crops have increased remarkably in recent years, and the country now ranks sixth in cashew production. Guinea-Bissau exports fish and seafood along with small amounts of peanuts, palm kernels, and timber. Rice is the major crop and staple food. However, intermittent fighting between Senegalese-backed government troops and a military junta destroyed much of the country's infrastructure and caused widespread damage to the economy in 1998; the civil war led to a 28% drop in GDP that year, with partial recovery in 1999-2002. Before the war, trade reform and price liberalization were the most successful part of the country's structural adjustment program under IMF sponsorship. The tightening of monetary policy and the development of the private sector had also begun to reinvigorate the economy. Because of high costs, the development of petroleum, phosphate, and other mineral resources is not a near-term prospect. However, unexploited offshore oil reserves could provide much-needed revenue in the long run. The inequality of income distribution is one of the most extreme in the world. The government and international donors continue to work out plans to forward economic development from a lamentably low base. Government drift and indecision, however, have resulted in low growth in 2002 and dim prospects for 2003.
Guyana Guyana The Guyanese economy exhibited moderate economic growth in 2001-02, based on expansion in the agricultural and mining sectors, a more favorable atmosphere for business initiatives, a more realistic exchange rate, fairly low inflation, and the continued support of international organizations. Growth slowed in 2003 and came back gradually in 2004, buoyed largely by increased export earnings; it slowed again in 2005. Chronic problems include a shortage of skilled labor and a deficient infrastructure. The government is juggling a sizable external debt against the urgent need for expanded public investment. The bauxite mining sector should benefit in the near term from restructuring and partial privatization. Export earnings from agriculture and mining have fallen sharply, while the import bill has risen, driven by higher energy prices. Guyana's entrance into the Caricom Single Market and Economy (CSME) in January 2006 might broaden the country's export market, primarily in the raw materials sector. The Guyanese economy has exhibited moderate economic growth in 2001-02, based on expansion in the agricultural and mining sectors, a more favorable atmosphere for business initiatives, a more realistic exchange rate, fairly low inflation, and the continued support of international organizations. Chronic problems include a shortage of skilled labor and a deficient infrastructure. The government is juggling a sizable external debt against the urgent need for expanded public investment. The bauxite mining sector should benefit in the near term by restructuring and partial privatization.
Haiti Haiti In this poorest country in the Western Hemisphere, 80% of the population lives in abject poverty. Two-thirds of all Haitians depend on the agriculture sector, mainly small-scale subsistence farming, and remain vulnerable to damage from frequent natural disasters, exacerbated by the country's widespread deforestation. The economy grew 1.5% in 2005, the highest growth rate since 1999. Haiti suffers from rampant inflation, a lack of investment, and a severe trade deficit. In early 2005, Haiti paid its arrears to the World Bank, paving the way for reengagement with the Bank. The government is reliant on formal international economic assistance for fiscal sustainability. Remittances are the primary source of foreign exchange, equaling nearly a quarter of GDP in 2005. About 80% of the population lives in abject poverty. Nearly 70% of all Haitians depend on the agriculture sector, which consists mainly of small-scale subsistence farming and employs about two-thirds of the economically active work force. Following legislative elections in May 2000, fraught with irregularities, international donors - including the US and EU - suspended almost all aid to Haiti. The economy shrank an estimated 1.2% in 2001 and an estimated 0.9% in 2002. The contraction will likely intensify in 2003 unless a political agreement with donors is reached on economic policy. Suspended aid and loan disbursements totaled more than $500 million at the start of 2003.
Heard Island and McDonald Islands Heard Island and McDonald Islands No indigenous economic activity, but the Australian Government allows limited fishing around the islands. No indigenous economic activity, but the Australian Government allows limited fishing around the islands.
Holy See (Vatican City) Holy See (Vatican City) This unique, noncommercial economy is supported financially by an annual contribution from Roman Catholic dioceses throughout the world (known as Peter's Pence); by the sale of postage stamps, coins, medals, and tourist mementos; by fees for admission to museums; and by the sale of publications. Investments and real estate income also account for a sizable portion of revenue. The incomes and living standards of lay workers are comparable to those of counterparts who work in the city of Rome. This unique, noncommercial economy is supported financially by an annual tax on Roman Catholic dioceses throughout the world, as well as by special collections (known as Peter's Pence); the sale of postage stamps, coins, medals, and tourist mementos; fees for admission to museums; and the sale of publications. Investments and real estate income also account for a sizable portion of revenue. The incomes and living standards of lay workers are comparable to those of counterparts who work in the city of Rome.
Honduras Honduras Honduras, one of the poorest countries in the Western Hemisphere with an extraordinarily unequal distribution of income and massive unemployment, is banking on expanded trade under the US-Central America Free Trade Agreement (CAFTA) and on debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. The country has met most of its macroeconomic targets, and began a three-year IMF Poverty Reduction and Growth Facility (PGRF) program in February 2004. Growth remains dependent on the economy of the US, its largest trading partner, on continued exports of non-traditional agricultural products (such as melons, chiles, tilapia, and shrimp), and on reduction of the high crime rate. Honduras, one of the poorest countries in the Western Hemisphere with an extraordinarily unequal distribution of income, is banking on expanded trade privileges under the Enhanced Caribbean Basin Initiative and on debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. While the country has met most of its macroeconomic targets, it failed to meet the IMF's goals to liberalize its energy and telecommunications sectors. Growth remains dependent on the status of the US economy, its major trading partner, on commodity prices, particularly coffee, and on reduction of the high crime rate.
Hong Kong Hong Kong Hong Kong has a free market, entrepot economy, highly dependent on international trade. Natural resources are limited, and food and raw materials must be imported. Gross imports and exports (i.e., including reexports to and from third countries) each exceed GDP in dollar value. Even before Hong Kong reverted to Chinese administration on 1 July 1997, it had extensive trade and investment ties with China. Hong Kong has been further integrating its economy with China because China's growing openness to the world economy has made manufacturing in China much more cost effective. Hong Kong's reexport business to and from China is a major driver of growth. Per capita GDP is comparable to that of the four big economies of Western Europe. GDP growth averaged a strong 5% from 1989 to 2005, but Hong Kong suffered two recessions in the past eight years because of the Asian financial crisis in 1997-1998 and the global downturn in 2001-2002. Although the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 also battered Hong Kong's economy, a solid rise in exports, a boom in tourism from the mainland because of China's easing of travel restrictions, and a return of consumer confidence resulted in the resumption of strong growth from late 2003 through 2005. Hong Kong has a free market economy highly dependent on international trade. Natural resources are limited, and food and raw materials must be imported. Imports and exports, including reexports, each exceed GDP in dollar value. Even before Hong Kong reverted to Chinese administration on 1 July 1997 it had extensive trade and investment ties with China. Hong Kong has been further integrating its economy with China because China's growing openness to the world economy has increased competitive pressure on Hong Kong's service industries, and Hong Kong's re-export business from China is a major driver of growth. Per capita GDP compares with the level in the four big economies of Western Europe. GDP growth averaged a strong 5% in 1989-1997, but Hong Kong suffered two recessions in the past 6 years because of the Asian financial crisis in 1998 and the global downturn of 2001-2002. The Severe Acute Respiratory Syndrome (SARS) outbreak has also battered Hong Kong's economy but the resumption of strong growth began in 2003.
Howland Island Howland Island no economic activity no economic activity
Hungary Hungary Hungary has made the transition from a centrally planned to a market economy, with a per capita income about 60% of the EU-25 average. Hungary continues to demonstrate strong economic growth and acceded to the EU in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $34 billion between 1990 and 2003. Several private sector analysts and sovereign ratings agencies have expressed concerns over Hungary's unsustainable budget and current account deficits. Inflation has declined from 14% in 1998 to 3.5% in 2005. Unemployment in 2005 rose to 7.1%, its highest point since 1999; Hungary's labor force participation rate of 57% is one of the lowest in the Organization for Economic Cooperation and Development (OECD). Germany is by far Hungary's largest economic partner. Policy challenges include cutting the public sector deficit to 3% of GDP by 2008, from about 6.1% in 2005, and orchestrating an orderly interest rate reduction without sparking capital outflows. Hungary has made the transition from a centrally planned to a market economy, with a per capita income one-half that of the Big Four European nations. Hungary continues to demonstrate strong economic growth and to work toward accession to the European Union in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $23 billion since 1989. Hungarian sovereign debt was upgraded in 2000 to the second-highest rating among all the Central European transition economies. Inflation has declined substantially, from 14% in 1998 to 4.7% in 2003; unemployment has persisted around the 6% level. Germany is by far Hungary's largest economic partner. Short-term issues include the reduction of the public sector deficit to 3% in 2004 and avoiding unjustified increases in wages.
Iceland Iceland Iceland's Scandinavian-type economy is basically capitalistic, yet with an extensive welfare system (including generous housing subsidies), low unemployment, and remarkably even distribution of income. In the absence of other natural resources (except for abundant geothermal power), the economy depends heavily on the fishing industry, which provides 70% of export earnings and employs 4% of the work force. The economy remains sensitive to declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon. Government policies include reducing the current account deficit, limiting foreign borrowing, containing inflation, revising agricultural and fishing policies, and diversifying the economy. The government remains opposed to EU membership, primarily because of Icelanders' concern about losing control over their fishing resources. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, and new developments in software production, biotechnology, and financial services are taking place. The tourism sector is also expanding, with the recent trends in ecotourism and whale watching. Growth had been remarkably steady in 1996-2001 at 3%-5%, but could not be sustained in 2002 in an environment of global recession. Growth resumed in 2003, and estimates call for strong growth until 2007, slowly dropping until the end of the decade. Iceland's Scandinavian-type economy is basically capitalistic, yet with an extensive welfare system (including generous housing subsidies), low unemployment, and remarkably even distribution of income. In the absence of other natural resources (except for abundant hydrothermal and geothermal power), the economy depends heavily on the fishing industry, which provides 70% of export earnings and employs 12% of the work force. The economy remains sensitive to declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon. Government policies include reducing the budget and current account deficits, limiting foreign borrowing, containing inflation, revising agricultural and fishing policies, diversifying the economy, and privatizing state-owned industries. The government remains opposed to EU membership, primarily because of Icelanders' concern about losing control over their fishing resources. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, and new developments in software production, biotechnology, and financial services are taking place. The tourism sector is also expanding, with the recent trends in ecotourism and whale watching. Growth had been remarkably steady in 1996-2001 at 3%-5%, but could not be sustained in 2002 in an environment of global recession. Growth resumed in 2003, and inflation dropped back from 5% to 2%.
Iles Eparses Iles Eparses no economic activity -
India India India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for half of India's output with less than one quarter of its labor force. About three-fifths of the work-force is in agriculture, leading the UPA government to articulate an economic reform program that includes developing basic infrastructure to improve the lives of the rural poor and boost economic performance. Government controls on foreign trade and investment have been reduced in some areas, but high tariffs (averaging 20% on non-agricultural items in 2004) and limits on foreign direct investment are still in place. The government in 2005 liberalized investment in the civil aviation, telecom, and construction sectors. Privatization of government-owned industries essentially came to a halt in 2005, and continues to generate political debate; continued social, political, and economic rigidities hold back needed initiatives. The economy has posted an average growth rate of more than 7% in the decade since 1994, reducing poverty by about 10 percentage points. India achieved 7.6% GDP growth in 2005, significantly expanding manufacturing. India is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers. Despite strong growth, the World Bank and others worry about the combined state and federal budget deficit, running at approximately 9% of GDP; government borrowing has kept interest rates high. Economic deregulation would help attract additional foreign capital and lower interest rates. The huge and growing population is the fundamental social, economic, and environmental problem. India's economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of support services. Overpopulation severely handicaps the economy and about a quarter of the population is too poor to be able to afford an adequate diet. Government controls have been reduced on imports and foreign investment, and privatization of domestic output has proceeded slowly. The economy has posted an excellent average growth rate of 6% since 1990, reducing poverty by about 10 percentage points. India has large numbers of well-educated people skilled in the English language; India is a major exporter of software services and software workers; the information technology sector leads the strong growth pattern. The World Bank and others worry about the continuing public-sector budget deficit, running at approximately 10% of GDP in 1997-2002. In 2003 the state-owned Indian Bank substantially reduced non-performing loans, attracted new customers, and turned a profit. Deep-rooted problems remain, notably conflicts among political and cultural groups.
Indian Ocean Indian Ocean The Indian Ocean provides major sea routes connecting the Middle East, Africa, and East Asia with Europe and the Americas. It carries a particularly heavy traffic of petroleum and petroleum products from the oilfields of the Persian Gulf and Indonesia. Its fish are of great and growing importance to the bordering countries for domestic consumption and export. Fishing fleets from Russia, Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainly for shrimp and tuna. Large reserves of hydrocarbons are being tapped in the offshore areas of Saudi Arabia, Iran, India, and western Australia. An estimated 40% of the world's offshore oil production comes from the Indian Ocean. Beach sands rich in heavy minerals and offshore placer deposits are actively exploited by bordering countries, particularly India, South Africa, Indonesia, Sri Lanka, and Thailand. The Indian Ocean provides major sea routes connecting the Middle East, Africa, and East Asia with Europe and the Americas. It carries a particularly heavy traffic of petroleum and petroleum products from the oilfields of the Persian Gulf and Indonesia. Its fish are of great and growing importance to the bordering countries for domestic consumption and export. Fishing fleets from Russia, Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainly for shrimp and tuna. Large reserves of hydrocarbons are being tapped in the offshore areas of Saudi Arabia, Iran, India, and western Australia. An estimated 40% of the world's offshore oil production comes from the Indian Ocean. Beach sands rich in heavy minerals and offshore placer deposits are actively exploited by bordering countries, particularly India, South Africa, Indonesia, Sri Lanka, and Thailand.
Indonesia Indonesia Indonesia, a vast polyglot nation, has struggled to overcome the Asian financial crisis, and still grapples with high unemployment, a fragile banking sector, endemic corruption, inadequate infrastructure, a poor investment climate, and unequal resource distribution among regions. Indonesia became a net oil importer in 2004 because of declining production and lack of new exploration investment. In late December 2004, the Indian Ocean tsunami took 131,000 lives with another 37,000 missing, left some 570,000 displaced persons, and caused an estimated $4.5 billion in damages and losses. The cost of subsidizing domestic fuel placed increasing strain on the budget in 2005, and combined with indecisive monetary policy, contributed to a run on the currency in August 2005, prompting the government to enact a 126% average fuel price hike in October. The resulting inflation and interest rate hikes dampened growth prospects in 2006. However, in October 2006, Jakarta paid off its outstanding IMF debt, incurred during the 1997-98 Asian financial crisis, four years ahead of schedule. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth. Indonesia, a vast polyglot nation, faces severe economic development problems stemming from secessionist movements and the low level of security in the regions; the lack of reliable legal recourse in contract disputes; corruption; weaknesses in the banking system; and strained relations with the IMF. Investor confidence will remain low and few new jobs will be created under these circumstances. In November 2001, Indonesia agreed with the IMF on a series of economic reforms in 2002, thus enabling further IMF disbursements. Negotiations with the IMF and bilateral donors continued in 2002. Keys to future growth remain internal reform, the build-up of the confidence of international donors and investors, and a strong comeback in the global economy.
Iran Iran Iran's economy is marked by a bloated, inefficient state sector, over reliance on the oil sector, and statist policies that create major distortions throughout. Most economic activity is controlled by the state. Private sector activity is typically small-scale - workshops, farming, and services. President Mahmud AHMADI-NEJAD has continued to follow the market reform plans of former President RAFSANJANI, with limited progress. Relatively high oil prices in recent years have enabled Iran to amass some $40 billion in foreign exchange reserves, but have not eased economic hardships such as high unemployment and inflation. The proportion of the economy devoted to the development of weapons of mass destruction remains a contentious issue with leading Western nations. Iran's economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and small-scale private trading and service ventures. President KHATAMI has continued to follow the market reform plans of former President RAFSANJANI and has indicated that he will pursue diversification of Iran's oil-reliant economy although he has made little progress toward that goal. Relatively high oil prices in recent years have enabled Iran to amass some $15 billion in foreign exchange reserves, but have not solved Iran's structural economic problems, including high unemployment and inflation.
Iraq Iraq Iraq's economy is dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings. Iraq's seizure of Kuwait in August 1990, subsequent international economic sanctions, and damage from military action by an international coalition beginning in January 1991 drastically reduced economic activity. Although government policies supporting large military and internal security forces and allocating resources to key supporters of the regime hurt the economy, implementation of the UN's oil-for-food program, which began in December 1996, helped improve conditions for the average Iraqi citizen. Iraq was allowed to export limited amounts of oil in exchange for food, medicine, and some infrastructure spare parts. In December 1999, the UN Security Council authorized Iraq to export under the program as much oil as required to meet humanitarian needs. Per capita food imports increased significantly, while medical supplies and health care services steadily improved. Per capita output and living standards were still well below the pre-1991 level, but any estimates have a wide range of error. The military victory of the US-led coalition in March-April 2003 resulted in the shutdown of much of the central economic administrative structure. Although a comparatively small amount of capital plant was damaged during the hostilities, looting, insurgent attacks, and sabotage have undermined efforts to rebuild the economy. Attacks on key economic facilities - especially oil pipelines and infrastructure - have prevented Iraq from reaching projected export volumes, but total government revenues have been higher than anticipated due to high oil prices. Despite political uncertainty, Iraq has established the institutions needed to implement economic policy, has successfully concluded a three-stage debt reduction agreement with the Paris Club, and is working toward a Standby Arrangement with the IMF. The Standby Arrangement would clear the way for continued debt relief from the Paris Club. Iraq's economy is dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s financial problems caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran led the government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses from the war of at least $100 billion. After hostilities ended in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities. Iraq's seizure of Kuwait in August 1990, subsequent international economic sanctions, and damage from military action by an international coalition beginning in January 1991 drastically reduced economic activity. Although government policies supporting large military and internal security forces and allocating resources to key supporters of the regime have hurt the economy, implementation of the UN's oil-for-food program beginning in December 1996 helped improve conditions for the average Iraqi citizen. Iraq was allowed to export limited amounts of oil in exchange for food, medicine, and some infrastructure spare parts. In December 1999 the UN Security Council authorized Iraq to export under the program as much oil as required to meet humanitarian needs. Oil exports have recently been more than three-quarters prewar level. However, 28% of Iraq's export revenues under the program have been deducted to meet UN Compensation Fund and UN administrative expenses. The drop in GDP in 2001-02 was largely the result of the global economic slowdown and lower oil prices. Per capita food imports increased significantly, while medical supplies and health care services steadily improved. Per capita output and living standards were still well below the prewar level, but any estimates have a wide range of error. The military victory of the US-led coalition in March-April 2003 resulted in the shutdown of much of the central economic administrative structure and the loss of a comparatively small amount of capital plant.
Ireland Ireland Ireland is a small, modern, trade-dependent economy with growth averaging a robust 7% in 1995-2004. Agriculture, once the most important sector, is now dwarfed by industry and services. Industry accounts for 46% of GDP, about 80% of exports, and 29% of the labor force. Although exports remain the primary engine for Ireland's growth, the economy has also benefited from a rise in consumer spending, construction, and business investment. Per capita GDP is 10% above that of the four big European economies and the second highest in the EU behind Luxembourg. Over the past decade, the Irish Government has implemented a series of national economic programs designed to curb price and wage inflation, reduce government spending, increase labor force skills, and promote foreign investment. Ireland joined in circulating the euro on 1 January 2002 along with 11 other EU nations. Ireland is a small, modern, trade-dependent economy with growth averaging a robust 8% in 1995-2002. The global slowdown, especially in the information technology sector, pressed growth down to 2.7% in 2003. Agriculture, once the most important sector, is now dwarfed by industry and services. Industry accounts for 46% of GDP and about 80% of exports and employs 28% of the labor force. Although exports remain the primary engine for Ireland's growth, the economy has also benefited from a rise in consumer spending, construction, and business investment. Per capita GDP is 10% above that of the four big European economies. Over the past decade, the Irish Government has implemented a series of national economic programs designed to curb inflation, reduce government spending, increase labor force skills, and promote foreign investment. Ireland joined in launching the euro currency system in January 1999 along with 10 other EU nations.
Isle of Man Isle of Man Offshore banking, manufacturing, and tourism are key sectors of the economy. The government offers incentives to high-technology companies and financial institutions to locate on the island; this has paid off in expanding employment opportunities in high-income industries. As a result, agriculture and fishing, once the mainstays of the economy, have declined in their shares of GDP. Trade is mostly with the UK. The Isle of Man enjoys free access to EU markets. Offshore banking, manufacturing, and tourism are key sectors of the economy. The government's policy of offering incentives to high-technology companies and financial institutions to locate on the island has paid off in expanding employment opportunities in high-income industries. As a result, agriculture and fishing, once the mainstays of the economy, have declined in their shares of GDP. Trade is mostly with the UK. The Isle of Man enjoys free access to EU markets.
Israel Israel Israel has a technologically advanced market economy with substantial government participation. It depends on imports of crude oil, grains, raw materials, and military equipment. Despite limited natural resources, Israel has intensively developed its agricultural and industrial sectors over the past 20 years. Israel imports substantial quantities of grain, but is largely self-sufficient in other agricultural products. Cut diamonds, high-technology equipment, and agricultural products (fruits and vegetables) are the leading exports. Israel usually posts sizable current account deficits, which are covered by large transfer payments from abroad and by foreign loans. Roughly half of the government's external debt is owed to the US, which is its major source of economic and military aid. The bitter Israeli-Palestinian conflict; difficulties in the high-technology, construction, and tourist sectors; and fiscal austerity in the face of growing inflation led to small declines in GDP in 2001 and 2002. The economy rebounded in 2003 and 2004, growing at a 4% rate each year, as the government tightened fiscal policy and implemented structural reforms to boost competition and efficiency in the markets. In 2005, rising consumer confidence, tourism, and foreign direct investment - as well as higher demand for Israeli exports - boosted GDP by 4.7%. Israel has a technologically advanced market economy with substantial government participation. It depends on imports of crude oil, grains, raw materials, and military equipment. Despite limited natural resources, Israel has intensively developed its agricultural and industrial sectors over the past 20 years. Israel imports significant quantities of grain but is largely self-sufficient in other agricultural products. Cut diamonds, high-technology equipment, and agricultural products (fruits and vegetables) are the leading exports. Israel usually posts sizable current account deficits, which are covered by large transfer payments from abroad and by foreign loans. Roughly half of the government's external debt is owed to the US, which is its major source of economic and military aid. The influx of Jewish immigrants from the former USSR during the period 1989-99, coupled with the opening of new markets at the end of the Cold War, energized Israel's economy, which grew rapidly in the early 1990s; growth began moderating in 1996 when the government imposed tighter fiscal and monetary policies and the immigration bonus petered out. Growth was a strong 7.2% in 2000, but the bitter Israeli-Palestinian conflict, difficulties in the high-technology, construction, and tourist sectors, and fiscal austerity in the face of growing inflation led to small declines in GDP in 2001 and 2002.
Italy Italy Italy has a diversified industrial economy with roughly the same total and per capita output as France and the UK. This capitalistic economy remains divided into a developed industrial north, dominated by private companies, and a less-developed, welfare-dependent, agricultural south, with 20% unemployment. Most raw materials needed by industry and more than 75% of energy requirements are imported. Over the past decade, Italy has pursued a tight fiscal policy in order to meet the requirements of the Economic and Monetary Unions and has benefited from lower interest and inflation rates. The current government has enacted numerous short-term reforms aimed at improving competitiveness and long-term growth. Italy has moved slowly, however, on implementing needed structural reforms, such as lightening the high tax burden and overhauling Italy's rigid labor market and over-generous pension system, because of the current economic slowdown and opposition from labor unions. But the leadership faces a severe economic constraint: the budget deficit has breached the 3% EU ceiling. The economy experienced almost no growth in 2005, and unemployment remained at a high level. Italy has a diversified industrial economy with roughly the same total and per capita output as France and the UK. This capitalistic economy remains divided into a developed industrial north, dominated by private companies, and a less developed, welfare-dependent agricultural south, with 20% unemployment. Most raw materials needed by industry and more than 75% of energy requirements are imported. Over the past decade, Italy has pursued a tight fiscal policy in order to meet the requirements of the Economic and Monetary Unions and has benefited from lower interest and inflation rates. The current government has enacted numerous short-term reforms aimed at improving competitiveness and long-term growth. Italy has moved slowly, however, on implementing needed structural reforms, such as lightening the high tax burden and overhauling Italy's rigid labor market and over-generous pension system, because of the current economic slowdown and opposition from labor unions.
Jamaica Jamaica The Jamaican economy is heavily dependent on services, which now account for 60% of GDP. The country continues to derive most of its foreign exchange from remittances, tourism, and bauxite/alumina. The global economic slowdown, particularly after the terrorist attacks in the US on 11 September 2001, stunted economic growth; the economy rebounded moderately in 2003-04, with brisk tourist seasons. But the economy faces serious long-term problems: high interest rates, increased foreign competition, exchange rate instability, a sizable merchandise trade deficit, large-scale unemployment and underemployment, and a growing stock of internal debt - the result of government bailouts to ailing sectors of the economy, most notably the financial sector in the mid-1990s. The ratio of debt to GDP is 135%. Inflation, previously a bright spot, is expected to remain in the double digits. Uncertain economic conditions have led to increased civil unrest, including gang violence fueled by the drug trade. In 2004, the government faced the difficult prospect of having to achieve fiscal discipline in order to maintain debt payments while simultaneously attacking a serious and growing crime problem that is hampering economic growth. Attempts at deficit control were derailed by Hurricane Ivan in September 2004, which required substantial government spending to repair the damage. Despite the hurricane, tourism looks set to enjoy solid growth for the foreseeable future. The economy, which depends heavily on tourism and bauxite, has been stagnant since 1995. After five years of recession, the economy inched ahead, by 0.8% in 2000, 1.7% in 2001, and 0.8% in 2002; the global economic slowdown, particularly in the United States after the 11 September 2001 terrorist attacks, has stunted the economic recovery. Serious problems include: high interest rates; increased foreign competition; a pressured, sometimes sliding, exchange rate; a widening merchandise trade deficit; and a growing internal debt, the result of government bailouts to various ailing sectors of the economy, particularly the financial sector. Depressed economic conditions have led to increased civil unrest, including serious violent crime. Jamaica's medium-term prospects will depend upon encouraging investment and tourism, maintaining a competitive exchange rate, selling off reacquired firms, and implementing proper fiscal and monetary policies.
Jan Mayen Jan Mayen Jan Mayen is a volcanic island with no exploitable natural resources. Economic activity is limited to providing services for employees of Norway's radio and meteorological stations on the island. Jan Mayen is a volcanic island with no exploitable natural resources. Economic activity is limited to providing services for employees of Norway's radio and meteorological stations located on the island.
Japan Japan Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan advance with extraordinary rapidity to the rank of second most technologically powerful economy in the world after the US and the third-largest economy in the world after the US and China, measured on a purchasing power parity (PPP) basis. One notable characteristic of the economy is how manufacturers, suppliers, and distributors work together in closely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Japan's industrial sector is heavily dependent on imported raw materials and fuels. The tiny agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self sufficient in rice, Japan must import about 60% of its food on a caloric basis. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades, overall real economic growth had been spectacular - a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of overinvestment during the late 1980s and contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets and to force a restructuring of the economy. From 2000 to 2003, government efforts to revive economic growth met with little success and were further hampered by the slowing of the US, European, and Asian economies. In 2004 and 2005, growth improved and the lingering fears of deflation in prices and economic activity lessened. Japan's huge government debt, which totals 170% of GDP, and the aging of the population are two major long-run problems. Some fear that a rise in taxes could endanger the current economic recovery. Internal conflict over the proper way to reform the financial system will continue as Japan Post's banking, insurance, and delivery services undergo privatization between 2007 and 2017. Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan advance with extraordinary rapidity to the rank of second-most-technologically-powerful economy in the world after the US and third-largest economy after the US and China. One notable characteristic of the economy is the working together of manufacturers, suppliers, and distributors in closely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Industry, the most important sector of the economy, is heavily dependent on imported raw materials and fuels. The much smaller agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self-sufficient in rice, Japan must import about 50% of its requirements of other grain and fodder crops. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades overall real economic growth had been spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the aftereffects of overinvestment during the late 1980s and contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth have met with little success and were further hampered in 2000-2003 by the slowing of the US, European, and Asian economies. Japan's huge government debt, which is approaching 150% of GDP, and the ageing of the population are two major long-run problems. Robotics constitutes a key long-term economic strength with Japan possessing 410,000 of the world's 720,000 "working robots." Internal conflict over the proper way to reform the ailing banking system continues.
Jarvis Island Jarvis Island no economic activity no economic activity
Jersey Jersey Jersey's economy is based on international financial services, agriculture, and tourism. In 1996, the finance sector accounted for about 60% of the island's output. Potatoes, cauliflower, tomatoes, and especially flowers are important export crops, shipped mostly to the UK. The Jersey breed of dairy cattle is known worldwide and represents an important export income earner. Milk products go to the UK and other EU countries. Tourism accounts for 24% of GDP. In recent years, the government has encouraged light industry to locate in Jersey, with the result that an electronics industry has developed alongside the traditional manufacturing of knitwear. All raw material and energy requirements are imported, as well as a large share of Jersey's food needs. Light taxes and death duties make the island a popular tax haven. Living standards come close to those of the UK. The economy is based largely on international financial services, agriculture, and tourism. Potatoes, cauliflower, tomatoes, and especially flowers are important export crops, shipped mostly to the UK. The Jersey breed of dairy cattle is known worldwide and represents an important export income earner. Milk products go to the UK and other EU countries. In 1996 the finance sector accounted for about 60% of the island's output. Tourism, another mainstay of the economy, accounts for 24% of GDP. In recent years, the government has encouraged light industry to locate in Jersey, with the result that an electronics industry has developed alongside the traditional manufacturing of knitwear. All raw material and energy requirements are imported, as well as a large share of Jersey's food needs. Light taxes and death duties make the island a popular tax haven.
Johnston Atoll Johnston Atoll no economic activity Economic activity is limited to providing services to US military personnel and contractors located on the island. All food and manufactured goods must be imported.
Jordan Jordan Jordan is a small Arab country with inadequate supplies of water and other natural resources such as oil. Debt, poverty, and unemployment are fundamental problems, but King ABDALLAH, since assuming the throne in 1999, has undertaken some broad economic reforms in a long-term effort to improve living standards. 'Amman in the past three years has worked closely with the IMF, practiced careful monetary policy, and made substantial headway with privatization. The government also has liberalized the trade regime sufficiently to secure Jordan's membership in the WTO (2000), a free trade accord with the US (2001), and an association agreement with the EU (2001). These measures have helped improve productivity and have put Jordan on the foreign investment map. Jordan imported most of its oil from Iraq, but the US-led war in Iraq in 2003 made Jordan more dependent on oil from other Gulf nations, forcing the Jordanian Government to raise retail petroleum product prices and the sales tax base. Jordan's export market, which is heavily dependent on exports to Iraq, was also affected by the war but recovered quickly while contributing to the Iraq recovery effort. The main challenges facing Jordan are reducing dependence on foreign grants, reducing the budget deficit, and creating investment incentives to promote job creation. Jordan is a small Arab country with inadequate supplies of water and other natural resources such as oil. Debt, poverty, and unemployment are fundamental problems, but King ABDALLAH since assuming the throne in 1999 has undertaken some broad economic reforms in a long-term effort to improve living standards. Amman in the past three years has worked closely with the IMF, practiced careful monetary policy, and made significant headway with privatization. The government also has liberalized the trade regime sufficiently to secure Jordan's membership in the WTrO (2000), a free trade accord with US (2000), and an association agreement with the EU (2001). These measures have helped improve productivity and have put Jordan on the foreign investment map. The US-led war in Iraq in 2003 dealt an economic blow to Jordan, which was dependent on Iraq for discounted oil. It remains unclear how Jordan will finance energy imports in the absence of such a deal. Other ongoing challenges include fiscal adjustment to reduce the budget deficit and broader investment incentives to promote job-creating ventures.
Juan de Nova Island Juan de Nova Island Up to 12,000 tons of guano are mined per year. Up to 12,000 tons of guano are mined per year.
Kazakhstan Kazakhstan Kazakhstan, the largest of the former Soviet republics in territory, excluding Russia, possesses enormous fossil fuel reserves and plentiful supplies of other minerals and metals. It also has a large agricultural sector featuring livestock and grain. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources and also on a growing machine-building sector specializing in construction equipment, tractors, agricultural machinery, and some defense items. The breakup of the USSR in December 1991 and the collapse in demand for Kazakhstan's traditional heavy industry products resulted in a short-term contraction of the economy, with the steepest annual decline occurring in 1994. In 1995-97, the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector. Kazakhstan enjoyed double-digit growth in 2000-01 - 9% or more per year in 2002-05 - thanks largely to its booming energy sector, but also to economic reform, good harvests, and foreign investment. The opening of the Caspian Consortium pipeline in 2001, from western Kazakhstan's Tengiz oilfield to the Black Sea, substantially raised export capacity. Kazakhstan also has begun work on an ambitious cooperative construction effort with China to build an oil pipeline that will extend from the country's Caspian coast eastward to the Chinese border. The country has embarked upon an industrial policy designed to diversify the economy away from overdependence on the oil sector by developing light industry. The policy aims to reduce the influence of foreign investment and foreign personnel. The government has engaged in several disputes with foreign oil companies over the terms of production agreements; tensions continue. Upward pressure on the local currency continued in 2005 due to massive oil-related foreign-exchange inflows. Kazakhstan, the largest of the former Soviet republics in territory, excluding Russia, possesses enormous fossil fuel reserves as well as plentiful supplies of other minerals and metals. It also is a large agricultural - livestock and grain - producer. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources and also on a growing machine-building sector specializing in construction equipment, tractors, agricultural machinery, and some defense items. The breakup of the USSR in December 1991 and the collapse in demand for Kazakhstan's traditional heavy industry products resulted in a short-term contraction of the economy, with the steepest annual decline occurring in 1994. In 1995-97, the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector. Kazakhstan enjoyed double-digit growth in 2000-01 - and a solid 9.5% in 2002 - thanks largely to its booming energy sector, but also to economic reform, good harvests, and foreign investment. The opening of the Caspian Consortium pipeline in 2001, from western Kazakhstan's Tengiz oilfield to the Black Sea, substantially raised export capacity. The country has embarked upon an industrial policy designed to diversify the economy away from overdependence on the oil sector, by developing light industry. Additionally, the policy aims to reduce the influence of foreign investment and foreign personnel; the government has engaged in several disputes with foreign oil companies over the terms of production agreements, and tensions continue.
Kenya Kenya The regional hub for trade and finance in East Africa, Kenya has been hampered by corruption and by reliance upon several primary goods whose prices have remained low. In 1997, the IMF suspended Kenya's Enhanced Structural Adjustment Program due to the government's failure to maintain reforms and curb corruption. A severe drought from 1999 to 2000 compounded Kenya's problems, causing water and energy rationing and reducing agricultural output. As a result, GDP contracted by 0.2% in 2000. The IMF, which had resumed loans in 2000 to help Kenya through the drought, again halted lending in 2001 when the government failed to institute several anticorruption measures. Despite the return of strong rains in 2001, weak commodity prices, endemic corruption, and low investment limited Kenya's economic growth to 1.2%. Growth lagged at 1.1% in 2002 because of erratic rains, low investor confidence, meager donor support, and political infighting up to the elections. In the key December 2002 elections, Daniel Arap MOI's 24-year-old reign ended, and a new opposition government took on the formidable economic problems facing the nation. In 2003, progress was made in rooting out corruption and encouraging donor support. GDP grew more than 5% in 2005. Kenya, the regional hub for trade and finance in East Africa, is hampered by corruption and reliance upon several primary goods whose prices remain low. Following strong economic growth in 1995 and 1996, Kenya's economy has stagnated, with GDP growth failing to keep up with the rate of population growth. In 1997, the IMF suspended Kenya's Enhanced Structural Adjustment Program due to the government's failure to maintain reforms and curb corruption. A severe drought from 1999 to 2000 compounded Kenya's problems, causing water and energy rationing and reducing agricultural output. As a result, GDP contracted by 0.3% in 2000. The IMF, which had resumed loans in 2000 to help Kenya through the drought, again halted lending in 2001 when the government failed to institute several anticorruption measures. Despite the return of strong rains in 2001, weak commodity prices, endemic corruption, and low investment limited Kenya's economic growth to 1%. Growth fell below 1% in 2002 because of erratic rains, low investor confidence, meager donor support, and political infighting up to the elections. In the key December 27, 2002 elections, Daniel Arap MOI's 24-year-old reign ended, and a new opposition government took on the formidable economic problems facing the nation. Substantial donor support and rooting out corruption are essential to making Kenya realize its substantial economic potential.
Kingman Reef Kingman Reef no economic activity no economic activity
Kiribati Kiribati A remote country of 33 scattered coral atolls, Kiribati has few natural resources. Commercially viable phosphate deposits were exhausted at the time of independence from the UK in 1979. Copra and fish now represent the bulk of production and exports. The economy has fluctuated widely in recent years. Economic development is constrained by a shortage of skilled workers, weak infrastructure, and remoteness from international markets. Tourism provides more than one-fifth of GDP. The financial sector is at an early stage of development as is the expansion of private sector initiatives. Foreign financial aid from UK, Japan, Australia, New Zealand, and China equals about 20% of GDP. Remittances from seamen on merchant ships abroad account for more than $5 million each year. Kiribati receives around $15 million annually for the government budget from an Australian trust fund. A remote country of 33 scattered coral atolls, Kiribati has few natural resources. Commercially viable phosphate deposits were exhausted at the time of independence from the UK in 1979. Copra and fish now represent the bulk of production and exports. The economy has fluctuated widely in recent years. Economic development is constrained by a shortage of skilled workers, weak infrastructure, and remoteness from international markets. Tourism provides more than one-fifth of GDP. The financial sector is at an early stage of development as is the expansion of private sector initiatives. Foreign financial aid from UK, Japan, Australia, New Zealand, and China is a critical supplement to GDP, equal to 25%-50% of GDP in recent years. Remittances from workers abroad account for more than $5 million each year.
Korea, North Korea, North North Korea, one of the world's most centrally planned and isolated economies, faces desperate economic conditions. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts. Industrial and power output have declined in parallel. Despite an increased harvest in 2005 because of more stable weather conditions, fertilizer assistance from South Korea, and an extraordinary mobilization of the population to help with agricultural production, the nation has suffered its 11th year of food shortages because of on-going systemic problems, including a lack of arable land, collective farming practices, and chronic shortages of tractors and fuel. Massive international food aid deliveries have allowed the people of North Korea to escape mass starvation since famine threatened in 1995, but the population continues to suffer from prolonged malnutrition and poor living conditions. Large-scale military spending eats up resources needed for investment and civilian consumption. In 2004, the regime formalized an arrangement whereby private "farmers markets" were allowed to begin selling a wider range of goods. It also permitted some private farming on an experimental basis in an effort to boost agricultural output. In October 2005, the regime reversed some of these policies by forbidding private sales of grains and reinstituting a centralized food rationing system. In December 2005, the regime confirmed that it intended to carry out earlier threats to terminate all international humanitarian assistance operations in the DPRK (calling instead for developmental assistance only) and to restrict the activities of international and non-governmental aid organizations such as the World Food Program. Firm political control remains the Communist government's overriding concern, which will likely inhibit the loosening of economic regulations. North Korea, one of the world's most centrally planned and isolated economies, faces desperate economic conditions. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and spare parts shortages. Industrial and power output have declined in parallel. The nation has suffered its tenth year of food shortages because of a lack of arable land; collective farming; weather-related problems, including major drought in 2000; and chronic shortages of fertilizer and fuel. Massive international food aid deliveries have allowed the regime to escape mass starvation since 1995-96, but the population remains the victim of prolonged malnutrition and deteriorating living conditions. Large-scale military spending eats up resources needed for investment and civilian consumption. Recently, the regime has placed emphasis on earning hard currency, developing information technology, addressing power shortages, and attracting foreign aid, but in no way at the expense of relinquishing central control over key national assets or undergoing widespread market-oriented reforms. In 2003, heightened political tensions with key donor countries and general donor fatigue have held down the flow of desperately needed food aid and have threatened fuel aid as well.
Korea, South Korea, South Since the early 1960s, South Korea has achieved an incredible record of growth and integration into the high-tech modern world economy. Four decades ago, GDP per capita was comparable with levels in the poorer countries of Africa and Asia. In 2004, South Korea joined the trillion dollar club of world economies. Today its GDP per capita is equal to the lesser economies of the EU. This success through the late 1980s was achieved by a system of close government/business ties, including directed credit, import restrictions, sponsorship of specific industries, and a strong labor effort. The government promoted the import of raw materials and technology at the expense of consumer goods and encouraged savings and investment over consumption. The Asian financial crisis of 1997-99 exposed longstanding weaknesses in South Korea's development model, including high debt/equity ratios, massive foreign borrowing, and an undisciplined financial sector. GDP plunged by 6.9% in 1998, then recovered 9.5% in 1999 and 8.5% in 2000. Growth fell back to 3.3% in 2001 because of the slowing global economy, falling exports, and the perception that much-needed corporate and financial reforms had stalled. Led by consumer spending and exports, growth in 2002 was an impressive 7%, despite anemic global growth. Between 2003 and 2005, growth moderated to about 4%. A downturn in consumer spending was offset by rapid export growth. In 2005, the government proposed labor reform legislation and a corporate pension scheme to help make the labor market more flexible, and new real estate policies to cool property speculation. Moderate inflation, low unemployment, an export surplus, and fairly equal distribution of income characterize this solid economy. As one of the Four Tigers of East Asia, South Korea has achieved an incredible record of growth and integration into the high-tech modern world economy. Three decades ago GDP per capita was comparable with levels in the poorer countries of Africa and Asia. Today its GDP per capita is 18 times North Korea's and equal to the lesser economies of the European Union. This success through the late 1980s was achieved by a system of close government/business ties, including directed credit, import restrictions, sponsorship of specific industries, and a strong labor effort. The government promoted the import of raw materials and technology at the expense of consumer goods and encouraged savings and investment over consumption. The Asian financial crisis of 1997-99 exposed longstanding weaknesses in South Korea's development model, including high debt/equity ratios, massive foreign borrowing, and an undisciplined financial sector. Growth plunged to a negative 6.6% in 1998, then strongly recovered to 10.8% in 1999 and 9.2% in 2000. Growth fell back to 3.3% in 2001 because of the slowing global economy, falling exports, and the perception that much-needed corporate and financial reforms had stalled. Led by consumer spending and exports, growth in 2002 was an impressive 6.2%, despite anemic global growth, followed by moderate 2.8% growth in 2003. In 2003 the six-day work week was reduced to five days.
Kuwait Kuwait Kuwait is a small, rich, relatively open economy with self-reported crude oil reserves of about 96 billion barrels - 10% of world reserves. Petroleum accounts for nearly half of GDP, 95% of export revenues, and 80% of government income. Kuwait's climate limits agricultural development. Consequently, with the exception of fish, it depends almost wholly on food imports. About 75% of potable water must be distilled or imported. Kuwait continues its discussions with foreign oil companies to develop fields in the northern part of the country. Kuwait is a small, rich, relatively open economy with proved crude oil reserves of about 98 billion barrels - 10% of world reserves. Petroleum accounts for nearly half of GDP, 95% of export revenues, and 80% of government income. Kuwait's climate limits agricultural development. Consequently, with the exception of fish, it depends almost wholly on food imports. About 75% of potable water must be distilled or imported. Kuwait continues its discussions with foreign oil companies to develop fields in the northern part of the country. Oil production declined by an estimated 8% in 2002 but is expected to return to the 2001 level in 2003.
Kyrgyzstan Kyrgyzstan Kyrgyzstan is a poor, mountainous country with a predominantly agricultural economy. Cotton, tobacco, wool, and meat are the main agricultural products, although only tobacco and cotton are exported in any quantity. Industrial exports include gold, mercury, uranium, natural gas, and electricity. Kyrgyzstan has been progressive in carrying out market reforms, such as an improved regulatory system and land reform. Kyrgyzstan was the first CIS country to be accepted into the World Trade Organization. Much of the government's stock in enterprises has been sold. Drops in production had been severe after the breakup of the Soviet Union in December 1991, but by mid-1995, production began to recover and exports began to increase. Kyrgyzstan has distinguished itself by adopting relatively liberal economic policies. The drop in output at the Kumtor gold mine sparked a 0.5% decline in GDP in 2002, but GDP growth bounced back in 2003-05. The government has made steady strides in controlling its substantial fiscal deficit and reduced the deficit to 1% of GDP in 2005. The government and international financial institutions have been engaged in a comprehensive medium-term poverty reduction and economic growth strategy, and in 2005 agreed to pursue much-needed tax reform. Progress fighting corruption, further restructuring of domestic industry, and success in attracting foreign investment are keys to future growth. Kyrgyzstan is a small, poor, mountainous country with a predominantly agricultural economy. Cotton, tobacco, wool, and meat are the main agricultural products, although only tobacco and cotton are exported in any quantity. Industrial exports include gold, mercury, uranium, and natural gas and electricity. Kyrgyzstan has been fairly progressive in carrying out market reforms, such as an improved regulatory system and land reform. Kyrgyzstan was the first CIS country to be accepted into the World Trade Organization. With fits and starts, inflation has been lowered to an estimated 7% in 2001, 2.1% in 2002, and 4.0% in 2003. Much of the government's stock in enterprises has been sold. Drops in production had been severe after the breakup of the Soviet Union in December 1991, but by mid-1995 production began to recover and exports began to increase. Growth was held down to 2.1% in 1998 largely because of the spillover from Russia's economic difficulties, but moved ahead to 3.6% in 1999, 5% in 2000, and 5% again in 2001. The drop in output at the Kumtor gold mine sparked a 0.5% decline in GDP in 2002 and again in 2003. On the positive side, the government and the international financial institutions have been engaged in a comprehensive medium-term poverty reduction and economic growth strategy. Further restructuring of domestic industry and success in attracting foreign investment are keys to future growth.
Laos Laos The government of Laos, one of the few remaining official Communist states, began decentralizing control and encouraging private enterprise in 1986. The results, starting from an extremely low base, were striking - growth averaged 6% in 1988-2004 except during the short-lived drop caused by the Asian financial crisis beginning in 1997. Despite this high growth rate, Laos remains a country with a primitive infrastructure. It has no railroads, a rudimentary road system, and limited external and internal telecommunications, though the government is sponsoring major improvements in the road system with possible support from Japan. Electricity is available in only a few urban areas. Subsistence agriculture, dominated by rice, accounts for about half of GDP and provides 80% of total employment. The economy will continue to benefit from aid by the IMF and other international sources and from new foreign investment in food processing and mining. Construction will be another strong economic driver, especially as hydroelectric dam and road projects gain steam. In late 2004, Laos gained Normal Trade Relations status with the US, allowing Laos-based producers to face lower tariffs on exports. This new status may help spur growth. In addition, the European Union has agreed to provide $1 million to the Lao Government for technical assistance in preparations for WTO membership. If the avian flu worsens and spreads in the region, however, prospects for tourism could dim. The government of Laos - one of the few remaining official Communist states - began decentralizing control and encouraging private enterprise in 1986. The results, starting from an extremely low base, were striking - growth averaged 7% in 1988-2001 except during the short-lived drop caused by the Asian financial crisis beginning in 1997. Despite this high growth rate, Laos remains a country with a primitive infrastructure; it has no railroads, a rudimentary road system, and limited external and internal telecommunications. Electricity is available in only a few urban areas. Subsistence agriculture accounts for half of GDP and provides 80% of total employment. The economy will continue to benefit from aid from the IMF and other international sources and from new foreign investment in food processing and mining.
Latvia Latvia Latvia's transitional economy recovered from the 1998 Russian financial crisis, largely due to the government's budget stringency and a gradual reorientation of exports toward EU countries, lessening Latvia's trade dependency on Russia. The majority of companies, banks, and real estate have been privatized, although the state still holds sizable stakes in a few large enterprises. Latvia officially joined the World Trade Organization in February 1999. EU membership, a top foreign policy goal, came in May 2004. The current account deficit - 11.5% of GDP in 2005 - remains a major concern. A growing perception that many of Latvia's banks facilitate illicit activity could damage the country's vibrant financial sector. Latvia's transitional economy recovered from the 1998 Russian financial crisis, largely due to the SKELE government's budget stringency and a gradual reorientation of exports toward EU countries, lessening Latvia's trade dependency on Russia. The majority of companies, banks, and real estate have been privatized, although the state still holds sizable stakes in a few large enterprises. Latvia officially joined the World Trade Organization in February 1999. Preparing for EU membership continues as a top foreign policy goal. The current account and internal government deficits remain major concerns, but the government's efforts to increase efficiency in revenue collection may lessen the budget deficit.
Lebanon Lebanon The 1975-91 civil war seriously damaged Lebanon's economic infrastructure, cut national output by half, and all but ended Lebanon's position as a Middle Eastern entrepot and banking hub. In the years since, Lebanon has rebuilt much of its war-torn physical and financial infrastructure by borrowing heavily - mostly from domestic banks. In an attempt to reduce the ballooning national debt, the Rafiq HARIRI government began an austerity program, reining in government expenditures, increasing revenue collection, and privatizing state enterprises. In November 2002, the government met with international donors at the Paris II conference to seek bilateral assistance in restructuring its massive domestic debt at lower interest rates. Substantial receipts from donor nations stabilized government finances in 2003, but did little to reduce the debt, which stands at nearly 170% of GDP. In 2004 the HARIRI government issued Eurobonds in an effort to manage maturing debt. The downturn in economic activity that followed the assassination of Rafiq al-HARIRI has eased, but has yet to be reversed. Tourism remains below the level of 2004. The new Prime Minister, Fuad SINIORA, has pledged to push ahead with economic reform, including privatization and more efficient government. The Core Group of nations has announced plans to hold a Donor's Conference in early 2006 to assist the government of Lebanon in restructuring its debt and increasing foreign investment. The 1975-91 civil war seriously damaged Lebanon's economic infrastructure, cut national output by half, and all but ended Lebanon's position as a Middle Eastern entrepot and banking hub. Peace enabled the central government to restore control in Beirut, begin collecting taxes, and regain access to key port and government facilities. Economic recovery was helped by a financially sound banking system and resilient small- and medium-scale manufacturers. Family remittances, banking services, manufactured and farm exports, and international aid provided the main sources of foreign exchange. Lebanon's economy made impressive gains since the launch in 1993 of "Horizon 2000," the government's $20 billion reconstruction program. Real GDP grew 8% in 1994, 7% in 1995, 4% in 1996 and in 1997, but slowed to 1.2% in 1998, -1.6% in 1999, -0.6% in 2000, 0.8% in 2001, and 1.5% in 2002. During the 1990s annual inflation fell to almost 0% from more than 100%. Lebanon has rebuilt much of its war-torn physical and financial infrastructure. The government nonetheless faces serious challenges in the economic arena. It has funded reconstruction by borrowing heavily - mostly from domestic banks. In order to reduce the ballooning national debt, the re-installed HARIRI government began an economic austerity program to rein in government expenditures, increase revenue collection, and privatize state enterprises. The HARIRI government met with international donors at the Paris II conference in November 2002 to seek bilateral assistance restructuring its domestic debt at lower rates of interest. While privatization of state-owned enterprises had not occurred by the end of 2002, the government had successfully avoided a currency devaluation and debt default in 2002.
Lesotho Lesotho Small, landlocked, and mountainous, Lesotho relies on remittances from miners employed in South Africa and customs duties from the Southern Africa Customs Union for the majority of government revenue. However, the government has recently strengthened its tax system to reduce dependency on customs duties. Completion of a major hydropower facility in January 1998 now permits the sale of water to South Africa, also generating royalties for Lesotho. As the number of mineworkers has declined steadily over the past several years, a small manufacturing base has developed based on farm products that support the milling, canning, leather, and jute industries, as well as a rapidly expanding apparel-assembly sector. The latter has grown significantly, mainly due to Lesotho qualifying for the trade benefits contained in the Africa Growth and Opportunity Act. The economy is still primarily based on subsistence agriculture, especially livestock, although drought has decreased agricultural activity. The extreme inequality in the distribution of income remains a major drawback. Lesotho has signed an Interim Poverty Reduction and Growth Facility with the IMF. Small, landlocked, and mountainous, Lesotho relies on remittances from miners employed in South Africa and customs duties from the Southern Africa Customs Union for the majority of government revenue, but the government has strengthened its tax system to reduce dependency on customs duties. Completion of a major hydropower facility in January 1998 now permits the sale of water to South Africa, also generating royalties for Lesotho. As the number of mineworkers has declined steadily over the past several years, a small manufacturing base has developed based on farm products that support the milling, canning, leather, and jute industries and a rapidly growing apparel-assembly sector. The economy is still primarily based on subsistence agriculture, especially livestock, although drought has decreased agricultural activity. The extreme inequality in the distribution of income remains a major drawback. Lesotho has signed an Interim Poverty Reduction and Growth Facility with the IMF.
Liberia Liberia Civil war and government mismanagement have destroyed much of Liberia's economy, especially the infrastructure in and around Monrovia, while continued international sanctions on diamonds and timber exports will limit growth prospects for the foreseeable future. Many businessmen have fled the country, taking capital and expertise with them. Some have returned, but many will not. Richly endowed with water, mineral resources, forests, and a climate favorable to agriculture, Liberia had been a producer and exporter of basic products - primarily raw timber and rubber. Local manufacturing, mainly foreign owned, had been small in scope. The departure of the former president, Charles TAYLOR, to Nigeria in August 2003, the establishment of the all-inclusive Transitional Government, and the arrival of a UN mission have helped defuse the political crisis, but have done little to encourage economic development. Wealthy international donors, who are ready to assist reconstruction efforts, are withholding funding until Liberia's National Assembly signs onto a Governance and Economic Management Action Plan (GEMAP). The Plan was created in October 2005 by the International Contact Group for Liberia to help ensure transparent revenue collection and allocation - something that was lacking under the Transitional Government and that has limited Liberia's economic recovery. The reconstruction of infrastructure and the raising of incomes in this ravaged economy will largely depend on generous financial support and technical assistance from donor countries. Civil war and misgovernment have destroyed much of Liberia's economy, especially the infrastructure in and around Monrovia. Many businessmen have fled the country, taking capital and expertise with them. Some have returned; many will not. Richly endowed with water, mineral resources, forests, and a climate favorable to agriculture, Liberia had been a producer and exporter of basic products - primarily raw timber and rubber. Local manufacturing, mainly foreign owned, had been small in scope. The restoration of the infrastructure and the raising of incomes in this ravaged economy depend on the settlement of civil warfare, the implementation of sound macro- and micro-economic policies, including the encouragement of foreign investment, and generous support from donor countries.
Libya Libya The Libyan economy depends primarily upon revenues from the oil sector, which contribute about 95% of export earnings, about one-quarter of GDP, and 60% of public sector wages. Substantial revenues from the energy sector coupled with a small population give Libya one of the highest per capita GDPs in Africa, but little of this income flows down to the lower orders of society. Libyan officials in the past four years have made progress on economic reforms as part of a broader campaign to reintegrate the country into the international fold. This effort picked up steam after UN sanctions were lifted in September 2003 and as Libya announced that it would abandon programs to build weapons of mass destruction in December 2003. Almost all US unilateral sanctions against Libya were removed in April 2004, helping Libya attract more foreign direct investment, mostly in the energy sector. Libya faces a long road ahead in liberalizing the socialist-oriented economy, but initial steps - including applying for WTO membership, reducing some subsidies, and announcing plans for privatization - are laying the groundwork for a transition to a more market-based economy. The non-oil manufacturing and construction sectors, which account for about 20% of GDP, have expanded from processing mostly agricultural products to include the production of petrochemicals, iron, steel, and aluminum. Climatic conditions and poor soils severely limit agricultural output, and Libya imports about 75% of its food. The socialist-oriented economy depends primarily upon revenues from the oil sector, which contribute practically all export earnings and about one-quarter of GDP. These oil revenues and a small population give Libya one of the highest per capita GDPs in Africa, but little of this income flows down to the lower orders of society. Import restrictions and inefficient resource allocations have led to periodic shortages of basic goods and foodstuffs. The nonoil manufacturing and construction sectors, which account for about 20% of GDP, have expanded from processing mostly agricultural products to include the production of petrochemicals, iron, steel, and aluminum. Climatic conditions and poor soils severely limit agricultural output, and Libya imports about 75% of its food. Higher oil prices in the last three years led to an increase in export revenues, which has improved macroeconomic balances but has done little to stimulate broad-based economic growth. Libya is making slow progress toward economic liberalization and the upgrading of economic infrastructure, but truly market-based reforms will be slow in coming.
Liechtenstein Liechtenstein Despite its small size and limited natural resources, Liechtenstein has developed into a prosperous, highly industrialized, free-enterprise economy with a vital financial service sector and living standards on a par with its large European neighbors. The Liechtenstein economy is widely diversified with a large number of small businesses. Low business taxes - the maximum tax rate is 20% - and easy incorporation rules have induced many holding or so-called letter box companies to establish nominal offices in Liechtenstein, providing 30% of state revenues. The country participates in a customs union with Switzerland and uses the Swiss franc as its national currency. It imports more than 90% of its energy requirements. Liechtenstein has been a member of the European Economic Area (an organization serving as a bridge between the European Free Trade Association (EFTA) and the EU) since May 1995. The government is working to harmonize its economic policies with those of an integrated Europe. Despite its small size and limited natural resources, Liechtenstein has developed into a prosperous, highly industrialized, free-enterprise economy with a vital financial service sector and living standards on a par with its large European neighbors. The Liechtenstein economy is widely diversified with a large number of small businesses. Low business taxes - the maximum tax rate is 20% - and easy incorporation rules have induced many holding or so-called letter box companies to establish nominal offices in Liechtenstein, providing 30% of state revenues. The country participates in a customs union with Switzerland and uses the Swiss franc as its national currency. It imports more than 90% of its energy requirements. Liechtenstein has been a member of the European Economic Area (an organization serving as a bridge between the European Free Trade Association (EFTA) and the EU) since May 1995. The government is working to harmonize its economic policies with those of an integrated Europe.
Lithuania Lithuania Lithuania, the Baltic state that has conducted the most trade with Russia, has slowly rebounded from the 1998 Russian financial crisis. Unemployment dropped from 11% in 2003 to about 8% in 2005. Growing domestic consumption and increased investment have furthered recovery. Trade has been increasingly oriented toward the West. Lithuania has gained membership in the World Trade Organization and joined the EU in May 2004. Privatization of the large, state-owned utilities, particularly in the energy sector, is nearing completion. Overall, more than 80% of enterprises have been privatized. Foreign government and business support have helped in the transition from the old command economy to a market economy. Lithuania, the Baltic state that has conducted the most trade with Russia, has slowly rebounded from the 1998 Russian financial crisis. Unemployment remains high, still 10.7% in 2003, but is improving. Growing domestic consumption and increased investment have furthered recovery. Trade has been increasingly oriented toward the West. Lithuania has gained membership in the World Trade Organization and has moved ahead with plans to join the EU. Privatization of the large, state-owned utilities, particularly in the energy sector, is nearing completion. Overall, more than 80% of enterprises have been privatized. Foreign government and business support have helped in the transition from the old command economy to a market economy.
Luxembourg Luxembourg This stable, high-income economy - benefitting from its proximity to France, Belgium, and Germany - features solid growth, low inflation, and low unemployment. The industrial sector, initially dominated by steel, has become increasingly diversified to include chemicals, rubber, and other products. Growth in the financial sector, which now accounts for about 28% of GDP, has more than compensated for the decline in steel. Most banks are foreign-owned and have extensive foreign dealings. Agriculture is based on small family-owned farms. The economy depends on foreign and cross-border workers for more than 30% of its labor force. Although Luxembourg, like all EU members, has suffered from the global economic slump, the country enjoys an extraordinarily high standard of living - GDP per capita ranks first in the world. This stable, high-income economy features solid growth, low inflation, and low unemployment. The industrial sector, initially dominated by steel, has become increasingly diversified to include chemicals, rubber, and other products. Growth in the financial sector, which now accounts for about 22% of GDP, has more than compensated for the decline in steel. Most banks are foreign-owned and have extensive foreign dealings. Agriculture is based on small family-owned farms. The economy depends on foreign and trans-border workers for more than 30% of its labor force. Although Luxembourg, like all EU members, has suffered from the global economic slump, the country has maintained a fairly strong growth rate and enjoys an extraordinarily high standard of living.
Macau Macau Macau's well-to-do economy has remained one of the most open in the world since its reversion to China in 1999. Apparel exports and tourism are mainstays of the economy. Although the territory was hit hard by the 1997-98 Asian financial crisis and the global downturn in 2001, its economy grew 10.1% in 2002, 14.2% in 2003, and 28.6% in 2004. During the first three quarters of 2005, Macau registered year-on-year GDP increases of 6.2%. A rapid rise in the number of mainland visitors because of China's easing of travel restrictions, increased public works expenditures, and significant investment inflows associated with the liberalization of Macau's gaming industry drove the four-year recovery. The budget also returned to surplus since 2002 because of the surge in visitors from China and a hike in taxes on gambling profits, which generated about 70% of government revenue. The three companies awarded gambling licenses have pledged to invest $2.2 billion in the territory, which will boost GDP growth. Much of Macau's textile industry may move to the mainland as the Multi-Fiber Agreement is phased out. The territory may have to rely more on gambling and trade-related services to generate growth. Two new casinos were opened by new foreign gambling licensees in 2004; development of new infrastructure and facilities in preparation for Macau's hosting of the 2005 East Asian Games led the construction sector. The Closer Economic Partnership Agreement (CEPA) between Macau and mainland China that came into effect on 1 January 2004 offers many Macau-made products tariff-free access to the mainland, and the range of products covered by CEPA was expanded on 1 January 2005. Macau's economy four years after reversion to China remains one of the most open in the world. The territory's net exports of goods and services account for 39% of GDP with tourism and apparel exports as the mainstays. Although the territory was hit hard by the 1998 Asian financial crisis and the global downturn in 2001, its economy grew an estimated 9.5% in 2002. A rapid rise in the number of mainland visitors because of China's easing of restrictions on travel drove the recovery. The budget also returned to surplus in 2002 because of the surge in visitors from China and a hike in taxes on gambling profits, which generated about 63% of government revenue. The liberalization of Macao's gambling monopoly may contribute to GDP growth, as the three companies awarded gambling licenses have pledged to invest $2.2 billion - roughly 33% of GDP - in the territory. Much of Macau's textile industry may move to the mainland as the Multi-Fiber Agreement is phased out. The territory may have to rely more on gambling and trade-related services to generate growth. Growth fell to 4% in 2003, according to early government forecasts, with the drop in large measure due to concerns over the Severe Acute Respiratory Syndrome (SARS).
Macedonia Macedonia At independence in September 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 central government and eliminated advantages from inclusion in a de facto free trade area. An absence of infrastructure, UN sanctions on the downsized Yugoslavia, one of its largest markets, and a Greek economic embargo over a dispute about the country's constitutional name and flag hindered economic growth until 1996. GDP subsequently rose each year through 2000. However, the leadership's commitment to economic reform, free trade, and regional integration was undermined by the ethnic Albanian insurgency of 2001. The economy shrank 4.5% because of decreased trade, intermittent border closures, increased deficit spending on security needs, and investor uncertainty. Growth barely recovered in 2002 to 0.9%, then rose by 3.4% in 2003, 4.1% in 2004, and 3.7% in 2005. Macedonia has maintained macroeconomic stability with low inflation, but it has lagged the region in attracting foreign investment and job growth has been anemic. Macedonia has an extensive grey market, estimated to be more than 20 percent of GDP, that falls outside official statistics. -
Macedonia, The Former Yugoslav Republic of Macedonia, The Former Yugoslav Republic of - 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 Yugoslavia, one of its largest markets, and a Greek economic embargo over a dispute about the country's constitutional name and flag hindered economic growth until 1996. GDP subsequently rose each year through 2000. However, the leadership's commitment to economic reform, free trade, and regional integration was undermined by the ethnic Albanian insurgency of 2001. The economy shrank 4.5% because of decreased trade, intermittent border closures, increased deficit spending on security needs, and investor uncertainty. Growth barely recovered in 2002 to 0.3%, then rose to 2.8% in 2003. Unemployment at one-third of the workforce remains the most critical economic problem. But even this issue is overshadowed by the fragile political situation.
Madagascar Madagascar Having discarded past socialist economic policies, Madagascar has since the mid 1990s followed a World Bank- and IMF-led policy of privatization and liberalization. This strategy placed the country on a slow and steady growth path from an extremely low level. Agriculture, including fishing and forestry, is a mainstay of the economy, accounting for more than one-fourth of GDP and employing 80% of the population. Exports of apparel have boomed in recent years primarily due to duty-free access to the United States. Deforestation and erosion, aggravated by the use of firewood as the primary source of fuel, are serious concerns. President RAVALOMANANA has worked aggressively to revive the economy following the 2002 political crisis, which triggered a 12% drop in GDP that year. Poverty reduction and combating corruption will be the centerpieces of economic policy for the next few years. Having discarded past socialist economic policies, Madagascar has since the mid 1990s followed a World Bank and IMF led policy of privatization and liberalization, which has placed the country on a slow and steady growth path. Agriculture, including fishing and forestry, is a mainstay of the economy, accounting for one-fourth of GDP and employing four-fifths of the population. Export earnings primarily are earned in the small industrial sector, which features textile manufacturing and agriculture processing. Deforestation and erosion, aggravated by the use of firewood as the primary source of fuel are serious concerns. The separatist political crisis of 2002 undermined macroeconomic stability, with the estimated drop in output being subject to a wide margin of error. Poverty reduction will be the centerpiece of economic policy for the next few years.
Malawi Malawi Landlocked Malawi ranks among the world's least developed countries. The economy is predominately agricultural, with about 90% of the population living in rural areas. Agriculture accounted for nearly 36% of GDP and 80% of export revenues in 2005. The performance of the tobacco sector is key to short-term growth as tobacco accounts for over 60% of exports. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. In late 2000, Malawi was approved for relief under the Heavily Indebted Poor Countries (HIPC) program. The government faces strong challenges, including developing a market economy, improving educational facilities, facing up to environmental problems, dealing with the rapidly growing problem of HIV/AIDS, and satisfying foreign donors that fiscal discipline is being tightened. In 2005, President MUTHARIKA championed an anticorruption campaign. Malawi's recent fiscal policy performance has been very strong, but a serious drought in 2005 and 2006 will heighten pressure on the government to increase spending. Landlocked Malawi ranks among the world's least developed countries. The economy is predominately agricultural, with about 90% of the population living in rural areas. Agriculture accounted for nearly 40% of GDP and 88% of export revenues in 2001. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. In late 2000, Malawi was approved for relief under the Heavily Indebted Poor Countries (HIPC) program. In November 2002 the World Bank approved a $50 million drought recovery package, which is to be used for famine relief. The government faces strong challenges, e.g., to fully develop a market economy, to improve educational facilities, to face up to environmental problems, to deal with the rapidly growing problem of HIV/AIDS, and to satisfy foreign donors that fiscal discipline is being tightened. The performance of the tobacco sector is key to short-term growth as tobacco accounts for over 50% of exports.
Malaysia Malaysia Malaysia, a middle-income country, transformed itself from 1971 through the late 1990s from a producer of raw materials into an emerging multi-sector economy. Growth was almost exclusively driven by exports - particularly of electronics. As a result, Malaysia was hard hit by the global economic downturn and the slump in the information technology (IT) sector in 2001 and 2002. GDP in 2001 grew only 0.5% because of an estimated 11% contraction in exports, but a substantial fiscal stimulus package equal to US $1.9 billion mitigated the worst of the recession, and the economy rebounded in 2002 with a 4.1% increase. The economy grew 4.9% in 2003, notwithstanding a difficult first half, when external pressures from Severe Acute Respiratory Syndrome (SARS) and the Iraq War led to caution in the business community. Growth topped 7% in 2004 and 5% in 2005. As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the cost of government subsidies for domestic gasoline and diesel fuel has risen and offset some of the benefit. Malaysia "unpegged" the ringgit from the US dollar in 2005, but so far there has been little movement in the exchange rate. Healthy foreign exchange reserves, low inflation, and a small external debt are all strengths that make it unlikely that Malaysia will experience a financial crisis over the near term similar to the one in 1997. The economy remains dependent on continued growth in the US, China, and Japan - top export destinations and key sources of foreign investment. Malaysia, a middle-income country, transformed itself from 1971 through the late 1990s from a producer of raw materials into an emerging multi-sector economy. Growth was almost exclusively driven by exports - particularly of electronics - and, as a result Malaysia was hard hit by the global economic downturn and the slump in the Information Technology (IT) sector in 2001. GDP in 2001 grew only 0.5% due to an estimated 11% contraction in exports, but a substantial fiscal stimulus package mitigated the worst of the recession and the economy rebounded in 2002. Healthy foreign exchange reserves and relatively small external debt make it unlikely that Malaysia will experience a crisis similar to the one in 1997, but the economy remains vulnerable to a more protracted slowdown in Japan and the US, top export destinations and key sources of foreign investment.
Maldives Maldives Tourism, Maldives' largest industry, accounts for 20% of GDP and more than 60% of the Maldives' foreign exchange receipts. Over 90% of government tax revenue comes from import duties and tourism-related taxes. Fishing is a second leading sector. The Maldivian Government began an economic reform program in 1989 initially by lifting import quotas and opening some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment. Agriculture and manufacturing continue to play a lesser role in the economy, constrained by the limited availability of cultivable land and the shortage of domestic labor. Most staple foods must be imported. Industry, which consists mainly of garment production, boat building, and handicrafts, accounts for about 18% of GDP. Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80% of the area is one meter or less above sea level. In late December 2004, a major tsunami left more than 100 dead, 12,000 displaced, and property damage exceeding $300 million. Over the past decade, real GDP growth averaged over 7.5% per year. As a result of the tsunami, the GDP contracted by about 5.5% in 2005. Tourism, Maldives largest industry, accounts for 20% of GDP and more than 60% of the Maldives' foreign exchange receipts. Over 90% of government tax revenue comes from import duties and tourism-related taxes. Almost 400,000 tourists visited the islands in 1998. Fishing is a second leading sector. The Maldivian Government began an economic reform program in 1989 initially by lifting import quotas and opening some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment. Agriculture and manufacturing continue to play a lesser role in the economy, constrained by the limited availability of cultivable land and the shortage of domestic labor. Most staple foods must be imported. Industry, which consists mainly of garment production, boat building, and handicrafts, accounts for about 18% of GDP. Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80% of the area is one meter or less above sea level.
Mali Mali Mali is among the poorest countries in the world, with 65% of its land area desert or semidesert and with a highly unequal distribution of income. Economic activity is largely confined to the riverine area irrigated by the Niger. About 10% of the population is nomadic and some 80% of the labor force is engaged in farming and fishing. Industrial activity is concentrated on processing farm commodities. Mali is heavily dependent on foreign aid and vulnerable to fluctuations in world prices for cotton, its main export, along with gold. The government has continued its successful implementation of an IMF-recommended structural adjustment program that is helping the economy grow, diversify, and attract foreign investment. Mali's adherence to economic reform and the 50% devaluation of the CFA franc in January 1994 have pushed up economic growth to a sturdy 5% average in 1996-2005. Worker remittances and external trade routes for the landlocked country have been jeopardized by continued unrest in neighboring Cote d'Ivoire. Mali is among the poorest countries in the world, with 65% of its land area desert or semidesert and with a highly unequal distribution of income. Economic activity is largely confined to the riverine area irrigated by the Niger. About 10% of the population is nomadic and some 80% of the labor force is engaged in farming and fishing. Industrial activity is concentrated on processing farm commodities. Mali is heavily dependent on foreign aid and vulnerable to fluctuations in world prices for cotton, its main export, along with gold. The government has continued its successful implementation of an IMF-recommended structural adjustment program that is helping the economy grow, diversify, and attract foreign investment. Mali's adherence to economic reform and the 50% devaluation of the African franc in January 1994 have pushed up economic growth to a sturdy 5% average in 1996-2002. Worker remittances and external trade routes have been jeopardized by continued unrest in neighboring Cote d'Ivoire.
Malta Malta Major resources are limestone, a favorable geographic location, and a productive labor force. Malta produces only about 20% of its food needs, has limited fresh water supplies, and has few domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics and textiles), and tourism. Continued sluggishness in the European economy is holding back exports, tourism, and overall growth. Major resources are limestone, a favorable geographic location, and a productive labor force. Malta produces only about 20% of its food needs, has limited fresh water supplies, and has no domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics and textiles), and tourism. Malta is privatizing state-controlled firms and liberalizing markets in order to prepare for membership in the European Union. The island remains divided politically, however, over the question of joining the EU. Continued sluggishness in the global economy is holding back exports, tourism, and overall growth.
Marshall Islands Marshall Islands US Government assistance is the mainstay of this tiny island economy. Agricultural production, primarily subsistence, is concentrated on small farms; the most important commercial crops are coconuts and breadfruit. Small-scale industry is limited to handicrafts, tuna processing, and copra. The tourist industry, now a small source of foreign exchange employing less than 10% of the labor force, remains the best hope for future added income. The islands have few natural resources, and imports far exceed exports. Under the terms of the Amended Compact of Free Association, the US will provide millions of dollars per year to the Marshall Islands (RMI) through 2023, at which time a Trust Fund made up of US and RMI contributions will begin perpetual annual payouts. Government downsizing, drought, a drop in construction, the decline in tourism and foreign investment due to the Asian financial difficulties, and less income from the renewal of fishing vessel licenses have held GDP growth to an average of 1% over the past decade. US Government assistance is the mainstay of this tiny island economy. Agricultural production is primarily subsistence and is concentrated on small farms; the most important commercial crops are coconuts and breadfruit. Small-scale industry is limited to handicrafts, tuna processing, and copra. The tourist industry, now a small source of foreign exchange employing less than 10% of the labor force, remains the best hope for future added income. The islands have few natural resources, and imports far exceed exports. Under the terms of the Compact of Free Association, the US has provided more than $1 billion in aid since 1986. Negotiations have continued for an extended agreement. Government downsizing, drought, a drop in construction, the decline in tourism and foreign investment due to the Asian financial difficulties, and less income from the renewal of fishing vessel licenses have held GDP growth to an average of 1% over the past decade.
Martinique Martinique The economy is based on sugarcane, bananas, tourism, and light industry. Agriculture accounts for about 6% of GDP and the small industrial sector for 11%. Sugar production has declined, with most of the sugarcane now used for the production of rum. Banana exports are increasing, going mostly to France. The bulk of meat, vegetable, and grain requirements must be imported, contributing to a chronic trade deficit that requires large annual transfers of aid from France. Tourism, which employs more than 11,000 people, has become more important than agricultural exports as a source of foreign exchange. The economy is based on sugarcane, bananas, tourism, and light industry. Agriculture accounts for about 6% of GDP and the small industrial sector for 11%. Sugar production has declined, with most of the sugarcane now used for the production of rum. Banana exports are increasing, going mostly to France. The bulk of meat, vegetable, and grain requirements must be imported, contributing to a chronic trade deficit that requires large annual transfers of aid from France. Tourism, which employs more than 11,000 people, has become more important than agricultural exports as a source of foreign exchange.
Mauritania Mauritania Half the population still depends on agriculture and livestock for a livelihood, even though many of the nomads and subsistence farmers were forced into the cities by recurrent droughts in the 1970s and 1980s. Mauritania has extensive deposits of iron ore, which account for nearly 40% of total exports. The decline in world demand for this ore, however, has led to cutbacks in production. The nation's coastal waters are among the richest fishing areas in the world, but overexploitation by foreigners threatens this key source of revenue. The country's first deepwater port opened near Nouakchott in 1986. In the past, drought and economic mismanagement resulted in a buildup of foreign debt which now stands at more than three times the level of annual exports. In February 2000, Mauritania qualified for debt relief under the Heavily Indebted Poor Countries (HIPC) initiative and in December 2001 received strong support from donor and lending countries at a triennial Consultative Group review. A new investment code approved in December 2001 improved the opportunities for direct foreign investment. Ongoing negotiations with the IMF involve problems of economic reforms and fiscal discipline. In 2001, exploratory oil wells in tracts 80 km offshore indicated potential extraction at current world oil prices. Mauritania has an estimated 1 billion barrels of proved reserves. Substantial oil production and exports are scheduled to begin in early 2006 and may average 75,000 barrels per day for that year. Meantime the government emphasizes reduction of poverty, improvement of health and education, and promoting privatization of the economy. Half the population still depends on agriculture and livestock for a livelihood, even though many of the nomads and subsistence farmers were forced into the cities by recurrent droughts in the 1970s and 1980s. Mauritania has extensive deposits of iron ore, which account for nearly 40% of total exports. The decline in world demand for this ore, however, has led to cutbacks in production. The nation's coastal waters are among the richest fishing areas in the world, but overexploitation by foreigners threatens this key source of revenue. The country's first deepwater port opened near Nouakchott in 1986. In the past, drought and economic mismanagement resulted in a buildup of foreign debt. In February 2000, Mauritania qualified for debt relief under the Heavily Indebted Poor Countries (HIPC) initiative and in December 2001 received strong support from donor and lending countries at a triennial Consultative Group review. In 2001, exploratory oil wells in tracts 80 km offshore indicated potential extraction at current world oil prices. A new investment code approved in December 2001 improved the opportunities for direct foreign investment. Ongoing negotiations with the IMF involve problems of economic reforms and fiscal discipline. Substantial oil production and exports probably will not begin until 2005.
Mauritius Mauritius Since independence in 1968, Mauritius has developed from a low-income, agriculturally based economy to a middle-income diversified economy with growing industrial, financial, and tourist sectors. For most of the period, annual growth has been in the order of 5% to 6%. This remarkable achievement has been reflected in more equitable income distribution, increased life expectancy, lowered infant mortality, and a much-improved infrastructure. Sugarcane is grown on about 90% of the cultivated land area and accounts for 25% of export earnings. The government's development strategy centers on expanding local financial institutions and building a domestic information telecommunications industry. Mauritius has attracted more than 9,000 offshore entities, many aimed at commerce in India and South Africa, and investment in the banking sector alone has reached over $1 billion. Mauritius, with its strong textile sector, has been well poised to take advantage of the Africa Growth and Opportunity Act (AGOA). Since independence in 1968, Mauritius has developed from a low-income, agriculturally based economy to a middle-income diversified economy with growing industrial, financial, and tourist sectors. For most of the period, annual growth has been in the order of 5% to 6%. This remarkable achievement has been reflected in more equitable income distribution, increased life expectancy, lowered infant mortality, and a much-improved infrastructure. Sugarcane is grown on about 90% of the cultivated land area and accounts for 25% of export earnings. The government's development strategy centers on foreign investment. Mauritius has attracted more than 9,000 offshore entities, many aimed at commerce in India and South Africa, and investment in the banking sector alone has reached over $1 billion. Mauritius, with its strong textile sector and responsible fiscal management, has been well poised to take advantage of the Africa Growth and Opportunity Act (AGOA). The government is encouraging foreign investment in the information technology field.
Mayotte Mayotte Economic activity is based primarily on the agricultural sector, including fishing and livestock raising. Mayotte is not self-sufficient and must import a large portion of its food requirements, mainly from France. The economy and future development of the island are heavily dependent on French financial assistance, an important supplement to GDP. Mayotte's remote location is an obstacle to the development of tourism. Economic activity is based primarily on the agricultural sector, including fishing and livestock raising. Mayotte is not self-sufficient and must import a large portion of its food requirements, mainly from France. The economy and future development of the island are heavily dependent on French financial assistance, an important supplement to GDP. Mayotte's remote location is an obstacle to the development of tourism.
Mexico Mexico Mexico has a free market economy that recently entered the trillion dollar class. It contains a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. Recent administrations have expanded competition in seaports, railroads, telecommunications, electricity generation, natural gas distribution, and airports. Per capita income is one-fourth that of the US; income distribution remains highly unequal. Trade with the US and Canada has tripled since the implementation of NAFTA in 1994. Mexico has 12 free trade agreements with over 40 countries including, Guatemala, Honduras, El Salvador, the European Free Trade Area, and Japan, putting more than 90% of trade under free trade agreements. The FOX administration is cognizant of the need to upgrade infrastructure, modernize the tax system and labor laws, and allow private investment in the energy sector, but has been unable to win the support of the opposition-led Congress. The next government that takes office in December 2006 will confront the same challenges of boosting economic growth, improving Mexico's international competitiveness, and reducing poverty. Mexico has a free market economy with a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. Recent administrations have expanded competition in seaports, railroads, telecommunications, electricity, natural gas distribution, and airports. Income distribution remains highly unequal. Trade with the US and Canada has tripled since the implementation of NAFTA in 1994. Following 6.9% growth in 2000, real GDP fell 0.3% in 2001, recovering to only a plus 1% in 2002, with the US slowdown the principal cause. Mexico implemented free trade agreements with Guatemala, Honduras, El Salvador, and the European Free Trade Area in 2001, putting more than 90% of trade under free trade agreements. Foreign direct investment reached $25 billion in 2001, of which $12.5 billion came from the purchase of Mexico's second-largest bank, Banamex, by Citigroup.
Micronesia, Federated States of Micronesia, Federated States of Economic activity consists primarily of subsistence farming and fishing. The islands have few mineral deposits worth exploiting, except for high-grade phosphate. The potential for a tourist industry exists, but the remote location, a lack of adequate facilities, and limited air connections hinder development. The Amended Compact of Free Association with the US guarantees the Federated States of Micronesia (FSM) millions of dollars in annual aid through 2023, and establishes a Trust Fund into which the US and the FSM make annual contributions in order to provide annual payouts to the FSM in perpetuity after 2023. The country's medium-term economic outlook appears fragile due not only to the reduction in US assistance but also to the slow growth of the private sector. Economic activity consists primarily of subsistence farming and fishing. The islands have few mineral deposits worth exploiting, except for high-grade phosphate. The potential for a tourist industry exists, but the remote location, a lack of adequate facilities, and limited air connections hinder development. In November 2002, the country experienced a further reduction in future revenues from the Compact of Free Association - the agreement with the US in which Micronesia received $1.3 billion in financial and technical assistance over a 15-year period until 2001. The country's medium-term economic outlook appears fragile due not only to the reduction in US assistance but also to the slow growth of the private sector. Geographical isolation and a poorly developed infrastructure remain major impediments to long-term growth.
Midway Islands Midway Islands The economy is based on providing support services for the national wildlife refuge activities located on the islands. All food and manufactured goods must be imported. The economy is based on providing support services for the national wildlife refuge activities located on the islands. All food and manufactured goods must be imported.
Moldova Moldova Moldova remains one of the poorest countries in Europe despite recent progress from its small economic base. It enjoys a favorable climate and good farmland but has no major mineral deposits. As a result, the economy depends heavily on agriculture, featuring fruits, vegetables, wine, and tobacco. Moldova must import almost all of its energy supplies. Energy shortages contributed to sharp production declines after the breakup of the Soviet Union in December 1991. As part of an ambitious reform effort after independence, Moldova introduced a convertible currency, freed prices, stopped issuing preferential credits to state enterprises, backed steady land privatization, removed export controls, and freed interest rates. The government entered into agreements with the World Bank and the IMF to promote growth and reduce poverty. The economy returned to positive growth in 2000, and has remained at or above 6% every year since. Further reforms will come slowly because of strong political forces backing government controls. The economy remains vulnerable to higher fuel prices, poor agricultural weather, and the skepticism of foreign investors. Moldova remains a very poor country despite recent progress from its small economic base. It enjoys a favorable climate and good farmland but has no major mineral deposits. As a result, the economy depends heavily on agriculture, featuring fruits, vegetables, wine, and tobacco. Moldova must import all of its supplies of oil, coal, and natural gas, largely from Russia. Energy shortages contributed to sharp production declines after the breakup of the Soviet Union in 1991. As part of an ambitious reform effort, Moldova introduced a convertible currency, freed all prices, stopped issuing preferential credits to state enterprises, backed steady land privatization, removed export controls, and freed interest rates. The government entered into agreements with the World Bank and the IMF to promote growth and reduce poverty. The economy returned to positive growth, of 2.1% in 2000, 6.1% in 2001, 7.2% in 2002, and 5.3% in 2003. Further reforms will come slowly because of strong political forces backing government controls. The economy remains vulnerable to higher fuel prices, poor agricultural weather, and the skepticism of foreign investors.
Monaco Monaco Monaco, bordering France on the Mediterranean coast, is a popular resort, attracting tourists to its casino and pleasant climate. In 2001, a major construction project extended the pier used by cruise ships in the main harbor. The principality has successfully sought to diversify into services and small, high-value-added, nonpolluting industries. The state has no income tax and low business taxes and thrives as a tax haven both for individuals who have established residence and for foreign companies that have set up businesses and offices. The state retains monopolies in a number of sectors, including tobacco, the telephone network, and the postal service. Living standards are high, roughly comparable to those in prosperous French metropolitan areas. Monaco, situated on the French Mediterranean coast, is a popular resort, attracting tourists to its casino and pleasant climate. In 2001, a major new construction project will extend the pier used by cruise ships in the main harbor. The principality has successfully sought to diversify into services and small, high-value-added, nonpolluting industries. The state has no income tax and low business taxes and thrives as a tax haven both for individuals who have established residence and for foreign companies that have set up businesses and offices. The state retains monopolies in a number of sectors, including tobacco, the telephone network, and the postal service. Living standards are high, roughly comparable to those in prosperous French metropolitan areas. Monaco does not publish national income figures; the estimates below are extremely rough.
Mongolia Mongolia Economic activity in Mongolia has traditionally been based on herding and agriculture. Mongolia has extensive mineral deposits. Copper, coal, molybdenum, tin, tungsten and gold account for a large part of industrial production. Soviet assistance, at its height one-third of GDP, disappeared almost overnight in 1990 and 1991 at the time of the dismantlement of the USSR. The following decade saw Mongolia endure both deep recession due to political inaction and natural disasters, as well as economic growth because of reform-embracing, free-market economics and extensive privatization of the formerly state-run economy. Severe winters and summer droughts in 2000-2002 resulted in massive livestock die-off and zero or negative GDP growth. This was compounded by falling prices for Mongolia's primary sector exports and widespread opposition to privatization. Growth was 10.6% in 2004 and 5.5% in 2005, largely because of high copper prices and new gold production. Mongolia's economy continues to be heavily influenced by its neighbors. For example, Mongolia purchases 80% of its petroleum products and a substantial amount of electric power from Russia, leaving it vulnerable to price increases. China is Mongolia's chief export partner and a main source of the "shadow" or "grey" economy. The World Bank and other international financial institutions estimate the grey economy to be at least equal to that of the official economy, but the former's actual size is difficult to calculate since the money does not pass through the hands of tax authorities or the banking sector. Remittances from Mongolians working abroad both legally and illegally are sizeable, and money laundering is a growing concern. Mongolia settled its $11 billion debt with Russia at the end of 2003 on favorable terms. Mongolia, which joined the World Trade Organization in 1997, seeks to expand its participation and integration into Asian regional economic and trade regimes. Economic activity traditionally has been based on agriculture and breeding of livestock. Mongolia also has extensive mineral deposits; copper, coal, molybdenum, tin, tungsten, and gold account for a large part of industrial production. Soviet assistance, at its height one-third of GDP, disappeared almost overnight in 1990-1991 at the time of the dismantlement of the USSR. Mongolia was driven into deep recession, prolonged by the Mongolian People's Revolutionary Party's (MPRP) reluctance to undertake serious economic reform. The Democratic Coalition (DC) government embraced free-market economics, eased price controls, liberalized domestic and international trade, and attempted to restructure the banking system and the energy sector. Major domestic privatization programs were undertaken, as well as the fostering of foreign investment through international tender of the oil distribution company, a leading cashmere company, and banks. Reform was held back by the ex-Communist MPRP opposition and by the political instability brought about through four successive governments under the DC. Economic growth picked up in 1997-1999 after stalling in 1996 due to a series of natural disasters and declines in world prices of copper and cashmere. In August and September 1999, the economy suffered from a temporary Russian ban on exports of oil and oil products, and Mongolia remains vulnerable in this sector. Mongolia joined the World Trade Organization (WTrO) in 1997. The international donor community pledged over $300 million per year at the Consultative Group Meeting, held in Ulaanbaatar in June 1999. The MPRP government, elected in July 2000, is anxious to improve the investment climate; it must also deal with a heavy burden of external debt. Falling prices for Mongolia's mainly primary sector exports, widespread opposition to privatization, and adverse effects of weather on agriculture in early 2000 and 2001 restrained real GDP growth in 2000-2001. Despite drought problems in 2002, GDP rose 4.0%, followed by a solid 5.0% increase in 2003. The first applications under the land privatization law have been marked by a number of disputes over particular sites. Russia claims Mongolia owes it $11 billion from the old Soviet period; any settlement could substantially increase Mongolia's foreign debt burden.
Montenegro Montenegro The republic of Montenegro severed its economy from federal control and from Serbia during the MILOSEVIC era and continues to maintain its own central bank, uses the euro instead of the Yugoslav dinar as official currency, collects customs tariffs, and manages its own budget. The dissolution of the loose political union between Serbia and Montenegro in 2006 led to separate membership in several international financial institutions, such as the IMF, World Bank, and the European Bank for Reconstruction and Development. Montenegro is pursuing its own membership in the World Trade Organization as well as negotiating a Stabilization and Association agreement with the European Union in anticipation of eventual membership. Severe unemployment remains a key political and economic problem for this entire region. Montenegro has privatized its large aluminum complex - the dominant industry - as well as most of its financial sector, and has begun to attract foreign direct investment in the tourism sector. -
Montserrat Montserrat Severe volcanic activity, which began in July 1995, has put a damper on this small, open economy. A catastrophic eruption in June 1997 closed the airports and seaports, causing further economic and social dislocation. Two-thirds of the 12,000 inhabitants fled the island. Some began to return in 1998, but lack of housing limited the number. The agriculture sector continued to be affected by the lack of suitable land for farming and the destruction of crops. Prospects for the economy depend largely on developments in relation to the volcanic activity and on public sector construction activity. The UK has launched a three-year $122.8 million aid program to help reconstruct the economy. Half of the island is expected to remain uninhabitable for another decade. Severe volcanic activity, which began in July 1995, has put a damper on this small, open economy. A catastrophic eruption in June 1997 closed the airports and seaports, causing further economic and social dislocation. Two-thirds of the 12,000 inhabitants fled the island. Some began to return in 1998, but lack of housing limited the number. The agriculture sector continued to be affected by the lack of suitable land for farming and the destruction of crops. Prospects for the economy depend largely on developments in relation to the volcano and on public sector construction activity. The UK has launched a three-year $122.8 million aid program to help reconstruct the economy. Half of the island is expected to remain uninhabitable for another decade.
Morocco Morocco Moroccan economic policies brought macroeconomic stability to the country in the early 1990s but have not spurred growth sufficient to reduce unemployment that nears 20% in urban areas. Poverty has actually increased due to the volatile nature of GDP, Morocco's continued dependence on foreign energy, and its inability to promote the growth of small and medium size enterprises. Despite structural adjustment programs supported by the IMF, the World Bank, and the Paris Club, the dirham is only fully convertible for current account transactions and Morocco's financial sector is rudimentary. Moroccan authorities understand that reducing poverty and providing jobs is key to domestic security and development. In 2004, Moroccan authorities instituted measures to boost foreign direct investment and trade by signing a free trade agreement with the US and selling government shares in the state telecommunications company and in the largest state-owned bank. The Free Trade agreement went into effect in January 2006. In 2005, GDP growth slipped to 1.2% and the budget deficit rose sharply - to 7.5% of GDP - because of substantial increases in wages and oil subsidies. Long-term challenges include preparing the economy for freer trade with the US and European Union, improving education and job prospects for Morocco's youth, and raising living standards, which the government hopes to achieve by increasing tourist arrivals and boosting competitiveness in textiles. Morocco faces the problems typical of developing countries - restraining government spending, reducing constraints on private activity and foreign trade, and achieving sustainable economic growth. Following structural adjustment programs supported by the IMF, World Bank, and the Paris Club, the dirham is now fully convertible for current account transactions, and reforms of the financial sector have been implemented. Droughts depressed activity in the key agricultural sector and contributed to a stagnant economy in 1999 and 2000. During that time, however, Morocco reported large foreign exchange inflows from the sale of a mobile telephone license and partial privatization of the state-owned telecommunications company. Favorable rainfall in 2001 led to a growth of 6.5%. Good harvest conditions continued to support GDP growth in 2002. Formidable long-term challenges include: servicing the external debt; modernizing the industrial sector; preparing the economy for freer trade with the EU and US; and improving education and attracting foreign investment to boost living standards and job prospects for Morocco's youth.
Mozambique Mozambique At independence in 1975, Mozambique was one of the world's poorest countries. Socialist mismanagement and a brutal civil war from 1977-92 exacerbated the situation. In 1987, the government embarked on a series of macroeconomic reforms designed to stabilize the economy. These steps, combined with donor assistance and with political stability since the multi-party elections in 1994, have led to dramatic improvements in the country's growth rate. Inflation was reduced to single digits during the late 1990s although it returned to double digits in 2000-03. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities. In spite of these gains, Mozambique remains dependent upon foreign assistance for much of its annual budget, and the majority of the population remains below the poverty line. Subsistence agriculture continues to employ the vast majority of the country's work force. A substantial trade imbalance persists although the opening of the Mozal aluminum smelter, the country's largest foreign investment project to date, has increased export earnings. In late 2005, and after years of negotiations, the government signed an agreement to gain Portugal's majority share of the Cahora Bassa Hydroelectricity (HCB) company, a dam that was not transferred to Mozambique at independence because of the ensuing civil war and unpaid debts. More power is needed for additional investment projects in titanium extraction and processing and garment manufacturing that could further close the import/export gap. Mozambique's once substantial foreign debt has been reduced through forgiveness and rescheduling under the IMF's Heavily Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is now at a manageable level. At independence in 1975, Mozambique was one of the world's poorest countries. Socialist mismanagement and a brutal civil war from 1977-92 exacerbated the situation. In 1987, the government embarked on a series of macroeconomic reforms designed to stabilize the economy. These steps, combined with donor assistance and with political stability since the multi-party elections in 1994, have led to dramatic improvements in the country's growth rate. Inflation was brought to single digits during the late 1990s although it returned to double digits in 2000-02. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities. In spite of these gains, Mozambique remains dependent upon foreign assistance for much of its annual budget, and the majority of the population remains below the poverty line. Subsistence agriculture continues to employ the vast majority of the country's workforce. A substantial trade imbalance persists although the opening of the MOZAL aluminum smelter, the country's largest foreign investment project to date has increased export earnings. Additional investment projects in titanium extraction and processing and garment manufacturing should further close the import/export gap. Mozambique's once substantial foreign debt has been reduced through forgiveness and rescheduling under the IMF's Heavily Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is now at a manageable level.
Namibia Namibia The economy is heavily dependent on the extraction and processing of minerals for export. Mining accounts for 20% of GDP. Rich alluvial diamond deposits make Namibia a primary source for gem-quality diamonds. Namibia is the fourth-largest exporter of nonfuel minerals in Africa, the world's fifth-largest producer of uranium, and the producer of large quantities of lead, zinc, tin, silver, and tungsten. The mining sector employs only about 3% of the population while about half of the population depends on subsistence agriculture for its livelihood. Namibia normally imports about 50% of its cereal requirements; in drought years food shortages are a major problem in rural areas. A high per capita GDP, relative to the region, hides the world's worst inequality of income distribution. The Namibian economy is closely linked to South Africa with the Namibian dollar pegged one-to-one to the South African rand. Privatization of several enterprises in coming years may stimulate long-run foreign investment. Increased fish production and mining of zinc, copper, uranium, and silver spurred growth in 2003-05. The economy is heavily dependent on the extraction and processing of minerals for export. Mining accounts for 20% of GDP. Rich alluvial diamond deposits make Namibia a primary source for gem-quality diamonds. Namibia is the fourth-largest exporter of nonfuel minerals in Africa, the world's fifth-largest producer of uranium, and the producer of large quantities of lead, zinc, tin, silver, and tungsten. The mining sector employs only about 3% of the population while about half of the population depends on subsistence agriculture for its livelihood. Namibia normally imports about 50% of its cereal requirements; in drought years food shortages are a major problem in rural areas. A high per capita GDP, relative to the region, hides the great inequality of income distribution; nearly one-third of Namibians had annual incomes of less than $1400 in constant 1994 dollars, according to a 1993 study. The Namibian economy is closely linked to South Africa with the Namibian dollar pegged to the South African rand. Privatization of several enterprises in coming years may stimulate long-run foreign investment.
Nauru Nauru Revenues of this tiny island have traditionally come from exports of phosphates, now significantly depleted. An Australian company in 2005 entered into an agreement intended to exploit remaining supplies. Few other resources exist with most necessities being imported, mainly from Australia, its former occupier and later major source of support. The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. In anticipation of the exhaustion of Nauru's phosphate deposits, substantial amounts of phosphate income were invested in trust funds to help cushion the transition and provide for Nauru's economic future. As a result of heavy spending from the trust funds, the government faces virtual bankruptcy. To cut costs the government has frozen wages and reduced overstaffed public service departments. In 2005, the deterioration in housing, hospitals, and other capital plant continued, and the cost to Australia of keeping the government and economy afloat continued to climb. Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely. Revenues of this tiny island have come from exports of phosphates, but reserves are expected to be exhausted within a few years. Phosphate production has declined since 1989, as demand has fallen in traditional markets and as the marginal cost of extracting the remaining phosphate increases, making it less internationally competitive. While phosphates have given Nauruans one of the highest per capita incomes in the Third World, few other resources exist with most necessities being imported, including fresh water from Australia. The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. In anticipation of the exhaustion of Nauru's phosphate deposits, substantial amounts of phosphate income have been invested in trust funds to help cushion the transition and provide for Nauru's economic future. The government has been borrowing heavily from the trusts to finance fiscal deficits. To cut costs the government has called for a freeze on wages, a reduction of over-staffed public service departments, privatization of numerous government agencies, and closure of some overseas consulates. In recent years Nauru has encouraged the registration of offshore banks and corporations. Tens of billions of dollars have been channeled through their accounts. Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely.
Navassa Island Navassa Island Subsistence fishing and commercial trawling occur within refuge waters. no economic activity
Nepal Nepal Nepal is among the poorest and least developed countries in the world with almost one-third of its population living below the poverty line. Agriculture is the mainstay of the economy, providing a livelihood for three-fourths of the population and accounting for 38% of GDP. Industrial activity mainly involves the processing of agricultural produce including jute, sugarcane, tobacco, and grain. Security concerns relating to the Maoist conflict have led to a decrease in tourism, a key source of foreign exchange. Nepal has considerable scope for exploiting its potential in hydropower and tourism, areas of recent foreign investment interest. Prospects for foreign trade or investment in other sectors will remain poor, however, because of the small size of the economy, its technological backwardness, its remoteness, its landlocked geographic location, its civil strife, and its susceptibility to natural disaster. Nepal is among the poorest and least developed countries in the world with 42% of its population living below the poverty line. Agriculture is the mainstay of the economy, providing a livelihood for over 80% of the population and accounting for 40% of GDP. Industrial activity mainly involves the processing of agricultural produce including jute, sugarcane, tobacco, and grain. Textile and carpet production, accounting for about 80% of foreign exchange earnings in recent years, contracted in 2001-02 due to the overall slowdown in the world economy and pressures by Maoist insurgents on factory owners and workers. Security concerns in the wake of the Maoist conflict and the September 11, 2001 terrorist attacks in the US have led to a decrease in tourism, another key source of foreign exchange. Since 1991, the government has been moving forward with economic reforms, e.g., by reducing business licenses and registration requirements to simplify investment procedures, reducing subsidies, privatizing state industries, and laying off civil servants. Nepal has considerable scope for exploiting its potential in hydropower and tourism, areas of recent foreign investment interest. Prospects for foreign trade or investment in other sectors will remain poor, however, because of the small size of the economy, its technological backwardness, its remoteness, its landlocked geographic location, and its susceptibility to natural disaster. The international community's role of funding more than 60% of Nepal's development budget and more than 28% of total budgetary expenditures will likely continue as a major ingredient of growth.
Netherlands Netherlands The Netherlands has a prosperous and open economy, which depends heavily on foreign trade. The economy is noted for stable industrial relations, moderate unemployment and inflation, a sizable current account surplus, and an important role as a European transportation hub. Industrial activity is predominantly in food processing, chemicals, petroleum refining, and electrical machinery. A highly mechanized agricultural sector employs no more than 2% of the labor force but provides large surpluses for the food-processing industry and for exports. The Netherlands, along with 11 of its EU partners, began circulating the euro currency on 1 January 2002. The country continues to be one of the leading European nations for attracting foreign direct investment. Economic growth slowed considerably in 2001-05, as part of the global economic slowdown, but for the four years before that, annual growth averaged nearly 4%, well above the EU average. The Netherlands is a prosperous and open economy depending heavily on foreign trade. The economy is noted for stable industrial relations, moderate unemployment and inflation, a sizable current account surplus, and an important role as a European transportation hub. Industrial activity is predominantly in food processing, chemicals, petroleum refining, and electrical machinery. A highly mechanized agricultural sector employs no more than 4% of the labor force but provides large surpluses for the food-processing industry and for exports. The Netherlands, along with 11 of its EU partners, began circulating the euro currency on 1 January 2002. The country continues to be one of the leading European nations for attracting foreign direct investment. Economic growth slowed considerably in 2001-03, as part of the global economic slowdown, but for the four years before that, annual growth averaged nearly 4%, well above the EU average. The government is wrestling with a deteriorating budget position, and is moving toward the EU 3% limit.
Netherlands Antilles Netherlands Antilles Tourism, petroleum refining, and offshore finance are the mainstays of this small economy, which is closely tied to the outside world. Although GDP has declined or grown slightly in each of the past eight years, the islands enjoy a high per capita income and a well-developed infrastructure compared with other countries in the region. Almost all consumer and capital goods are imported, the US and Mexico being the major suppliers. Poor soils and inadequate water supplies hamper the development of agriculture. Budgetary problems hamper reform of the health and pension systems of an aging population. Tourism, petroleum refining, and offshore finance are the mainstays of this small economy, which is closely tied to the outside world. Although GDP has declined or remained even in each of the past six years, the islands enjoy a high per capita income and a well-developed infrastructure compared with other countries in the region. Almost all consumer and capital goods are imported, the US and Mexico being the major suppliers. Poor soils and inadequate water supplies hamper the development of agriculture.
New Caledonia New Caledonia New Caledonia has about 25% of the world's known nickel resources. Only a small amount of the land is suitable for cultivation, and food accounts for about 20% of imports. In addition to nickel, substantial financial support from France - equal to more than one-fourth of GDP - and tourism are keys to the health of the economy. Substantial new investment in the nickel industry, combined with the recovery of global nickel prices, brightens the economic outlook for the next several years. New Caledonia has about 25% of the world's known nickel resources. Only a small amount of the land is suitable for cultivation, and food accounts for about 20% of imports. In addition to nickel, substantial financial support from France - equal to more than one-fourth of GDP - and tourism are keys to the health of the economy. Substantial new investment in the nickel industry, combined with the recovery of global nickel prices, brightens the economic outlook for the next several years.
New Zealand New Zealand Over the past 20 years the government has transformed New Zealand from an agrarian economy dependent on concessionary British market access to a more industrialized, free market economy that can compete globally. This dynamic growth has boosted real incomes (but left behind many at the bottom of the ladder), broadened and deepened the technological capabilities of the industrial sector, and contained inflationary pressures. Per capita income has risen for six consecutive years and was more than $24,000 in 2005 in purchasing power parity terms. New Zealand is heavily dependent on trade - particularly in agricultural products - to drive growth. Exports are equal to about 22% of GDP. Thus far the economy has been resilient, and the Labor Government promises that expenditures on health, education, and pensions will increase proportionately to output. Since 1984 the government has accomplished major economic restructuring, transforming New Zealand from an agrarian economy dependent on concessionary British market access to a more industrialized, free market economy that can compete globally. This dynamic growth has boosted real incomes (but left behind many at the bottom of the ladder), broadened and deepened the technological capabilities of the industrial sector, and contained inflationary pressures. While per capita incomes have been rising, however, they remain below the level of the four largest EU economies, and there is some government concern that New Zealand is not closing the gap. New Zealand is heavily dependent on trade - particularly in agricultural products - to drive growth, and it has been affected by the global economic slowdown and the slump in commodity prices. Thus far the New Zealand economy has been relatively resilient, although growth may slow to 2.5% in 2003.
Nicaragua Nicaragua Nicaragua, one of the Western Hemisphere's poorest countries, has low per capita income, widespread underemployment, and a heavy external debt burden. Distribution of income is one of the most unequal on the globe. While the country has progressed toward macroeconomic stability in the past few years, GDP annual growth has been far too low to meet the country's needs, forcing the country to rely on international economic assistance to meet fiscal and debt financing obligations. Nicaragua qualified in early 2004 for some $4.5 billion in foreign debt reduction under the Heavily Indebted Poor Countries (HIPC) initiative because of its earlier successful performances under its International Monetary Fund policy program and other efforts. In October 2005, Nicaragua ratified the US-Central America Free Trade Agreement (CAFTA), which will provide an opportunity for Nicaragua to attract investment, create jobs, and deepen economic development. High oil prices helped drive inflation to 9.6% in 2005, leading to a fall in real GDP growth to 4% from over 5% in 2004. Nicaragua, one of the hemisphere's poorest countries, faces low per capita income, flagging socio-economic indicators, and huge external debt. Distribution of income is one of the most unequal on the globe. While the country has made progress toward macroeconomic stability over the past few years, a banking crisis and scandal has shaken the economy. Nicaragua will continue to be dependent on international aid and debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. Donors have made aid conditional on the openness of government financial operation, poverty alleviation, and human rights. Nicaragua met the conditions for additional debt service relief in December 2000. Growth should move up moderately in 2003 because of increased private investment and exports.
Niger Niger Niger is one of the poorest countries in the world, ranking last on the United Nations Development Fund index of human development. It is a landlocked, Sub-Saharan nation, whose economy centers on subsistence crops, livestock, and some of the world's largest uranium deposits. Drought cycles, desertification, a 2.9% population growth rate, and the drop in world demand for uranium have undercut the economy. Niger shares a common currency, the CFA franc, and a common central bank, the Central Bank of West African States (BCEAO), with seven other members of the West African Monetary Union. In December 2000, Niger qualified for enhanced debt relief under the International Monetary Fund program for Highly Indebted Poor Countries (HIPC) and concluded an agreement with the Fund on a Poverty Reduction and Growth Facility (PRGF). Debt relief provided under the enhanced HIPC initiative significantly reduces Niger's annual debt service obligations, freeing funds for expenditures on basic health care, primary education, HIV/AIDS prevention, rural infrastructure, and other programs geared at poverty reduction. In December 2005, it was announced that Niger had received 100% multilateral debt relief from the IMF, which translates into the forgiveness of approximately $86 million USD in debts to the IMF, excluding the remaining assistance under HIPC. Nearly half of the government's budget is derived from foreign donor resources. Future growth may be sustained by exploitation of oil, gold, coal, and other mineral resources. Uranium prices have recovered somewhat in the last few years. A drought and locust infestation in 2005 led to food shortages for as many as 2.5 million Nigerians. Niger is a poor, landlocked Sub-Saharan nation, whose economy centers on subsistence agriculture, animal husbandry, and reexport trade, and increasingly less on uranium, because of declining world demand. The 50% devaluation of the West African franc in January 1994 boosted exports of livestock, cowpeas, onions, and the products of Niger's small cotton industry. The government relies on bilateral and multilateral aid - which was suspended following the April 1999 coup d'etat - for operating expenses and public investment. In 2000-01, the World Bank approved a structural adjustment loan of $105 million to help support fiscal reforms. However, reforms could prove difficult given the government's bleak financial situation. The IMF approved a $73 million poverty reduction and growth facility for Niger in 2000 and announced $115 million in debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. Further disbursements of aid occurred in 2002. Future growth may be sustained by exploitation of oil, gold, coal, and other mineral resources.
Nigeria Nigeria Oil-rich Nigeria, long hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management, is undertaking some reforms under a new reform-minded administration. Nigeria's former military rulers failed to diversify the economy away from its overdependence on the capital-intensive oil sector, which provides 20% of GDP, 95% of foreign exchange earnings, and about 65% of budgetary revenues. The largely subsistence agricultural sector has failed to keep up with rapid population growth - Nigeria is Africa's most populous country - and the country, once a large net exporter of food, now must import food. Following the signing of an IMF stand-by agreement in August 2000, Nigeria received a debt-restructuring deal from the Paris Club and a $1 billion credit from the IMF, both contingent on economic reforms. Nigeria pulled out of its IMF program in April 2002, after failing to meet spending and exchange rate targets, making it ineligible for additional debt forgiveness from the Paris Club. In the last year the government has begun showing the political will to implement the market-oriented reforms urged by the IMF, such as to modernize the banking system, to curb inflation by blocking excessive wage demands, and to resolve regional disputes over the distribution of earnings from the oil industry. In 2003, the government began deregulating fuel prices, announced the privatization of the country's four oil refineries, and instituted the National Economic Empowerment Development Strategy, a domestically designed and run program modeled on the IMF's Poverty Reduction and Growth Facility for fiscal and monetary management. GDP rose strongly in 2005, based largely on increased oil exports and high global crude prices. In November 2005, Abuja won Paris Club approval for a historic debt-relief deal that by March 2006 should eliminate $30 billion worth of Nigeria's total $37 billion external debt. The deal first requires that Nigeria repay roughly $12 billion in arrears to its bilateral creditors. Nigeria would then be allowed to buy back its remaining debt stock at a discount. The deal also commits Nigeria to more intensified IMF reviews. The oil-rich Nigerian economy, long hobbled by political instability, corruption, and poor macroeconomic management, is undergoing substantial reform under the new civilian administration. Nigeria's former military rulers failed to diversify the economy away from overdependence on the capital-intensive oil sector, which provides 20% of GDP, 95% of foreign exchange earnings, and about 65% of budgetary revenues. The largely subsistence agricultural sector has failed to keep up with rapid population growth, and Nigeria, once a large net exporter of food, now must import food. Following the signing of an IMF stand-by agreement in August 2000, Nigeria received a debt-restructuring deal from the Paris Club and a $1 billion credit from the IMF, both contingent on economic reforms. The agreement was allowed to expire by the IMF in November 2001, however, and Nigeria apparently received much less multilateral assistance than expected in 2002. Nonetheless, increases in foreign oil investment and oil production kept growth at 3% in 2002. The government lacks the strength to implement the market-oriented reforms urged by the IMF, such as modernization of the banking system; to curb inflation by blocking excessive wage demands; and to resolve regional disputes over the distribution of earnings from the oil industry. When the uncertainties in the global economy are added in, estimates of Nigeria's prospects for 2003 must have a wide margin of error.
Niue Niue The economy suffers from the typical Pacific island problems of geographic isolation, few resources, and a small population. Government expenditures regularly exceed revenues, and the shortfall is made up by critically needed grants from New Zealand that are used to pay wages to public employees. Niue has cut government expenditures by reducing the public service by almost half. The agricultural sector consists mainly of subsistence gardening, although some cash crops are grown for export. Industry consists primarily of small factories to process passion fruit, lime oil, honey, and coconut cream. The sale of postage stamps to foreign collectors is an important source of revenue. The island in recent years has suffered a serious loss of population because of emigration to New Zealand. Efforts to increase GDP include the promotion of tourism and a financial services industry, although the International Banking Repeal Act of 2002 resulted in the termination of all offshore banking licenses. Economic aid from New Zealand in 2002 was about US$2 million. Niue suffered a devastating typhoon in January 2004, which decimated nascent economic programs. While in the process of rebuilding, Niue has been dependent on foreign aid. The economy suffers from the typical Pacific island problems of geographic isolation, few resources, and a small population. Government expenditures regularly exceed revenues, and the shortfall is made up by critically needed grants from New Zealand that are used to pay wages to public employees. Niue has cut government expenditures by reducing the public service by almost half. The agricultural sector consists mainly of subsistence gardening, although some cash crops are grown for export. Industry consists primarily of small factories to process passion fruit, lime oil, honey, and coconut cream. The sale of postage stamps to foreign collectors is an important source of revenue. The island in recent years has suffered a serious loss of population because of migration of Niueans to New Zealand. Efforts to increase GDP include the promotion of tourism and a financial services industry, although Premier LAKATANI announced in February 2002 that Niue will shut down the offshore banking industry. Economic aid from New Zealand in 2002 was about $2.6 million.
Norfolk Island Norfolk Island Tourism, the primary economic activity, has steadily increased over the years and has brought a level of prosperity unusual among inhabitants of the Pacific islands. The agricultural sector has become self-sufficient in the production of beef, poultry, and eggs. Tourism, the primary economic activity, has steadily increased over the years and has brought a level of prosperity unusual among inhabitants of the Pacific islands. The agricultural sector has become self-sufficient in the production of beef, poultry, and eggs.
Northern Mariana Islands Northern Mariana Islands The economy benefits substantially from financial assistance from the US. The rate of funding has declined as locally generated government revenues have grown. The key tourist industry employs about 50% of the work force and accounts for roughly one-fourth of GDP. Japanese tourists predominate. Annual tourist entries have exceeded one-half million in recent years, but financial difficulties in Japan have caused a temporary slowdown. The agricultural sector is made up of cattle ranches and small farms producing coconuts, breadfruit, tomatoes, and melons. Garment production is by far the most important industry with the employment of 17,500 mostly Chinese workers and sizable shipments to the US under duty and quota exemptions. The economy benefits substantially from financial assistance from the US. The rate of funding has declined as locally generated government revenues have grown. The key tourist industry employs about 50% of the work force and accounts for roughly one-fourth of GDP. Japanese tourists predominate. Annual tourist entries have exceeded one-half million in recent years, but financial difficulties in Japan have caused a temporary slowdown. The agricultural sector is made up of cattle ranches and small farms producing coconuts, breadfruit, tomatoes, and melons. Garment production is by far the most important industry with employment of 17,500 mostly Chinese workers and sizable shipments to the US under duty and quota exemptions.
Norway Norway The Norwegian economy is a prosperous bastion of welfare capitalism, featuring a combination of free market activity and government intervention. The government controls key areas such as the vital petroleum sector (through large-scale state enterprises). The country is richly endowed with natural resources - petroleum, hydropower, fish, forests, and minerals - and is highly dependent on its oil production and international oil prices, with oil and gas accounting for one-third of exports. Only Saudi Arabia and Russia export more oil than Norway. Norway opted to stay out of the EU during a referendum in November 1994; nonetheless, it contributes sizably to the EU budget. The government has moved ahead with privatization. Although Norwegian oil production peaked in 2000, natural gas production is still rising. Norwegians realize that once their gas production peaks they will eventually face declining oil and gas revenues; accordingly, Norway has been saving its oil-and-gas-boosted budget surpluses in a Government Petroleum Fund, which is invested abroad and now is valued at more than $250 billion. After lackluster growth of 1% in 2002 and 0.5% in 2003, GDP growth picked up to 3.3% in 2004 and to 3.7% in 2005. The Norwegian economy is a prosperous bastion of welfare capitalism, featuring a combination of free market activity and government intervention. The government controls key areas, such as the vital petroleum sector (through large-scale state enterprises). The country is richly endowed with natural resources - petroleum, hydropower, fish, forests, and minerals - and is highly dependent on its oil production and international oil prices; in 1999, oil and gas accounted for 35% of exports. Only Saudi Arabia and Russia export more oil than Norway. Norway opted to stay out of the EU during a referendum in November 1994. The government has moved ahead with privatization. With arguably the highest quality of life worldwide, Norwegians still worry about that time in the next two decades when the oil and gas begin to run out. Accordingly, Norway has been saving its oil-boosted budget surpluses in a Government Petroleum Fund, which is invested abroad and now is valued at more than $43 billion. GDP growth was a lackluster 1% in 2002 and 2003 against the background of a faltering European economy.
Oman Oman Oman is a middle-income economy in the Middle East with notable oil and gas resources, a substantial trade surplus, and low inflation. Work on a new liquefied natural gas (LNG) facility progressed in 2005 and will contribute to slightly higher oil and gas exports in 2006. Oman continues to liberalize its markets and joined the World Trade Organization (WTO) in November 2000. To reduce unemployment and limit dependence on foreign labor, the government is encouraging the replacement of foreign expatriate workers with local workers. Training in information technology, business management, and English support this objective. Industrial development plans focus on gas resources, metal manufacturing, petrochemicals, and international transshipment ports. In 2005, Oman signed agreements with several foreign investors to boost oil reserves, build and operate a power plant, and develop a second mobile phone network in the country. Oman's economic performance improved significantly in 2000 due largely to the upturn in oil prices. The government is moving ahead with privatization of its utilities, the development of a body of commercial law to facilitate foreign investment, and increased budgetary outlays. Oman continues to liberalize its markets and joined the World Trade Organization (WTrO) in November 2000. GDP growth improved in 2001 despite the global slowdown and then fell back to 2.2% in 2002. In order to reduce unemployment, the government is trying to replace expatriate workers with local workers. Another government objective is the development of the nation's gas resources.
Pacific Ocean Pacific Ocean The Pacific Ocean is a major contributor to the world economy and particularly to those nations its waters directly touch. It provides low-cost sea transportation between East and West, extensive fishing grounds, offshore oil and gas fields, minerals, and sand and gravel for the construction industry. In 1996, over 60% of the world's fish catch came from the Pacific Ocean. Exploitation of offshore oil and gas reserves is playing an ever-increasing role in the energy supplies of the US, Australia, NZ, China, and Peru. The high cost of recovering offshore oil and gas, combined with the wide swings in world prices for oil since 1985, has led to fluctuations in new drillings. The Pacific Ocean is a major contributor to the world economy and particularly to those nations its waters directly touch. It provides low-cost sea transportation between East and West, extensive fishing grounds, offshore oil and gas fields, minerals, and sand and gravel for the construction industry. In 1996, over 60% of the world's fish catch came from the Pacific Ocean. Exploitation of offshore oil and gas reserves is playing an ever-increasing role in the energy supplies of US, Australia, NZ, China, and Peru. The high cost of recovering offshore oil and gas, combined with the wide swings in world prices for oil since 1985, has slowed but not stopped new drillings.
Pakistan Pakistan Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by generous foreign assistance and renewed access to global markets since 2001, have generated solid macroeconomic recovery the last four years. The government has made substantial macroeconomic reforms since 2000, although progress on more politically sensitive reforms has slowed. For example, in the budget for fiscal year 2006, Islamabad did not impose taxes on the agriculture or real estate sectors, despite Pakistan's chronically low tax-to-GDP ratio. While long-term prospects remain uncertain, given Pakistan's low level of development, medium-term prospects for job creation and poverty reduction are the best in more than a decade. Islamabad has raised development spending from about 2% of GDP in the 1990s to 4% in 2003, a necessary step towards reversing the broad underdevelopment of its social sector. GDP growth, spurred by double-digit gains in industrial production over the past year, has become less dependent on agriculture, and remained above 7% in 2004 and 2005. Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005. The World Bank and Asian Development Bank announced that they would provide US $1 billion each in aid to help Pakistan rebuild areas hit by the October 2005 earthquake in Kashmir. Foreign exchange reserves continued to reach new levels in 2005, supported by steady worker remittances. In the near term, growth probably cannot be sustained at the 7% level; however, massive international aid, increased government spending, lower taxes, and pay increases for government workers will help Pakistan maintain strong GDP growth over the longer term. Pakistan, an impoverished and underdeveloped country, suffers from internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. Pakistan's economic prospects, although still marred by poor human development indicators, continued to improve in 2002 following unprecedented inflows of foreign assistance beginning in 2001. Foreign exchange reserves have grown to record levels, supported largely by fast growth in recorded worker remittances. Trade levels rebounded after a sharp decline in late 2001. The government has made significant inroads in macroeconomic reform since 2000, but progress is beginning to slow. Although it is in the second year of its $1.3 billion IMF Poverty Reduction and Growth Facility, Islamabad continues to require waivers for politically difficult reforms. Long-term prospects remain uncertain as development spending remains low, regional tensions remain high, and political tensions weaken Pakistan's commitment to lender-recommended economic reforms. GDP growth will continue to hinge on crop performance; dependence on foreign oil leaves the import bill vulnerable to fluctuating oil prices; and efforts to open and modernize the economy remain uneven.
Palau Palau The economy consists primarily of tourism, subsistence agriculture, and fishing. The government is the major employer of the work force, relying heavily on financial assistance from the US. Business and tourist arrivals numbered 63,000 in 2003. The population enjoys a per capita income twice that of the Philippines and much of Micronesia. Long-run prospects for the key tourist sector have been greatly bolstered by the expansion of air travel in the Pacific, the rising prosperity of leading East Asian countries, and the willingness of foreigners to finance infrastructure development. The economy consists primarily of tourism, subsistence agriculture and fishing. The government is the major employer of the work force, relying heavily on financial assistance from the US. Business and tourist arrivals numbered 50,000 in FY00/01. The population enjoys a per capita income twice that of the Philippines and much of Micronesia. Long-run prospects for the key tourist sector have been greatly bolstered by the expansion of air travel in the Pacific, the rising prosperity of leading East Asian countries, and the willingness of foreigners to finance infrastructure development.
Palmyra Atoll Palmyra Atoll no economic activity no economic activity
Panama Panama Panama's dollarised economy rests primarily on a well-developed services sector that accounts for three-fourths of GDP. Services include operating the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism. A slump in the Colon Free Zone and agricultural exports, the global slowdown, and the withdrawal of US military forces held back economic growth in 2000-03; growth picked up in 2004 and 2005 led by export-oriented services and a construction boom stimulated by tax incentives. The government has implemented tax reforms, as well as social security reforms, and backs regional trade agreements and development of tourism. Unemployment remains high. Panama's economy is based primarily on a well-developed services sector that accounts for three-fourths of GDP. Services include operating the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism. A slump in Colon Free Zone and agricultural exports, the global slowdown, and the withdrawal of US military forces held back economic growth in 2000-02. The government has been backing public works programs, tax reforms, new regional trade agreements, and development of tourism in order to stimulate growth.
Papua New Guinea Papua New Guinea Papua New Guinea is richly endowed with natural resources, but exploitation has been hampered by rugged terrain and the high cost of developing infrastructure. Agriculture provides a subsistence livelihood for 85% of the population. Mineral deposits, including oil, copper, and gold, account for nearly two-thirds of export earnings. The economy has improved over the past three years because of high commodity prices following a prolonged period of instability. The government of Prime Minister SOMARE has expended much of its energy remaining in power and should be the first government in decades to serve a full five-year term. The government has also brought stability to the national budget thus far, largely through expenditure control. Numerous challenges still face the government including regaining investor confidence, restoring integrity to state institutions, promoting economic efficiency by privatizing moribund state institutions, and balancing relations with Australia, the former colonial ruler. Other socio-cultural challenges include the HIV/Aids epidemic, law and order, and land tenure issues. Australia annually supplies $240 million in aid, which accounts for nearly 20% of the national budget. Papua New Guinea is richly endowed with natural resources, but exploitation has been hampered by rugged terrain and the high cost of developing infrastructure. Agriculture provides a subsistence livelihood for 85% of the population. Mineral deposits, including oil, copper, and gold, account for 72% of export earnings. The economy has faltered over the past three years but will probably improve slightly in 2003. Former Prime Minister Mekere MORAUTA had tried to restore integrity to state institutions, stabilize the kina, restore stability to the national budget, privatize public enterprises where appropriate, and ensure ongoing peace on Bougainville. The government has had considerable success in attracting international support, specifically gaining the backing of the IMF and the World Bank in securing development assistance loans. Significant challenges face Prime Minister Michael SOMARE, including gaining further investor confidence, continuing efforts to privatize government assets, and maintaining the support of members of Parliament.
Paracel Islands Paracel Islands China announced plans in 1997 to open the islands for tourism. China announced plans in 1997 to open the islands for tourism.
Paraguay Paraguay Landlocked Paraguay has a market economy marked by a large informal sector. This sector features both reexport of imported consumer goods to neighboring countries, as well as the activities of thousands of microenterprises and urban street vendors. Because of the importance of the informal sector, accurate economic measures are difficult to obtain. A large percentage of the population derives its living from agricultural activity, often on a subsistence basis. The formal economy grew by an average of about 3% annually in 1995-97, but averaged near-zero growth in 1998-2001 and contracted by 2.3 percent in 2002, in response to regional contagion and an outbreak of hoof-and-mouth disease. On a per capita basis, real income has stagnated at 1980 levels. Most observers attribute Paraguay's poor economic performance to political uncertainty, corruption, lack of progress on structural reform, substantial internal and external debt, and deficient infrastructure. Aided by a firmer exchange rate and perhaps a greater confidence in the economic policy of the DUARTE FRUTOS administration, the economy rebounded between 2003 and 2005, posting modest growth each year. Paraguay has a market economy marked by a large informal sector. The informal sector features both reexport of imported consumer goods to neighboring countries as well as the activities of thousands of microenterprises and urban street vendors. Because of the importance of the informal sector, accurate economic measures are difficult to obtain. A large percentage of the population derives their living from agricultural activity, often on a subsistence basis. The formal economy grew by an average of about 3% annually in 1995-97; but GDP declined slightly in 1998, 1999, and 2000, rose slightly in 2001, only to fall again in 2002. On a per capita basis, real income has stagnated at 1980 levels. Most observers attribute Paraguay's poor economic performance to political uncertainty, corruption, lack of progress on structural reform, substantial internal and external debt, and deficient infrastructure.
Peru Peru Peru's economy reflects its varied geography - an arid coastal region, the Andes further inland, and tropical lands bordering Colombia and Brazil. Abundant mineral resources are found in the mountainous areas, and Peru's coastal waters provide excellent fishing grounds. However, overdependence on minerals and metals subjects the economy to fluctuations in world prices, and a lack of infrastructure deters trade and investment. After several years of inconsistent economic performance, the Peruvian economy grew by more than 4 percent per year during the period 2002-2005, with a stable exchange rate and low inflation. Risk premiums on Peruvian bonds on secondary markets reached historically low levels in late 2004, reflecting investor optimism regarding the government's prudent fiscal policies and openness to trade and investment. Despite the strong macroeconomic performance, the TOLEDO administration remained unpopular in 2005, and unemployment and poverty have stayed persistently high. Economic growth will be driven by the Camisea natural gas megaproject and by exports of minerals, textiles, and agricultural products. Peru is expected to sign a free-trade agreement with the United States in early 2006. Thanks to foreign investment and the cooperation between the government and the IMF and World Bank, growth was strong in 1994-97 and inflation was brought under control. In 1998, El Nino's impact on agriculture, the financial crisis in Asia, and instability in Brazilian markets undercut growth. The following year was again lean year for Peru, with the aftermath of El Nino and the Asian financial crisis working its way through the economy. Political instability resulting from the presidential election and FUJIMORI's subsequent departure from office limited growth in 2000. The downturn in the global economy further curtailed growth in 2001. President TOLEDO, who assumed the presidency in July 2001, has been working to reinvigorate the economy and reduce unemployment. Economic growth in 2002 is estimated at 4.8%, led by construction in the retail and gas sectors.
Philippines Philippines The Philippines was less severely affected by the Asian financial crisis of 1998 than its neighbors, aided in part by its high level of annual remittances from overseas workers, and no sustained runup in asset prices or foreign borrowing prior to the crisis. From a 0.6% decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in 2000, but slowed to 3.2% in 2001 in the context of a global economic slowdown, an export slump, and political and security concerns. GDP growth accelerated to about 5% between 2002 and 2005 reflecting the continued resilience of the service sector, and improved exports and agricultural output. Nonetheless, it will take a higher, sustained growth path to make appreciable progress in the alleviation of poverty given the Philippines' high annual population growth rate and unequal distribution of income. The Philippines also faces higher oil prices, higher interest rates on its dollar borrowings, and higher inflation. Fiscal constraints limit Manila's ability to finance infrastructure and social spending. The Philippines' consistently large budget deficit has produced a high debt level, and this situation has forced Manila to spend a large portion of the national government budget on debt service. Large unprofitable public enterprises, especially in the energy sector, contribute to the government's debt because of slow progress on privatization. Credit rating agencies have at times expressed concern about the Philippines' ability to service the debt, though central bank reserves appear adequate and large remittance inflows appear stable. The implementation of the expanded Value Added Tax (VAT) in November 2005 boosted confidence in the government's fiscal capacity and helped to strengthen the peso, which gained 5.7 percent year-on-year, making it East Asia's best performing currency in 2005. Investors and credit rating institutions will continue to look for effective implementation of the new VAT and continued improvement in the government's overall fiscal capacity in the coming year. In 1998, the Philippine economy - a mixture of agriculture, light industry, and supporting services - deteriorated as a result of spillover from the Asian financial crisis and poor weather conditions. Growth fell to 0.6% in 1998 from 5% in 1997, but recovered to about 3.3% in 1999, 4.5% in 2000, and 4.5% in 2001. In 2002, the Philippines recorded GDP growth of 4.4% but also incurred a record budget deficit. As a result, the Philippines is burdened with a public sector debt equal to more than 100% of GDP. Growth eased to 3.8% in 2003. The government has promised economic reforms including going forward with privatization, reforming the tax system, and promoting additional trade integration within its region. Considerable drive is required to update the educational system and the road network.
Pitcairn Islands Pitcairn Islands The inhabitants of this tiny isolated economy exist on fishing, subsistence farming, handicrafts, and postage stamps. The fertile soil of the valleys produces a wide variety of fruits and vegetables, including citrus, sugarcane, watermelons, bananas, yams, and beans. Bartering is an important part of the economy. The major sources of revenue are the sale of postage stamps to collectors and the sale of handicrafts to passing ships. In October 2004, more than one-quarter of Pitcairn's small labor force was arrested, putting the economy in a bind, since their services were required as lighter crew to load or unload passing ships. The inhabitants of this tiny isolated economy exist on fishing, subsistence farming, handicrafts, and postage stamps. The fertile soil of the valleys produces a wide variety of fruits and vegetables, including citrus, sugarcane, watermelons, bananas, yams, and beans. Bartering is an important part of the economy. The major sources of revenue are the sale of postage stamps to collectors and the sale of handicrafts to passing ships.
Poland Poland Poland has steadfastly pursued a policy of economic liberalization throughout the 1990s and today stands out as a success story among transition economies. Even so, much remains to be done, especially in bringing down the unemployment rate - currently the highest in the EU. The privatization of small- and medium-sized state-owned companies and a liberal law on establishing new firms has encouraged the development of the private business sector, but legal and bureaucratic obstacles alongside persistent corruption are hampering its further development. Poland's agricultural sector remains handicapped by surplus labor, inefficient small farms, and lack of investment. Restructuring and privatization of "sensitive sectors" (e.g., coal, steel, railroads, and energy), while recently initiated, have stalled. Reforms in health care, education, the pension system, and state administration have resulted in larger-than-expected fiscal pressures. Further progress in public finance depends mainly on reducing losses in Polish state enterprises, restraining entitlements, and overhauling the tax code to incorporate the growing gray economy and farmers, most of whom pay no tax. The previous Socialist-led government introduced a package of social and administrative spending cuts to reduce public spending by about $17 billion through 2007, but full implementation of the plan was trumped by election-year politics in 2005. The right-wing Law and Justice party won parliamentary elections in September, and Lech KACZYNSKI won the presidential election in October 2005, running on a state-interventionist fiscal and monetary platform. Poland joined the EU in May 2004, and surging exports to the EU contributed to Poland's strong growth in 2004, though its competitiveness could be threatened by the zloty's appreciation. GDP per capita roughly equals that of the three Baltic states. Poland stands to benefit from nearly $23.2 billion in EU funds, available through 2006. Farmers have already begun to reap the rewards of membership via booming exports, higher food prices, and EU agricultural subsidies. Poland has steadfastly pursued a policy of economic liberalization throughout the 1990s and today stands out as a success story among transition economies. Even so, much remains to be done. The privatization of small and medium state-owned companies and a liberal law on establishing new firms has encouraged the development of the private business sector, but legal and bureaucratic obstacles alongside persistent corruption are hampering its further development. Poland's agricultural sector remains handicapped by structural problems, surplus labor, inefficient small farms, and lack of investment. Restructuring and privatization of "sensitive sectors" (e.g., coal, steel, railroads, and energy), while recently initiated, have stalled due to a lack of political will on the part of the government. Structural reforms in health care, education, the pension system, and state administration have resulted in larger than expected fiscal pressures. Further progress in public finance depends mainly on privatization of Poland's remaining state sector, the reduction of state employment, and an overhaul of the tax code to incorporate the growing gray economy and farmers most of whom pay no tax. The government's determination to enter the EU has shaped most aspects of its economic policy and new legislation; in June 2003, 77% of the voters approved membership, now scheduled for May 2004. Improving Poland's export competitiveness and containing the internal budget deficit are top priorities. Due to political uncertainty, the zloty has recently depreciated in relation to the euro and the dollar while currencies of the other euro-zone aspirants have been appreciating. GDP per capita equals that of the 3 Baltic states.
Portugal Portugal Portugal has become a diversified and increasingly service-based economy since joining the European Community in 1986. Over the past decade, successive governments have privatized many state-controlled firms and liberalized key areas of the economy, including the financial and telecommunications sectors. The country qualified for the European Monetary Union (EMU) in 1998 and began circulating the euro on 1 January 2002 along with 11 other EU member economies. Economic growth had been above the EU average for much of the past decade, but fell back in 2001-05. GDP per capita stands at two-thirds that of the Big Four EU economies. A poor educational system, in particular, has been an obstacle to greater productivity and growth. Portugal has been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a target for foreign direct investment. The government faces tough choices in its attempts to boost Portugal's economic competitiveness while keeping the budget deficit within the eurozone's 3%-of-GDP ceiling. Portugal has become a diversified and increasingly service-based economy since joining the European Community in 1986. Over the past decade, successive governments have privatized many state-controlled firms and liberalized key areas of the economy, including the financial and telecommunications sectors. The country qualified for the European Monetary Union (EMU) in 1998 and began circulating the euro on 1 January 2002 along with 11 other EU member economies. Economic growth has been above the EU average for much of the past decade, but fell back in 2001-03. GDP per capita stands at 70% of that of the leading EU economies. A poor educational system, in particular, has been an obstacle to greater productivity and growth. Portugal has been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a target for foreign direct investment. The coalition government faces tough choices in its attempts to boost Portugal's economic competitiveness and to keep the budget deficit within the 3% EU ceiling.
Puerto Rico Puerto Rico Puerto Rico has one of the most dynamic economies in the Caribbean region. A diverse industrial sector has far surpassed agriculture as the primary locus of economic activity and income. Encouraged by duty-free access to the US and by tax incentives, US firms have invested heavily in Puerto Rico since the 1950s. US minimum wage laws apply. Sugar production has lost out to dairy production and other livestock products as the main source of income in the agricultural sector. Tourism has traditionally been an important source of income, with estimated arrivals of nearly 5 million tourists in 2004. Growth fell off in 2001-03, largely due to the slowdown in the US economy, and has recovered in 2004-2005. Puerto Rico has one of the most dynamic economies in the Caribbean region. A diverse industrial sector has far surpassed agriculture as the primary locus of economic activity and income. Encouraged by duty-free access to the US and by tax incentives, US firms have invested heavily in Puerto Rico since the 1950s. US minimum wage laws apply. Sugar production has lost out to dairy production and other livestock products as the main source of income in the agricultural sector. Tourism has traditionally been an important source of income, with estimated arrivals of nearly 5 million tourists in 1999. Growth fell off in 2001-02, largely due to the slowdown in the US economy.
Qatar Qatar Oil and gas account for more than 60% of GDP, roughly 85% of export earnings, and 70% of government revenues. Oil and gas have given Qatar a per capita GDP about 80% of that of the leading West European industrial countries. Proved oil reserves of 16 billion barrels should ensure continued output at current levels for 23 years. Qatar's proved reserves of natural gas exceed 25 trillion cubic meters, more than 5% of the world total and third largest in the world. Qatar has permitted substantial foreign investment in the development of its gas fields during the last decade and is expected to become the world's top liquefied natural gas (LNG) exporter by 2007. In recent years, Qatar has consistently posted trade surpluses largely because of high oil prices and increased natural gas exports, becoming one of the world's fastest growing and highest per-capita income countries. Oil and gas account for more than 55% of GDP, roughly 85% of export earnings, and 70% of government revenues. Oil and gas have given Qatar a per capita GDP comparable to that of the leading West European industrial countries. Proved oil reserves of 14.5 billion barrels should ensure continued output at current levels for 23 years. Production and export of natural gas are becoming increasingly important to the economy. Qatar's proved reserves of natural gas exceed 17.9 trillion cubic meters, more than 5% of the world total and third largest in the world. Long-term goals feature the development of offshore natural gas reserves. Since 2000, Qatar has consistently posted trade surpluses largely because of high oil prices and increased natural gas exports, and Qatar's economy is expected to receive an added boost as it begins to increase liquid natural gas exports.
Reunion Reunion The economy has traditionally been based on agriculture, but services now dominate. Sugarcane has been the primary crop for more than a century, and in some years it accounts for 85% of exports. The government has been pushing the development of a tourist industry to relieve high unemployment, which amounts to one-third of the labor force. The gap in Reunion between the well-off and the poor is extraordinary and accounts for the persistent social tensions. The white and Indian communities are substantially better off than other segments of the population, often approaching European standards, whereas minority groups suffer the poverty and unemployment typical of the poorer nations of the African continent. The outbreak of severe rioting in February 1991 illustrated the seriousness of socioeconomic tensions. The economic well-being of Reunion depends heavily on continued financial assistance from France. The economy has traditionally been based on agriculture, but services now dominate. Sugarcane has been the primary crop for more than a century, and in some years it accounts for 85% of exports. The government has been pushing the development of a tourist industry to relieve high unemployment, which amounts to one-third of the labor force. The gap in Reunion between the well-off and the poor is extraordinary and accounts for the persistent social tensions. The white and Indian communities are substantially better off than other segments of the population, often approaching European standards, whereas minority groups suffer the poverty and unemployment typical of the poorer nations of the African continent. The outbreak of severe rioting in February 1991 illustrates the seriousness of socioeconomic tensions. The economic well-being of Reunion depends heavily on continued financial assistance from France.
Romania Romania Romania began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. Despite the global slowdown in 2001-02, strong domestic activity in construction, agriculture, and consumption have kept GDP growth above 4%. An IMF standby agreement, signed in 2001, has been accompanied by slow but palpable gains in privatization, deficit reduction, and the curbing of inflation. The IMF Board approved Romania's completion of the standby agreement in October 2003, the first time Romania has successfully concluded an IMF agreement since the 1989 revolution. In July 2004, the executive board of the IMF approved a 24-month standby agreement for $367 million. IMF concerns about Romania's tax policy and budget deficit led to a breakdown of this agreement in 2005. In the past, the IMF has criticized the government's fiscal, wage, and monetary policies. Meanwhile, macroeconomic gains have only recently started to spur creation of a middle class and address Romania's widespread poverty, while corruption and red tape continue to handicap the business environment. Romanian government confidence in continuing disinflation was underscored by its currency revaluation in 2005, making 10,000 "old" lei equal 1 "new" leu. Romania began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. Despite the global slowdown in 2001-02, strong domestic activity in construction, agriculture, and consumption have kept growth above 4%. An IMF Standby Agreement, signed in 2001, has been accompanied by slow but palpable gains in privatization, deficit reduction, and the curbing of inflation. Nonetheless, recent macroeconomic gains have done little to address Romania's widespread poverty, while corruption and red tape hinder foreign investment.
Russia Russia Russia ended 2005 with its seventh straight year of growth, averaging 6.4% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% over the last five years, and real personal incomes have realized average increases over 12%. During this time, poverty has declined steadily and the middle class has continued to expand. Russia has also improved its international financial position since the 1998 financial crisis, with its foreign debt declining from 90% of GDP to around 31%. Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some $180 billion at yearend 2005. These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia's economic prospects. Nevertheless, serious problems persist. Economic growth slowed to 5.9% for 2005 while inflation remains high. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, and widespread lack of trust in institutions. In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003 and the acquisition of the company by a state owned firm, have raised concerns by some observers that President PUTIN is granting more influence to forces within his government that desire to reassert state control over the economy. State control has increased in the past year with a number of large acquisitions. Most fundamentally, Russia has made little progress in building the rule of law, the bedrock of a modern market economy. A decade after the implosion of the Soviet Union in December 1991, Russia is still struggling to establish a modern market economy and achieve strong economic growth. In contrast to its trading partners in Central Europe - which were able within 3 to 5 years to overcome the initial production declines that accompanied the launch of market reforms - Russia saw its economy contract for five years, as the executive and legislature dithered over the implementation of many of the basic foundations of a market economy. Russia achieved a slight recovery in 1997, but the government's stubborn budget deficits and the country's poor business climate made it vulnerable when the global financial crisis swept through in 1998. The crisis culminated in the August depreciation of the ruble, a debt default by the government, and a sharp deterioration in living standards for most of the population. The economy subsequently has rebounded, growing by an average of more than 6% annually in 1999-2002 on the back of higher oil prices and the 60% depreciation of the ruble in 1998. These GDP numbers, along with a renewed government effort to advance lagging structural reforms, have raised business and investor confidence over Russia's prospects in its second decade of transition. Yet serious problems persist. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to maintain vigorous economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread lack of trust in institutions. In 2003 President PUTIN further tightened his control over the "oligarchs," especially in the realm of political expression.
Rwanda Rwanda Rwanda is a poor rural country with about 90% of the population engaged in (mainly subsistence) agriculture. It is the most densely populated country in Africa and is landlocked with few natural resources and minimal industry. Primary foreign exchange earners are coffee and tea. The 1994 genocide decimated Rwanda's fragile economic base, severely impoverished the population, particularly women, and eroded the country's ability to attract private and external investment. However, Rwanda has made substantial progress in stabilizing and rehabilitating its economy to pre-1994 levels, although poverty levels are higher now. GDP has rebounded and inflation has been curbed. Despite Rwanda's fertile ecosystem, food production often does not keep pace with population growth, requiring food imports. Rwanda continues to receive substantial aid money and obtained IMF-World Bank Heavily Indebted Poor Country (HIPC) initiative debt relief in 2005. Kigali's high defense expenditures have caused tension between the government and international donors and lending agencies. An energy shortage and instability in neighboring states may slow growth in 2006, while the lack of adequate transportation linkages to other countries continues to handicap export growth. Rwanda is a poor rural country with about 90% of the population engaged in (mainly subsistence) agriculture. It is the most densely populated country in Africa; landlocked with few natural resources and minimal industry. Primary foreign exchange earners are coffee and tea. The 1994 genocide decimated Rwanda's fragile economic base, severely impoverished the population, particularly women, and eroded the country's ability to attract private and external investment. However, Rwanda has made substantial progress in stabilizing and rehabilitating its economy to pre-1994 levels, although poverty levels are higher now. GDP has rebounded, and inflation has been curbed. Export earnings, however, have been hindered by low beverage prices, depriving the country of much needed hard currency. Attempts to diversify into non-traditional agriculture exports such as flowers and vegetables have been stymied by a lack of adequate transportation infrastructure. Despite Rwanda's fertile ecosystem, food production often does not keep pace with population growth, requiring food to be imported. Rwanda continues to receive substantial amounts of aid money and was approved for IMF-World Bank Heavily Indebted Poor Country (HIPC) initiative debt relief in late 2000. But Kigali's high defense expenditures cause tension between the government and international donors and lending agencies.
Saint Helena Saint Helena The economy depends largely on financial assistance from the UK, which amounted to about $5 million in 1997 or almost one-half of annual budgetary revenues. The local population earns income from fishing, raising livestock, and sales of handicrafts. Because there are few jobs, 25% of the work force has left to seek employment on Ascension Island, on the Falklands, and in the UK. The economy depends largely on financial assistance from the UK, which amounted to about $5 million in 1997 or almost one-half of annual budgetary revenues. The local population earns income from fishing, the raising of livestock, and sales of handicrafts. Because there are few jobs, 25% of the work force has left to seek employment on Ascension Island, on the Falklands, and in the UK.
Saint Kitts and Nevis Saint Kitts and Nevis Sugar was the traditional mainstay of the Saint Kitts economy until the 1970s. Although the crop still dominates the agricultural sector, activities such as tourism, export-oriented manufacturing, and offshore banking have assumed larger roles in the economy. Tourism revenues are now the chief source of the islands' foreign exchange; about 40,000 tourist visited Nevis during the 2003-2004 season. Additional tourist facilities, including a second cruise ship pier, hotels, and golf courses are under construction. Sugar was the traditional mainstay of the Saint Kitts economy until the 1970s. Although the crop still dominates the agricultural sector, activities such as tourism, export-oriented manufacturing, and offshore banking have assumed larger roles in the economy. As tourism revenues are now the chief source of the islands' foreign exchange, a decline in stopover tourist arrivals following the September 11, 2001 terrorist attacks has eroded government finances. The opening of a 1,000+ bed Marriott hotel in February 2003 is expected to bring in much-needed revenue.
Saint Lucia Saint Lucia Changes in the EU import preference regime and the increased competition from Latin American bananas have made economic diversification increasingly important in Saint Lucia. The island nation has been able to attract foreign business and investment, especially in its offshore banking and tourism industries. The manufacturing sector is the most diverse in the Eastern Caribbean area, and the government is trying to revitalize the banana industry. Economic fundamentals remain solid, even though unemployment needs to be cut. The recent changes in the EU import preference regime and the increased competition from Latin American bananas have made economic diversification increasingly important in Saint Lucia. The island nation has been able to attract foreign business and investment, especially in its offshore banking and tourism industries. The manufacturing sector is the most diverse in the Eastern Caribbean area, and the government is trying to revitalize the banana industry. Economic fundamentals remain solid.
Saint Pierre and Miquelon Saint Pierre and Miquelon The inhabitants have traditionally earned their livelihood by fishing and by servicing fishing fleets operating off the coast of Newfoundland. The economy has been declining, however, because of disputes with Canada over fishing quotas and a steady decline in the number of ships stopping at Saint Pierre. In 1992, an arbitration panel awarded the islands an exclusive economic zone of 12,348 sq km to settle a longstanding territorial dispute with Canada, although it represents only 25% of what France had sought. The islands are heavily subsidized by France to the great betterment of living standards. The government hopes an expansion of tourism will boost economic prospects. Recent test drilling for oil may pave the way for development of the energy sector. The inhabitants have traditionally earned their livelihood by fishing and by servicing fishing fleets operating off the coast of Newfoundland. The economy has been declining, however, because of disputes with Canada over fishing quotas and a steady decline in the number of ships stopping at Saint Pierre. In 1992, an arbitration panel awarded the islands an exclusive economic zone of 12,348 sq km to settle a longstanding territorial dispute with Canada, although it represents only 25% of what France had sought. The islands are heavily subsidized by France to the great betterment of living standards. The government hopes an expansion of tourism will boost economic prospects. Recent test drilling for oil may pave the way for development of the energy sector.
Saint Vincent and the Grenadines Saint Vincent and the Grenadines Economic growth in this lower-middle-income country hinges upon seasonal variations in the agricultural and tourism sectors. Tropical storms wiped out substantial portions of crops in 1994, 1995, and 2002, and tourism in the Eastern Caribbean has suffered low arrivals following 11 September 2001. Saint Vincent is home to a small offshore banking sector and has moved to adopt international regulatory standards. Saint Vincent is also a producer of marijuana and is being used as a transshipment point for illegal narcotics from South America. Bananas and other agricultural products remain the staple of this lower-middle income country's economy. Although tourism and other services have been growing moderately in recent years, the government has been ineffective at introducing new industries. Unemployment remains high, and economic growth hinges upon seasonal variations in the agricultural and tourism sectors. Tropical storms wiped out substantial portions of crops in 1994, 1995, and 2002, and tourism in the Eastern Caribbean has suffered low arrivals following 11 September 2001. Saint Vincent is home to a small offshore banking sector, but its restrictive secrecy laws have come under international review. As of June 2001, it remained on the Financial Action Task Force's list of noncooperative jurisdictions. Saint Vincent is also the largest producer of marijuana in the Eastern Caribbean and is increasingly being used as a transshipment point for illegal narcotics from South America.
Samoa Samoa The economy of Samoa has traditionally been dependent on development aid, family remittances from overseas, agriculture, and fishing. The country is vulnerable to devastating storms. Agriculture employs two-thirds of the labor force, and furnishes 90% of exports, featuring coconut cream, coconut oil, and copra. The manufacturing sector mainly processes agricultural products. The decline of fish stocks in the area is a continuing problem. Tourism is an expanding sector, accounting for 25% of GDP; about 88,000 tourists visited the islands in 2001. One factory in the Foreign Trade Zone employs 3,000 people to make automobile electrical harnesses for an assembly plant in Australia. The Samoan Government has called for deregulation of the financial sector, encouragement of investment, and continued fiscal discipline, while at the same time protecting the environment. Observers point to the flexibility of the labor market as a basic strength for future economic advances. Foreign reserves are in a relatively healthy state, the external debt is stable, and inflation is low. The economy of Samoa has traditionally been dependent on development aid, family remittances from overseas, and agriculture and fishing. The country is vulnerable to devastating storms. Agriculture employs two-thirds of the labor force, and furnishes 90% of exports, featuring coconut cream, coconut oil, and copra. The manufacturing sector mainly processes agricultural products. The decline of fish stocks in the area is a continuing problem. Tourism is an expanding sector, accounting for 25% of GDP; about 88,000 tourists visited the islands in 2001. The Samoan Government has called for deregulation of the financial sector, encouragement of investment, and continued fiscal discipline, meantime protecting the environment. Observers point to the flexibility of the labor market as a basic strength for future economic advances. Foreign reserves are in a relatively healthy state, the external debt is stable, and inflation is low.
San Marino San Marino The tourist sector contributes over 50% of GDP. In 2000 more than 3 million tourists visited San Marino. The key industries are banking, wearing apparel, electronics, and ceramics. Main agricultural products are wine and cheeses. The per capita level of output and standard of living are comparable to those of the most prosperous regions of Italy, which supplies much of its food. The tourist sector contributes over 50% of GDP. In 2000 more than 3 million tourists visited San Marino. The key industries are banking, wearing apparel, electronics, and ceramics. Main agricultural products are wine and cheeses. The per capita level of output and standard of living are comparable to those of the most prosperous regions of Italy, which supplies much of its food.
Sao Tome and Principe Sao Tome and Principe This small, poor island economy has become increasingly dependent on cocoa since independence in 1975. Cocoa production has substantially declined in recent years because of drought and mismanagement, but strengthening prices helped boost export earnings in 2003. Sao Tome has to import all fuels, most manufactured goods, consumer goods, and a substantial amount of food. Over the years, it has had difficulty servicing its external debt and has relied heavily on concessional aid and debt rescheduling. Sao Tome benefited from $200 million in debt relief in December 2000 under the Highly Indebted Poor Countries (HIPC) program, and is expected to benefit from an additional round of HIPC debt relief in early 2006, to help bring down the country's $300 million debt burden. In August 2005, Sao Tome signed on to a new 3-year IMF Poverty Reduction and Growth Facility (PRGF) program worth $4.3 million. Considerable potential exists for development of a tourist industry, and the government has taken steps to expand facilities in recent years. The government also has attempted to reduce price controls and subsidies. Sao Tome is optimistic about the development of petroleum resources in its territorial waters in the oil-rich Gulf of Guinea, which are being jointly developed in a 60-40 split with Nigeria. The first production licenses were sold in 2004, though a dispute over licensing with Nigeria delayed Sao Tome's receipt of more than $20 million in signing bonuses for almost a year. Real GDP growth reached 6% in 2004, and also probably in 2005, as a result of increases in public expenditures and oil-related capital investment. This small poor island economy has become increasingly dependent on cocoa since independence 28 years ago. Cocoa production has substantially declined in recent years because of drought and mismanagement, but strengthening prices brighten prospects for 2003. Sao Tome has to import all fuels, most manufactured goods, consumer goods, and a substantial amount of food. Over the years, it has been unable to service its external debt and has had to depend on concessional aid and debt rescheduling. Sao Tome benefited from $200 million in debt relief in December 2000 under the Highly Indebted Poor Countries (HIPC) program. Sao Tome's success in implementing structural reforms has been rewarded by international donors, who pledged increased assistance in 2001. Considerable potential exists for development of a tourist industry, and the government has taken steps to expand facilities in recent years. The government also has attempted to reduce price controls and subsidies. Sao Tome is optimistic that substantial petroleum discoveries are forthcoming in its territorial waters in the oil-rich waters of the Gulf of Guinea; production could begin as early as 2004.
Saudi Arabia Saudi Arabia This is an oil-based economy with strong government controls over major economic activities. Saudi Arabia possesses 25% of the world's proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 75% of budget revenues, 45% of GDP, and 90% of export earnings. About 40% of GDP comes from the private sector. Roughly 5.5 million foreign workers play an important role in the Saudi economy, particularly, in the oil and service sectors. The government is encouraging private sector growth to lessen the kingdom's dependence on oil and increase employment opportunities for the swelling Saudi population. The government has begun to permit private sector and foreign investor participation in the power generation and telecom sectors. As part of its effort to attract foreign investment and diversify the economy, Saudi Arabia acceded to the WTO in 2005 after many years of negotiations. With high oil revenues enabling the government to post large budget surpluses, Riyadh has been able to substantially boost spending on job training and education, infrastructure development, and government salaries. This is an oil-based economy with strong government controls over major economic activities. Saudi Arabia has the largest reserves of petroleum in the world (26% of the proved reserves), ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 75% of budget revenues, 45% of GDP, and 90% of export earnings. About 25% of GDP comes from the private sector. Roughly 4 million foreign workers play an important role in the Saudi economy, for example, in the oil and service sectors. The government in 1999 announced plans to begin privatizing the electricity companies, which follows the ongoing privatization of the telecommunications company. The government is supporting private sector growth to lessen the kingdom's dependence on oil and increase employment opportunities for the swelling Saudi population. Priorities for government spending in the short term include additional funds for the water and sewage systems and for education. Water shortages and rapid population growth constrain the government's efforts to increase self-sufficiency in agricultural products.
Senegal Senegal In January 1994, Senegal undertook a bold and ambitious economic reform program with the support of the international donor community. This reform began with a 50% devaluation of Senegal's currency, the CFA franc, which was linked at a fixed rate to the French franc. Government price controls and subsidies have been steadily dismantled. After seeing its economy contract by 2.1% in 1993, Senegal made an important turnaround, thanks to the reform program, with real growth in GDP averaging over 5% annually during 1995-2004. Annual inflation had been pushed down to the low single digits. As a member of the West African Economic and Monetary Union (WAEMU), Senegal is working toward greater regional integration with a unified external tariff and a more stable monetary policy. However, Senegal still relies heavily upon outside donor assistance. Under the IMF's Highly Indebted Poor Countries (HIPC) debt relief program, Senegal will benefit from eradication of two-thirds of its bilateral, multilateral, and private-sector debt. In January 1994, Senegal undertook a bold and ambitious economic reform program with the support of the international donor community. This reform began with a 50% devaluation of Senegal's currency, the CFA franc, which was linked at a fixed rate to the French franc. Government price controls and subsidies have been steadily dismantled. After seeing its economy contract by 2.1% in 1993, Senegal made an important turnaround, thanks to the reform program, with real growth in GDP averaging 5% annually during 1995-2002. Annual inflation had been pushed down to less than 1%, but rose to an estimated 3.3% in 2001 and 3.0% in 2002. Investment rose steadily from 13.8% of GDP in 1993 to 16.5% in 1997. As a member of the West African Economic and Monetary Union (WAEMU), Senegal is working toward greater regional integration with a unified external tariff. Senegal also realized full Internet connectivity in 1996, creating a miniboom in information technology-based services. Private activity now accounts for 82% of GDP. In 2003, GDP will probably again grow at about 5%. On the negative side, Senegal faces deep-seated urban problems of chronic unemployment, trade union militancy, juvenile delinquency, and drug addiction.
Serbia Serbia MILOSEVIC-era mismanagement of the economy, an extended period of economic sanctions, and the damage to Yugoslavia's infrastructure and industry during the NATO airstrikes in 1999 left the economy only half the size it was in 1990. After the ousting of former Federal Yugoslav President MILOSEVIC in October 2000, the Democratic Opposition of Serbia (DOS) coalition government implemented stabilization measures and embarked on a market reform program. After renewing its membership in the IMF in December 2000, a down-sized Yugoslavia continued to reintegrate into the international community by rejoining the World Bank (IBRD) and the European Bank for Reconstruction and Development (EBRD). A World Bank-European Commission sponsored Donors' Conference held in June 2001 raised $1.3 billion for economic restructuring. In November 2001, the Paris Club agreed to reschedule the country's $4.5 billion public debt and wrote off 66% of the debt. In July 2004, the London Club of private creditors forgave $1.7 billion of debt, just over half the total owed. Belgrade has made only minimal progress in restructuring and privatizing its holdings in major sectors of the economy, including energy and telecommunications. It has made halting progress towards EU membership and is currently pursuing a Stabilization and Association Agreement with Brussels. Serbia is also pursuing membership in the World Trade Organization. Unemployment remains an ongoing political and economic problem. The Republic of Montenegro severed its economy from Serbia during the MILOSEVIC era; therefore, the formal separation of Serbia and Montenegro in June 2006 had little real impact on either economy. Kosovo's economy continues to transition to a market-based system and is largely dependent on the international community and the diaspora for financial and technical assistance. The euro and the Yugoslav dinar are both accepted currencies in Kosovo. While maintaining ultimate oversight, UNMIK continues to work with the EU and Kosovo's local provisional government to accelerate economic growth, lower unemployment, and attract foreign investment to help Kosovo integrate into regional economic structures. The complexity of Serbia and Kosovo's political and legal relationships has created uncertainty over property rights and hindered the privatization of state-owned assets in Kosovo. Most of Kosovo's population lives in rural towns outside of the largest city, Pristina. Inefficient, near-subsistence farming is common.


note: economic data for Serbia currently reflects information for the former Serbia and Montenegro, unless otherwise noted; data for Serbia alone will be added when available
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Serbia and Montenegro Serbia and Montenegro - MILOSEVIC-era mismanagement of the economy, an extended period of economic sanctions, and the damage to Yugoslavia's infrastructure and industry during the war in Kosovo have left the economy only half the size it was in 1990. Since the ousting of former Federal Yugoslav President MILOSEVIC in October 2000, the Democratic Opposition of Serbia (DOS) coalition government has implemented stabilization measures and embarked on an aggressive market reform program. After renewing its membership in the IMF in December 2000, Yugoslavia continued to reintegrate into the international community by rejoining the World Bank (IBRD) and the European Bank for Reconstruction and Development (EBRD). A World Bank-European Commission sponsored Donors' Conference held in June 2001 raised $1.3 billion for economic restructuring. An agreement rescheduling the country's $4.5 billion Paris Club government debts was concluded in November 2001; it will write off 66% of the debt; a similar debt relief agreement on its $2.8 billion London Club commercial debt is still pending. The smaller republic of Montenegro severed its economy from federal control and from Serbia during the MILOSEVIC era and continues to maintain its own central bank, uses the euro instead of the Yugoslav dinar as official currency, collects customs tariffs, and manages its own budget. Kosovo, while technically still part of the Federal Republic of Yugoslavia (now Serbia and Montenegro) according to United Nations Security Council Resolution 1244, is moving toward local autonomy under United Nations Interim Administration Mission in Kosovo (UNMIK) and is dependent on the international community for financial and technical assistance. The euro and the Yugoslav dinar are official currencies, and UNMIK collects taxes and manages the budget. The complexity of Serbia and Montenegro political relationships, slow progress in privatization, and stagnation in the European economy are holding back the economy. Arrangements with the IMF, especially requirements for fiscal discipline, are an important element in policy formation. Severe unemployment remains a key political economic problem.
Seychelles Seychelles Since independence in 1976, per capita output in this Indian Ocean archipelago has expanded to roughly seven times the old near-subsistence level. Growth has been led by the tourist sector, which employs about 30% of the labor force and provides more than 70% of hard currency earnings, and by tuna fishing. In recent years the government has encouraged foreign investment in order to upgrade hotels and other services. At the same time, the government has moved to reduce the dependence on tourism by promoting the development of farming, fishing, and small-scale manufacturing. Sharp drops illustrated the vulnerability of the tourist sector in 1991-92 due largely to the Gulf War, and once again following the 11 September 2001 terrorist attacks on the US. Growth slowed in 1998-2002, and fell in 2003, due to sluggish tourist and tuna sectors, but resumed in 2004, erasing a persistent budget deficit. Growth turned negative again in 2005. Tight controls on exchange rates and the scarcity of foreign exchange have impaired short-term economic prospects. The black-market value of the Seychelles rupee is half the official exchange rate; without a devaluation of the currency, the tourist sector may remain sluggish as vacationers seek cheaper destinations such as Comoros, Mauritius, and Madagascar. Since independence in 1976, per capita output in this Indian Ocean archipelago has expanded to roughly seven times the old near-subsistence level. Growth has been led by the tourist sector, which employs about 30% of the labor force and provides more than 70% of hard currency earnings, and by tuna fishing. In recent years the government has encouraged foreign investment in order to upgrade hotels and other services. At the same time, the government has moved to reduce the dependence on tourism by promoting the development of farming, fishing, and small-scale manufacturing. A sharp drop illustrated the vulnerability of the tourist sector in 1991-92 due largely to the Gulf war, and once again following the 11 September 2001 terrorist attacks on the US. Other issues facing the government are the curbing of the budget deficit, including the containment of social welfare costs, and further privatization of public enterprises. Growth slowed in 1998-2002, due to sluggish tourist and tuna sectors. Also, tight controls on exchange rates and the scarcity of foreign exchange have impaired short-term economic prospects. The black market value of the Seychelles rupee is half the official exchange rate; without a devaluation of the currency the tourist sector should remain sluggish as vacationers seek cheaper destinations such as Comoros, Mauritius, and Madagascar.
Sierra Leone Sierra Leone Sierra Leone is an extremely poor African nation with tremendous inequality in income distribution. While it possesses substantial mineral, agricultural, and fishery resources, its economic and social infrastructure is not well developed, and serious social disorders continue to hamper economic development. About two-thirds of the working-age population engages in subsistence agriculture. Manufacturing consists mainly of the processing of raw materials and of light manufacturing for the domestic market. Alluvial diamond mining remains the major source of hard currency earnings, accounting for nearly half of Sierra Leone's exports. The fate of the economy depends upon the maintenance of domestic peace and the continued receipt of substantial aid from abroad, which is essential to offset the severe trade imbalance and supplement government revenues. The IMF has completed a Poverty Reduction and Growth Facility program that helped stabilize economic growth and reduce inflation. A recent increase in political stability has led to a revival of economic activity, such as the rehabilitation of bauxite mining. Sierra Leone is an extremely poor African nation with tremendous inequality in income distribution. It does have substantial mineral, agricultural, and fishery resources. However, the economic and social infrastructure is not well developed, and serious social disorders continue to hamper economic development, following a 11-year civil war. About two-thirds of the working-age population engages in subsistence agriculture. Manufacturing consists mainly of the processing of raw materials and of light manufacturing for the domestic market. Plans continue to reopen bauxite and rutile mines shut down during the conflict. The major source of hard currency consists of the mining of diamonds. The fate of the economy depends upon the maintenance of domestic peace and the continued receipt of substantial aid from abroad, which is essential to offset the severe trade imbalance and to supplement government revenues.
Singapore Singapore Singapore, a highly-developed and successful free-market economy, enjoys a remarkably open and corruption-free environment, stable prices, and a per capita GDP equal to that of the four largest West European countries. The economy depends heavily on exports, particularly in electronics and manufacturing. It was hard hit in 2001-03 by the global recession, by the slump in the technology sector, and by an outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, which curbed tourism and consumer spending. The government hopes to establish a new growth path that will be less vulnerable to the external business cycle and will continue efforts to establish Singapore as Southeast Asia's financial and high-tech hub. Fiscal stimulus, low interest rates, a surge in exports, and internal flexibility led to vigorous growth in 2004, with real GDP rising by 8% - by far the economy's best performance since 2000 - but growth slowed to 5.7% in 2005. Singapore, a highly developed and successful free market economy, enjoys a remarkably open and corruption-free environment, stable prices, and one of the highest per capita GDPs in the world. The economy depends heavily on exports, particularly in electronics and manufacturing. It was hard hit in 2001-2002 by the global recession and the slump in the technology sector. The government hopes to establish a new growth path that will be less vulnerable to the external business cycle than the current export-led model but is unlikely to abandon efforts to establish Singapore as Southeast Asia's financial and high-tech hub.
Slovakia Slovakia Slovakia has mastered much of the difficult transition from a centrally planned economy to a modern market economy. The DZURINDA government made excellent progress during 2001-04 in macroeconomic stabilization and structural reform. Major privatizations are nearly complete, the banking sector is almost completely in foreign hands, and the government has helped facilitate a foreign investment boom with business-friendly policies, such as labor market liberalization and a 19% flat tax. Foreign investment in the automotive sector has been strong. Slovakia's economic growth exceeded expectations in 2001-05, despite the general European slowdown. Unemployment, at an unacceptable 18% in 2003-04, dropped to 16.4% in 2005, but remains the economy's Achilles heel. Slovakia joined the EU on 1 May 2004. Slovakia has mastered much of the difficult transition from a centrally planned economy to a modern market economy. The DZURINDA government has made excellent progress in 2001-03 in macroeconomic stabilization and structural reform. Major privatizations are nearly complete, the banking sector is almost completely in foreign hands, and foreign investment has picked up. Slovakia's economy exceeded expectations in 2001-03, despite the general European slowdown. Unemployment, at an unacceptable 15% in 2003, remains the economy's Achilles heel. The government faces other strong challenges in 2004, especially the cutting of budget and current account deficits, the containment of inflation, and the strengthening of the health care system.
Slovenia Slovenia With its small transition economy and population of approximately two million, Slovenia is a model of economic success and stability for its neighbors in the former Yugoslavia. The country, which joined the EU in 2004, has excellent infrastructure, a well-educated work force, and an excellent central location. It enjoys a GDP per capita substantially higher than any of the other transitioning economies of Central Europe. In March 2004, Slovenia became the first transition country to graduate from borrower status to donor partner at the World Bank. Slovenia plans to adopt the euro by 2007 and has met the EU's Maastricht criteria for inflation. Despite its economic success, Slovenia faces growing challenges. Much of the economy remains in state hands and foreign direct investment (FDI) in Slovenia is one of the lowest in the EU on a per capita basis. Taxes are relatively high, the labor market is often seen as inflexible, and legacy industries are losing sales to more competitive firms in China, India, and elsewhere. The current center-right government, elected in October 2004, has pledged to accelerate privatization of a number of large state holdings and is interested in increasing FDI in Slovenia. In late 2005, the government's new Committee for Economic Reforms was elevated to cabinet-level status. The Committee's program includes plans for lowering the tax burden, privatizing state-controlled firms, improving the flexibility of the labor market, and increasing the government's efficiency. Slovenia, with its historical ties to Western Europe, enjoys a GDP per capita substantially higher than that of the other transitioning economies of Central Europe. Privatization of the economy proceeded at an accelerated pace in 2002-3, and the budget deficit dropped from 3.0% of GDP in 2002 to 1.9% in 2003. Despite the economic slowdown in Europe in 2001-03, Slovenia maintained 3% growth. Structural reforms to improve the business environment allow for greater foreign participation in Slovenia's economy and help to lower unemployment. Further measures to curb inflation are also needed. Corruption and the high degree of coordination between government, business, and central bank policy are issues of concern in the run-up to Slovenia's scheduled 1 May 2004 accession to the European Union.
Solomon Islands Solomon Islands The bulk of the population depends on agriculture, fishing, and forestry for at least part of its livelihood. Most manufactured goods and petroleum products must be imported. The islands are rich in undeveloped mineral resources such as lead, zinc, nickel, and gold. Prior to the arrival of the Regional Assistance Mission to the Solomon Islands (RAMSI), severe ethnic violence, the closing of key businesses, and an empty government treasury culminated in economic collapse. RAMSI has enabled a return to law and order, a new period of economic stability, and modest growth as the economy rebuilds. The bulk of the population depends on agriculture, fishing, and forestry for at least part of their livelihood. Most manufactured goods and petroleum products must be imported. The islands are rich in undeveloped mineral resources such as lead, zinc, nickel, and gold. However, severe ethnic violence, the closing of key business enterprises, and an empty government treasury have led to serious economic disarray, indeed near collapse. Tanker deliveries of crucial fuel supplies (including those for electrical generation) have become sporadic due to the government's inability to pay and attacks against ships. Telecommunications are threatened by the nonpayment of bills and by the lack of technical and maintenance staff many of whom have left the country.
Somalia Somalia Somalia's economic fortunes are driven by its deep political divisions. The northwestern area has declared its independence as the "Republic of Somaliland"; the northeastern region of Puntland is a semi-autonomous state; and the remaining southern portion is riddled with the struggles of rival factions. Economic life continues, in part because much activity is local and relatively easily protected. Agriculture is the most important sector, with livestock normally accounting for about 40% of GDP and about 65% of export earnings, but Saudi Arabia's ban on Somali livestock, due to Rift Valley Fever concerns, has severely hampered the sector. Nomads and semi-nomads, who are dependent upon livestock for their livelihood, make up a large portion of the population. Livestock, hides, fish, charcoal, and bananas are Somalia's principal exports, while sugar, sorghum, corn, qat, and machined goods are the principal imports. Somalia's small industrial sector, based on the processing of agricultural products, has largely been looted and sold as scrap metal. Despite the seeming anarchy, Somalia's service sector has managed to survive and grow. Telecommunication firms provide wireless services in most major cities and offer the lowest international call rates on the continent. In the absence of a formal banking sector, money exchange services have sprouted throughout the country, handling between $500 million and $1 billion in remittances annually. Mogadishu's main market offers a variety of goods from food to the newest electronic gadgets. Hotels continue to operate, and militias provide security. The ongoing civil disturbances and clan rivalries, however, have interfered with any broad-based economic development and international aid arrangements. Somalia's arrears to the IMF continued to grow in 2005. Statistics on Somalia's GDP, growth, per capita income, and inflation should be viewed skeptically. In late December 2004, a major tsunami caused an estimated 150 deaths and resulted in destruction of property in coastal areas. Somalia's economic fortunes are being driven by its deep political divisions. The northern area has declared its independence as "Somaliland"; the central area, Puntland, is a self-declared autonomous state; and the remaining southern portion is riddled with the struggles of rival factions. Economic life continues, in part because much activity is local and relatively easily protected. Agriculture is the most important sector, with livestock normally accounting for about 40% of GDP and about 65% of export earnings, but Saudi Arabia's recent ban on Somali livestock, because of Rift Valley Fever concerns, has severely hampered the sector. Nomads and semi-nomads, who are dependent upon livestock for their livelihood, make up a large portion of the population. Livestock, hides, fish, charcoal, and bananas are Somalia's principal exports, while sugar, sorghum, corn, qat, and machined goods are the principal imports. Somalia's small industrial sector, based on the processing of agricultural products, has largely been looted and sold as scrap metal. Despite the seeming anarchy, Somalia's service sector has managed to survive and grow. Telecommunication firms provide wireless services in most major cities and offer the lowest international call rates on the continent. In the absence of a formal banking sector, money exchange services have sprouted throughout the country, handling between $200 million and $500 million in remittances annually. Mogadishu's main market offers a variety of goods from food to the newest electronic gadgets. Hotels continue to operate, and security is provided by militias. The ongoing civil disturbances and clan rivalries, however, have interfered with any broad-based economic development and international aid arrangements. In 2002 Somalia's overdue financial obligations to the IMF continued to grow.
South Africa South Africa South Africa is a middle-income, emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; a stock exchange that ranks among the 10 largest in the world; and a modern infrastructure supporting an efficient distribution of goods to major urban centers throughout the region. However, growth has not been strong enough to lower South Africa's high unemployment rate, and daunting economic problems remain from the apartheid era - especially poverty and lack of economic empowerment among the disadvantaged groups. South African economic policy is fiscally conservative, but pragmatic, focusing on targeting inflation and liberalizing trade as means to increase job growth and household income. South Africa is a middle-income, emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; a stock exchange that ranks among the 10 largest in the world; and a modern infrastructure supporting an efficient distribution of goods to major urban centers throughout the region. However, growth has not been strong enough to lower South Africa's high unemployment rate; and daunting economic problems remain from the apartheid era, especially poverty and lack of economic empowerment among the disadvantaged groups. High crime and HIV/AIDS infection rates also deter investment. South African economic policy is fiscally conservative, but pragmatic, focusing on targeting inflation and liberalizing trade as means to increase job growth and household income.
South Georgia and the South Sandwich Islands South Georgia and the South Sandwich Islands Some fishing takes place in adjacent waters. There is a potential source of income from harvesting finfish and krill. The islands receive income from postage stamps produced in the UK, sale of fishing licenses, and harbor and landing fees from tourist vessels. Tourism from specialized cruise ships is increasing rapidly. Some fishing takes place in adjacent waters. There is a potential source of income from harvesting finfish and krill. The islands receive income from postage stamps produced in the UK, sale of fishing licenses, and harbor and landing fees from tourist vessels. Tourism from specialized cruise ships is increasing rapidly.
Southern Ocean Southern Ocean Fisheries in 2003-04 landed 136,262 metric tons, of which 87% (118,166 tons) was krill and 8% (11,182 tons) Patagonian toothfish, compared to 142,555 tons in 2002-03 of which 83% (117,728 tons) was krill and 12% (16,479 tons) Patagonian toothfish (estimated fishing from the area covered by the Convention of the Conservation of Antarctic Marine Living Resources (CCAMLR), which extends slightly beyond the Southern Ocean area). International agreements were adopted in late 1999 to reduce illegal, unreported, and unregulated fishing, which in the 2000-01 season landed, by one estimate, 8,376 metric tons of Patagonian and Antarctic toothfish. In the 2004-05 Antarctic summer 28,202 tourists, most of them seaborne (approximately 97%), visited the Southern Ocean and Antarctica, compared to 14,762 in 1999-2000. Fisheries in 2000-01 (1 July to 30 June) landed 112,934 metric tons, of which 87% was krill and 11% Patagonian toothfish. International agreements were adopted in late 1999 to reduce illegal, unreported, and unregulated fishing, which in the 2000-01 season landed, by one estimate, 8,376 metric tons of Patagonian and antarctic toothfish. In the 2000-01 antarctic summer 12,248 tourists, most of them seaborne, visited the Southern Ocean and Antarctica, compared to 14,762 the previous year.
Spain Spain The Spanish economy boomed from 1986 to 1990, averaging five percent annual growth. After a European-wide recession in the early 1990s, the Spanish economy resumed moderate growth starting in 1994. Spain's mixed capitalist economy supports a GDP that on a per capita basis is 80% that of the four leading West European economies. The center-right government of former President AZNAR successfully worked to gain admission to the first group of countries launching the European single currency (the euro) on 1 January 1999. The AZNAR administration continued to advocate liberalization, privatization, and deregulation of the economy and introduced some tax reforms to that end. Unemployment fell steadily under the AZNAR administration but remains high at 10.1%. Growth of 2.5% in 2003, 2.6% in 2004, and 3.4% in 2005 was satisfactory given the background of a faltering European economy. The socialist president, RODRIGUEZ ZAPATERO, has initiated economic and social reforms that are generally popular among the masses of people, but that are anathema to religious and other conservative elements. Adjusting to the monetary and other economic policies of an integrated Europe, reducing unemployment, and absorbing widespread social changes will pose challenges to Spain over the next few years. Spain's mixed capitalist economy supports a GDP that on a per capita basis is 80% that of the four leading West European economies. Its center-right government successfully worked to gain admission to the first group of countries launching the European single currency (the euro) on 1 January 1999. The AZNAR administration has continued to advocate liberalization, privatization, and deregulation of the economy and has introduced some tax reforms to that end. Unemployment has been steadily falling under the AZNAR administration but remains high at 11.7%. The government intends to make further progress in changing labor laws and reforming pension schemes, which are key to the sustainability of both Spain's internal economic advances and its competitiveness in a single currency area. A general strike in mid-2002 reduced cooperation between labor and government. Growth of 2.4% in 2003 was satisfactory given the background of a faltering European economy. Adjusting to the monetary and other economic policies of an integrated Europe - and reducing unemployment - will pose challenges to Spain over the next few years.
Spratly Islands Spratly Islands Economic activity is limited to commercial fishing. The proximity to nearby oil- and gas-producing sedimentary basins suggests the potential for oil and gas deposits, but the region is largely unexplored. There are no reliable estimates of potential reserves. Commercial exploitation has yet to be developed. Economic activity is limited to commercial fishing. The proximity to nearby oil- and gas-producing sedimentary basins suggests the potential for oil and gas deposits, but the region is largely unexplored, and there are no reliable estimates of potential reserves; commercial exploitation has yet to be developed.
Sri Lanka Sri Lanka In 1977, Colombo abandoned statist economic policies and its import substitution trade policy for market-oriented policies and export-oriented trade. Sri Lanka's most dynamic sectors now are food processing, textiles and apparel, food and beverages, telecommunications, and insurance and banking. In 2003, plantation crops made up only 15% of exports (compared with 93% in 1970), while textiles and garments accounted for 63%. GDP grew at an average annual rate of about 5.5% in the 1990s, but 2001 saw the first contraction in the country's history, by 1.4%, due to a combination of power shortages, severe budgetary problems, the global slowdown, and continuing civil strife. Growth recovered to 5% between 2002 and 2005. About 800,000 Sri Lankans work abroad, 90% in the Middle East. They send home about $1 billion a year. The struggle by the Tamil Tigers of the north and east for a largely independent homeland continues to cast a shadow over the economy. In late December 2004, a major tsunami took about 31,000 lives, left more than 6,300 missing and 443,000 displaced, and destroyed an estimated $1.5 billion worth of property. In 1977, Colombo abandoned statist economic policies and its import substitution trade policy for market-oriented policies and export-oriented trade. Sri Lanka's most dynamic sectors now are food processing, textiles and apparel, food and beverages, telecommunications, and insurance and banking. By 1996 plantation crops made up only 20% of exports (compared with 93% in 1970), while textiles and garments accounted for 63%. GDP grew at an average annual rate of 5.5% in the early 1990s until a drought and a deteriorating security situation lowered growth to 3.8% in 1996. The economy rebounded in 1997-2000 with average growth of 5.3%, but 2001 saw the first contraction in the country's history, -1.4%, due to a combination of power shortages, severe budgetary problems, the global slowdown, and continuing civil strife. Growth recovered to 3.2% in 2002. About 800,000 Sri Lankans work abroad, 90% in the Middle East. They send home about $1 billion a year.
Sudan Sudan Sudan has turned around a struggling economy with sound economic policies and infrastructure investments, but it still faces formidable economic problems, starting from its low level of per capita output. From 1997 to date, Sudan has been implementing IMF macroeconomic reforms. In 1999, Sudan began exporting crude oil and in the last quarter of 1999 recorded its first trade surplus, which, along with monetary policy, has stabilized the exchange rate. Increased oil production, revived light industry, and expanded export processing zones helped sustain GDP growth at 8.6% in 2004. Agricultural production remains Sudan's most important sector, employing 80% of the work force, contributing 39% of GDP, and accounting for most of GDP growth, but most farms remain rain-fed and susceptible to drought. Chronic instability - resulting from the long-standing civil war between the Muslim north and the Christian/pagan south, adverse weather, and weak world agricultural prices - ensure that much of the population will remain at or below the poverty line for years. Sudan has turned around a struggling economy with sound economic policies and infrastructure investments, but it still faces formidable economic problems, notably the low level of per capita output. From 1997 to date, Sudan has been implementing IMF macroeconomic reforms. In 1999 Sudan began exporting crude oil and in the last quarter of 1999 recorded its first trade surplus, which, along with monetary policy, has stabilized the exchange rate. Increased oil production, revived light industry, and expanded export processing zones helped maintain GDP growth at 5.1% in 2002. Agriculture production remains Sudan's most important sector, employing 80% of the work force and contributing 43% of GDP, but most farms remain rain-fed and susceptible to drought. Chronic domestic instability, lagging reforms, adverse weather, and weak world agricultural prices - but, above all, the low starting point - ensure that much of the population will remain at or below the poverty line for years.
Suriname Suriname The economy is dominated by the mining industry, which accounts for more than a third of GDP and subjects government revenues to mineral price volatility. The short-term economic outlook depends on the government's ability to control inflation and on the development of projects in the bauxite and gold mining sectors. Suriname's economic prospects for the medium term will depend on continued commitment to responsible monetary and fiscal policies and to the introduction of structural reforms to liberalize markets and promote competition. The government of Ronald VENETIAAN, in his first term, implemented an austerity program, raised taxes, and attempted to control spending. Economic policies are likely to remain the same during VENETIAAN's second term. Prospects for local onshore oil production are good, as a drilling program is underway. Offshore oil drilling was given a boost in 2004 when the State Oil Company (Staatsolie) signed exploration agreements with Repsol, Mearsk, and Occidental. The economy is dominated by the bauxite industry, which accounts for more than 15% of GDP and 70% of export earnings. Suriname's economic prospects for the medium term will depend on renewed commitment to responsible monetary and fiscal policies and to the introduction of structural reforms to liberalize markets and promote competition. The government of Ronald VENETIAAN has begun an austerity program, raised taxes, and attempted to control spending. However, in 2002, President VENETIAAN agreed to a large pay raise for civil servants, which threatens his earlier gains in stabilizing the economy. The Dutch Government has agreed to restart the aid flow, which will allow Suriname to access international development financing. The short-term economic outlook depends on the government's ability to control inflation and on the development of projects in the bauxite and gold mining sectors.
Svalbard Svalbard Coal mining is the major economic activity on Svalbard. The treaty of 9 February 1920 gives the 41 signatories equal rights to exploit mineral deposits, subject to Norwegian regulation. Although US, UK, Dutch, and Swedish coal companies have mined in the past, the only companies still mining are Norwegian and Russian. The settlements on Svalbard are essentially company towns. The Norwegian state-owned coal company employs nearly 60% of the Norwegian population on the island, runs many of the local services, and provides most of the local infrastructure. There is also some hunting of seal, reindeer, and fox. Coal mining is the major economic activity on Svalbard. The treaty of 9 February 1920 gives the 41 signatories equal rights to exploit mineral deposits, subject to Norwegian regulation. Although US, UK, Dutch, and Swedish coal companies have mined in the past, the only companies still mining are Norwegian and Russian. The settlements on Svalbard are essentially company towns. The Norwegian state-owned coal company employs nearly 60% of the Norwegian population on the island, runs many of the local services, and provides most of the local infrastructure. There is also some trapping of seal, polar bear, fox, and walrus.
Swaziland Swaziland In this small, landlocked economy, subsistence agriculture occupies more than 80% of the population. The manufacturing sector has diversified since the mid-1980s. Sugar and wood pulp remain important foreign exchange earners. Mining has declined in importance in recent years with only coal and quarry stone mines remaining active. Surrounded by South Africa, except for a short border with Mozambique, Swaziland is heavily dependent on South Africa from which it receives about nine-tenths of its imports and to which it sends nearly two-thirds of its exports. Customs duties from the Southern African Customs Union and worker remittances from South Africa substantially supplement domestically earned income. The government is trying to improve the atmosphere for foreign investment. Overgrazing, soil depletion, drought, and sometimes floods persist as problems for the future. More than one-fourth of the population needed emergency food aid in 2004-05 because of drought, and nearly two-fifths of the adult population has been infected by HIV/AIDS. In this small, landlocked economy, subsistence agriculture occupies more than 80% of the population. The manufacturing sector has diversified since the mid-1980s. Sugar and wood pulp remain important foreign exchange earners. Mining has declined in importance in recent years with only coal and quarry stone mines remaining active. Surrounded by South Africa, except for a short border with Mozambique, Swaziland is heavily dependent on South Africa from which it receives nine-tenths of its imports and to which it sends more than two-thirds of its exports. Customs duties from the Southern African Customs Union and worker remittances from South Africa substantially supplement domestically earned income. The government is trying to improve the atmosphere for foreign investment. Overgrazing, soil depletion, drought, and sometimes floods persist as problems for the future. More than one-fourth of the population needed emergency food aid in 2002 because of drought, and more than one-third of the adult population was infected by HIV/AIDS.
Sweden Sweden Aided by peace and neutrality for the whole of the 20th century, Sweden has achieved an enviable standard of living under a mixed system of high-tech capitalism and extensive welfare benefits. It has a modern distribution system, excellent internal and external communications, and a skilled labor force. Timber, hydropower, and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. Privately owned firms account for about 90% of industrial output, of which the engineering sector accounts for 50% of output and exports. Agriculture accounts for only 2% of GDP and of jobs. The government's commitment to fiscal discipline resulted in a substantial budgetary surplus in 2001, which was cut by more than half in 2002, due to the global economic slowdown, declining revenue, and increased spending. The Swedish central bank (the Riksbank) focuses on price stability with its inflation target of 2%. Growth remained sluggish in 2003, but picked up in 2004 and 2005. Presumably because of generous sick-leave benefits, Swedish workers report in sick more often than other Europeans. In September 2003, Swedish voters turned down entry into the euro system, concerned about the impact on democracy and sovereignty. Aided by peace and neutrality for the whole 20th century, Sweden has achieved an enviable standard of living under a mixed system of high-tech capitalism and extensive welfare benefits. It has a modern distribution system, excellent internal and external communications, and a skilled labor force. Timber, hydropower, and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. Privately owned firms account for about 90% of industrial output, of which the engineering sector accounts for 50% of output and exports. Agriculture accounts for only 2% of GDP and 2% of the jobs. The government's commitment to fiscal discipline resulted in a substantial budgetary surplus in 2001, which was cut by more than half in 2002, due to the global economic slowdown, revenue declines, and spending increases. The Swedish central bank (the Riksbank) is focusing on price stability with its inflation target of 2%. Growth remained sluggish in 2003. On September 14, 2003, Swedish voters turned down entry into the euro system, concerned about the impact on democracy and sovereignty.
Switzerland Switzerland Switzerland is a peaceful, prosperous, and stable modern market economy with low unemployment, a highly skilled labor force, and a per capita GDP larger than that of the big Western European economies. The Swiss in recent years have brought their economic practices largely into conformity with the EU's to enhance their international competitiveness. Switzerland remains a safehaven for investors, because it has maintained a degree of bank secrecy and has kept up the franc's long-term external value. Reflecting the anemic economic conditions of Europe, GDP growth dropped in 2001 to about 0.8%, to 0.2% in 2002, and to -0.3% in 2003, with a small rise to 1.8% in 2004-05. Even so, unemployment has remained at less than half the EU average. Switzerland is a prosperous and stable modern market economy with low unemployment, a highly skilled labor force, and a per capita GDP larger than that of the big western European economies. The Swiss in recent years have brought their economic practices largely into conformity with the EU's to enhance their international competitiveness. Switzerland remains a safe haven for investors, because it has maintained a degree of bank secrecy and has kept up the franc's long-term external value. Reflecting the anemic economic conditions of Europe, GDP growth dropped in 2001 to about 0.8%, to 0.2% in 2002, and to -0.3% in 2003.
Syria Syria The Syrian Government estimates the economy grew by 4.5 percent in real terms in 2005, led by the petroleum and agricultural sectors, which together account for about half of GDP. Economic performance and the exchange rate on the informal market were hit by international political developments following the assassination in February of former Lebanese Prime Minister Rafiq al-HARIRI and the specter of international sanctions. Higher crude oil prices countered declining oil production and exports and helped to narrow the budget deficit and widen the current account surplus. The Government of Syria has implemented modest economic reforms in the last few years, including cutting interest rates, opening private banks, consolidating some of the multiple exchange rates, and raising prices on some subsidized foodstuffs. Nevertheless, the economy remains highly controlled by the government. Long-run economic constraints include declining oil production and exports, increasing pressure on water supplies caused by rapid population growth, industrial expansion, and water pollution. Syria's predominantly statist economy has been growing, on average, more slowly than its 2.4% annual population growth rate, causing a persistent decline in per capita GDP. Recent legislation allows private banks to operate in Syria, although a private banking sector will take years and further government cooperation to develop. External factors such as the international war on terrorism, the Israeli-Palestinian conflict, and the war between the US-led coalition and Iraq probably will drive real annual GDP growth levels back below their 3.5% spike in 2002. A long-run economic constraint is the pressure on water supplies caused by rapid population growth, industrial expansion, and increased water pollution.
Taiwan Taiwan Taiwan has a dynamic capitalist economy with gradually decreasing guidance of investment and foreign trade by government authorities. In keeping with this trend, some large, government-owned banks and industrial firms are being privatized. Exports have provided the primary impetus for industrialization. The trade surplus is substantial, and foreign reserves are the world's third largest. Agriculture contributes less than 2% to GDP, down from 32% in 1952. Taiwan is a major investor throughout Southeast Asia. China has overtaken the US to become Taiwan's largest export market and, in 2005, Taiwan's third-largest source of imports after Japan and the US. Taiwan has benefited from cross-Strait economic integration and a sharp increase in world demand to achieve substantial growth in its export sector and a seven-year-high real GDP growth of 6.1% in 2004. However, excess inventory, higher international oil prices, and rising interest rates dampened consumption in developed markets, and GDP growth dropped to 3.8% in 2005. The service sector, which accounts for 69% of Taiwan's GDP, has continued to expand, while unemployment and inflation rates have declined. Taiwan has a dynamic capitalist economy with gradually decreasing guidance of investment and foreign trade by government authorities. In keeping with this trend, some large government-owned banks and industrial firms are being privatized. Exports have provided the primary impetus for industrialization. The trade surplus is substantial, and foreign reserves are the world's third largest. Agriculture contributes 2% to GDP, down from 32% in 1952. While Taiwan is a major investor throughout Southeast Asia, China has become the largest destination for investment and has overtaken the US to become Taiwan's largest export market. Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors from the Asian financial crisis in 1998. The global economic downturn, combined with problems in policy coordination by the administration and bad debts in the banking system, pushed Taiwan into recession in 2001, the first year of negative growth ever recorded. Unemployment also reached record levels. Output recovered moderately in 2002 in the face of continued global slowdown, fragile consumer confidence, and bad bank loans. Growing economic ties with China are a dominant long-term factor. Exports to China - mainly parts and equipment for the assembly of goods for export to developed countries - drove Taiwan's economic recovery in 2002.
Tajikistan Tajikistan Tajikistan has one of the lowest per capita GDPs among the 15 former Soviet republics. Only 6% of the land area is arable; cotton is the most important crop. Mineral resources, varied but limited in amount, include silver, gold, uranium, and tungsten. Industry consists only of a large aluminum plant, hydropower facilities, and small obsolete factories mostly in light industry and food processing. The civil war (1992-97) severely damaged the already weak economic infrastructure and caused a sharp decline in industrial and agricultural production. Even though 64% of its people continue to live in abject poverty, Tajikistan has experienced steady economic growth since 1997, but experienced a slight drop in its growth rate to 8% in 2005 from 10.6% in 2004. Continued privatization of medium and large state-owned enterprises would further increase productivity. Tajikistan's economic situation, however, remains fragile due to uneven implementation of structural reforms, weak governance, widespread unemployment, and the external debt burden. A debt restructuring agreement was reached with Russia in December 2002, including a $250 million write-off of Tajikistan's $300 million debt to Russia. Tajikistan ranks third in the world in terms of water resources per head. A proposed investment to finish the hydropower dams Rogun and Sangtuda would substantially add to electricity production. If finished, Rogun will be the world's tallest dam. Tajikistan has the lowest per capita GDP among the 15 former Soviet republics. Only 8% to 10% of the land area is arable. Cotton is the most important crop. Mineral resources, varied but limited in amount, include silver, gold, uranium, and tungsten. Industry consists only of a large aluminum plant, hydropower facilities, and small obsolete factories mostly in light industry and food processing. The civil war (1992-97) severely damaged the already weak economic infrastructure and caused a sharp decline in industrial and agricultural production. Even though 60% of its people continue to live in abject poverty, Tajikistan has experienced steady economic growth since 1997. Continued privatization of medium and large state-owned enterprises will further increase productivity. Tajikistan's economic situation, however, remains fragile due to uneven implementation of structural reforms, weak governance, widespread unemployment, and the external debt burden. A debt restructuring agreement was reached with Russia in December 2002, including an interest rate of 4%, a 3-year grace period, and a US $49.8 million credit to the Central Bank of Tajikistan.
Tanzania Tanzania Tanzania is one of the poorest countries in the world. The economy depends heavily on agriculture, which accounts for almost half of GDP, provides 85% of exports, and employs 80% of the work force. Topography and climatic conditions, however, limit cultivated crops to only 4% of the land area. Industry traditionally featured the processing of agricultural products and light consumer goods. The World Bank, the International Monetary Fund, and bilateral donors have provided funds to rehabilitate Tanzania's out-of-date economic infrastructure and to alleviate poverty. Long-term growth through 2005 featured a pickup in industrial production and a substantial increase in output of minerals, led by gold. Recent banking reforms have helped increase private-sector growth and investment. Continued donor assistance and solid macroeconomic policies supported real GDP growth of more than 6% in 2005. Tanzania is one of the poorest countries in the world. The economy depends heavily on agriculture, which accounts for half of GDP, provides 85% of exports, and employs 80% of the work force. Topography and climatic conditions, however, limit cultivated crops to only 4% of the land area. Industry traditionally featured the processing of agricultural products and light consumer goods. The World Bank, the International Monetary Fund, and bilateral donors have provided funds to rehabilitate Tanzania's out-of-date economic infrastructure and to alleviate poverty. Growth in 1991-2002 featured a pickup in industrial production and a substantial increase in output of minerals, led by gold. Oil and gas exploration and development played an important role in this growth. Recent banking reforms have helped increase private sector growth and investment. Continued donor support and solid macroeconomic policies should support continued real GDP growth of 5% in 2003.
Thailand Thailand With a well-developed infrastructure, a free-enterprise economy, and pro-investment policies, Thailand appears to have fully recovered from the 1997-98 Asian Financial Crisis. The country was one of East Asia's best performers in 2002-04. Boosted by increased consumption and strong export growth, the Thai economy grew 6.9% in 2003 and 6.1% in 2004 despite a sluggish global economy. Bangkok has pursued preferential trade agreements with a variety of partners in an effort to boost exports and to maintain high growth. In 2004, Thailand and the US began negotiations on a Free Trade Agreement. In late December 2004, a major tsunami took 8,500 lives in Thailand and caused massive destruction of property in the southern provinces of Krabi, Phangnga, and Phuket. Growth slowed to 4.4% in 2005. The downturn can be attributed to high oil prices, weaker demand from Western markets, severe drought in rural regions, tsunami-related declines in tourism, and lower consumer confidence. Moreover, the THAKSIN administration's expansionist economic policies, including plans for multi-billion-dollar mega-projects in infrastructure and social development, has raised concerns about fiscal discipline and the health of financial institutions. On the positive side, the Thai economy performed well beginning in the third quarter of 2005. Export-oriented manufacturing - in particular automobile production - and farm output are driving these gains. In 2006, the economy should benefit from an influx of investment and a revived tourism sector; however, a possible avian flu epidemic could significantly harm economic prospects throughout the region. Thailand has a free enterprise economy and welcomes foreign investment. Exports feature computers and electrical appliances. After enjoying the world's highest growth rate from 1985 to 1995 - averaging almost 9% annually - increased speculative pressure on Thailand's currency in 1997 led to a crisis that uncovered financial sector weaknesses and forced the government to float the baht. Long pegged at 25 to the dollar, the baht reached its lowest point of 56 to the dollar in January 1998, and the economy contracted by 10.2% that same year. Thailand then entered a recovery stage, expanding by 4.2% in 1999 and 4.4% in 2000, largely due to strong exports. An ailing financial sector and the slow pace of corporate debt restructuring, combined with a softening of global demand, slowed growth to 1.4% in 2001. Increased consumption and investment spending pushed GDP growth up to 5.2% in 2002 despite a sluggish global economy.
Togo Togo This small, sub-Saharan economy is heavily dependent on both commercial and subsistence agriculture, which provides employment for 65% of the labor force. Some basic foodstuffs must still be imported. Cocoa, coffee, and cotton generate about 40% of export earnings, with cotton being the most important cash crop. Togo is the world's fourth-largest producer of phosphate. The government's decade-long effort, supported by the World Bank and the IMF, to implement economic reform measures, encourage foreign investment, and bring revenues in line with expenditures has moved slowly. Progress depends on follow-through on privatization, increased openness in government financial operations, progress toward legislative elections, and continued support from foreign donors. Togo is working with donors to write a PRGF that could eventually lead to a debt reduction plan. This small sub-Saharan economy is heavily dependent on both commercial and subsistence agriculture, which provides employment for 65% of the labor force. Some basic foodstuffs must still be imported. Cocoa, coffee, and cotton generate about 40% of export earnings, with cotton being the most important cash crop. Togo is the world's fourth-largest producer of phosphate, but production fell an estimated 22% in 2002 due to power shortages and the cost of developing new deposits. The government's decade-long effort, supported by the World Bank and the IMF, to implement economic reform measures, encourage foreign investment, and bring revenues in line with expenditures has moved slowly. Progress depends on following through on privatization, increased openness in government financial operations, progress toward legislative elections, and continued support from foreign donors.
Tokelau Tokelau Tokelau's small size (three villages), isolation, and lack of resources greatly restrain economic development and confine agriculture to the subsistence level. The people rely heavily on aid from New Zealand - about $4 million annually - to maintain public services, with annual aid being substantially greater than GDP. The principal sources of revenue come from sales of copra, postage stamps, souvenir coins, and handicrafts. Money is also remitted to families from relatives in New Zealand. Tokelau's small size (three villages), isolation, and lack of resources greatly restrain economic development and confine agriculture to the subsistence level. The people rely heavily on aid from New Zealand - about $4 million annually - to maintain public services, with annual aid being substantially greater than GDP. The principal sources of revenue come from sales of copra, postage stamps, souvenir coins, and handicrafts. Money is also remitted to families from relatives in New Zealand.
Tonga Tonga Tonga, a small, open, South Pacific island economy, has a narrow export base in agricultural goods. Squash, coconuts, bananas, and vanilla beans are the main crops, and agricultural exports make up two-thirds of total exports. The country must import a high proportion of its food, mainly from New Zealand. The country remains dependent on external aid and remittances from Tongan communities overseas to offset its trade deficit. Tourism is the second-largest source of hard currency earnings following remittances. The government is emphasizing the development of the private sector, especially the encouragement of investment, and is committing increased funds for health and education. Tonga has a reasonably sound basic infrastructure and well-developed social services. High unemployment among the young, a continuing upturn in inflation, pressures for democratic reform, and rising civil service expenditures are major issues facing the government. Tonga has a small, open economy with a narrow export base in agricultural goods. Squash, coconuts, bananas, and vanilla beans are the main crops, and agricultural exports make up two-thirds of total exports. The country must import a high proportion of its food, mainly from New Zealand. Tourism is the second-largest source of hard currency earnings following remittances. The country remains dependent on external aid and remittances from Tongan communities overseas to offset its trade deficit. The government is emphasizing the development of the private sector, especially the encouragement of investment, and is committing increased funds for health and education. Tonga has a reasonably sound basic infrastructure and well-developed social services.
Trinidad and Tobago Trinidad and Tobago Trinidad and Tobago, the leading Caribbean producer of oil and gas, has earned a reputation as an excellent investment site for international businesses. Tourism is a growing sector, although not proportionately as important as in many other Caribbean islands. The economy benefits from low inflation and a growing trade surplus. Prospects for growth in 2006 are good as prices for oil, petrochemicals, and liquefied natural gas are expected to remain high, and foreign direct investment continues to grow to support expanded capacity in the energy sector. The government is coping with a rise in violent crime. Trinidad and Tobago has earned a reputation as an excellent investment site for international businesses. A leading performer the past four years has been the booming natural gas sector. Tourism is a growing sector, although not proportionately as important as in many other Caribbean islands. The economy benefits from low inflation and a trade surplus. The year 2002 was marked by solid growth in the oil sector, offset in part by domestic political uncertainty.
Tromelin Island Tromelin Island no economic activity no economic activity
Tunisia Tunisia Tunisia has a diverse economy, with important agricultural, mining, energy, tourism, and manufacturing sectors. Governmental control of economic affairs while still heavy has gradually lessened over the past decade with increasing privatization, simplification of the tax structure, and a prudent approach to debt. Progressive social policies also have helped raise living conditions in Tunisia relative to the region. Real growth slowed to a 15-year low of 1.9% in 2002 because of agricultural drought and lackluster tourism. Better rains in 2003 through 2005, however, helped push GDP growth to about 5% for these years. Tourism also recovered after the end of combat operations in Iraq. Tunisia is gradually removing barriers to trade with the EU. Broader privatization, further liberalization of the investment code to increase foreign investment, improvements in government efficiency, and reduction of the trade deficit are among the challenges ahead. Tunisia has a diverse economy, with important agricultural, mining, energy, tourism, and manufacturing sectors. Governmental control of economic affairs while still heavy has gradually lessened over the past decade with increasing privatization, simplification of the tax structure, and a prudent approach to debt. Real growth averaged 5.4% in 1997-2001 but slowed to 1.9% in 2002 because of agricultural drought, slow investment, and lackluster tourism. Increased rainfall portends higher growth levels for 2003, but continued regional tension from the war in Iraq will most likely continue to suppress tourism earnings. Tunisia has agreed to gradually remove barriers to trade with the European Union over the next decade. Broader privatization, further liberalization of the investment code to increase foreign investment, improvements in government efficiency, and reduction of the trade deficit are among the challenges for the future.
Turkey Turkey Turkey's dynamic economy is a complex mix of modern industry and commerce along with a traditional agriculture sector that still accounts for more than 35% of employment. It has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport, and communication. The largest industrial sector is textiles and clothing, which accounts for one-third of industrial employment; it faces stiff competition in international markets with the end of the global quota system. However, other sectors, notably the automotive and electronics industries, are rising in importance within Turkey's export mix. Real GNP growth has exceeded 6% in many years, but this strong expansion has been interrupted by sharp declines in output in 1994, 1999, and 2001. The economy is turning around with the implementation of economic reforms, and 2004 GDP growth reached 9%. Inflation fell to 7.7% in 2005 - a 30-year low. Despite the strong economic gains in 2002-05, which were largely due to renewed investor interest in emerging markets, IMF backing, and tighter fiscal policy, the economy is still burdened by a high current account deficit and high debt. The public sector fiscal deficit exceeds 6% of GDP - due in large part to high interest payments, which accounted for about 37% of central government spending in 2004. Prior to 2005, foreign direct investment (FDI) in Turkey averaged less than $1 billion annually, but further economic and judicial reforms and prospective EU membership are expected to boost FDI. Privatization sales are currently approaching $21 billion. Turkey's dynamic economy is a complex mix of modern industry and commerce along with a traditional agriculture sector that in 2001 still accounted for 40% of employment. It has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport, and communication. The most important industry - and largest exporter - is textiles and clothing, which is almost entirely in private hands. In recent years the economic situation has been marked by erratic economic growth and serious imbalances. Real GNP growth has exceeded 6% in many years, but this strong expansion has been interrupted by sharp declines in output in 1994, 1999, and 2001. Meanwhile, the public sector fiscal deficit has regularly exceeded 10% of GDP - due in large part to the huge burden of interest payments, which account for more than 50% of central government spending. Inflation, in recent years in the high double-digit range, fell to 26% in 2003. Perhaps because of these problems, foreign direct investment in Turkey remains low - less than $1 billion annually. In late 2000 and early 2001 a growing trade deficit and serious weaknesses in the banking sector plunged the economy into crisis - forcing Turkey to float the lira and pushing the country into recession. Results in 2002-03 were much better, because of strong financial support from the IMF and tighter fiscal policy. Continued slow global growth and serious political tensions in the Middle East could result in negative growth in 2004.
Turkmenistan Turkmenistan Turkmenistan is a largely desert country with intensive agriculture in irrigated oases and large gas and oil resources. One-half of its irrigated land is planted in cotton; formerly it was the world's tenth-largest producer. Poor harvests in recent years have led to an almost 50% decline in cotton exports. With an authoritarian ex-Communist regime in power and a tribally based social structure, Turkmenistan has taken a cautious approach to economic reform, hoping to use gas and cotton sales to sustain its inefficient economy. Privatization goals remain limited. In 1998-2005, Turkmenistan suffered from the continued lack of adequate export routes for natural gas and from obligations on extensive short-term external debt. At the same time, however, total exports rose by 20% to 30% per year in 2003-2005, largely because of higher international oil and gas prices. In 2005, Ashgabat sought to raise natural gas export prices to its main customers, Russia and Ukraine, from $44 per thousand cubic meters (tcm) to $66 per tcm. Overall prospects in the near future are discouraging because of widespread internal poverty, the burden of foreign debt, the government's irrational use of oil and gas revenues, and its unwillingness to adopt market-oriented reforms. Turkmenistan's economic statistics are state secrets, and GDP and other figures are subject to wide margins of error. In particular, the rate of GDP growth is uncertain. Turkmenistan is largely desert country with intensive agriculture in irrigated oases and large gas and oil resources. One-half of its irrigated land is planted in cotton, making it the world's tenth-largest producer. With an authoritarian ex-Communist regime in power and a tribally based social structure, Turkmenistan has taken a cautious approach to economic reform, hoping to use gas and cotton sales to sustain its inefficient economy. Privatization goals remain limited. In 1998-2003, Turkmenistan suffered from the continued lack of adequate export routes for natural gas and from obligations on extensive short-term external debt. At the same time, however, total exports rose by 38% in 2003, largely because of higher international oil and gas prices. Overall prospects in the near future are discouraging because of widespread internal poverty, the burden of foreign debt, and the unwillingness of the government to adopt market-oriented reforms. However, Turkmenistan's cooperation with the international community in transporting humanitarian aid to Afghanistan may foreshadow a change in the atmosphere for foreign investment, aid, and technological support. Turkmenistan's economic statistics are state secrets, and GDP and other figures are subject to wide margins of error. In any event, GDP increased substantially in 2003 because of a strong recovery in agriculture and rapid industrial growth.
Turks and Caicos Islands Turks and Caicos Islands The Turks and Caicos economy is based on tourism, fishing, and offshore financial services. Most capital goods and food for domestic consumption are imported. The US is the leading source of tourists, accounting for more than half of the annual 93,000 visitors in the late 1990s. Major sources of government revenue also include fees from offshore financial activities and customs receipts. The Turks and Caicos economy is based on tourism, fishing, and offshore financial services. Most capital goods and food for domestic consumption are imported. The US is the leading source of tourists, accounting for more than half of the 93,000 visitors in 1998. Major sources of government revenue include fees from offshore financial activities and customs receipts. Tourism fell by 6% in 2002 but appeared to be picking up at yearend.
Tuvalu Tuvalu Tuvalu consists of a densely populated, scattered group of nine coral atolls with poor soil. The country has no known mineral resources and few exports. Subsistence farming and fishing are the primary economic activities. Fewer than 1,000 tourists, on average, visit Tuvalu annually. Government revenues largely come from the sale of stamps and coins and remittances from seamen on merchant ships abroad. About 1,000 Tuvaluans are being repatriated from Nauru, with the decline of phosphate resources there. Substantial income is received annually from an international trust fund established in 1987 by Australia, NZ, and the UK and supported also by Japan and South Korea. Thanks to wise investments and conservative withdrawals, this fund has grown from an initial $17 million to over $35 million in 1999. The US Government is also a major revenue source for Tuvalu because of payments from a 1988 treaty on fisheries. In an effort to reduce its dependence on foreign aid, the government is pursuing public sector reforms, including privatization of some government functions and personnel cuts of up to 7%. Tuvalu derives around $1.5 million per year from the lease of its ".tv" Internet domain name. With merchandise exports only a fraction of merchandise imports, continued reliance must be placed on fishing and telecommunications license fees, remittances from overseas workers, official transfers, and income from overseas investments. Tuvalu consists of a densely populated, scattered group of nine coral atolls with poor soil. The country has no known mineral resources and few exports. Subsistence farming and fishing are the primary economic activities. Fewer than 1,000 tourists, on average, visit Tuvalu annually. Government revenues largely come from the sale of stamps and coins and worker remittances. About 1,000 Tuvaluans work in Nauru in the phosphate mining industry. Nauru has begun repatriating Tuvaluans, however, as phosphate resources decline. Substantial income is received annually from an international trust fund established in 1987 by Australia, NZ, and the UK and supported also by Japan and South Korea. Thanks to wise investments and conservative withdrawals, this Fund has grown from an initial $17 million to over $35 million in 1999. The US government is also a major revenue source for Tuvalu, because of payments from a 1988 treaty on fisheries. In an effort to reduce its dependence on foreign aid, the government is pursuing public sector reforms, including privatization of some government functions and personnel cuts of up to 7%. In 1998, Tuvalu began deriving revenue from use of its area code for "900" lines and in 2000, from the lease of its ".tv" Internet domain name. Royalties from these new technology sources could increase substantially over the next decade. With merchandise exports only a fraction of merchandise imports, continued reliance must be placed on fishing and telecommunications license fees, remittances from overseas workers, official transfers, and investment income from overseas assets.
Uganda Uganda Uganda has substantial natural resources, including fertile soils, regular rainfall, and sizable mineral deposits of copper and cobalt. Agriculture is the most important sector of the economy, employing over 80% of the work force. Coffee accounts for the bulk of export revenues. Since 1986, the government - with the support of foreign countries and international agencies - has acted to rehabilitate and stabilize the economy by undertaking currency reform, raising producer prices on export crops, increasing prices of petroleum products, and improving civil service wages. The policy changes are especially aimed at dampening inflation and boosting production and export earnings. During 1990-2001, the economy turned in a solid performance based on continued investment in the rehabilitation of infrastructure, improved incentives for production and exports, reduced inflation, gradually improved domestic security, and the return of exiled Indian-Ugandan entrepreneurs. In 2000, Uganda qualified for enhanced Highly Indebted Poor Countries (HIPC) debt relief worth $1.3 billion and Paris Club debt relief worth $145 million. These amounts combined with the original HIPC debt relief added up to about $2 billion. Growth for 2001-02 was solid despite continued decline in the price of coffee, Uganda's principal export. Growth in 2003-05 reflected an upturn in Uganda's export markets. Uganda has substantial natural resources, including fertile soils, regular rainfall, and sizable mineral deposits of copper and cobalt. Agriculture is the most important sector of the economy, employing over 80% of the work force. Coffee accounts for the bulk of export revenues. Since 1986, the government - with the support of foreign countries and international agencies - has acted to rehabilitate and stabilize the economy by undertaking currency reform, raising producer prices on export crops, increasing prices of petroleum products, and improving civil service wages. The policy changes are especially aimed at dampening inflation and boosting production and export earnings. During 1990-2001, the economy turned in a solid performance based on continued investment in the rehabilitation of infrastructure, improved incentives for production and exports, reduced inflation, gradually improved domestic security, and the return of exiled Indian-Ugandan entrepreneurs. Ongoing Ugandan involvement in the war in the Democratic Republic of the Congo, corruption within the government, and slippage in the government's determination to press reforms raise doubts about the continuation of strong growth. In 2000, Uganda qualified for enhanced Highly Indebted Poor Countries (HIPC) debt relief worth $1.3 billion and Paris Club debt relief worth $145 million. These amounts combined with the original HIPC debt relief added up to about $2 billion. Growth for 2001-02 was solid despite continued decline in the price of coffee, Uganda's principal export. Prospects for 2003 are mixed, with probable strengthening of coffee prices yet with halting growth in the economies of major export customers.
Ukraine Ukraine After Russia, the Ukrainian republic was far and away the most important economic component of the former Soviet Union, producing about four times the output of the next-ranking republic. Its fertile black soil generated more than one-fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied the unique equipment (for example, large diameter pipes) and raw materials to industrial and mining sites (vertical drilling apparatus) in other regions of the former USSR. Ukraine depends on imports of energy, especially natural gas, to meet some 85% of its annual energy requirements. Shortly after independence was ratified in December 1991, the Ukrainian Government liberalized most prices and erected a legal framework for privatization, but widespread resistance to reform within the government and the legislature soon stalled reform efforts and led to some backtracking. Output by 1999 had fallen to less than 40% of the 1991 level. Loose monetary policies pushed inflation to hyperinflationary levels in late 1993. Ukraine's dependence on Russia for energy supplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to external shocks. A dispute with Russia over pricing led to a temporary gas cut-off; Ukraine concluded a deal with Russia in January 2006, which almost doubled the price Ukraine pays for Russian gas, and could cost the Ukrainian economy $1.4-2.2 billion and cause GDP growth to fall 3-4%. Ukrainian government officials eliminated most tax and customs privileges in a March 2005 budget law, bringing more economic activity out of Ukraine's large shadow economy, but more improvements are needed, including fighting corruption, developing capital markets, and improving the legislative framework for businesses. Reforms in the more politically sensitive areas of structural reform and land privatization are still lagging. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the pace and scope of reforms. GDP growth was 2.4% in 2005, down from 12.4% in 2004. The current account surplus reached $2.2 billion in 2005. The privatization of the Kryvoryzhstal steelworks in late 2005 produced $4.8 billion in windfall revenue for the government. Some of the proceeds were used to finance the budget deficit, some to recapitalize two state banks, some to retire public debt, and the rest may be used to finance future deficits. After Russia, the Ukrainian republic was far and away the most important economic component of the former Soviet Union, producing about four times the output of the next-ranking republic. Its fertile black soil generated more than one-fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied the unique equipment (for example, large diameter pipes) and raw materials to industrial and mining sites (vertical drilling apparatus) in other regions of the former USSR. Ukraine depends on imports of energy, especially natural gas, to meet some 85% of its annual energy requirements. Shortly after independence in December 1991, the Ukrainian Government liberalized most prices and erected a legal framework for privatization, but widespread resistance to reform within the government and the legislature soon stalled reform efforts and led to some backtracking. Output by 1999 had fallen to less than 40% of the 1991 level. Loose monetary policies pushed inflation to hyperinflationary levels in late 1993. Ukraine's dependence on Russia for energy supplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to external shocks. Now in his second term, President KUCHMA has pledged to reduce the number of government agencies, streamline the regulatory process, create a legal environment to encourage entrepreneurs, and enact a comprehensive tax overhaul. Reforms in the more politically sensitive areas of structural reform and land privatization are still lagging. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the pace and scope of reforms. GDP in 2000 showed strong export-based growth of 6% - the first growth since independence - and industrial production grew 12.9%. The economy continued to expand in 2001 as real GDP rose 9% and industrial output grew by over 14%. Growth of 4.1% in 2002 was more moderate, in part a reflection of faltering growth in the developed world. In general, growth has been undergirded by strong domestic demand, low inflation, and solid consumer and investor confidence. Growth was a sturdy 6% in 2003 despite a loss of mementum in needed economic reforms.
United Arab Emirates United Arab Emirates The UAE has an open economy with a high per capita income and a sizable annual trade surplus. Its wealth is based on oil and gas output (about 30% of GDP), and the fortunes of the economy fluctuate with the prices of those commodities. Since the discovery of oil in the UAE more than 30 years ago, the UAE has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living. At present levels of production, oil and gas reserves should last for more than 100 years. The government has increased spending on job creation and infrastructure expansion and is opening up its utilities to greater private sector involvement. Higher oil revenue, strong liquidity, and cheap credit in 2005 led to a surge in asset prices (shares and real estate) and consumer inflation. Any sharp correction to the UAE's equity markets could damage investor and consumer sentiment and affect bank asset quality. In April 2004, the UAE signed a Trade and Investment Framework Agreement (TIFA) with Washington and in November 2004 agreed to undertake negotiations toward a Free Trade Agreement (FTA) with the US. The UAE has an open economy with a high per capita income and a sizable annual trade surplus. Its wealth is based on oil and gas output (about 33% of GDP), and the fortunes of the economy fluctuate with the prices of those commodities. Since 1973, the UAE has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living. At present levels of production, oil and gas reserves should last for more than 100 years. The government has increased spending on job creation and infrastructure expansion and is opening up its utilities to greater private sector involvement.
United Kingdom United Kingdom The UK, a leading trading power and financial center, is one of the quintet of trillion dollar economies of Western Europe. Over the past two decades, the government has greatly reduced public ownership and contained the growth of social welfare programs. Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs with less than 2% of the labor force. The UK has large coal, natural gas, and oil reserves; primary energy production accounts for 10% of GDP, one of the highest shares of any industrial nation. Services, particularly banking, insurance, and business services, account by far for the largest proportion of GDP while industry continues to decline in importance. GDP growth slipped in 2001-03 as the global downturn, the high value of the pound, and the bursting of the "new economy" bubble hurt manufacturing and exports. Output recovered in 2004, to 3.2% growth, but fell in 2005, to 1.7%. Despite slower growth, the economy is one of the strongest in Europe; inflation, interest rates, and unemployment remain low. The relatively good economic performance has complicated the BLAIR government's efforts to make a case for Britain to join the European Economic and Monetary Union (EMU). Critics point out that the economy is doing well outside of EMU, and public opinion polls show a majority of Britons are opposed to the euro. Meantime, the government has been speeding up the improvement of education, transport, and health services, at a cost in higher taxes and a widening public deficit. The UK, a leading trading power and financial center, is one of the quartet of trillion dollar economies of Western Europe. Over the past two decades the government has greatly reduced public ownership and contained the growth of social welfare programs. Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs with only 1% of the labor force. The UK has large coal, natural gas, and oil reserves; primary energy production accounts for 10% of GDP, one of the highest shares of any industrial nation. Services, particularly banking, insurance, and business services, account by far for the largest proportion of GDP while industry continues to decline in importance. GDP growth slipped in 2001-03 as the global downturn, the high value of the pound, and the bursting of the "new economy" bubble hurt manufacturing and exports. Still, the economy is one of the strongest in Europe; inflation, interest rates, and unemployment remain low. The relatively good economic performance has complicated the BLAIR government's efforts to make a case for Britain to join the European Economic and Monetary Union (EMU). Critics point out, however, that the economy is doing well outside of EMU, and they point to public opinion polls that continue to show a majority of Britons opposed to the single currency. Meantime, the government has been speeding up the improvement of education, transport, and health services, at a cost in higher taxes. The war in March-April 2003 between a US-led coalition and Iraq, together with the subsequent problems of restoring the economy and the polity, involve a heavy commitment of British military forces.
United States United States The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $42,000. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets. US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment; their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households. The response to the terrorist attacks of 11 September 2001 showed the remarkable resilience of the economy. The war in March-April 2003 between a US-led coalition and Iraq, and the subsequent occupation of Iraq, required major shifts in national resources to the military. The rise in GDP in 2004 and 2005 was undergirded by substantial gains in labor productivity. Hurricane Katrina caused extensive damage in the Gulf Coast region in August 2005, but had a small impact on overall GDP growth for the year. Soaring oil prices in 2005 and 2006 threatened inflation and unemployment, yet the economy continued to grow through mid-2006. Imported oil accounts for about two-thirds of US consumption. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups. The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $37,600. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy considerably greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, lay off surplus workers, and develop new products. At the same time, they face higher barriers to entry in their rivals' home markets than the barriers to entry of foreign firms in US markets. US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment, although their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households. The years 1994-2000 witnessed solid increases in real output, low inflation rates, and a drop in unemployment to below 5%. The year 2001 saw the end of boom psychology and performance, with output increasing only 0.3% and unemployment and business failures rising substantially. The response to the terrorist attacks of 11 September 2001 showed the remarkable resilience of the economy. Moderate recovery took place in 2002, with the GDP growth rate rising to 2.45%. A major short-term problem in first half 2002 was a sharp decline in the stock market, fueled in part by the exposure of dubious accounting practices in some major corporations. The war in March/April 2003 between a US-led coalition and Iraq shifted resources to military industries and introduced uncertainties about investment and employment in other sectors of the economy. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade deficits, and stagnation of family income in the lower economic groups.
United States Pacific Island Wildlife Refuges United States Pacific Island Wildlife Refuges no economic activity -
Uruguay Uruguay Uruguay's well-to-do economy is characterized by an export-oriented agricultural sector, a well-educated work force, and high levels of social spending. After averaging growth of 5% annually during 1996-98, in 1999-2002 the economy suffered a major downturn, stemming largely from the spillover effects of the economic problems of its large neighbors, Argentina and Brazil. For instance, in 2001-02 Argentina made massive withdrawals of dollars deposited in Uruguayan banks, which led to a plunge in the Uruguayan peso and a massive rise in unemployment. Total GDP in these four years dropped by nearly 20%, with 2002 the worst year due to the banking crisis. The unemployment rate rose to nearly 20% in 2002, inflation surged, and the burden of external debt doubled. Cooperation with the IMF helped stem the damage. A debt swap with private-sector creditors in 2003 extended the maturity dates on nearly half of Uruguay's then $11.3 billion of public debt and helped restore public confidence. The economy grew about 10% in 2004 as a result of high commodity prices for Uruguayan exports, a competitive peso, growth in the region, and low international interest rates, but slowed to 6.1% in 2005. Uruguay's economy is characterized by an export-oriented agricultural sector, a well-educated workforce, and high levels of social spending. After averaging growth of 5% annually during 1996-98, in 1999-2002 the economy suffered a major downturn, stemming largely from lower demand in Argentina and Brazil, which together account for nearly half of Uruguay's exports. Total GDP in these four years dropped by nearly 20%, with 2002 the worst year. Unemployment rose to nearly 20% in 2002, inflation surged, and the burden of external debt doubled. Cooperation with the IMF and the US has limited the damage, which is still extensive. Moves to reschedule debt and promote economic recovery may help limit a further decline in output in 2003.
Uzbekistan Uzbekistan Uzbekistan is a dry, landlocked country of which 11% consists of intensely cultivated, irrigated river valleys. More than 60% of its population lives in densely populated rural communities. Uzbekistan is now the world's second-largest cotton exporter and fifth largest producer; it relies heavily on cotton production as the major source of export earnings. Other major export earners include gold, natural gas, and oil. Following independence in September 1991, the government sought to prop up its Soviet-style command economy with subsidies and tight controls on production and prices. While aware of the need to improve the investment climate, the government still sponsors measures that often increase, not decrease, its control over business decisions. A sharp increase in the inequality of income distribution has hurt the lower ranks of society since independence. In 2003, the government accepted the obligations of Article VIII under the International Monetary Fund (IMF), providing for full currency convertibility. However, strict currency controls and tightening of borders have lessened the effects of convertibility and have also led to some shortages that have further stifled economic activity. The Central Bank often delays or restricts convertibility, especially for consumer goods. Potential investment by Russia and China in Uzbekistan's gas and oil industry would increase economic growth prospects. In November 2005, Russian President Vladimir PUTIN and Uzbekistan President KARIMOV signed an "alliance" treaty, which included provisions for economic and business cooperation. Russian businesses have shown increased interest in Uzbekistan, especially in mining, telecom, and oil and gas. In December 2005, the Russians opened a "Trade House" to support and develop Russian-Uzbek business and economic ties. Uzbekistan is a dry, landlocked country of which 11% consists of intensely cultivated, irrigated river valleys. More than 60% of its population lives in densely populated rural communities. Uzbekistan is now the world's second-largest cotton exporter, a large producer of gold and oil, and a regionally significant producer of chemicals and machinery. Following independence in December 1991, the government sought to prop up its Soviet-style command economy with subsidies and tight controls on production and prices. Uzbekistan responded to the negative external conditions generated by the Asian and Russian financial crises by emphasizing import substitute industrialization and by tightening export and currency controls within its already largely closed economy. The government, while aware of the need to improve the investment climate, sponsors measures that often increase, not decrease, the government's control over business decisions. A sharp increase in the inequality of income distribution has hurt the lower ranks of society since independence.
Vanuatu Vanuatu This South Pacific island economy is based primarily on small-scale agriculture, which provides a living for 65% of the population. Fishing, offshore financial services, and tourism, with about 50,000 visitors in 2004, are other mainstays of the economy. Mineral deposits are negligible; the country has no known petroleum deposits. A small light industry sector caters to the local market. Tax revenues come mainly from import duties. Economic development is hindered by dependence on relatively few commodity exports, vulnerability to natural disasters, and long distances from main markets and between constituent islands. GDP growth rose less than 3% on average in the 1990s. In response to foreign concerns, the government has promised to tighten regulation of its offshore financial center. In mid-2002 the government stepped up efforts to boost tourism. Agriculture, especially livestock farming, is a second target for growth. Australia and New Zealand are the main suppliers of tourists and foreign aid. The economy is based primarily on subsistence or small-scale agriculture, which provides a living for 65% of the population. Fishing, offshore financial services, and tourism, with about 50,000 visitors in 1997, are other mainstays of the economy. Mineral deposits are negligible; the country has no known petroleum deposits. A small light industry sector caters to the local market. Tax revenues come mainly from import duties. Economic development is hindered by dependence on relatively few commodity exports, vulnerability to natural disasters, and long distances from main markets and between constituent islands. A severe earthquake in November 1999 followed by a tsunami, caused extensive damage to the northern island of Pentecote and left thousands homeless. Another powerful earthquake in January 2002 caused extensive damage in the capital, Port-Vila, and surrounding areas, and also was followed by a tsunami. GDP growth rose less than 3% on average in the 1990s. In response to foreign concerns, the government has promised to tighten regulation of its offshore financial center. In mid-2002 the government stepped up efforts to boost tourism. Australia and New Zealand are the main suppliers of foreign aid.
Venezuela Venezuela Venezuela continues to be highly dependent on the petroleum sector, accounting for roughly one-third of GDP, around 80% of export earnings, and over half of government operating revenues. Government revenue also has been bolstered by increased tax collection, which has surpassed its 2005 collection goal by almost 50%. Tax revenue is the primary source of non-oil revenue, which accounts for 53% of the 2006 budget. A disastrous two-month national oil strike, from December 2002 to February 2003, temporarily halted economic activity. The economy remained in depression in 2003, declining by 9.2% after an 8.9% fall in 2002. Output recovered strongly in 2004-2005, aided by high oil prices and strong consumption growth. Venezuela continues to be an important source of crude oil for the US market. Both inflation and unemployment remain fundamental problems. Venezuela continues to be highly dependent on the petroleum sector, which accounts for roughly one-third of GDP, around 80% of export earnings, and more than half of government operating revenues. Despite higher oil prices at the end of 2002 and into 2003, domestic political instability, culminating in a two-month national oil strike from December 2002 to February 2003, temporarily halted economic activity. The economy is likely to remain in a recession in 2003, after sinking an estimated 8.9 percent in 2002.
Vietnam Vietnam Vietnam is a densely-populated, developing country that in the last 30 years has had to recover from the ravages of war, the loss of financial support from the old Soviet Bloc, and the rigidities of a centrally-planned economy. Substantial progress was achieved from 1986 to 1997 in moving forward from an extremely low level of development and significantly reducing poverty. Growth averaged around 9% per year from 1993 to 1997. The 1997 Asian financial crisis highlighted the problems in the Vietnamese economy and temporarily allowed opponents of reform to slow progress toward a market-oriented economy. GDP growth averaged 6.8% per year from 1997 to 2004 even against the background of the Asian financial crisis and a global recession, and growth hit 8% in 2005. Since 2001, however, Vietnamese authorities have reaffirmed their commitment to economic liberalization and international integration. They have moved to implement the structural reforms needed to modernize the economy and to produce more competitive, export-driven industries. Vietnam's membership in the ASEAN Free Trade Area (AFTA) and entry into force of the US-Vietnam Bilateral Trade Agreement in December 2001 have led to even more rapid changes in Vietnam's trade and economic regime. Vietnam's exports to the US doubled in 2002 and again in 2003. Vietnam hopes to become a member of the WTO in 2006. Among other benefits, accession would allow Vietnam to take advantage of the phase out of the Agreement on Textiles and Clothing, which eliminated quotas on textiles and clothing for WTO partners on 1 January 2005. Agriculture's share of economic output has continued to shrink, from about 25% in 2000 to 21% in 2005. Deep poverty, defined as a percent of the population living under $1 per day, has declined significantly and is now smaller than that of China, India, and the Philippines. Vietnam is working to promote job creation to keep up with the country's high population growth rate. However, high levels of inflation have prompted Vietnamese authorities to tighten monetary and fiscal policies. Vietnam is a poor, densely-populated country that has had to recover from the ravages of war, the loss of financial support from the old Soviet Bloc, and the rigidities of a centrally planned economy. Substantial progress was achieved from 1986 to 1996 in moving forward from an extremely low starting point - growth averaged around 9% per year from 1993 to 1997. The 1997 Asian financial crisis highlighted the problems in the Vietnamese economy but, rather than prompting reform, reaffirmed the government's belief that shifting to a market-oriented economy would lead to disaster. GDP growth of 8.5% in 1997 fell to 6% in 1998 and 5% in 1999. Growth then rose to 6% to 7% in 2000-02 even against the background of global recession. These numbers mask some major difficulties in economic performance. Many domestic industries, including coal, cement, steel, and paper, have reported large stockpiles of inventory and tough competition from more efficient foreign producers. Meanwhile, Vietnamese authorities have moved to implement the structural reforms needed to modernize the economy and to produce more competitive, export-driven industries. The US-Vietnam Bilateral Trade Agreement entered into force near the end of 2001 and is expected to significantly increase Vietnam's exports to the US. The US is assisting Vietnam with implementing the legal and structural reforms called for in the agreement.
Virgin Islands Virgin Islands Tourism is the primary economic activity, accounting for 80% of GDP and employment. The islands normally host 2 million visitors a year. The manufacturing sector consists of petroleum refining, textiles, electronics, pharmaceuticals, and watch assembly. The agricultural sector is small, with most food being imported. International business and financial services are small but growing components of the economy. One of the world's largest petroleum refineries is at Saint Croix. The islands are subject to substantial damage from storms. The government is working to improve fiscal discipline, to support construction projects in the private sector, to expand tourist facilities, to reduce crime, and to protect the environment. Tourism is the primary economic activity, accounting for more than 70% of GDP and 70% of employment. The islands normally host 2 million visitors a year. The manufacturing sector consists of petroleum refining, textiles, electronics, pharmaceuticals, and watch assembly. The agricultural sector is small, with most food being imported. International business and financial services are a small but growing component of the economy. One of the world's largest petroleum refineries is at Saint Croix. The islands are subject to substantial damage from storms. The government is working to improve fiscal discipline, support construction projects in the private sector, expand tourist facilities, reduce crime, and protect the environment.
Wake Island Wake Island Economic activity is limited to providing services to military personnel and contractors located on the island. All food and manufactured goods must be imported. Economic activity is limited to providing services to contractors located on the island. All food and manufactured goods must be imported.
Wallis and Futuna Wallis and Futuna The economy is limited to traditional subsistence agriculture, with about 80% labor force earnings from agriculture (coconuts and vegetables), livestock (mostly pigs), and fishing. About 4% of the population is employed in government. Revenues come from French Government subsidies, licensing of fishing rights to Japan and South Korea, import taxes, and remittances from expatriate workers in New Caledonia. The economy is limited to traditional subsistence agriculture, with about 80% labor force earnings from agriculture (coconuts and vegetables), livestock (mostly pigs), and fishing. About 4% of the population is employed in government. Revenues come from French Government subsidies, licensing of fishing rights to Japan and South Korea, import taxes, and remittances from expatriate workers in New Caledonia.
West Bank West Bank The West Bank - the larger of the two areas under the Palestinian Authority (PA)- has experienced a general decline in economic growth and a degradation in economic conditions made worse since the second intifadah began in September 2000. The downturn has been largely the result of the Israeli closure policies - the imposition of border closures in response to security incidents in Israel - which disrupted labor and commodity market relationships. In 2001, and even more severely in 2002, Israeli military measures in PA areas resulted in the destruction of much capital plant, the disruption of administrative structure, and widespread business closures. Including the Gaza Strip, the UN estimates that more than 100,000 Palestinians out of the 125,000 who used to work in Israeli settlements, or in joint industrial zones, have lost their jobs. International aid of $2 billion to the West Bank and Gaza Strip in 2004 prevented the complete collapse of the economy and allowed some reforms in the government's financial operations. In 2005, high unemployment and limited trade opportunities, due to continued closures both within the West Bank and externally, stymied growth. Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined by about one-third between 1992 and 1996 due to the combined effect of falling aggregate incomes and rapid population growth. The downturn in economic activity was largely the result of Israeli closure policies - the imposition of border closures in response to security incidents in Israel - which disrupted labor and commodity market relationships between Israel and the WBGS. The most serious social effect of this downturn was rising unemployment; unemployment in the WBGS during the 1980s was generally under 5%; by 1995 it had risen to over 20%. Israel's use of comprehensive closures during the next five years decreased and, in 1998, Israel implemented new policies to reduce the impact of closures and other security procedures on the movement of Palestinian goods and labor. These changes fueled an almost three-year-long economic recovery in the West Bank and Gaza Strip; real GDP grew by 5% in 1998 and 6% in 1999. Recovery was upended in the last quarter of 2000 with the outbreak of violence, which triggered tight Israeli closures of Palestinian self-rule areas and severely disrupted trade and labor movements. In 2001, and even more severely in 2002, Israeli military measures in Palestinian Authority areas have resulted in the destruction of much capital plant and administrative structure, widespread business closures, and a sharp drop in GDP. Another major loss has been the decline in earnings of Palestinian workers in Israel. International aid of $2 billion in 2001-02 to the West Bank and Gaza Strip have prevented the complete collapse of the economy.
Western Sahara Western Sahara Western Sahara depends on pastoral nomadism, fishing, and phosphate mining as the principal sources of income for the population. The territory lacks sufficient rainfall for sustainable agricultural production, and most of the food for the urban population must be imported. All trade and other economic activities are controlled by the Moroccan Government. Moroccan energy interests in 2001 signed contracts to explore for oil off the coast of Western Sahara, which has angered the Polisario. Incomes and standards of living in Western Sahara are substantially below the Moroccan level. Western Sahara depends on pastoral nomadism, fishing, and phosphate mining as the principal sources of income for the population. The territory lacks sufficient rainfall for sustainable agricultural production, and most of the food for the urban population must be imported. All trade and other economic activities are controlled by the Moroccan Government. Moroccan energy interests in 2001 signed contracts to explore for oil off the coast of Western Sahara, which has angered the Polisario. Incomes and standards of living in Western Sahara are substantially below the Moroccan level.
World World Global output rose by 4.4% in 2005, led by China (9.3%), India (7.6%), and Russia (5.9%). The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 7% range of growth. Growth results posted by the major industrial countries varied from no gain for Italy to a strong gain by the United States (3.5%). The developing nations also varied in their growth results, with many countries facing population increases that erode gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decisionmaking powers to international bodies, notably the EU. In Western Europe, governments face the difficult political problem of channeling resources away from welfare programs in order to increase investment and strengthen incentives to seek employment. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. Because of their own internal problems and priorities, the industrialized countries devote insufficient resources to deal effectively with the poorer areas of the world, which, at least from an economic point of view, are becoming further marginalized. The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, poses economic risks because of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuated a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. After the coalition victory, the complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continued into 2006. Growth in global output (gross world product, GWP) fell from 4.8% in 2000 to 2.2% in 2001 and 2.7% in 2002. The causes: sluggishness in the US economy (21% of GWP) and in the 15 EU economies (19% of GWP); continued stagnation in the Japanese economy (7.2% of GWP); and spillover effects in the less developed regions of the world. China, the second-largest economy in the world (12% of GWP), proved an exception, continuing its rapid annual growth, officially announced as 8% but estimated by many observers as perhaps two percentage points lower. Russia (2.6% of GWP), with 4% growth, continued to make uneven progress, its GDP per capita still only one-third that of the leading industrial nations. The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 5% range of growth. The developing nations also varied in their growth results, with many countries facing population increases that erode gains in output. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Indonesia, and in Canada. Externally, the central government is losing decision-making powers to international bodies. In Western Europe, governments face the difficult political problem of channeling resources away from welfare programs in order to increase investment and strengthen incentives to seek employment. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. Because of their own internal problems and priorities, the industrialized countries devote insufficient resources to deal effectively with the poorer areas of the world, which, at least from the economic point of view, are becoming further marginalized. The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, poses economic risks because of varying levels of income and cultural and political differences among the participating nations. The terrorist attacks on the US on 11 September 2001 accentuate a further growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. (For specific economic developments in each country of the world in 2002, see the individual country entries.)
Yemen Yemen Yemen, one of the poorest countries in the Arab world, has reported meager growth since 2000. Its economic fortunes depend mostly on oil. Oil revenues increased in 2005 due to higher prices. Yemen was on an IMF-supported structural adjustment program designed to modernize and streamline the economy, which led to substantial foreign debt relief and restructuring. However, government dedication to the program waned in 2001 for political reasons. Yemen is struggling to control excessive spending and rampant corruption. The people have grown increasingly upset over the economic situation. In July 2005, a reduction in fuel subsidies sparked riots; over 20 Yemenis were killed and hundreds were injured. Yemen, one of the poorest countries in the Arab world, reported strong growth in the mid-1990s with the onset of oil production, but has been harmed by periodic declines in oil prices. Yemen has embarked on an IMF-supported structural adjustment program designed to modernize and streamline the economy, which has led to substantial foreign debt relief and restructuring. International donors, meeting in Paris in October 2002, agreed on a further $2.3 billion economic support package. Yemen has worked to maintain tight control over spending and implement additional components of the IMF program. A high population growth rate and internal political dissension complicate the government's task.
Zambia Zambia Despite progress in privatization and budgetary reform, Zambia's economic growth remains somewhat below the 6%-7% needed to reduce poverty significantly. Privatization of government-owned copper mines relieved the government from covering mammoth losses generated by the industry and greatly improved the chances for copper mining to return to profitability and spur economic growth. Copper output has increased steadily since 2004, due to higher copper prices and the opening of new mines. The maize harvest was again good in 2005, helping boost GDP and agricultural exports. Cooperation continues with international bodies on programs to reduce poverty, including a new lending arrangement with the IMF in the second quarter of 2004. A tighter monetary policy will help cut inflation, but Zambia still has a serious problem with high public debt. Despite progress in privatization and budgetary reform, Zambia's economic growth remains below the 5% to 7% necessary to reduce poverty significantly. Privatization of government-owned copper mines relieved the government from covering mammoth losses generated by the industry and greatly improved the chances for copper mining to return to profitability and spur economic growth. However, low mineral prices have slowed the benefits of privatizing the mines and have reduced incentives for further private investment in the sector. Cooperation continues with international bodies on programs to reduce poverty.
Zimbabwe Zimbabwe The government of Zimbabwe faces a wide variety of difficult economic problems as it struggles with an unsustainable fiscal deficit, an overvalued exchange rate, soaring inflation, and bare shelves. Its 1998-2002 involvement in the war in the Democratic Republic of the Congo, for example, drained hundreds of millions of dollars from the economy. Badly needed support from the IMF has been suspended because of the government's arrears on past loans, which it began repaying in 2005. The official annual inflation rate rose from 32% in 1998, to 133% at the end of 2004, and 585% at the end of 2005, although private sector estimates put the figure much higher. Meanwhile, the official exchange rate fell from 24 Zimbabwean dollars per US dollar in 1998 to 96,000 in mid-January 2006. The government's land reform program, characterized by chaos and violence, has badly damaged the commercial farming sector, the traditional source of exports and foreign exchange and the provider of 400,000 jobs, turning Zimbabwe into a net importer of food products. The government of Zimbabwe faces a wide variety of difficult economic problems as it struggles with an unsustainable fiscal deficit, an overvalued exchange rate, soaring inflation, and bare shelves. Its 1998-2002 involvement in the war in the Democratic Republic of the Congo, for example, drained hundreds of millions of dollars from the economy. Badly needed support from the IMF has been suspended because of the country's failure to meet budgetary goals. Inflation rose from an annual rate of 32% in 1998 to 59% in 1999, to 60% in 2000, to over 100% by yearend 2001, to 228% in early 2003. The government's land reform program, characterized by chaos and violence, has nearly destroyed the commercial farming sector, the traditional source of exports and foreign exchange and the provider of 400,000 jobs.
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