This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.
Afghanistan's economy is recovering from decades of conflict. The economy has improved significantly since the fall of the Taliban regime in 2001 largely because of the infusion of international assistance, the recovery of the agricultural sector, and service sector growth. Real GDP growth fell from the 10% level in 2006-07 to a little more than 3% in 2008. Despite the progress of the past few years, Afghanistan is extremely poor, landlocked, and highly dependent on foreign aid, agriculture, and trade with neighboring countries. Much of the population continues to suffer from shortages of housing, clean water, electricity, medical care, and jobs. Criminality, insecurity, and the Afghan Government's inability to extend rule of law to all parts of the country pose challenges to future economic growth. 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 level, among the lowest in the world. International pledges made by more than 60 countries and international financial institutions at the Berlin Donors Conference for Afghan reconstruction in March 2004 reached $8.9 billion for 2004-09. While the international community remains committed to Afghanistan's development, pledging over $57 billion at three donors' conferences since 2002, Kabul will need to overcome a number of challenges. Expanding poppy cultivation and a growing opium trade generate roughly $3 billion in illicit economic activity and looms as one of Kabul's most serious policy concerns. Other long-term challenges include: budget sustainability, job creation, corruption, government capacity, and rebuilding war torn infrastructure.
Lagging behind its Balkan neighbors, Albania is making the difficult transition to a more modern open-market economy. Macroeconomic growth has averaged around 5% over the last five years and inflation is low and stable. The government has taken measures to curb violent crime, and recently adopted a fiscal reform package aimed at reducing the large gray economy and attracting foreign investment. The economy is bolstered by annual remittances from abroad representing about 15% of GDP, mostly from Albanians residing in Greece and Italy; this helps offset the towering trade deficit. The agricultural sector, which accounts for over half of employment but only about one-fifth of GDP, is limited primarily to small family operations and subsistence farming because of lack of modern equipment, unclear property rights, and the prevalence of small, inefficient plots of land. Energy shortages because of a reliance on hydropower, and antiquated and inadequate infrastructure contribute to Albania's poor business environment and lack of success in attracting new foreign investment. The completion of a new thermal power plant near Vlore has helped diversify generation capacity, and plans to upgrade transmission lines between Albania and Montenegro and Kosovo would help relieve the energy shortages. Also, with help from EU funds, the government is taking steps to improve the poor national road and rail network, a long-standing barrier to sustained economic growth.
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 eighth-largest reserves of natural gas in the world and is the fourth-largest gas exporter; it ranks 15th in oil reserves. Sustained high oil prices in recent years have helped improve Algeria's financial and macroeconomic indicators. Algeria is running substantial trade surpluses and building up record foreign exchange reserves. Algeria has decreased its external debt to less than 5% of GDP after repaying its Paris Club and London Club debt in 2006. 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. 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.
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 commerce. 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.
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.
Angola's high growth rate is driven by its oil sector, which has taken advantage of high international oil prices. Oil production and its supporting activities contribute about 85% of GDP. Increased oil production supported growth averaging more than 15% per year from 2004 to 2007. 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 most of the people, but half of the country's food must still be imported. In 2005, the government started using a $2 billion line of credit, since increased to $7 billion, from China to rebuild Angola's public infrastructure, and several large-scale projects were completed in 2006. Angola also has large credit lines from Brazil, Portugal, Germany, Spain, and the EU. The central bank in 2003 implemented an exchange rate stabilization program using foreign exchange reserves to buy kwanzas out of circulation. This policy became more sustainable in 2005 because of strong oil export earnings; it has significantly reduced inflation. Although consumer inflation declined from 325% in 2000 to under 13% in 2008, the stabilization policy has put pressure on international net liquidity. Angola became a member of OPEC in late 2006 and in late 2007 was assigned a production quota of 1.9 million barrels a day, somewhat less than the 2-2.5 million bbl Angola's government had wanted. To fully take advantage of its rich national resources - gold, diamonds, extensive forests, Atlantic fisheries, and large oil deposits - Angola will need to implement government reforms, increase transparency, and reduce corruption. The government has rejected a formal IMF monitored program, although it continues Article IV consultations and ad hoc cooperation. Corruption, especially in the extractive sectors, and the negative effects of large inflows of foreign exchange, are major challenges facing Angola.
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 has spurred the growth of the construction sector contributing 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.
Fishing off the coast and tourism, both based abroad, account for Antarctica's limited economic activity. Antarctic fisheries in 2006-07 (1 July-30 June) reported landing 126,976 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 (Dissostichus eleginoides - also known as Chilean sea bass), is a serious problem. The CCAMLR determines the recommended catch limits for marine species. A total of 45,652 tourists visited the Antarctic Treaty area in the 2007-08 Antarctic summer, up from the 36,460 visitors in 2006-2007, and the 30,877 visitors in 2005-2006 (estimates provided to the Antarctic Treaty by the International Association of Antarctica Tour Operators (IAATO); this does not include passengers on overflights). 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.
Antigua has a relatively high GDP per capita in comparison to most other Caribbean nations. The economy experienced solid growth from 2003 to 2007, reaching over 12% in 2006 driven by a construction boom in hotels and housing associated with the Cricket World Cup. Growth dropped off in 2008 with the end of the boom. Tourism continues to dominate the economy, accounting for nearly 60% of GDP and 40% of investment. 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 tourist arrivals from the US, Canada, and Europe and potential damages from natural disasters. Since taking office in 2004, the SPENCER government has adopted an ambitious fiscal reform program, and has been successful in reducing its public debt-to-GDP ratio from 120% to about 90%.
Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Although one of the world's wealthiest countries 100 years ago, Argentina suffered during most of the 20th century from recurring economic crises, persistent fiscal and current account deficits, high inflation, mounting external debt, and capital flight. A severe depression, growing public and external indebtedness, and a bank run culminated in 2001 in the most serious economic, social, and political crisis in the country's turbulent history. Interim President Adolfo RODRIGUEZ SAA declared a default - the largest in history - on the government's foreign debt in December of that year, and abruptly resigned only a few days after taking office. His successor, Eduardo DUHALDE, announced an end to the peso's decade-long 1-to-1 peg to the US dollar in early 2002. The economy bottomed out that year, with real GDP 18% smaller than in 1998 and almost 60% of Argentines under the poverty line. Real GDP rebounded to grow by an average 9% annually over the subsequent five years, taking advantage of previously idled industrial capacity and labor, an audacious debt restructuring and reduced debt burden, excellent international financial conditions, and expansionary monetary and fiscal policies. Inflation also increased, however, during the administration of President Nestor KIRCHNER, which responded with price restraints on businesses, as well as export taxes and restraints, and beginning in early 2007, with understating inflation data. Cristina FERNANDEZ DE KIRCHNER succeeded her husband as President in late 2007, but was stymied in her efforts to hike export taxes still further by protesting farmers. Her government nationalized private pension funds in late 2008, which bolstered government coffers, but failed to assuage investors' concerns about the direction of economic policy.
Since the breakup of the Soviet Union in 1991, Armenia has made progress in implementing many economic reforms including privatization, price reforms, and prudent fiscal policies. The conflict with Azerbaijan over the ethnic Armenian-dominated region of Nagorno-Karabakh contributed to a severe economic decline in the early 1990s. By 1994, however, the Armenian Government launched an ambitious IMF-sponsored economic liberalization program that resulted in positive growth rates. Economic growth has averaged over 10% in recent years. However, with the global economic downturn, Armenia's growth rate dropped to 6.8% in 2008. Armenia has managed to reduce poverty, slash inflation, stabilize its currency, and privatize most small- and medium-sized enterprises. Under the old Soviet central planning system, Armenia developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics, in exchange for raw materials and energy. Armenia has since switched to small-scale agriculture and away from the large agroindustrial complexes of the Soviet era. Nuclear power plants built at Metsamor in the 1970s were closed following the 1988 Spitak Earthquake, though they sustained no damage. One of the two reactors was re-opened in 1995, but the Armenian government is under international pressure to close it due to concerns that the Soviet era design lacks important safeguards. Metsamor provides 40 percent of the country's electricity - hydropower accounts for about one-fourth. Economic ties with Russia remain close, especially in the energy sector. The electricity distribution system was privatized in 2002 and bought by Russia's RAO-UES in 2005. Construction of a pipeline to deliver natural gas from Iran to Armenia was completed in December 2008 and after testing is expected to be operational in Spring 2009, though it is unlikely significant quantities of gas will flow through it until the Yerevan Thermal Power Plant renovation is completed in 2010. Armenia has some mineral deposits (copper, gold, bauxite). Pig iron, unwrought copper, and other nonferrous metals are Armenia's highest valued exports. Armenia's severe trade imbalance has been offset somewhat by international aid, remittances from Armenians working abroad, and foreign direct investment. Armenia joined the WTO in January 2003. The government made some improvements in tax and customs administration in recent years, but anti-corruption measures will be more difficult to implement. Despite strong economic growth, Armenia's unemployment rate remains high. Armenia will need to pursue additional economic reforms in order to improve its economic competitiveness and to build on recent improvements in poverty and unemployment, especially given its economic isolation from two of its nearest neighbors, Turkey and Azerbaijan. The disruption of rail transit into Armenia during the Georgia-Russia conflict in August 2008 highlighted how vulnerable Armenia's supply chains for key goods - such as gasoline - are to instances of regional instability.
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 country's oil refinery reopened in 1993 providing a major source of employment, foreign exchange earnings, and growth. Tourist arrivals have rebounded strongly following a dip after the 11 September 2001 attacks. The island experiences only a brief low season. Hotel occupancy in 2004 averaged 80% compared to 68% throughout the rest of the Caribbean. The government has made cutting the budget and trade deficits a high priority.
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).
Australia has an enviable, strong economy with a per capita GDP on par with the four dominant West European economies. Emphasis on reforms, low inflation, a housing market boom, and growing ties with China have been key factors over the course of the economy's 17 solid years of expansion. Robust business and consumer confidence and high export prices for raw materials and agricultural products fueled the economy in recent years, particularly in mining states. Drought, robust import demand, and a strong currency pushed the trade deficit up however, while infrastructure bottlenecks and a tight labor market constrained growth in export volumes and stoked inflation through mid-2008. The unwinding of the yen-based carry trade in late 2008 has contributed to a weakening of the Australian dollar. Tight global liquidity has challenged Australia's banking sector, which relies heavily on international wholesale markets for funding. The economy remains relatively healthy despite falling export commodity prices. The government plans to counter slowing growth in 2009 with fiscal stimulus efforts.
Austria, with its well-developed market economy and high standard of living, is closely tied to other EU economies, especially Germany's. Its economy features a large service sector, a sound industrial sector, and a small, but highly developed agricultural sector. Following several years of solid foreign demand for Austrian exports and record employment growth, the global economic downturn in 2008 led to a recession that is likely to persist through 2009. The government's stabilization measures could increase the budget deficit to about 2.8% of GDP in 2009 and above 3% in 2010, from about 0.6% in 2008. The Austrian economy has benefited greatly in the past from strong commercial relations, especially in the banking and insurance sectors, with central, eastern, and southeastern Europe, but these sectors have been vulnerable to recent international financial instabilities, and some of Austria's largest banks have required government support. Even after the global economic outlook improves, Austria will need to continue restructuring, emphasizing knowledge-based sectors of the economy, and encouraging greater labor flexibility and greater labor participation to offset its aging population and exceedingly low fertility rate.
Azerbaijan's high economic growth during 2006-08 is attributable to large and growing oil exports, but the non-energy sector also featured double-digit growth in 2008, spurred by growth in the construction, banking, and real estate sectors. However, the current global economic slowdown presents some challenges for the Azerbaijani economy as oil prices have plummeted since mid-2008 and local banks face a more uncertain international financial environment. 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 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 built a $4 billion pipeline from Baku to Turkey's Mediterranean port of Ceyhan which will pump 1.2 million barrels a day from a large offshore field when at full capacity. 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 medium-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, pervasive corruption, and potential for a sharp downturn in the construction and real estate sectors. 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 oil and gas pipelines in the region, and Azerbaijan's ability to manage its energy wealth to promote sustainable growth in non-energy sectors of the economy and spur employment.
The Bahamas is one of the wealthiest Caribbean countries 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 tourist arrivals have been on the decline since 2006 and will likely drop even further in 2009. Tourism, in turn, depends on growth in the US, the source of more than 80% of the visitors. To help offset the effect of the global economic downturn, particularly on employment, the INGRAHAM administration plans to engage in infrastructure projects. Financial services constitute the second-most important sector of the Bahamian economy and, when combined with business services, account for about 36% 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 combined 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.
With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the Gulf. Petroleum production and refining account for over 60% of Bahrain's export receipts, over 70% of government revenues, and 11% of GDP (exclusive of allied industries), underpinning Bahrain's strong economic growth in recent years. Aluminum is Bahrain's second major export after oil. Other major segments of Bahrain's economy are the financial and construction sectors. Bahrain is focused on Islamic banking and is competing on an international scale with Malaysia as a worldwide banking center. Bahrain is actively pursuing the diversification and privatization of its economy to reduce the country's dependence on oil. As part of this effort, in August 2006 Bahrain and the US implemented a Free Trade Agreement (FTA), the first FTA between the US and a Gulf state. Continued strong growth hinges on Bahrain's ability to acquire new natural gas supplies as feedstock to support its expanding petrochemical and aluminum industries. Unemployment, especially among the young, and the depletion of oil and underground water resources are long-term economic problems. The global financial crisis is likely to result in slower economic growth for Bahrain during 2009 as tight international credit and a slowing global economy cause funding for many non-oil projects to dry up. Lower oil prices may also cause Bahrain's budget to slip back into deficit.
The economy has grown 5-6% per year since 1996 despite inefficient state-owned enterprises, delays in exploiting natural gas resources, insufficient power supplies, and slow implementation of economic reforms. Bangladesh remains a poor, overpopulated, and inefficiently-governed nation. Although more than 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. Garment exports and remittances from Bangladeshis working overseas, mainly in the Middle East and East Asia, fuel economic growth. In 2008 Bangladesh pursued a monetary policy aimed at maintaining high employment, but created higher inflation in the process.
Historically, the Barbadian economy was dependent on sugarcane cultivation and related activities. However, in recent years the economy has diversified into light industry and tourism with about three-quarters of GDP and 80% of exports being attributed to services. Growth has rebounded since 2003, bolstered by increases in construction projects and tourism revenues, reflecting its success in the higher-end segment, but the sector will likely face declining revenues with the global economic downturn. The country enjoys one of the highest per capita incomes in the region. Offshore finance and information services are important foreign exchange earners and thrive from having the same time zone as eastern US financial centers and a relatively highly educated workforce. The government continues its efforts to reduce unemployment, to encourage direct foreign investment, and to privatize remaining state-owned enterprises. The public debt-to-GDP ratio of about 80% will likely widen as the THOMPSON administration engages in a more expansionary fiscal policy.
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. Since 2005, the government has 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. Nevertheless, government statistics indicate GDP growth has been strong in recent years, reaching 10% in 2008, despite the roadblocks of a tough, centrally directed economy with a high rate of inflation. Belarus receives discounted oil and natural gas from Russia and much of Belarus' growth can be attributed to the re-export of Russian oil at market prices. Trade with Russia - by far its largest single trade partner - decreased in 2007-08, largely as a result of a change in the way the Value Added Tax (VAT) on trade was collected. Russia has introduced an export duty on oil shipped to Belarus, which will increase gradually through 2009, and a requirement that Belarusian duties on re-exported Russian oil be shared with Russia - 80% was slated to go to Russia in 2008, and 85% in 2009. Russia also increased Belarusian natural gas prices from $47 per thousand cubic meters (tcm)in 2006 to $100 per tcm in 2007, and to $128 per tcm in 2008, and plans to increase prices gradually to world levels by 2011. Russia's recent policy of bringing energy prices for Belarus to world market levels may result in a slowdown in economic growth in Belarus over the next few years. Some policy measures, including improving energy efficiency and diversifying exports, have been introduced, but external borrowing has been the main mechanism used to manage the growing pressures on the economy. Belarus felt the effects of the global financial crisis in late 2008 and reached agreement with Russia in November for a $2 billion stabilization loan and with the IMF for a $2.5 billion stand-by agreement in January 2009. In line with IMF conditionality, Belarus devalued the ruble approximately 20% in January 2009 and has tightened some fiscal and monetary policies. Belarus's economic growth is likely to slow in 2009 as it faces decreasing demand for its exports, and will find it difficult to increase external borrowing if the credit markets continue to tighten.
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 more than 80% of GDP. On the positive side, the government succeeded in balancing its budget during the 2000-2008 period, and income distribution is relatively equal. Belgium began circulating the euro currency in January 2002. Economic growth and foreign direct investment dropped in 2008. In 2009 Belgium is likely to have negative growth, growing unemployment, and a 3% budget deficit, stemming from the worldwide banking crisis.
In this small, essentially private-enterprise economy, tourism is the number one foreign exchange earner followed by exports of 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 4% in 1999-2007, though growth slipped to 3.8% in 2008 as a result of the global slowdown, natural disasters, and the drop in the price of oil. Oil discoveries in 2006 bolstered the economic growth. Exploration efforts continue and a small increase in production is expected in 2009. Major concerns continue to be the sizable trade deficit and unsustainable foreign debt equivalent to nearly 70% of GDP. In February 2007, the government restructured nearly all of its public external commercial debt, which helped reduce interest payments and relieve some of the country's liquidity concerns. A key short-term objective remains the reduction of poverty with the help of international donors.
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 seven 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. Specific projects to improve the business climate by reforms to the land tenure system, the commercial justice system, and the financial sector were included in Benin's $307 million Millennium Challenge Account grant signed in February 2006. The 2001 privatization policy continues in telecommunications, water, electricity, and agriculture though the government annulled the privatization of Benin's state cotton company in November 2007 after the discovery of irregularities in the bidding process. 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. An insufficient electrical supply continues to adversely affect Benin's economic growth though the government recently has taken steps to increase domestic power production.
Bermuda enjoys the third 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 the 11 September 2001 attacks and again after Hurricane Katrina in August 2005 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.
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 60% 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. 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 such as industrial licensing, trade, labor, and finance continue to hamper foreign investment. Hydropower exports to India have boosted Bhutan's overall growth, even though GDP fell in 2008 as a result of a slowdown in India, its predominant export market. New hydropower projects will be the driving force behind Bhutan's ability to create employment and sustain growth in the coming years.
Bolivia is one of the poorest and least developed countries in Latin America. Following a disastrous economic crisis during the early 1980s, reforms spurred private investment, stimulated economic growth, and cut poverty rates in the 1990s. The period 2003-05 was characterized by political instability, racial tensions, and violent protests against plans - subsequently abandoned - to export Bolivia's newly discovered natural gas reserves to large northern hemisphere markets. In 2005, the government passed a controversial hydrocarbons law that imposed significantly higher royalties and required foreign firms then operating under risk-sharing contracts to surrender all production to the state energy company. In early 2008, higher earnings for mining and hydrocarbons exports pushed the current account surplus to 9.4% of GDP and the government's higher tax take produced a fiscal surplus after years of large deficits. Private investment as a share of GDP, however, remains among the lowest in Latin America, and inflation remained at double-digit levels in 2008. The decline in commodity prices in late 2008, the lack of foreign investment in the mining and hydrocarbon sectors, and the suspension of trade benefits with the United States will pose challenges for the Bolivian economy in 2009.
The interethnic warfare in Bosnia and Herzegovina 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 2003-08 when GDP growth exceeded 5% per year. 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. 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. Bosnia's private sector is growing and foreign investment is slowly increasing, but government spending, at nearly 40% of adjusted GDP, remains high because of redundant government offices at the state, entity and municipal level. Implementing privatization, however, has been slow, particularly in the Federation where political division between ethnically-based political parties makes agreement on economic policy more difficult. A sizeable current account deficit and high unemployment rate remain the two most serious macroeconomic problems. Successful implementation of a value-added tax in 2006 provided a predictable source of revenue for the government and helped rein in gray market activity. National-level statistics have also improved over time but a large share of economic activity remains unofficial and unrecorded. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007. Bosnia's economy has been largely sheltered from the global financial downtown although key economic indicators have worsened. Key exporters in the metal, automobile and wood processing industries have reported a worsening performance and have announced layoffs and output reductions.
Botswana has maintained one of the world's highest economic growth rates since independence in 1966, though growth fell below 5% in 2007-08. 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 $13,300 in 2008. 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 was 23.8% in 2004, 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.
Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and Brazil is expanding its presence in world markets. From 2003 to 2007, Brazil ran record trade surpluses and recorded its first current account surpluses since 1992. Productivity gains coupled with high commodity prices contributed to the surge in exports. Brazil improved its debt profile in 2006 by shifting its debt burden toward real denominated and domestically held instruments. LULA da Silva restated his commitment to fiscal responsibility by maintaining the country's primary surplus during the 2006 election. Following his second inauguration in October of that year, LULA da Silva announced a package of further economic reforms to reduce taxes and increase investment in infrastructure. Brazil's debt achieved investment grade status early in 2008, but the government's attempt to achieve strong growth while reducing the debt burden created inflationary pressures. For most of 2008, the Central Bank embarked on a restrictive monetary policy to stem these pressures. Since the onset of the global financial crisis in September, Brazil's currency and its stock market - Bovespa - have significantly lost value, -41% for Bovespa for the year ending 30 December 2008. Brazil incurred another current account deficit in 2008, as world demand and prices for commodities dropped in the second-half of the year.
All economic activity is concentrated on the largest island of Diego Garcia, where a joint UK-US military facility is located. Construction projects and various services needed to support the military installation are performed by military and contract employees from the UK, Mauritius, the Philippines, and the US. There are no industrial or agricultural activities on the islands. The territory earns foreign exchange by selling fishing licenses and postage stamps.
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 820,000 tourists, mainly from the US, visited the islands in 2005. 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.
Brunei has a small well-to-do economy that encompasses a mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village tradition. Crude oil and natural gas production account for just over half of GDP and more than 90% of exports. Per capita GDP is among the highest in Asia, 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 into the world economy will undermine internal social cohesion. Plans for the future include upgrading the labor force, reducing unemployment, strengthening the banking and tourist sectors, increasing agricultural production, and, in general, further widening the economic base beyond oil and gas.
Bulgaria, a former Communist country that entered the EU on 1 January 2007, has experienced strong growth since a major economic downturn in 1996. Successive governments have demonstrated a commitment to economic reforms and responsible fiscal planning, but have failed so far to rein in rising inflation and large current account deficits. Bulgaria has averaged more than 6% growth since 2004, attracting significant amounts of foreign direct investment, but corruption in the public administration, a weak judiciary, and the presence of organized crime remain significant challenges.
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 periodic drought. Cotton is the main cash crop and the government has joined with three other cotton producing countries in the region - Mali, Niger, and Chad - to lobby in the World Trade Organization for fewer subsidies to producers in other competing countries. Since 1998, Burkina Faso has embarked upon a gradual but successful privatization of state-owned enterprises. Having revised its investment code in 2004, Burkina Faso hopes to attract foreign investors. Thanks to this new code and other legislation favoring the mining sector, the country has seen an upswing in gold exploration and production. While the bitter internal crisis in neighboring Cote d'Ivoire is beginning to be resolved, it is still having a negative effect on Burkina Faso's trade and employment. Burkina Faso received a Millennium Challenge Corporation (MCC) threshold grant to improve girls' education at the primary school level, and signed an MCC compact that focuses on the areas of infrastructure, agriculture, and land reform in July 2008.
Burma, a resource-rich country, suffers from pervasive government controls, inefficient economic policies, and rural poverty. Despite Burma's increasing oil and gas revenue, socio-economic conditions have deteriorated because of the regime's mismanagement of the economy. The economy suffers from serious macroeconomic imbalances - including rising inflation, fiscal deficits, multiple official exchange rates that overvalue the Burmese kyat, a distorted interest rate regime, unreliable statistics, and an inability to reconcile national accounts to determine a realistic GDP figure. 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 in August 2003 including a ban on imports of Burmese products and a ban on provision of financial services by US persons. Further, a poor investment climate hampers the inflow of foreign investment. Foreign investors have shied away from nearly every sector except for natural gas and power generation. The business climate is widely perceived as opaque, corrupt, and highly inefficient. The most productive sectors will continue to be in extractive industries - especially oil and gas, mining, and timber - with the latter causing significant environmental degradation. Other areas, such as manufacturing and services, are struggling with inadequate infrastructure, unpredictable import/export policies, deteriorating health and education systems, and endemic corruption. A major banking crisis in 2003 shuttered 20 private banks and disrupted the economy. As of 2008, the largest private banks operated under tight restrictions, limiting the private sector's access to formal credit. The September 2007 crackdown on prodemocracy demonstrators, including thousands of monks, strained the economy as the tourism industry, which directly employs about 500,000 people, suffered dramatic declines in foreign visitor levels. In November 2007, the European Union announced new sanctions banning investment and trade in Burmese gems, timber, and precious stones, while the United States expanded its sanctions list to include more Burmese government and military officials and their family members, as well as prominent regime business cronies, their family members, and associated companies. Official statistics are inaccurate. In July 2008 the President signed into law the Tom LANTOS JADE (Junta's Anti-Democratic Efforts) Act of 2008, imposing new targeted sanctions on the regime. 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. 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 serious foreign investment, exports, and tourism.
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 rests primarily on weather conditions and international coffee and tea prices. The Tutsi minority, 14% of the population, dominates the coffee trade. 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 15 adults has HIV/AIDS. Food, medicine, and electricity remain in short supply. Burundi's GDP grew around 4% annually in 2006-08. 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 will continue to remain heavily dependent on aid from bilateral and multilateral donors; the delay of funds after a corruption scandal cut off bilateral aid in 2007 reduced government's revenues and its ability to pay salaries.
From 2004 to 2007, the economy grew about 10% per year, driven largely by an expansion in the garment sector, construction, agriculture, and tourism. Growth dropped to below 7% in 2008 as a result of the global economic slowdown. With the January 2005 expiration of a WTO Agreement on Textiles and Clothing, Cambodian textile producers were forced to compete directly with lower-priced countries such as China, India, Vietnam, and Bangladesh. The garment industry currently employs more than 320,000 people and contributes more than 85% of Cambodia's exports. In 2005, exploitable oil deposits were found beneath Cambodia's territorial waters, representing a new revenue stream for the government if commercial extraction begins. Mining also is attracting significant investor interest, particularly in the northern parts of the country. The government has said opportunities exist for mining bauxite, gold, iron and gems. In 2006, a US-Cambodia bilateral Trade and Investment Framework Agreement (TIFA) was signed, and several rounds of discussions have been held since 2007. The tourism industry has continued to grow rapidly, with foreign arrivals exceeding 2 million per year in 2007-08, however, economic troubles abroad will dampen growth in 2009. Rubber exports declined more than 15% in 2008 due to falling world market prices. The global financial crisis is weakening demand for Cambodian exports, and construction is declining due to a shortage of credit. The long-term development of the economy remains a daunting challenge. The Cambodian government is working with bilateral and multilateral donors, including the World Bank and IMF, to address the country's many pressing needs. 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 less than 21 years old. The population lacks education and productive skills, particularly in the poverty-ridden countryside, which suffers from an almost total lack of basic infrastructure.
Because of its modest 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 stagnating per capita income, a relatively inequitable distribution of income, a top-heavy civil service, and a generally unfavorable climate for business enterprise. International oil and cocoa prices have a significant impact on the economy. 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. The IMF is pressing for more reforms, including increased budget transparency, privatization, and poverty reduction programs.
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, its principle trading partner. Canada enjoys a substantial trade surplus with the US, which absorbs nearly 80% of Canadian exports each year. Canada is the US's largest foreign supplier of energy, including oil, gas, uranium, and electric power. Given its great natural resources, skilled labor force, and modern capital plant, Canada has enjoyed solid economic growth, and prudent fiscal management has produced consecutive balanced budgets from 1997 to 2007. In 2008, growth slowed sharply as a result of the global economic downturn, US housing slump, plunging auto sector demand, and a drop in world commodity prices. Public finances, too, are set to deteriorate for the first time in a decade. Tight global credit conditions have further restrained business and housing investment, despite the conservative lending practices and strong capitalization that made Canada's major banks among the most stable in the world.
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 about three-fourths of GDP. Although nearly 70% of the population lives in rural areas, the share of food production in GDP is low. 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. Cape Verde became a member of the WTO in July 2008.
With no direct taxation, the islands are a thriving offshore financial center. More than 68,000 companies were registered in the Cayman Islands as of 2003, including almost 500 banks, 800 insurers, and 5,000 mutual funds. 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 2.1 million in 2003, with about half 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.
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 more than 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. Distribution of income is extraordinarily unequal. Grants from France and the international community can only partially meet humanitarian needs.
Chad's primarily agricultural economy will continue to be boosted by major foreign direct investment projects in the oil sector that began in 2000. At least 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. Chinese companies are also expanding exploration efforts and plan to build a refinery. The nation's total oil reserves are estimated at 1.5 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.
Chile has a market-oriented economy characterized by a high level of foreign trade and a reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. Exports account for 40% of GDP, with commodities making up some three-quarters of total exports. Copper alone provides one-third of government revenue. 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 situation 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. In the years since then, growth has averaged 4% per year. 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 claims to have more bilateral or regional trade agreements than any other country. It has 57 such agreements (not all of them full free trade agreements), including with the European Union, Mercosur, China, India, South Korea, and Mexico. Over the past five years, foreign direct investment inflows have quadrupled to some $17 billion in 2008. The Chilean government conducts a rule-based countercyclical fiscal policy, accumulating surpluses in sovereign wealth funds during periods of high copper prices and economic growth, and allowing deficit spending only during periods of low copper prices and growth. As of September 2008, those sovereign wealth funds - kept mostly outside the country and separate from Central Bank reserves - amounted to more than $20 billion.
China's economy during the past 30 years 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. Annual inflows of foreign direct investment rose to nearly $84 billion in 2007. China has generally implemented reforms in a gradualist or piecemeal fashion. In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. After keeping its currency tightly linked to the US dollar for years, China in July 2005 revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. Cumulative appreciation of the renminbi against the US dollar since the end of the dollar peg was more than 20% by late 2008, but the exchange rate has changed little since the onset of the global financial crisis. 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 that adjusts for price differences, China in 2008 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income. The Chinese government faces numerous economic development challenges, including: (a) strengthening its social safety net, including pension and health system reform, to counteract a high domestic savings rate and correspondingly low domestic demand; (b) sustaining adequate job growth for tens of millions of migrants, new entrants to the work force, and workers laid off from state-owned enterprises deemed not worth saving; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy's rapid transformation. Economic development has been more rapid in coastal provinces than in the interior, and approximately 200 million rural laborers and their dependents have relocated to urban areas to find work - in recent years many have returned to their villages. One demographic consequence of the "one child" policy is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the north - is another long-term problem. China continues to lose arable land because of erosion and economic development. In 2007 China intensified government efforts to improve environmental conditions, tying the evaluation of local officials to environmental targets, publishing a national climate change policy, and establishing a high level leading group on climate change, headed by Premier WEN Jiabao. The Chinese government seeks to add energy production capacity from sources other than coal and oil. In late 2008, as China commemorated the 30th anniversary of its historic economic reforms, the global economic downturn began to slow foreign demand for Chinese exports for the first time in many years. The government vowed to continue reforming the economy and emphasized the need to increase domestic consumption in order to make China less dependent on foreign exports for GDP growth in the 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, but closed in 1998. The Australian government in 2001 agreed to support the creation of a commercial space-launching site on the island expected to begin operations in the near future.
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 has experienced accelerating growth between 2002 and 2007, with expansion above 7% in 2007, chiefly due to advancements in domestic security, to rising commodity prices, and to President URIBE's promarket economic policies. Colombia's sustained growth helped reduce poverty by 20% and cut unemployment by 25% since 2002. Additionally, investor friendly reforms to Colombia's hydrocarbon sector and the US-Colombia Trade Promotion Agreement (CTPA) negotiations have attracted record levels of foreign investment. Inequality, underemployment,and narcotrafficking remain significant challenges, and Colombia's infrastructure requires significant updating in order to sustain expansion. Economic growth slipped in 2008 as a result of the global financial crisis and weakening demand for Colombia's exports. In response, URIBE's administration has cut capital controls, arranged for emergency credit lines from multilateral institutions, and promoted investment incentives such as Colombia's modernized free trade zone mechanism, legal stability contracts, and new bilateral investment treaties and trade agreements. The government has also encouraged exporters to diversify their customer base away from the United States and Venezuela, Colombia's largest trading partners. Nevertheless, the business sector continues to be concerned about the impact of a global recession on Colombia's exports, as well as the approval of the CTPA, which is stalled in the US Congress.
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. The political problems have inhibited growth, which has averaged only about 1% in 2006-08. Remittances from 150,000 Comorans abroad help supplement GDP.
The economy of the Democratic Republic of the Congo - a nation endowed with vast potential wealth - is slowly recovering from two decades of decline. Conflict that began in August 1998 has dramatically reduced national output and government revenue, increased external debt, and resulted in the deaths of more than 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 began to improve in late 2002 with the withdrawal of a large portion of the invading foreign troops. The transitional government reopened relations with international financial institutions and international donors, and President KABILA began implementing reforms, although progress has been slow and the International Monetary Fund curtailed their program for the DRC at the end of March 2006 because of fiscal overruns. Much economic activity still occurs in the informal sector, and is not reflected in GDP data. Renewed activity in the mining sector, the source of most export income, boosted Kinshasa's fiscal position and GDP growth from 2006-2008, however, renewed strife in the second half of 2008, combined with a fall in world market prices for the DRC's key mineral exports inflicted major damage on the economy and halted growth. Government reforms may lead to increased government revenues, outside budget assistance, and foreign direct investment, although an uncertain legal framework, corruption, a lack of transparency in government policy are long-term problems. The DRC government has applied to the IMF for an Exogenous Shock Facility in the amount of $200 million to help it deal with its deteriorating financial situation, and the World Bank will consider a separate $100 million in emergency funding. The global recession probably will cut economic growth in 2009 to half its 2008 level.
The economy is a mixture of subsistence agriculture, an industrial sector based largely on oil, and 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. In March 2006, the World Bank and the International Monetary Fund (IMF) approved Heavily Indebted Poor Countries (HIPC) treatment for Congo.
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 more than one-quarter of the working population, provides the economic base with major exports made up of copra and citrus fruit. Black pearls are the Cook Islands' 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.
Costa Rica's basically stable economy depends on tourism, agriculture, and electronics exports. Exports have become more diversified in the past 10 years due to the growth of the high-tech manufacturing sector, which is dominated by the microprocessor industry and the production of medical devices. Tourism continues to bring in foreign exchange, as Costa Rica's impressive biodiversity makes it a key destination for ecotourism. Foreign investors remain attracted by the country's political stability and relatively high education levels, as well as the fiscal incentives offered in the free-trade zones. Costa Rica has attracted one of the highest levels of foreign direct investment per capita in Latin America. Poverty has remained around 20% for nearly 20 years, and the strong social safety net that had been put into place by the government has eroded due to increased financial constraints on government expenditures. Immigration from Nicaragua has increasingly become a concern for the government. The estimated 300,000-500,000 Nicaraguans in Costa Rica legally and illegally are an important source of - mostly unskilled - labor, but also place heavy demands on the social welfare system. Under the ARIAS administration, the government has made strides in reducing internal and external debt - in 2007, Costa Rica had its first budget surplus in 50 years. Reducing inflation remains a difficult problem because of rising commodity import prices and labor market rigidities, though lower oil prices will decrease upward pressures. The Central Bank is moving towards a more flexible exchange rate system to focus on inflation targeting by 2010. The US-Central American Free Trade Agreement (CAFTA) entered into force on 1 January 2009, after significant delays within the Costa Rican legislature. Nevertheless, economic growth has slowed in 2009 as the global downturn reduced export demand and invesment inflows.
Cote d'Ivoire is the world's largest producer and exporter of cocoa beans and a significant producer and exporter of coffee and palm oil. Consequently, the economy is highly sensitive to fluctuations in international prices for these products, and, to a lesser extent, in climatic conditions. Despite government attempts to diversify the economy, it is still heavily dependent on agriculture and related activities, engaging roughly 68% of the population. Since 2006, oil and gas production have become more important engines of economic activity than cocoa. According to IMF statistics, earnings from oil and refined products were $1.3 billion in 2006, while cocoa-related revenues were $1 billion during the same period. Cote d'Ivoire's offshore oil and gas production has resulted in substantial crude oil exports and provides sufficient natural gas to fuel electricity exports to Ghana, Togo, Benin, Mali and Burkina Faso. Oil exploration by a number of consortiums of private companies continues offshore, and President GBAGBO has expressed hope that daily crude output could reach 200,000 barrels per day (b/d) by the end of the decade. Since the end of the civil war in 2003, political turmoil has continued to damage the economy, resulting in the loss of foreign investment and slow economic growth. GDP grew by nearly 2% in 2007 and 3% in 2008. Per capita income has declined by 15% since 1999.
Once one of the wealthiest of the Yugoslav republics, Croatia's economy suffered badly during the 1991-95 war as output collapsed and the country missed the early waves of investment in Central and Eastern Europe that followed the fall of the Berlin Wall. Between 2000 and 2007, however, Croatia's economic fortunes began to improve slowly, with moderate but steady GDP growth between 4% and 6% led by a rebound in tourism and credit-driven consumer spending. Inflation over the same period has remained tame and the currency, the kuna, stable. Nevertheless, difficult problems still remain, including a stubbornly high unemployment rate, a growing trade deficit and uneven regional development. The state retains a large role in the economy, as privatization efforts often meet stiff public and political resistance. 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. The EU accession process should accelerate fiscal and structural reform. While long term growth prospects for the economy remain strong, Croatia will face significant pressure as a result of the global financial crisis. Croatia's high foreign debt, anemic export sector, strained state budget, and over-reliance on tourism revenue will result in higher risk to economic stability over the medium term.
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. Since late 2000, Venezuela has been providing oil on preferential terms, and it currently supplies about 100,000 barrels per day of petroleum products. Cuba has been paying for the oil, in part, with the services of Cuban personnel in Venezuela including some 30,000 medical professionals.
The area of the Republic of Cyprus under government control has a market economy dominated by the service sector, which accounts for 78% of GDP. Tourism, financial services, and real estate 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 in the area under government control has grown at a rate well above the EU average since 2000. Cyprus joined the European Exchange Rate Mechanism (ERM2) in May 2005 and adopted the euro as its national currency on 1 January 2008. An aggressive austerity program in the preceding years, aimed at paving the way for the euro, helped turn a soaring fiscal deficit (6.3% in 2003) into a surplus of 1.2% in 2008, and reduced inflation to 5.1%. This prosperity will come under pressure in 2009, as construction and tourism slow in the face of reduced foreign demand triggered by the ongoing global financial crisis. Growth is expected to slow to less than 2%, which would be its lowest level since 2003. As in the area administered by Turkish Cypriots, water shortages are a perennial problem; a few desalination plants have been added to existing plants over the last year and are now on line. After 10 years of drought, the country received substantial rainfall from 2001-04. Since then, rainfall has been well below average, making water rationing a necessity.
The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Maintaining an open investment climate has been a key element of the Czech Republic's transition from a communist, centrally planned economy to a functioning market economy. As a member of the European Union, with an advantageous location in the center of Europe, a relatively low cost structure, and a well-qualified labor force, the Czech Republic is an attractive destination for foreign investment. Prior to its EU accession in 2004, the Czech government harmonized its laws and regulations with those of the European Union. The government plans to meet the criteria for joining the euro area around 2012. The small, open, export-driven Czech economy grew by over 6% annually from 2005-2007 and strong growth continued throughout the first three quarters of 2008. Despite the global financial crisis, the conservative Czech financial system has remained relatively healthy. The rate of Czech economic growth, however, fell in the fourth quarter of 2008, mainly due to a significant drop in demand for Czech exports in Western Europe. This trend is expected to continue, with many analysts predicting the Czech economy to contract slightly in 2009.
This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, an equitable distribution of income, comfortable living standards, a stable currency, a stable political system, and high dependence on foreign trade. Unemployment is low and capacity constraints limit growth potential. Denmark is a net exporter of food and energy and enjoys a comfortable balance of payments surplus. 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 so far Denmark has decided not to join 16 other EU members in the euro. Nonetheless, the Danish krone remains pegged to the euro. Denmark's fiscal position is among the strongest in the EU. Economic growth gained momentum in 2004 and the upturn continued through 2006. After a long consumption-driven upswing, Denmark's economy began slowing in early 2007 with the end of a housing boom. This cyclical slowdown has been exacerbated by the global financial crisis through increased borrowing costs and lower export demand, consumer confidence, and investment. The slowing global economy cut GDP by 1.2% in 2008. A major long-term issue will be the sharp decline in the ratio of workers to retirees.
The economy is based on service activities connected with the country's strategic location and status as a free trade zone in the Horn of Africa. Two-thirds of Djibouti's 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. Imports and exports from landlocked neighbor Ethiopia represent 85% of port activity at Djibouti's container terminal. 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 nearly 60% in urban areas 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% between 1999 and 2006 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 Dominican economy depends on agriculture, primarily bananas, and remains highly vulnerable to climatic conditions and international economic developments. Tourism has increased as the government seeks to promote Dominica as an "ecotourism" destination and has developed a new tourism development plan with assistance from the EU. Hurricane Dean struck the island in August 2007 causing damages equivalent to 20% of GDP. In 2003, the government began a comprehensive restructuring of the economy - including elimination of price controls, privatization of the state banana company, and tax increases - to address Dominica's economic and financial crisis of 2001-02 and to meet IMF targets. This restructuring paved the way for the current economic recovery - real growth for 2006 reached a two-decade high - and will help to reduce the debt burden, which remains at about 100% of GDP. In order to diversify the island's production base, the government is attempting to develop an offshore financial sector and has signed an agreement with the EU to develop geothermal energy resources.
The Dominican Republic has enjoyed strong GDP growth since 2005 and continued to post sound gains through mid-2008. The global recession, however, had a significant impact on GDP growth in the latter half of the year as tourism and remittances, two of the Dominican Republic's most important economic contributors, showed signs of slowing. The economy is highly dependent upon the US, the destination for about two-thirds of exports. Remittances from the US amount to about a tenth of GDP, equivalent to almost half of exports and three-quarters of tourism receipts. The country has long been viewed primarily as an exporter of sugar, coffee, and tobacco but in recent years the service sector has overtaken agriculture as the economy's largest employer due to growth in tourism and free trade zones. Although 2007 saw inflation around 6%, the rate grew to over 12% in 2008. High food prices, driven by the effects of consecutive tropical storms on agricultural products, and education prices were significant contributors to the jump. The effects of the global financial crisis and the US recession are projected to negatively affect GDP growth in 2009 with a rebound expected in 2010. Although the economy is growing at a respectable rate, high unemployment and underemployment 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 Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) came into force in March 2007, which should boost investment and exports and reduce losses to the Asian garment industry.
Ecuador is substantially dependent on its petroleum resources, which have accounted for more than half of the country's export earnings and one-fourth of public sector revenues in recent years. In 1999/2000, Ecuador suffered a severe economic crisis, with GDP contracting by more than 6%. Poverty increased significantly, the banking system collapsed, and Ecuador defaulted on its external debt later that year. In March 2000, Congress approved a series of structural reforms that also provided for the adoption of the US dollar as legal tender. Dollarization stabilized the economy, and positive growth returned in the years that followed, helped by high oil prices, remittances, and increased non-traditional exports. From 2002-06 the economy grew 5.5%, the highest five-year average in 25 years. The poverty rate declined but remained high at 38% in 2006. In 2006 the government imposed a windfall revenue tax on foreign oil companies, leading to the suspension of free trade negotiations with the US. These measures led to a drop in petroleum production in 2007. President Rafael CORREA raised the specter of debt default and followed through on those threats in December 2008 by defaulting on some commercial bond obligations. He also decreed a higher windfall revenue tax on private oil companies, then renegotiated their contracts to overcome the debilitating effect of the tax. This generated economic uncertainty; private investment has dropped and economic growth has slowed.
Occupying the northeast corner of the African continent, Egypt is bisected by the highly fertile Nile valley, where most economic activity takes place. Egypt's economy was highly centralized during the rule of former President Gamal Abdel NASSER but has opened up considerably under former President Anwar EL-SADAT and current President Mohamed Hosni MUBARAK. Cairo has aggressively pursued economic reforms to encourage inflows of foreign investment and facilitate GDP growth. In 2005, Prime Minister Ahmed NAZIF's government reduced personal and corporate tax rates, reduced energy subsidies, and privatized several enterprises. The stock market boomed, and GDP grew about 7% each year since 2006. 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 sizeable budget deficit - roughly 7% of GDP in 2007-08 - and represent a significant drain on the economy. Foreign direct investment has increased significantly in the past two years, but the NAZIF government will need to continue its aggressive pursuit of reforms in order to sustain the spike in investment and growth and begin to improve economic conditions for the broader population. Egypt's export sectors - particularly natural gas - have bright prospects.
The smallest country in Central America, El Salvador has the third largest economy, but growth has been modest in recent years. Economic growth will decelerate in 2009 due to the global slowdown and to El Salvador's dependence on exports to the US and remittances from the US. El Salvador leads the region in remittances per capita with inflows equivalent to nearly all export income. In 2006 El Salvador was the first country to ratify the Central America-Dominican Republic Free Trade Agreement (CAFTA). CAFTA has bolstered the export of processed foods, sugar, and ethanol, and supported investment in the maquila sector. The SACA administration has sought to diversify the economy, focusing on regional transportation and tourism. El Salvador has promoted an open trade and investment environment, and has embarked on a wave of privatizations extending to telecom, electricity distribution, banking, and pension funds. In late 2006, the government and the Millennium Challenge Corporation signed a five-year, $461 million compact to stimulate economic growth and reduce poverty in the country's northern region through investments in education, public services, enterprise development, and transportation infrastructure. With the adoption of the US dollar as its currency in 2001, El Salvador lost control over monetary policy and must concentrate on maintaining a disciplined fiscal policy.
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. Government officials and their family members own most businesses. Undeveloped natural resources include titanium, iron ore, manganese, uranium, and alluvial gold. Growth remained strong in 2008, led by oil.
Since independence from Ethiopia in 1993, Eritrea has faced the economic problems of a small, desperately poor country, accentuated by the recent implementation of restrictive economic policies. Eritrea has a command economy under the control of the sole political party, the People's Front for Democracy and Justice (PFDJ). 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%. Despite the fighting, Eritrea developed its transportation infrastructure, asphalting new roads, improving its ports, and repairing war-damaged roads and bridges. Since the war's conclusion, 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. The government strictly controls the use of foreign currency by limiting access and availability. Few private enterprises remain in Eritrea. Eritrea's economy depends heavily on taxes paid by members of the diaspora. Erratic rainfall and the delayed demobilization of agriculturalists from the military continue to interfere with agricultural production, and Eritrea's recent harvests have been unable to meet the food needs of the country. The Government continues to place its hope for additional revenue on the development of several international mining projects. Despite difficulties for international companies in working with the Eritrean Government, a Canadian mining company signed a contract with the Government in 2007 and plans to begin mineral extraction in 2010. Eritrea also opened a free trade zone at the port of Massawa in 2008. Eritrea's economic future depends upon its ability to master social problems such as illiteracy, unemployment, and low skills, and more importantly, on the government's willingness to support a true market economy.
Estonia, a 2004 European Union entrant, has a modern market-based economy and one of the highest per capita income levels in Central Europe. Estonia's successive governments have pursued a free market, pro-business economic agenda and have wavered little in their commitment to pro-market reforms. Tallinn's priority has been to sustain high growth rates - on average 8% per year from 2003 to 2007. The economy benefits from strong electronics and telecommunications sectors and strong trade ties with Finland, Sweden, and Germany. The current government has pursued relatively sound fiscal policies, resulting in balanced budgets and low public debt. Rapid growth, however, has made it difficult to keep inflation and large current-account deficits from soaring, putting downward pressure on the country's currency. The government has not given up on adopting the euro, but has repeatedly postponed its target date. Estonia's economy slowed down markedly and fell sharply into recession in mid-2008, primarily as a result of an investment and consumption slump following the bursting of the real estate market bubble.
Ethiopia's poverty-stricken economy is based on agriculture, accounting for almost 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 $350 million in 2006, 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 IMF forgave Ethiopia's debt. Under Ethiopia's constitution, the state 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 3.3% decline in GDP in 2003. Normal weather patterns helped agricultural and GDP growth recover during 2004-08.
Internally, the EU is attempting 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 among member states (from $7,000 to $69,000) and historic national animosities, the EU 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. Between 2004 and 2007, the EU admitted 12 countries that are, in general, less advanced technologically and economically than the other 15. Eleven established EU member states introduced the euro as their common currency on 1 January 1999 (Greece did so two years later), but the UK, Sweden, and Denmark chose not to participate. Of the 12 most recent member states, only Slovenia (1 January 2007) and Cyprus and Malta (1 January 2008) have adopted the euro; the remaining nine are legally required to adopt the currency upon meeting EU's fiscal and monetary convergence criteria.
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 help 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 Faroese economy is dependent on fishing, which makes the economy vulnerable to price swings. The sector accounts for 95% of exports and nearly half of GDP. Since 2003 the Faroese economy has picked up as a result of higher prices for fish and for housing. Unemployment is minimal and government finances are relatively sound. Oil finds close to the Islands give hope for economically recoverable deposits, which could eventually lay the basis for a more diversified economy and 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.
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 400,000 to 500,000 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. Fiji's tourism industry was damaged by the December 2006 coup and is facing an uncertain recovery time. In 2007 tourist arrivals were down almost 6%, with substantial job losses in the service sector, and GDP dipped nearly 7%. The coup has created a difficult business climate. The EU has suspended all aid until the interim government takes steps toward new elections. Long-term problems include low investment, uncertain land ownership rights, and the government's inability to manage its budget. Overseas remittances from Fijians working in Kuwait and Iraq have decreased significantly. Fiji's current account deficit reached 23% of GDP in 2006.
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; Finland's ratio of exports to GDP has risen from a quarter to 37% over the past 15 years. Finland excels in high-tech exports such as 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. Although Finland has been one of the best performing economies within the EU in recent years and its banks and financial markets have avoided the worst of global financial crisis, the world slowdown has hit export growth and domestic demand and will serve as a brake on economic growth in 2009 and 2010. The slowdown of construction, other investment, and exports will cause unemployment to rise. During 2009, unemployment will climb to over 8% of the labor force. Long-term challenges include the need to address a rapidly aging population and decreasing productivity that threaten competitiveness, fiscal sustainability, and economic growth.
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, and has ceded stakes in such leading firms as Air France, France Telecom, Renault, and Thales. It maintains a strong presence 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. Widespread opposition to labor reform has in recent years hampered the government's ability to revitalize the economy. During 2007-08, the government implemented several important labor reforms, including a de facto extension of the 35-hour workweek by allowing employees to work longer overtime hours. During 2009, the government is expected to delay or even renounce other reform efforts due to the on-going financial crisis. GDP growth dropped to 0.3% in 2008; the French government plans to increase public investment and continue injecting capital into the banking sector to alleviate the negative effects of the crisis during 2009. As a result of lower fiscal revenues and increased expenditures the general government deficit is expected to exceed the euro-zone ceiling 3% of GDP. France's tax burden remains one of the highest in Europe - at nearly 50% of GDP in 2005. With at least 75 million foreign tourists per year, France is the most visited country in the world and maintains the third largest income in the world from tourism.
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.
Economic activity is limited to servicing meteorological and geophysical research stations, military bases, and French and other fishing fleets. The fish catches landed on Iles Kerguelen by foreign ships are exported to France and Reunion.
Gabon enjoys a per capita income four times that of most sub-Saharan African nations, but 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 more than 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. 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 since 1999 have helped growth, but drops in production have hampered Gabon from fully realizing potential gains, and will continue to temper the gains for most of this decade. 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 2007, and received Paris Club debt rescheduling later that year.
The Gambia has no confirmed 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 Gambia's natural beauty and proximity to Europe has made it one of the larger markets for tourism in West Africa. 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.
High population density, limited land access, and strict internal and external security 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 intifada in September 2000 sparked an economic downturn, largely the result of Israeli closure policies; these policies, which were imposed to address security concerns in Israel, disrupted labor and trade access to and from the Gaza Strip. In 2001, and even more severely in 2003, Israeli military measures in PA areas resulted in the destruction of capital, the disruption of administrative structures, and widespread business closures. The Israeli withdrawal from the Gaza Strip in September 2005 offered some medium-term opportunities for economic growth, but Israeli-imposed crossings closures, which became more restrictive after HAMAS violently took over the territory in June 2007, have resulted in widespread private sector layoffs and shortages of most goods. The status of the crossings, which are closed to all but the most basic goods, has not changed following Israel's military offensive into the Gaza Strip in early 2009.
Georgia's economy sustained GDP growth of close to 10% in 2006 and 12% in 2007, based on strong inflows of foreign investment and robust government spending. However, growth slowed to less than 3% in 2008 and is expected to slow further in 2009. 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, aircraft and chemicals. Areas of recent improvement include growth in the construction, banking services, and mining sectors, but reduced availability of external investment and the slowing regional economy are emerging risks. The country imports nearly all its needed supplies of natural gas and oil products. It has sizeable hydropower capacity, a growing component of its energy supplies. Georgia has overcome the chronic energy shortages of the past by renovating hydropower plants and by bringing in newly available supplies from Azerbaijan. It also has an increased ability to pay for more expensive gas imports from Russia. The construction on the Baku-T'bilisi-Ceyhan oil pipeline, the Baku-T'bilisi-Erzerum gas pipeline, and the Kars-Akhalkalaki Railroad are part of a strategy to capitalize on Georgia's strategic location between Europe and Asia and develop its role as a transit point for gas, oil and other goods. Georgia has historically suffered from a chronic failure to collect tax revenues; however, the government has made great progress and has reformed the tax code, improved tax administration, increased tax enforcement, and cracked down on corruption since coming to power in 2004. Government revenues have increased nearly four fold since 2003. Due to improvements in customs and tax enforcement, smuggling is a declining problem. The country is pinning its hopes for long-term growth on a determined effort to reduce regulation, taxes, and corruption in order to attract foreign investment, but the economy faces a more difficult investment climate both domestically and internationally.
The German economy - the fifth largest economy in the world in PPP terms and Europe's largest - began to contract in the second quarter of 2008 as the strong euro, high oil prices, tighter credit markets, and slowing growth abroad took their toll on Germany's export-dependent economy. At just 1% in 2008, GDP growth is expected to be negative in 2009. Recent stimulus and lender relief efforts will make demands on Germany's federal budget and undercut plans to balance its budget by 2011. The reforms launched by the former government of Chancellor Gerhard SCHOEDER, deemed necessary due to chronically high unemployment and low average growth, led to strong growth in 2007, while unemployment in 2008 fell below 8%, a new post-reunification low. Germany's aging population, combined with high chronic unemployment, has pushed social security outlays to a level exceeding contributions, but higher government revenues from the cyclical upturn in 2006-07 and a 3% rise in the value-added tax cut Germany's budget deficit to within the EU's 3% debt limit in 2007. The current government of Chancellor Angela MERKEL has initiated other reform measures, such as a gradual increase in the mandatory retirement age from 65 to 67 and measures to increase female participation in the labor market. The modernization and integration of the eastern German economy - where unemployment still exceeds 30% in some municipalities - continues to be a costly long-term process, with annual transfers from west to east amounting to roughly $80 billion. While corporate restructuring and growing capital markets have set strong foundations to help Germany meet the longer-term challenges of European economic integration and globalization, Germany's export-oriented economy has proved a disadvantage in the context of weak global demand.
Well endowed with natural resources, Ghana has roughly twice the per capita output of the poorest countries in West Africa. Even so, Ghana remains heavily dependent on international financial and technical assistance. Gold and cocoa production, and individual remittances, are major sources of foreign exchange. The domestic economy continues to revolve around agriculture, which accounts for about 35% of GDP and employs about 55% of the work force, mainly small landholders. Ghana signed a Millennium Challenge Corporation (MCC) Compact in 2006, which aims to assist in transforming Ghana's agricultural sector. Ghana opted for debt relief under the Heavily Indebted Poor Country (HIPC) program in 2002, and is also benefiting from the Multilateral Debt Relief Initiative that took effect in 2006. Thematic priorities under its current Growth and Poverty Reduction Strategy, which also provides the framework for development partner assistance, are: macroeconomic stability; private sector competitiveness; human resource development; and good governance and civic responsibility. Sound macro-economic management along with high prices for gold and cocoa helped sustain GDP growth in 2008.
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.
Greece has a capitalist economy with the public sector accounting for about 40% of GDP and with per capita GDP about two-thirds that of the leading euro-zone economies. Tourism provides 15% of GDP. Immigrants make up nearly one-fifth of the work force, mainly in agricultural and unskilled jobs. Greece is a major beneficiary of EU aid, equal to about 3.3% of annual GDP. The Greek economy grew by nearly 4.0% per year between 2003 and 2007, due partly to infrastructural spending related to the 2004 Athens Olympic Games, and in part to an increased availability of credit, which has sustained record levels of consumer spending. But growth dropped to 2.9% in 2008, as a result of the world financial crisis and tightening credit conditions. Greece violated the EU's Growth and Stability Pact budget deficit criteria of no more than 3% of GDP from 2001 to 2006, but finally met that criteria in 2007-08. Public debt, inflation, and unemployment are above the euro-zone average, but are falling. The Greek Government continues to grapple with cutting government spending, reducing the size of the public sector, and reforming the labor and pension systems, in the face of often vocal opposition from the country's powerful labor unions and the general public. The economy remains an important domestic political issue in Greece and, while the ruling New Democracy government has had some success in improving economic growth and reducing the budget deficit, Athens faces long-term challenges in its effort to continue its economic reforms, especially social security reform and privatization.
The economy remains critically dependent on exports of shrimp and fish and on a substantial subsidy - about $700 million in 2008-09 - from the Danish Government, which supplies about 60% of government revenues. The public sector, including publicly-owned enterprises and the municipalities, plays the dominant role in the economy. Several interesting hydrocarbon and mineral exploration activities are ongoing and in 2007 a US firm signed an agreement with the Greenland Home Rule government to study the feasibility of building a multi-billion dollar aluminum smelter and hydropower plant. Denmark plans to reduce its subsidies to Greenland as revenues from oil exports come onstream.
Grenada relies on tourism as its main source of foreign exchange especially since the construction of an international airport in 1985. Hurricanes Ivan (2004) and Emily (2005) severely damaged the agricultural sector - particularly nutmeg and cocoa cultivation - which had been a key driver of economic growth. Grenada has rebounded from the devastating effects of the hurricanes but is now saddled with the debt burden from the rebuilding process. Public debt-to-GDP is nearly 110%, leaving the THOMAS administration limited room to engage in public investments and social spending. Strong performances in construction and manufacturing, together with the development of tourism and an offshore financial industry, have also contributed to growth in national output; however, economic growth will likely slow in 2009 because of the global economic slowdown's effects on tourism and remittances.
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.
Guatemala is the most populous of the Central American countries with a GDP per capita roughly one-half that of Argentina, Brazil, and Chile. The agricultural sector accounts for about one-tenth of GDP, two-fifths of exports, and half of the labor force. Coffee, sugar, and bananas are the main products, with sugar exports benefiting from increased global demand for ethanol. The 1996 signing of peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment, and Guatemala since then has pursued important reforms and macroeconomic stabilization. The Central American Free Trade Agreement (CAFTA) entered into force in July 2006 and has since spurred increased investment in the export sector, but concerns over security, the lack of skilled workers and poor infrastructure continued to hamper foreign participation. The distribution of income remains highly unequal with more than half of the population below the national poverty line. Other ongoing challenges include increasing government revenues, negotiating further assistance from international donors, curtailing drug trafficking and rampant crime, and narrowing the trade deficit. Given Guatemala's large expatriate community in the United States, it is the top remittance recipient in Central America, with inflows serving as a primary source of foreign income equivalent to nearly two-thirds of exports. Economic growth will slow in 2009 as export demand from US and other Central American markets drop and foreign investment slows amid the global slowdown.
Financial services - banking, fund management, insurance - account for about 23% of employment and about 55% of total income in this tiny, prosperous Channel Island economy. Tourism, manufacturing, and horticulture, mainly tomatoes and cut flowers, have been declining. Financial services, construction, retail, and the public sector have been growing. 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.
Guinea possesses major mineral, hydropower, and agricultural resources, yet remains an underdeveloped nation. The country has almost half of the world's bauxite reserves. The mining sector accounts for more than 70% of exports. Long-run improvements in government fiscal arrangements, literacy, and the legal framework are needed if the country is to move out of poverty. Investor confidence has been sapped by rampant corruption, a lack of electricity and other infrastructure, a lack of skilled workers, and the political uncertainty because of the death of President Lansana CONTE in December 2008. Guinea is trying to reengage with the IMF and World Bank, which cut off most assistance in 2003, and is working closely with technical advisors from the U.S. Treasury Department, the World Bank and IMF, seeking to return to a fully funded program. Growth rose slightly in 2006-08, primarily due to increases in global demand and commodity prices on world markets, but the standard of living fell. The Guinea franc depreciated sharply as the prices for basic necessities like food and fuel rose beyond the reach of most Guineans. Dissatisfaction with economic conditions prompted nationwide strikes in February and June 2006.
One of the five 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 fifth 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. Offshore oil prospecting is underway in several sectors but has not yet led to commercially viable crude deposits. 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, resulted in continued low growth in 2002-06. Higher raw material prices boosted growth in 2007 and 2008.
The Guyanese economy exhibited moderate economic growth in recent years and is based largely on agriculture and extractive industries. The economy is heavily dependent upon the export of six commodities - sugar, gold, bauxite, shrimp, timber, and rice - which represent nearly 60% of the country's GDP and are highly susceptible to adverse weather conditions and fluctuations in commodity prices. Economic recovery since the 2005 flood-related contraction has been buoyed by increases in remittances and foreign direct investment in the sugar and rice industries as well as the mining sector. The bauxite mining sector should benefit in the near term from restructuring and partial privatization, and the state-owned sugar industry will conduct efficiency increasing modernizations. Export earnings from agriculture and mining have remained flat as rising commodity prices have offset declining production, while the import bill has risen, driven by higher energy costs. 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. In March 2007, the Inter-American Development Bank, Guyana's principal donor, canceled Guyana's nearly $470 million debt, equivalent to nearly 48% of GDP, which along with other Highly Indebted Poor Country (HIPC) debt forgiveness brought the debt-to-GDP ratio down from 183% in 2006 to 120% in 2007. Guyana became heavily indebted as a result of the inward-looking, state-led development model pursued in the 1970s and 1980s. Guyana's entrance into the Caricom Single Market and Economy (CSME) in January 2006 has broadened the country's export market, primarily in the raw materials sector.
Haiti is the poorest country in the Western Hemisphere with 80% of the population living under the poverty line and 54% in abject poverty. Two-thirds of all Haitians depend on the agricultural sector, mainly small-scale subsistence farming, and remain vulnerable to damage from frequent natural disasters, exacerbated by the country's widespread deforestation. While the economy has recovered in recent years, registering positive growth since 2005, four tropical storms in 2008 severely damaged the transportation infrastructure and agricultural sector. US economic engagement under the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act, passed in December 2006, has boosted apparel exports and investment by providing tariff-free access to the US. HOPE II, passed in October 2008, has further improved the export environment for the apparel sector by extending preferences to 2018; the apparel sector accounts for two-thirds of Haitian exports and nearly one-tenth of GDP. Remittances are the primary source of foreign exchange, equaling nearly a quarter of GDP and more than twice the earnings from exports. Haiti suffers from high inflation, a lack of investment because of insecurity and limited infrastructure, and a severe trade deficit. In 2005, Haiti paid its arrears to the World Bank, paving the way for reengagement with the Bank. Haiti is expected to receive debt forgiveness for about $525 million of its debt through the Highly-Indebted Poor Country (HIPC) initiative by mid-2009. The government relies on formal international economic assistance for fiscal sustainability.
The Holy See is supported financially by a variety of sources, including investments, real estate income, and donations from Catholic individuals, dioceses, and institutions; these help fund the Roman Curia (Vatican bureaucracy), diplomatic missions, and media outlets. The separate Vatican City State budget includes the Vatican museums and post office and is supported financially by the sale of stamps, coins, medals, and tourist mementos; by fees for admission to museums; and by publications sales. Moreover, an annual collection taken up in dioceses and direct donations go to a non-budgetary fund known as Peter's Pence, which is used directly by the Pope for charity, disaster relief, and aid to churches in developing nations. The incomes and living standards of lay workers are comparable to those of counterparts who work in the city of Rome.
Honduras, the second poorest country in Central America, has an extraordinarily unequal distribution of income and high unemployment. The economy relies heavily on a narrow range of exports, notably bananas and coffee, making it vulnerable to natural disasters and shifts in commodity prices; however, investments in the maquila and non-traditional export sectors are slowly diversifying the economy. Economic growth remains dependent on the US economy its largest trading partner, and will decline in 2009 as a result of reduction in export demand and tightening global credit markets. Remittances represent over a quarter of GDP or nearly three-quarters of exports. The US-Central America Free Trade Agreement (CAFTA) came into force in 2006 and has helped foster investment. Despite improvements in tax collections, the government's fiscal deficit is growing due to increases in current expenditures and financial losses from the state energy and telephone companies.
Hong Kong has a free market economy highly dependent on international trade and finance, which has left it heavily exposed to the global economic slowdown that began in 2008. The total value of goods and services trade, including the sizable share of reexports, was equivalent to 404% of GDP in 2007. The territory has become increasingly integrated with mainland China over the past few years through trade, tourism, and financial links. The mainland has long been Hong Kong's largest trading partner, accounting for nearly 49% of Hong Kong's exports trade by value in 2008. As a result of China's easing of travel restrictions, the number of mainland tourists to the territory has surged from 4.5 million in 2001 to 16.9 million in 2008, when they outnumbered visitors from all other countries combined. Hong Kong has also established itself as the premier stock market for Chinese firms seeking to list abroad. More than one-third of the firms listed on the Hong Kong Stock Exchange are now mainland Chinese companies. They account for 60% of the Exchange's market capitalization. During the past decade, as Hong Kong's manufacturing industry moved to the mainland, its service industry has grown rapidly and now accounts for more than 90% of the territory's GDP. Hong Kong's natural resources are limited, and food and raw materials must be imported. GDP growth averaged a strong 5% from 1989 to 2007, but the global financial crisis caused a sharp slowdown in the second half of 2008, pushing the territory into recession. Hong Kong continues to link its currency closely to the US dollar, maintaining an arrangement established in 1983.
Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms is widespread, with cumulative foreign direct investment totaling more than $200 billion since 1989. The government's IMF-mandated austerity measures, imposed since late 2006, have reduced the budget deficit from over 9% of GDP in 2006 to 3.3% in 2008. Hungary's impending inability to service its short-term debt - brought on by the global credit crunch in late 2008 - led Budapest to seek and receive an IMF-arranged financial assistance package worth over $25 billion. The global financial crisis, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, will result in a negative growth rate of about -1.5% to -2.5% in 2009.
Iceland's Scandinavian-type social-market economy combines a capitalist structure and free-market principles with an extensive welfare system, including generous housing subsidies. Prior to the 2008 crisis, Iceland had achieved high growth, low unemployment, and a remarkably even distribution of income. Government economic priorities have included stabilizing the krona, reducing the current account deficit, containing inflation, restructuring the financial sector, and diversifying the economy. The economy depends heavily on the fishing industry, which provides 40% of export earnings, more than 12% of GDP, and employs 7% of the work force. It 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. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, with new developments in software production, biotechnology, and tourism. Abundant geothermal sources have attracted substantial foreign investment in the aluminum and hydropower sectors and boosted economic growth, although the financial crisis has put several investment projects on hold. Much of Iceland's economic growth in recent years came as the result of a boom in domestic demand following the rapid expansion of the country's financial sector. Domestic banks expanded aggressively in foreign markets, and consumers and businesses borrowed heavily in foreign-currency loans, following the privatization of the sector in the early 2000s. Worsening global financial conditions throughout 2008 resulted in a sharp depreciation of the krona vis-a-vis other major currencies. The foreign exposure of Icelandic banks, whose loans and other assets totaled more than 10 times the country's GDP, became unsustainable. Iceland's three largest banks collapsed in late 2008. The country negotiated over $10 billion in loans from the IMF and other countries to stabilize its currency and financial sector, and to guarantee foreign deposits in Icelandic banks. A protracted recession is expected in 2009 and 2010 with GDP likely to contract and unemployment likely to surpass 10%. The collapse of the financial system has led to a major shift in opinion in favor of joining the EU and adopting the euro. Previous opposition to this move stemmed from Icelanders' concern about losing control of their fishing resources. Iceland's coalition government collapsed in January 2009 following protests over growing joblessness and losses to personal savings.
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 more than half of India's output with less than one third of its labor force. Slightly more than half of the work force is in agriculture, leading the United Progressive Alliance (UPA) government to articulate a rural economic development program that includes creating basic infrastructure to improve the lives of the rural poor and boost economic performance. The government has reduced controls on foreign trade and investment. Higher limits on foreign direct investment were permitted in a few key sectors, such as telecommunications. However, tariff spikes in sensitive categories, including agriculture, and incremental progress on economic reforms still hinder foreign access to India's vast and growing market. Privatization of government-owned industries remains stalled and continues to generate political debate; populist pressure from within the UPA government had restrained needed initiatives. The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. India achieved 9.6% GDP growth in 2006, 9.0% in 2007, and 6.6% in 2008, significantly expanding manufactures through late 2008. India also 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. Strong growth combined with easy consumer credit, a real estate boom, and fast-rising commodity prices fueled inflation concerns from mid-2006 to August 2008. Rising tax revenues from better tax administration and economic expansion helped New Delhi make progress in reducing its fiscal deficit for three straight years before skyrocketing global commodity prices more than doubled the cost of government energy and fertilizer subsidies. The ballooning subsidies, amidst slowing growth, brought the return of a large fiscal deficit in 2008. In the long run, the huge and growing population is the fundamental social, economic, and environmental problem.
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, a vast polyglot nation, has made significant economic advances under the administration of President YUDHOYONO but faces challenges stemming from the global financial crisis and world economic downturn. Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship. The government has introduced significant reforms in the financial sector, including in the areas of tax and customs, the use of Treasury bills, and capital market supervision. Indonesia's investment law, passed in March 2007, seeks to address some of the concerns of foreign and domestic investors. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. The non-bank financial sector, including pension funds and insurance, remains weak. Despite efforts to broaden and deepen capital markets, they remain underdeveloped. Economic difficulties in early 2008 centered on high global food and oil prices and their impact on Indonesia's poor and on the budget. The onset of the global financial crisis dampened inflationary pressures, but increased risk aversion for emerging market assets resulted in large losses in the stock market, significant depreciation of the rupiah, and a difficult environment for bond issuance. As global demand has slowed and prices for Indonesia's commodity exports have fallen, Indonesia faces the prospect of growth significantly below the 6-plus percent recorded in 2007 and 2008.
Iran's economy is marked by an inefficient state sector, reliance on the oil sector, which provides the majority of government revenues, and statist policies, which create major distortions throughout the system. Most economic activity is controlled by the state. Private sector activity is typically limited to small-scale workshops, farming, and services. Price controls, subsidies, and other rigidities weigh down the economy, undermining the potential for private-sector-led growth. Significant informal market activity flourishes. Corruption and shortages of goods are widespread. President Mahmud AHMADI-NEJAD has proposed reforms to Iran's system of price controls and subsidies, particularly on food and energy. However, previous government-led efforts at reform - such as fuel rationing in July 2007 and the imposition of the Value-Added Tax (VAT) in October 2008 - were met with stiff resistance and violent protests. High oil prices in recent years allowed Iran to greatly increase its export earnings and amass nearly $100 billion in foreign exchange reserves. But with oil prices currently below $40 per barrel, the Iranian government is facing difficulties. Tehran has formulated a 2009 budget that anticipates lower oil prices. The government has drawn down the country's Oil Stabilization Fund, and may be dipping into foreign exchange reserves. Iran continues to suffer from double-digit unemployment and inflation - inflation climbed to a 28% annual rate in 2008. Underemployment among Iran's educated youth has convinced many to seek jobs overseas, resulting in a significant "brain drain."
Decreasing insurgent attacks and an improving security environment in many parts of the country are helping to spur economic activity. Iraq's economy is dominated by the oil sector, which has traditionally provided over 90% of foreign exchange earnings. Oil exports are around levels seen before Operation Iraqi Freedom. Total government revenues have benefited from high oil prices in recent years; however, revenues have declined significantly since the oil price drop in fall 2008. Iraq is making some progress in building the institutions needed to implement economic policy. In March 2009 Iraq concluded a Stand-By Arrangement (SBA) with the IMF that details economic reforms. The SBA allows an 80% reduction of the debt owed to Paris Club creditor nations. The International Compact with Iraq was established in May 2007 to integrate Iraq into the regional and global economy, and the Iraqi government is seeking to pass laws to strengthen its economy. This legislation includes a hydrocarbon law to establish a modern legal framework to allow Iraq to develop its resources and a revenue sharing law to equitably divide oil revenues within the nation, although both are still under contentious political negotiation. Some foreign entities have expressed interest in reinvigorating Iraq's industrial sector. The government of Iraq is pursuing a strategy to gain foreign participation in joint ventures with State-owned enterprises. Provincial Councils are also using their own budgets to promote and facilitate investment at the local level. The Central Bank has been successful in controlling inflation through appreciation of the dinar against the US dollar. However, Iraq's challenge will be to use macroeconomic gains to improve the lives of ordinary Iraqis. Reducing corruption and implementing structural reforms, such as bank restructuring and developing the private sector, will be key to Iraq's economic success.
Ireland is a small, modern, trade-dependent economy. GDP growth averaged 6% in 1995-2007, but economic activity dropped sharply in 2008 and Ireland entered into a recession for the first time in more than a decade with the onset of the world financial crisis and subsequent severe slowdown in the property and construction markets. Agriculture, once the most important sector, is now dwarfed by industry and services. Although the export sector, dominated by foreign multinationals, remains a key component of Ireland's economy, construction most recently fueled economic growth along with strong consumer spending and business investment. Property prices rose more rapidly in Ireland in the decade up to 2006 than in any other developed world economy. Per capita GDP also surged during Ireland's high-growth years, and in 2007 surpassed that of the United States. The Irish Government has implemented a series of national economic programs designed to curb price and wage inflation, invest in infrastructure, increase labor force skills, and promote foreign investment. In 2008 the COWEN government moved to guarantee all bank deposits, recapitalize the banking system, and establish partly-public venture capital funds in response to the country's economic downturn. Ireland joined in circulating the euro on 1 January 2002 along with 11 other EU nations.
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 contributions to GDP. The Isle of Man also attracts online gambling sites and the film industry. Trade is mostly with the UK. The Isle of Man enjoys free access to EU markets.
Israel has a technologically advanced market economy with substantial, though diminishing, 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 trade 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, its major source of economic and military aid. Israel's GDP, after contracting slightly in 2001 and 2002 due to the Palestinian conflict and troubles in the high-technology sector, has grown by about 5% per year since 2003. The economy grew an estimated 3.9% in 2008, slowed by the global financial crisis. The government's prudent fiscal policy and structural reforms over the past few years have helped to induce strong foreign investment, tax revenues, and private consumption, setting the economy on a solid growth path.
Italy has a diversified industrial economy, which is divided into a developed industrial north, dominated by private companies, and a less-developed, welfare-dependent, agricultural south, with high unemployment. The Italian economy is driven in large part by the manufacture of high-quality consumer goods produced by small and medium-sized enterprises. Italy also has a sizable underground economy, which by some estimates accounts for as much as 15% of GDP. These activities are most common within the agriculture, construction, and service sectors. Italy has moved slowly on implementing needed structural reforms, such as lightening the high tax burden and overhauling Italy's rigid labor market and over-generous pension system and these conditions will be exacerbated by the recent global financial crisis. The Italian government is seeking to rein in government spending, but the leadership faces a severe economic constraint: Italy's official debt remains above 100% of GDP, and the fiscal deficit - 1.5% of GDP in 2007 - could approach 3% in 2009 as political pressure to stimulate the economy and the costs of servicing Italy's debt rise. The economy will continue to contract through 2009 as the global demand for exports drop.
The Jamaican economy is heavily dependent on services, which now account for more than 60% of GDP. The country continues to derive most of its foreign exchange from tourism, remittances, and bauxite/alumina. Remittances account for nearly 20% of GDP and are equivalent to tourism revenues. Jamaica's economy, already saddled with the lowest economic growth in Latin America, will face increasing difficulties as the global economy slows. The economy faces serious long-term problems: a sizable merchandise trade deficit, large-scale unemployment and underemployment, and a debt-to-GDP ratio of almost 130%. Jamaica's onerous debt burden - the fourth highest per capita - is the result of government bailouts to ailing sectors of the economy, most notably the financial sector in the mid-to-late 1990s. It hinders government spending on infrastructure and social programs as debt servicing accounts for nearly half of government expenditures. Inflation rose sharply in 2008 as a result of high prices for imported food and oil and should fall in 2009 with the decline in international oil prices. High unemployment exacerbates the serious crime problem, including gang violence that is fueled by the drug trade. The GOLDING administration faces 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.
In the years following World War II, 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 speed to the rank of second most technologically powerful economy in the world after the US. Today, measured on a purchasing power parity (PPP) basis, Japan is the third-largest economy in the world after the US and China. Two notable characteristic of the post-war economy were the close interlocking structures of manufacturers, suppliers, and distributors, known as keiretsu, and the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding under the dual pressures of global competition and domestic demographic change. Japan's industrial sector is heavily dependent on imported raw materials and fuels. A tiny agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self sufficient in rice, Japan imports 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 inefficient investment and an asset price bubble in the late 1980s that required a protracted period of time for firms to reduce excess debt, capital, and labor. In October 2007 Japan's longest post-war period of economic expansion ended after 69 months and Japan entered into recession in 2008, with 2009 marking a return to near 0% interest rates. The 10-year privatization of Japan Post, which has functioned not only as the national postal delivery system but also, through its banking and insurance facilities as Japan's largest financial institution, was completed in October 2007, marking a major milestone in the process of structural reform. The Japanese financial sector was not heavily exposed to sub-prime mortgages or their derivative instruments and weathered the initial effect of the global credit crunch, but a sharp downturn in business investment and global demand for Japan's exports in late 2008 pushed Japan further into a recession. Japan's huge government debt, which totals 170% of GDP, and the aging of the population are two major long-run problems. Debate continues on the role of and effects of reform in restructuring the economy.
Jersey's economy is based on international financial services, agriculture, and tourism. In 2005 the finance sector accounted for about 50% 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 one-quarter of GDP. In recent years, the government has encouraged light industry to locate in Jersey, with the result that an electronics industry has developed, displacing more traditional industries. 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.
Jordan is a small Arab country with insufficient supplies of water, oil, and other natural resources. Poverty, unemployment, and inflation are fundamental problems, but King ABDALLAH II, since assuming the throne in 1999, has undertaken some broad economic reforms in a long-term effort to improve living standards. Since Jordan's graduation from its most recent IMF program in 2002, Amman has continued to follow IMF guidelines, practicing careful monetary policy, making substantial headway with privatization, and opening the trade regime. Jordan's exports have significantly increased under the free trade accord with the US and Jordanian Qualifying Industrial Zones (QIZ), which allow Jordan to export goods with some Israeli content duty free to the US. In 2006 and 2008, Jordan used privatization proceeds to significantly reduce its debt-to-GDP ratio. These measures have helped improve productivity and have made Jordan more attractive for foreign investment. The government ended subsidies for petroleum and other consumer goods in 2008 in an effort to control the budget. The main challenges facing Jordan are reducing dependence on foreign grants, reducing the growing budget deficit, attracting investments, and creating jobs. Jordan is currently exploring nuclear power generation to forestall energy shortfalls. Jordan's conservative banking sector has been largely protected from the worldwide financial crisis, but many businesses, particularly in the tourism and real estate sector, are predicting a slow-down in 2009.
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. Kazakhstan enjoyed double-digit growth in 2000-01 and 8% or more per year in 2002-07 - thanks largely to its booming energy sector, but also to economic reform, good harvests, and increased foreign investment; growth slowed to 2.4% in 2008, however, as a result of declining oil prices and a softening world economy. Inflation reached 10% in 2007 and 17% in 2008. In the energy sector, the opening of the Caspian Pipeline Consortium in 2001, from western Kazakhstan's Tengiz oilfield to the Black Sea, substantially raised export capacity. In 2006, Kazakhstan completed the Atasu-Alashankou portion of an oil pipeline to China that is planned in future construction to 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 its manufacturing potential. The policy changed the corporate tax code to favor domestic industry as a means 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, most recently, with regard to the Kashagan project in 2007-08. Since 2007, Astana has provided financial support to the banking sector which has been struggling with poor asset quality and large foreign loans.
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. After some early progress in rooting out corruption and encouraging donor support, the KIBAKI government was rocked by high-level graft scandals in 2005 and 2006. In 2006, the World Bank and IMF delayed loans pending action by the government on corruption. The international financial institutions and donors have since resumed lending, despite little action on the government's part to deal with corruption. Post-election violence in early 2008, coupled with the effects of the global financial crisis on remittance and exports, reduced GDP growth to 2.2% in 2008, down from 7% the previous year.
A remote country of 33 scattered coral atolls, Kiribati has few natural resources and is one of the least developed Pacific Islands. 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. Private sector initiatives and a financial sector are in the early stages of development. Foreign financial aid from the EU, UK, US, Japan, Australia, New Zealand, Canada, UN agencies, and Taiwan accounts for 20-25% 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.
North Korea, one of the world's most centrally directed and least open economies, faces chronic economic problems. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts. Large-scale military spending draws off resources needed for investment and civilian consumption. Industrial and power output have declined in parallel from pre-1990 levels. Severe flooding in the summer of 2007 aggravated chronic food shortages caused by on-going systemic problems including a lack of arable land, collective farming practices, and persistent shortages of tractors and fuel. Large-scale international food aid deliveries have allowed the people of North Korea to escape widespread starvation since famine threatened in 1995, but the population continues to suffer from prolonged malnutrition and poor living conditions. Since 2002, the government has allowed private "farmers' markets" 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 government tried to reverse some of these policies by forbidding private sales of grains and reinstituting a centralized food rationing system. By December 2005, the government terminated most international humanitarian assistance operations in North Korea (calling instead for developmental assistance only) and restricted the activities of remaining international and non-governmental aid organizations such as the World Food Program. External food aid now comes primarily from China and South Korea in the form of grants and long-term concessional loans. In May 2008, the US agreed to give 500,000 metric tons of food to North Korea via the World Food Program and US nongovernmental organizations; Pyongyang began receiving these shipments in mid-2008. During the October 2007 summit, South Korea also agreed to develop some of North Korea's infrastructure, natural resources, and light industry, but inter-Korean economic cooperation slowed in 2008 as Pyongyang restricted tourism and manufacturing joint ventures in the North, and food aid from South Korea was suspended. Firm political control remains the Communist government's overriding concern, which will likely inhibit the loosening of economic regulations.
Since the 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. In 2008, its GDP per capita was roughly the same as that of the Czech Republic and New Zealand. Initially, this success 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 1997-98 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 by 9% in 1999-2000. Korea adopted numerous economic reforms following the crisis, including greater openness to foreign investment and imports. 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 2007, growth moderated to about 4-5% annually. A downturn in consumer spending was offset by rapid export growth. In 2008, inflation increased in the face of rising oil and food prices before easing in the fourth quarter. Korea was hit hard by the global financial turmoil that began in September 2008. Stock prices fell by more than 40% for the year and the value of the won fell by approximately 26%. Korean GDP shrank in the fourth quarter and GDP growth for the year was just 2.2%. The Korean government adopted several measures to combat the credit crunch and stimulate the economy.
Over the past few years Kosovo's economy has shown significant progress in transitioning to a market-based system and maintaining macroeconomic stability, but it is still highly dependent on the international community and the diaspora for financial and technical assistance. Remittances from the diaspora - located mainly in Germany and Switzerland - are estimated to account for about 15% of GDP, and donor-financed activities and aid for another 15%. Kosovo's citizens are the poorest in Europe with an average annual per capita income of only $2,300. Unemployment, around 40% of the population, is a significant problem that encourages outward migration and black market activity. Most of Kosovo's population lives in rural towns outside of the capital, Pristina. Inefficient, near-subsistence farming is common - the result of small plots, limited mechanization, and lack of technical expertise. With international assistance, Kosovo has been able to privatize 50% of its state-owned enterprises (SOEs) by number, and over 90% of SOEs by value. Minerals and metals - including lignite, lead, zinc, nickel, chrome, aluminum, magnesium, and a wide variety of construction materials - once formed the backbone of industry, but output has declined because of ageing equipment and insufficient investment. A limited and unreliable electricity supply due to technical and financial problems is a major impediment to economic development. Kosovo's Ministry of Energy and Mining has solicited expressions of interest from private investors to develop a new power plant in order to address Kosovo and the region's unmet and growing demands for power. The official currency of Kosovo is the euro, but the Serbian dinar is also used in Serb enclaves. Kosovo's tie to the euro has helped keep core inflation low. Kosovo has one of the most open economies in the region, and continues to work with the international community on measures to improve the business environment and attract foreign investment.
Kuwait is a small, rich, relatively open economy with self-reported crude oil reserves of about 104 billion barrels - 8% of world reserves. Petroleum accounts for nearly half of GDP, 95% of export revenues, and 80% of government income. Kuwait experienced rapid economic growth over the last several years on the back of high oil prices and in 2008 posted its tenth consecutive budget surplus. As a result of this positive fiscal situation, the need for economic reforms was less urgent and the government did not push through new initiatives. The drop in oil prices in late 2008 will reduce Kuwait's fiscal surplus in 2009. The global financial crisis may slow the pace of investment and development projects, but Kuwait has vowed to use its considerable financial resources to stabilize the economy if necessary.
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. Following independence, Kyrgyzstan was progressive in carrying out market reforms such as an improved regulatory system and land reform. Kyrgyzstan was the first Commonwealth of Independent States (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. The economy is heavily weighted toward gold export and a drop in output at the main Kumtor gold mine sparked a 0.5% decline in GDP in 2002 and a 0.6% decline in 2005. The government made steady strides in controlling its substantial fiscal deficit, nearly closing the gap between revenues and expenditures in 2006, before boosting expenditures more than 20% in 2007-08. The government and international financial institutions have been engaged in a comprehensive medium-term poverty reduction and economic growth strategy. In 2005, Bishkek agreed to pursue much-needed tax reform and, in 2006, became eligible for the heavily indebted poor countries (HIPC) initiative. Progress fighting corruption, further restructuring of domestic industry, and success in attracting foreign investment are keys to future growth. GDP grew more than 6% annually in 2007-08, partly due to higher gold prices internationally, but growth is likely to decline from that level in 2009, due to declining demand and lower commodity prices in the wake of the international financial crisis.
The government of Laos, one of the few remaining one-party Communist states, began decentralizing control and encouraging private enterprise in 1986. The results, starting from an extremely low base, were striking - growth averaged 6% per year from 1988-2008 except during the short-lived drop caused by the Asian financial crisis that began in 1997. Despite this high growth rate, Laos remains a country with an underdeveloped infrastructure, particularly in rural areas. 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 support from Japan and China. Electricity is available in urban areas and in many rural districts. Subsistence agriculture, dominated by rice, accounts for about 40% of GDP and provides 80% of total employment. The government depends upon aid from international donors for over 80% of its capital investment. The economy has until recently benefited from high foreign investment in hydropower, mining, and construction. The fiscal crisis of late 2008, and the rapid drop in commodity prices - especially copper - has slowed these investments. Several policy changes since 2004 may help spur growth. Laos, which gained Normal Trade Relations status with the US in 2004, is taking steps to join the World Trade Organization. Related trade policy reforms will improve the business environment. On the fiscal side, a value-added tax (VAT) regime, which began with a few large businesses in early 2009, should slowly help streamline the government's inefficient tax system. Economic prospects will improve gradually as the administration continues to simplify investment procedures and as a more competitive banking sector extends credit to small farmers and small entrepreneurs. The government appears committed to raising the country's profile among investors. Foreign donors have praised the Lao government for its efforts to improve the investment regime. The World Bank has declared that Laos' goal of graduating from the UN Development Program's list of least-developed countries by 2020 could be achievable.
Latvia's economy experienced GDP growth of more than 10% per year during 2006-07; but entered a severe recession in 2008 as a result of an unsustainable current account deficit and large debt exposure amid the softening world economy. The IMF, EU, and other donors provided assistance to Latvia as part of an agreement to defend the currency's peg to the euro and reduce the fiscal deficit to about 5% of GDP. 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 and inflation remain major concerns.
Lebanon has a free-market economy and a strong laissez-faire commercial tradition. The government does not restrict foreign investment; however, the investment climate suffers from red tape, corruption, arbitrary licensing decisions, high taxes, tariffs, and fees, archaic legislation, and weak intellectual property rights. The Lebanese economy is service-oriented; main growth sectors include banking and tourism. The 1975-90 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 in 2000 began an austerity program, reining in government expenditures, increasing revenue collection, and passing legislation to privatize state enterprises, but economic and financial reform initiatives stalled and public debt continued to grow despite receipt of more than $2 billion in bilateral assistance at the 2002 Paris II Donors Conference. The Israeli-Hizballah conflict in July-August 2006 caused an estimated $3.6 billion in infrastructure damage, and prompted international donors to pledge nearly $1 billion in recovery and reconstruction assistance. Donors met again in January 2007 at the Paris III Donor Conference and pledged more than $7.5 billion to Lebanon for development projects and budget support, conditioned on progress on Beirut's fiscal reform and privatization program. An 18-month political stalemate and sporadic sectarian and political violence hampered economic activity, particularly tourism, retail sales, and investment, until the new government was formed in July 2008. Political stability since the Doha Accord of May 2008 has helped to boost investment and tourism, but economic growth is likely to slow in 2009 as a result of the global economic recession.
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 permitted the sale of water to South Africa and generated royalties for Lesotho. Lesotho produces about 90% of its own electrical power needs. 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. In July 2007, Lesotho signed a Millennium Challenge Account Compact with the US worth $362.5 million.
Civil war and government mismanagement destroyed much of Liberia's economy, especially the infrastructure in and around the capital, Monrovia. Many businesses fled the country, taking capital and expertise with them, but with the conclusion of fighting and the installation of a democratically-elected government in 2006, some have returned. 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. President JOHNSON SIRLEAF, a Harvard-trained banker and administrator, has taken steps to reduce corruption, build support from international donors, and encourage private investment. Embargos on timber and diamond exports have been lifted, opening new sources of revenue for the government. The reconstruction of infrastructure and the raising of incomes in this ravaged economy will largely depend on generous financial and technical assistance from donor countries and foreign investment in key sectors, such as infrastructure and power generation.
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. The expected weakness in world hydrocarbon prices throughout 2009 will reduce Libyan government tax income and constrain Libyan economic growth in 2009. 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 five 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 in December 2003 that it would abandon programs to build weapons of mass destruction. UN Sanctions against Libya were lifted in September 2003. The process of lifting US unilateral sanctions began in the spring of 2004; all sanctions were removed by June 2006, helping Libya attract greater foreign direct investment, especially in the energy sector. Libyan oil and gas licensing rounds continue to draw high international interest; the National Oil Company set a goal of nearly doubling oil production to 3 million bbl/day by 2012. 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 more than 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. Libya's primary agricultural water source remains the Great Manmade River Project, but significant resources are being invested in desalinization research to meet growing water demands.
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 the highest per capita income in the world. 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 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. In 2008 Liechtenstein came under renewed international pressure - particularly from Germany - to improve transparency in its banking and tax systems.
Lithuania's economy grew on average 8% per year for the four years prior to 2008, driven by exports and domestic consumer demand. Unemployment stood at 4.8% in 2008, while wages grew at double digit rates. The current account deficit rose to roughly 15% of GDP in 2007-08. Lithuania has gained membership in the World Trade Organization and joined the EU in May 2004. Despite Lithuania's EU accession, Lithuania's trade with its Central and Eastern European neighbors, and Russia in particular, accounts for a growing percentage of total trade. Privatization of the large, state-owned utilities is nearly complete. Foreign government and business support have helped in the transition from the old command economy to a market economy.
This stable, high-income economy - benefiting from its proximity to France, Belgium, and Germany - has historically featured 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 about 60% of its labor force. Although Luxembourg, like all EU members, suffered from the global economic slump in the early part of this decade, the country continues to enjoy an extraordinarily high standard of living - GDP per capita ranks third in the world, after Liechtenstein and Qatar. After two years of strong economic growth in 2006-07, turmoil in the world financial markets trimmed Luxembourg's economy in 2008.
Macau's economy has enjoyed strong growth in recent years on the back of its expanding tourism and gaming sectors. After opening up its locally-controlled casino industry to foreign competition in 2001, the territory attracted tens of billions of dollars in foreign investment, transforming Macao into the world's largest gaming center. By 2006, Macau's gaming revenue surpassed that of the Las Vegas strip, and gaming-related taxes accounted for 75% of total government revenue. In 2008, government revenue from gaming was set to double 2006 collections. The expanding casino sector, and China's decision beginning in 2002 to relax travel restrictions, reenergized Macau's tourism industry. This city of just over 500,000 hosted more than 30 million visitors in 2008. Almost 60% came from mainland China despite increasing restrictions on travel to the SAR. Macau's traditional manufacturing industry has been in a slow decline since the termination of the Multi-Fiber Agreement in 2005. In 2008, exports of textiles and garments generated only $1.1 billion, compared to $13.7 billion in gross gaming receipts. 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. Macau's currency, the Pataca, is closely tied to the Hong Kong dollar, which is also freely accepted in the territory.
Having a small, open economy makes Macedonia vulnerable to economic developments in Europe and dependent on regional integration and progress toward EU membership for continued economic growth. 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, 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. In 2001, during a civil conflict, the economy shrank 4.5% because of decreased trade, intermittent border closures, increased deficit spending on security needs, and investor uncertainty. Growth averaged 4% per year during 2003-06 and more than 5% per year during 2007-08. Macedonia has maintained macroeconomic stability with low inflation, but it has so far lagged the region in attracting foreign investment and creating jobs, despite making extensive fiscal and business sector reforms. Official unemployment remains high at nearly 35%, but may be overstated based on the existence of an extensive gray market, estimated to be more than 20% of GDP, that is not captured by official statistics. In the wake of the global economic downturn, Macedonia has experienced decreased foreign direct investment, lowered credit, and a slowdown of export growth. The Government of Macedonia now predicts growth in 2009 to be no more than 3%.
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 US. 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.
Landlocked Malawi ranks among the world's most densely populated and least developed countries. The economy is predominately agricultural with about 85% of the population living in rural areas. Agriculture accounts for more than one-third of GDP and 90% of export revenues. The performance of the tobacco sector is key to short-term growth as tobacco accounts for more than half of exports. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. In December 2007, the US granted Malawi eligibility status to receive financial support within the Millennium Challenge Corporation (MCC) initiative. Malawi will now begin a consultative process to develop a five-year program before funding can begin. In 2006, Malawi was approved for relief under the Heavily Indebted Poor Countries (HIPC) program. The government faces many 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. Since 2005 President MUTHARIKA'S government has exhibited improved financial discipline under the guidance of Finance Minister Goodall GONDWE and signed a three year Poverty Reduction and Growth Facility worth $56 million with the IMF. Improved relations with the IMF lead other international donors to resume aid as well.
Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. After coming to office in 2003, former Prime Minister ABDULLAH tried to move the economy farther up the value-added production chain by attracting investments in high technology industries, medical technology, and pharmaceuticals. The Government of Malaysia is continuing efforts to boost domestic demand to wean the economy off of its dependence on exports. Nevertheless, exports - particularly of electronics - remain a significant driver of the economy. As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel forced Kuala Lumpur to reduce government subsidies. Malaysia "unpegged" the ringgit from the US dollar in 2005 and the currency appreciated 6% per year against the dollar in 2006-08. Although this has helped to hold down the price of imports, inflationary pressures began to build in 2007 - in 2008 inflation stood at nearly 6%, year-over-year. The government presented its five-year national development agenda in April 2006 through the Ninth Malaysia Plan, a comprehensive blueprint for the allocation of the national budget from 2006-10. ABDULLAH unveiled a series of ambitious development schemes for several regions that have had trouble attracting business investment. Real GDP growth averaged about 6% per year under ABDULLAH, but regions outside of Kuala Lumpur and the manufacturing hub Penang did not fare as well. The central bank maintains healthy foreign exchange reserves and the regulatory regime has limited Malaysia's exposure to riskier financial instruments and the global financial crisis. Decreasing worldwide demand for consumer goods is expected to hurt economic growth in 2009 and beyond, however.
Tourism, Maldives' largest industry, accounts for 28% of GDP and more than 60% of foreign exchange receipts. Over 90% of government tax revenue comes from import duties and tourism-related taxes. Fishing is the second leading sector. 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 7% of GDP. 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. Real GDP growth averaged over 7.5% per year for more than a decade. In late December 2004, a major tsunami left more than 100 dead, 12,000 displaced, and property damage exceeding $300 million. As a result of the tsunami, the GDP contracted by about 4.6% in 2005. A rebound in tourism, post-tsunami reconstruction, and development of new resorts helped the economy recover quickly, with GDP growth registering 18% in 2006. Growth slowed in 2007-08, but remained above 5% per year. The trade deficit expanded sharply as a result of high oil prices and imports of construction material. Government spending on social needs, subsidies, and civil servant salaries have created a large budget deficit and inflation has picked up sharply, reaching nearly 13% in October 2008 due to high oil and food prices. Diversifying beyond tourism and fishing, reforming public finance, and increasing employment are the major challenges facing the government. Over the longer term Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80% of the area is 1 meter or less above sea level.
Mali is among the 25 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 gold and cotton, its main exports. 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 has invested in tourism and a tractor assembly factory. Mali's adherence to economic reform and the 50% devaluation of the CFA franc in January 1994 have pushed up economic growth to a 5% average in 1996-2008. Worker remittances and external trade routes for the landlocked country have been jeopardized by continued unrest in neighboring Cote d'Ivoire, however, Mali is building a road network that will connect it to all adjacent countries and it has a railway line to Senegal.
Malta produces only about 20% of its food needs, has limited fresh water supplies, and has few domestic energy sources. Malta's geographic position between the EU and Africa makes it a recipient of illegal immigration, which has strained Malta's political and economic resources. The financial services industry has grown in recent years, but is not fully modernized. Malta's economy is dependent on foreign trade, manufacturing - especially electronics and pharmaceuticals - and tourism all of which have been negatively affected by the global economic downturn. Malta adopted the euro on 1 January 2008. The Maltese government in 2009 will be challenged to contain the budget deficit, which ballooned in 2008 to about 4.1% of GDP, placing it above the euro zone's 3% maximum.
US Government assistance is the mainstay of this tiny island economy. The Marshall Islands received more than $1 billion in aid from the US from 1986-2002. 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 less income from the renewal of fishing vessel licenses have held GDP growth to an average of 1% over the past decade.
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 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. Before 2000, 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 nearly all of its foreign debt has since been forgiven. In December 2007 donors pledged $2.1 billion at a triennial Consultative Group review. A new investment code approved in December 2001 improved the opportunities for direct foreign investment. Mauritania and the IMF agreed to a three-year Poverty Reduction and Growth Facility (PRGF) arrangement in 2006 and Mauritania made satisfactory progress, but IMF and World Bank suspended their programs in Mauritania following the August 2008 coup; following the July 2009 Presidential elections, the IMF and World Bank agreed to meet with the Goverment to discuss a resumption. Oil prospects, while initially promising, have largely failed to materialize. The Government continues to emphasize reduction of poverty, improvement of health and education, and privatization of the economy.
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. The economy rests on sugar, tourism, textiles and apparel, and financial services, and is expanding into fish processing, information and communications technology, and hospitality and property development. Sugarcane is grown on about 90% of the cultivated land area and accounts for 15% of export earnings. The government's development strategy centers on creating vertical and horizontal clusters of development in these sectors. Mauritius has attracted more than 32,000 offshore entities, many aimed at commerce in India, South Africa, and China. 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).
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 has a free market economy in 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 roughly one-third that of the US; income distribution remains highly unequal. Trade with the US and Canada has nearly 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. In 2007, during its first year in office, the Felipe CALDERON administration was able to garner support from the opposition to successfully pass a pension and a fiscal reform. The administration continues to face many economic challenges including the need to upgrade infrastructure, modernize labor laws, and allow private investment in the energy sector. CALDERON has stated that his top economic priorities remain reducing poverty and creating jobs.
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. Under the original terms of the Compact of Free Association, the US provided $1.3 billion in grant aid during the period 1986-2001; the level of aid has been subsequently reduced. 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 current slow growth of the private sector.
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. Moldova's dependence on Russian energy was underscored at the end of 2005, when a Russian-owned electrical station in Moldova's separatist Transnistria region cut off power to Moldova and Russia's Gazprom cut off natural gas in disputes over pricing, and again in January 2009, during a similar dispute. Russia's decision to ban Moldovan wine and agricultural products, coupled with its decision to double the price Moldova paid for Russian natural gas, slowed GDP growth in 2006-07. However, in 2008 growth exceeded the 6% level Moldova had achieved in 2000-05, boosted by Russia's partial removal of the bans, solid fixed capital investment, and strong domestic demand driven by remittances from abroad. Economic reforms have been slow because of corruption and strong political forces backing government controls. Nevertheless, the government's primary goal of EU integration has resulted in some market-oriented progress. The granting of EU trade preferences and increased exports to Russia will encourage higher growth rates, but the agreements are unlikely to serve as a panacea, given the extent to which export success depends on higher quality standards and other factors. The economy remains vulnerable to higher fuel prices, poor agricultural weather, and the skepticism of foreign investors. Also, the presence of an illegal separatist regime in Moldova's Transnistria region continues to be a drag on the Moldovan economy. The deteriorating global economic crisis did not seriously effect the Moldovan economy in 2008 due to its low exposure to the international financial system, but a global economic slowdown, particularly in the EU and Russia, could hurt the economy in 2009 as Moldova relies heavily on remittances from Moldovans abroad.
Monaco, bordering France on the Mediterranean coast, is a popular resort, attracting tourists to its casino and pleasant climate. The principality also is a major banking center and 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.
Economic activity in Mongolia has traditionally been based on herding and agriculture. Mongolia has extensive mineral deposits. Copper, coal, gold, molybdenum, fluorspar, uranium, tin, and tungsten account for a large part of industrial production and foreign direct investment. 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 because of 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 2000-02 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 averaged nearly 9% per year in 2004-08 largely because of high copper prices and new gold production. Until late 2008 Mongolia experienced a soaring inflation rate with year-to-year inflation reaching nearly 40% - the highest inflation rate in over a decade. In late 2008 falling commodity prices in this import-reliant country helped lower inflation but by that time, the country had begun to feel the effects of the global financial crisis. Falling prices for copper and other mineral exports have reduced government revenues and are forcing cuts in spending. The global credit crisis has stalled growth in key sectors, especially those that had been fueled by foreign investment. Mongolia's economy continues to be heavily influenced by its neighbors. Mongolia purchases 95% of its petroleum products and a substantial amount of electric power from Russia, leaving it vulnerable to price increases. Trade with China represents more than half of Mongolia's total external trade - China receives about 70% of Mongolia's exports. Remittances from Mongolians working abroad both legally and illegally are sizable but have fallen due to the economic crisis; 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.
Montenegro severed its economy from federal control and from Serbia during the MILOSEVIC era and maintained its own central bank, adopted the Deutchmark, then the euro - rather than the Yugoslav dinar - as official currency, collected customs tariffs, and managed 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 European Bank for Reconstruction and Development. On 18 January 2007, Montenegro joined the World Bank and IMF. Montenegro is pursuing its own membership in the World Trade Organization and signed a Stabilization and Association agreement with the European Union in October 2007. On December 15, 2008, Montenegro submitted an EU membership application. Unemployment and regional disparities in development are key political and economic problems. 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. The global financial crisis is likely to have a significant negative impact on the economy.
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.
Moroccan economic policies brought macroeconomic stability to the country in the early 1990s but have not spurred growth sufficient to reduce unemployment - nearing 20% in urban areas - despite the Moroccan Government's ongoing efforts to diversify the economy. Morocco's GDP growth rose to 5.9% in 2008, with the economy recovering from a drought in 2007 that severely reduced agricultural output and necessitated wheat imports at rising world prices. Moroccan authorities understand that reducing poverty and providing jobs are key to domestic security and development. In 2005, Morocco launched the National Initiative for Human Development (INDH), a $2 billion social development plan to address poverty and unemployment and to improve the living conditions of the country's urban slums. Moroccan authorities are implementing reform efforts to open the economy to international investors. 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. In 2000, Morocco entered an Association Agreement with the EU and, in 2006, entered a Free Trade Agreement (FTA) with the US. Long-term challenges include improving education and job prospects for Morocco's youth, and closing the income gap between the rich and the poor, which the government hopes to achieve by increasing tourist arrivals and boosting competitiveness in textiles.
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, and although it returned to double digits in 2000-06, in 2007 inflation had slowed to 8%, while GDP growth reached 7.5%. 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. At the end of 2007, and after years of negotiations, the government took over 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. In July 2007 the Millennium Challenge Corporation (MCC) signed a Compact with Mozambique; the Compact entered into force in September 2008 and will continue for five years. Compact projects will focus on improving sanitation, roads, agriculture, and the business regulation environment in an effort to spur economic growth in the four northern provinces of the country.
The economy is heavily dependent on the extraction and processing of minerals for export. Mining accounts for 8% of GDP, but provides more than 50% of foreign exchange earnings. 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 one of the world's most unequal income distributions. The Namibian economy is closely linked to South Africa with the Namibian dollar pegged one-to-one to the South African rand. Increased payments from the Southern African Customs Union (SACU) put Namibia's budget into surplus in 2007 for the first time since independence, but SACU payments will decline after 2008 as part of a new revenue sharing formula. Increased fish production and mining of zinc, copper, uranium, and silver spurred growth in 2003-07, but growth in recent years was undercut by poor fish catches and high costs for metal inputs.
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. Reserves of phosphates may only last until 2010 at current mining rates. 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. Nauru lost further revenue in 2008 with the closure of Australia's refugee processing center, making it almost totally dependent on food imports and foreign aid. Housing, hospitals, and other capital plant is deteriorating. The cost to Australia of keeping the government and economy afloat continues to climb. Few comprehensive statistics on the Nauru economy exist with estimates of Nauru's GDP varying widely.
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 about one-third of GDP. Industrial activity mainly involves the processing of agricultural products, including pulses, jute, sugarcane, tobacco, and grain. Bumper crops, better security, improved transportation, and increased tourism pushed growth past 5% in 2008, after growth had hovered around 3% - barely above the rate of population growth - for the previous three years. The deteriorating world economy in 2009 will challenge tourism and remittance growth, 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 and landlocked geographic location, its civil strife and labor unrest, and its susceptibility to natural disaster.
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 3% 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 has been one of the leading European nations for attracting foreign direct investment and is one of the four largest investors in the US. The pace of job growth reached 10-year highs in 2007, but economic growth fell sharply in 2008 as fallout from the world financial crisis constricted demand and raised the specter of a recession in 2009.
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. Most of the oil Netherlands Antilles imports for its refineries come from Venezuela. Almost all consumer and capital goods are imported, the US, Italy, 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. The Netherlands provides financial aid to support the economy.
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 15% 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.
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 some at the bottom of the ladder - and broadened and deepened the technological capabilities of the industrial sector. Per capita income has risen for nine consecutive years and reached $27,900 in 2008 in purchasing power parity terms. Debt-driven consumer spending drove robust growth in the first half of the decade, helping fuel a large balance of payments deficit that posed a challenge for economic managers. Inflationary pressures caused the central bank to raise its key rate steadily from January 2004 until it was among the highest in the OECD in 2007-08; international capital inflows attracted to the high rates further strengthened the currency and housing market, however, aggravating the current account deficit. The economy fell into recession in 2008. In line with global peers, the central bank has cut interest rates aggressively; the new government is responding with plans to raise productivity growth and develop infrastructure.
Nicaragua has widespread underemployment and the second lowest per capita income in the Western Hemisphere. The US-Central America Free Trade Agreement (CAFTA) has been in effect since April 2006 and has expanded export opportunities for many agricultural and manufactured goods. Textiles and apparel account for nearly 60% of Nicaragua's exports, but recent increases in the minimum wage will likely erode its comparative advantage in this industry. Nicaragua relies on international economic assistance to meet internal- and external-debt financing obligations. In early 2004, Nicaragua secured some $4.5 billion in foreign debt reduction under the Heavily Indebted Poor Countries (HIPC) initiative, and in October 2007, the IMF approved a new poverty reduction and growth facility (PRGF) program. However, severe budget shortfalls resulting from the suspension of large amounts of direct budget support from foreign donors concerned with recent political developments has caused a slowdown in PRGF disbursements. Similarly, private sector concerns surrounding ORTEGA's handling of economic issues have dampened investment. Economic growth has slowed in 2009, due to decreased export demand from the US and Central American markets, lower commodity prices for key agricultural exports, and low remittance growth - remittances are equivalent to almost 15% of GDP.
Niger is one of the poorest countries in the world, ranking near 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, and strong population growth 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, Niger received 100% multilateral debt relief from the IMF, which translates into the forgiveness of approximately US $86 million 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 increased sharply in the last few years. A drought and locust infestation in 2005 led to food shortages for as many as 2.5 million Nigeriens.
Oil-rich Nigeria, long hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management, has undertaken several reforms over the past decade. Nigeria's former military rulers failed to diversify the economy away from its overdependence on the capital-intensive oil sector, which provides 95% of foreign exchange earnings and about 80% of budgetary revenues. 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. Since 2008 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. In November 2005, Abuja won Paris Club approval for a debt-relief deal that eliminated $18 billion of debt in exchange for $12 billion in payments - a total package worth $30 billion of Nigeria's total $37 billion external debt. The deal requires Nigeria to be subject to stringent IMF reviews. Based largely on increased oil exports and high global crude prices, GDP rose strongly in 2007 and 2008. President YAR'ADUA has pledged to continue the economic reforms of his predecessor with emphasis on infrastructure improvements. Infrastructure is the main impediment to growth. The government is working toward developing stronger public-private partnerships for electricity and roads.
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 US$2.6 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.
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.
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 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 the petroleum sector, which accounts for nearly half of exports and over 30% of state revenue. Norway is the world's third-largest gas exporter; its position as an oil exporter has slipped to seventh-largest as production has begun to decline. Norway opted to stay out of the EU during a referendum in November 1994; nonetheless, as a member of the European Economic Area, it contributes sizably to the EU budget. In anticipation of eventual declines in oil and gas production, Norway saves almost all state revenue from the petroleum sector in a sovereign wealth fund. After lackluster growth of less than 1.5% in 2002-03, GDP growth picked up to 2.5-6.2% in 2004-07, partly due to higher oil prices. Growth fell to 2.6% in 2008 as a result of the slowing world economy and the drop in oil prices.
Oman is a middle-income economy that is heavily dependent on dwindling oil resources, but sustained high oil prices in recent years have helped build Oman's budget and trade surpluses and foreign reserves. As a result of its dwindling oil resources, Oman is actively pursuing a development plan that focuses on diversification, industrialization, and privatization, with the objective of reducing the oil sector's contribution to GDP to 9% by 2020. Some of these projects may be in jeopardy, however, because Muscat overestimated its ability to produce or secure the natural gas needed to power them. Oman actively seeks private foreign investors, especially in the industrial, information technology, tourism, and higher education fields. Industrial development plans focus on gas resources, metal manufacturing, petrochemicals, and international transshipment ports. The drop in oil prices and the global financial crisis in 2008 will affect Oman's fiscal position and it may post a deficit in 2009 if oil prices stay low. In addition, the global credit crisis is slowing the pace of investment and development projects - a trend that probably will continue into 2009.
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.
Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and declining exports of manufactures. Faced with untenable budgetary deficits, high inflation, and hemorrhaging foreign exchange reserves, the government agreed to an International Monetary Fund Standby Arrangement in November 2008. Between 2004-07, GDP growth in the 6-8% range was spurred by gains in the industrial and service sectors, despite severe electricity shortfalls. Poverty levels decreased by 10% since 2001, and Islamabad steadily raised development spending in recent years. In 2008 the fiscal deficit - a result of chronically low tax collection and increased spending - exceeded Islamabad's target of 4% of GDP. Inflation remains the top concern among the public, jumping from 7.7% in 2007 to 20.8% in 2008, primarily because of rising world fuel and commodity prices. In addition, the Pakistani rupee has depreciated significantly as a result of political and economic instability.
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. The Compact of Free Association with the US, entered into after the end of the UN trusteeship on 1 October 1994, provided Palau with up to $700 million in US aid for the following 15 years in return for furnishing military facilities. Business and tourist arrivals numbered 85,000 in 2007. The population enjoys a per capita income roughly 50% higher than 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.
Panama's dollarized economy rests primarily on a well-developed services sector that accounts for 80% of GDP. Services include operating the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism. Economic growth will be bolstered by the Panama Canal expansion project that began in 2007 and is scheduled to be completed by 2014 at a cost of $5.3 billion - about 25% of current GDP. The expansion project will more than double the Canal's capacity, enabling it to accommodate ships that are now too large to transverse the transoceanic crossway, and should help to reduce the high unemployment rate. Strong economic performance has reduced the national poverty level to 29% in 2008; however, Panama has the second most unequal income distribution in Latin America. The government has implemented tax reforms, as well as social security reforms, and backs regional trade agreements and development of tourism. Not a CAFTA signatory, Panama in December 2006 independently negotiated a free trade agreement with the US, which, when implemented, will help promote the country's economic growth.
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 75% of the population. Mineral deposits, including copper, gold, and oil, account for nearly two-thirds of export earnings. The government of Prime Minister SOMARE has expended much of its energy remaining in power. He was the first prime minister ever to serve a full five-year term. The government also brought stability to the national budget, largely through expenditure control; however, it relaxed spending constraints in 2006 and 2007 as elections approached. 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, its former colonial ruler. Other socio-cultural challenges could upend the economy including a worsening HIV/AIDS epidemic, currently the highest rate in all of East Asia and the Pacific, and chronic law and order and land tenure issues. Australia supplied more than $300 million in aid in FY07/08, which accounts for nearly 20% of the national budget. A consortium led by a major American oil company hopes to begin the commercialization of the country's estimated 227 billion cubic meters of natural gas reserves through the construction of a liquefied natural gas (LNG) production facility by 2010. The project has the potential to double the GDP of Papua New Guinea.
The islands have the potential for oil and gas development. Waters around the islands support commercial fishing, but the islands themselves are not populated on a permanent basis. China announced plans in 1997 to open the islands for tourism.
Landlocked Paraguay has a market economy marked by a large informal sector, featuring reexport of imported consumer goods to neighboring countries, as well as the activities of thousands of microenterprises and urban street vendors. A large percentage of the population, especially in rural areas, derives its living from agricultural activity, often on a subsistence basis. Because of the importance of the informal sector, accurate economic measures are difficult to obtain. On a per capita basis, real income has stagnated at 1980 levels. Most observers attribute Paraguay's poor economic performance to political uncertainty, corruption, limited progress on structural reform, and deficient infrastructure. The economy rebounded between 2003 and 2008, however, as growing world demand for commodities combined with high prices and favorable weather to support Paraguay's commodity-based export expansion. Paraguay is the sixth largest soy producer in the world.
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. The Peruvian economy grew by more than 4% per year during the period 2002-06, with a stable exchange rate and low inflation. Growth jumped to 9% per year in 2007 and 2008, driven by higher world prices for minerals and metals and the government's aggressive trade liberalization strategies. Peru's rapid expansion has helped to reduce the national poverty rate by about 15% since 2002, though underemployment and inflation remain high. Despite Peru's strong macroeconomic performance, overdependence on minerals and metals subjects the economy to fluctuations in world prices, and poor infrastructure precludes the spread of growth to Peru's non-coastal areas. Not all Peruvians therefore have shared in the benefits of growth. President GARCIA's pursuit of sound trade and macroeconomic policies has cost him political support since his election. Nevertheless, he remains committed to Peru's free-trade path. The United States and Peru completed negotiations on the implementation of the US-Peru Trade Promotion Agreement (PTPA), and the agreement entered into force February 1, 2009, opening the way to greater trade and investment between the two economies.
Economic growth has averaged 5% since President MACAPAGAL-ARROYO took office in 2001. MACAPAGAL-ARROYO averted a fiscal crisis by pushing for new revenue measures and, until recently, tightening expenditures. Declining fiscal deficits, tapering debt and debt service ratios, and increased spending on infrastructure and social services bolstered optimism over Philippine economic prospects. Although the general macroeconomic outlook improved significantly in recent years, the economy still faces several long term challenges. The Philippines must maintain the reform momentum in order to catch up with regional competitors, improve employment opportunities, and alleviate poverty. The Philippines will need still higher, sustained growth to make progress in alleviating poverty, given its high population growth and unequal distribution of income. The Philippine economy grew at its fastest pace in three decades in 2007 with real GDP growth exceeding 7%, but growth slowed to 3.8% in 2008 as a result of the world financial crisis. High government spending, a relatively small trade sector, a resilient service sector, and large remittances from the four- to five-million Filipinos who work abroad have helped cushion the economy from the current financial crisis.
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.
Poland has pursued a policy of economic liberalization since 1990 and today stands out as a success story among transition economies. In 2008, GDP grew an estimated 4.8%, based on rising private consumption, a jump in corporate investment, and EU funds inflows. GDP per capita is still much below the EU average, but is similar to that of the three Baltic states. Since 2004, EU membership and access to EU structural funds have provided a major boost to the economy. Unemployment is falling rapidly, though at roughly 9.7% in 2008, it remains above the EU average. In 2008 inflation reached 4.3%, more than the upper limit of the National Bank of Poland's target range, but has been falling due to global economic slowdown. Poland's economic performance could improve further if the country addresses some of the remaining deficiencies in its business environment. An inefficient commercial court system, a rigid labor code, bureaucratic red tape, and persistent low-level corruption keep the private sector from performing up to its full potential. Rising demands to fund health care, education, and the state pension system present a challenge to the Polish Government's effort to hold the consolidated public sector budget deficit under 3.0% of GDP, a target which was achieved in 2007-08. The PO/PSL coalition government which came to power in November 2007 plans to further reduce the budget deficit with the aim of eventually adopting the euro by 2012. The new government has also announced its intention to enact business-friendly reforms, reduce public sector spending growth, lower taxes, and accelerate privatization. The government, however, has moved slowly on major reforms. Pension and health-care bills passed through the legislature, but the legislature failed to overturn a presidential veto.
Portugal has become a diversified and increasingly service-based economy since joining the European Community in 1986. Over the past two decades, 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 1990s, but fell back in 2001-08. GDP per capita stands at roughly two-thirds of the EU-27 average. 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 budget deficit surged to an all-time high of 6% of GDP in 2005, but the government reduced the deficit to 2.6% in 2007 - a year ahead of Portugal's targeted schedule. Nonetheless, the government faces tough choices in its attempts to boost the economy, which declined 0.1% in 2008, while keeping the budget deficit within the euro-zone 3%-of-GDP ceiling.
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, recovered in 2004-05, but declined again in 2006-07.
Qatar has experienced rapid economic growth over the last several years on the back of high oil prices, and in 2008 posted its eighth consecutive budget surplus. Economic policy is focused on developing Qatar's nonassociated natural gas reserves and increasing private and foreign investment in non-energy sectors, but oil and gas still account for more than 50% of GDP, roughly 85% of export earnings, and 70% of government revenues. Oil and gas have made Qatar the second highest per-capita income country - following Liechtenstein - and one of the world's fastest growing. Proved oil reserves of 15 billion barrels should enable continued output at current levels for 37 years. Qatar's proved reserves of natural gas are nearly 26 trillion cubic meters, about 14% of the world total and third largest in the world. The drop in oil prices in late 2008 and the global financial crisis will reduce Qatar's budget surplus and may slow the pace of investment and development projects in 2009.
Romania, which joined the European Union on 1 January 2007, 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. Domestic consumption and investment have fueled strong GDP growth in recent years, but have led to large current account imbalances. Romania's macroeconomic gains have only recently started to spur creation of a middle class and address Romania's widespread poverty. Corruption and red tape continue to handicap its business environment. Inflation rose in 2007-08, driven in part by strong consumer demand and high wage growth, rising energy costs, a nation-wide drought affecting food prices, and a relaxation of fiscal discipline. Romania's strong GDP growth moderated markedly in the last quarter of 2008 as the country began to feel the effects of a global downturn in financial markets and trade, and growth is expected to be much weaker in 2009. Romania hopes to adopt the euro by 2014.
Russia ended 2008 with GDP growth of 5.6%, following 10 straight years of growth averaging 7% annually since the financial crisis of 1998. Over the last six years, fixed capital investment growth and personal income growth have averaged above 10%, but both grew at slower rates in 2008. Growth in 2008 was driven largely by non-tradable services and domestic manufacturing, rather than exports. During the past decade, poverty and unemployment declined steadily and the middle class continued to expand. Russia also improved its international financial position, running balance of payments surpluses since 2000. Foreign exchange reserves grew from $12 billion in 1999 to almost $600 billion by end July 2008, which include $200 billion in two sovereign wealth funds: a reserve fund to support budgetary expenditures in case of a fall in the price of oil and a national welfare fund to help fund pensions and infrastructure development. Total foreign debt is almost one-third of GDP. The state component of foreign debt has declined, but commercial short-term debt to foreigners has risen strongly. These positive trends began to reverse in the second half of 2008. Investor concerns over the Russia-Georgia conflict, corporate governance issues, and the global credit crunch in September caused the Russian stock market to fall by roughly 70%, primarily due to margin calls that were difficult for many Russian companies to meet. The global crisis also affected Russia's banking system, which faced liquidity problems. Moscow responded quickly in early October 2008, initiating a rescue plan of over $200 billion that was designed to increase liquidity in the financial sector, to help firms refinance foreign debt, and to support the stock market. The government also unveiled a $20 billion tax cut plan and other safety nets for society and industry. Meanwhile, a 70% drop in the price of oil since mid-July further exacerbated imbalances in external accounts and the federal budget. In mid-November, mini-devaluations of the currency by the Central Bank caused increased capital flight and froze domestic credit markets, resulting in growing unemployment, wage arrears, and a severe drop in production. Foreign exchange reserves dropped to around $435 billion by end 2008, as the Central Bank defended an overvalued ruble. In the first year of his term, President MEDVEDEV outlined a number of economic priorities for Russia including improving infrastructure, innovation, investment, and institutions; reducing the state's role in the economy; reforming the tax system and banking sector; developing one of the biggest financial centers in the world, combating corruption, and improving the judiciary. The Russian government needs to diversify the economy further, as energy and other raw materials still dominate Russian export earnings and federal budget receipts. Russia's infrastructure requires large investments and must be replaced or modernized if the country is to achieve broad-based economic growth. Corruption, lack of trust in institutions, and more recently, exchange rate uncertainty and the global economic crisis continue to dampen domestic and foreign investor sentiment. Russia has made some progress in building the rule of law, the bedrock of a modern market economy, but much work remains on judicial reform. Moscow continues to seek accession to the WTO and has made some progress, but its timeline for entry into the organization continues to slip, and the negotiating atmosphere has soured in the wake of the Georgia and global economic crises.
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 2005-06. Rwanda also received Millennium Challenge Account Threshold status in 2006. The government has embraced an expansionary fiscal policy to reduce poverty by improving education, infrastructure, and foreign and domestic investment and pursuing market-oriented reforms, although energy shortages, instability in neighboring states, and lack of adequate transportation linkages to other countries continue to handicap growth.
The economy of Saint Barthelemy is based upon high-end tourism and duty-free luxury commerce, serving visitors primarily from North America. The luxury hotels and villas host 70,000 visitors each year with another 130,000 arriving by boat. The relative isolation and high cost of living inhibits mass tourism. The construction and public sectors also enjoy significant investment in support of tourism. With limited fresh water resources, all food must be imported, as must all energy resources and most manufactured goods. Employment is strong and attracts labor from Brazil and Portugal.
The economy depends largely on financial assistance from the UK, which amounted to about $27 million in FY06/07 or more than twice the level 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 of Saint Kitts and Nevis is heavily dependent upon tourism revenues, which has replaced sugar, the traditional mainstay of the economy until the 1970s. Following the 2005 harvest, the government closed the sugar industry after decades of losses of 3-4% of GDP annually. To compensate for employment losses, the government has embarked on a program to diversify the agricultural sector and to stimulate other sectors of the economy, such as tourism, export-oriented manufacturing, and offshore banking. Economic growth was above average for Latin America from 2004 to 2006, but has since slowed. Like other tourist destinations in the Caribbean, the St. Kitts and Nevis is vulnerable to damage from natural disasters and shifts in tourism demand. The current government is constrained by a high public debt burden equivalent to nearly 185% of GDP by the end of 2006, largely attributable to public enterprise losses.
The island nation has been able to attract foreign business and investment, especially in its offshore banking and tourism industries, with a surge in foreign direct investment in 2006, attributed to the construction of several tourism projects. Although crops such as bananas, mangos, and avocados continue to be grown for export, tourism provides Saint Lucia's main source of income and the industry is the island's biggest employer. The tourism sector is likely to face declining revenues with the global economic downturn as US and European travel declines. The manufacturing sector is the most diverse in the Eastern Caribbean area, and the government is trying to revitalize the banana industry, although recent hurricanes have caused exports to contract. Saint Lucia is vulnerable to a variety of external shocks including volatile tourism receipts, natural disasters, and dependence on foreign oil. The public debt-to-GDP ratio is about 70% and high debt servicing obligations constrain the KING administration's ability to respond to adverse external shocks. Economic fundamentals remain solid, even though unemployment needs to be reduced.
The economy of Saint Martin centers around tourism with 85% of the labor force engaged in this sector. Over one million visitors come to the island each year with most arriving through the Princess Juliana International Airport in Sint Maarten. No significant agriculture and limited local fishing means that almost all food must be imported. Energy resources and manufactured goods are also imported, primarily from Mexico and the United States. Saint Martin is reported to have the highest per capita income in the Caribbean.
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. France heavily subsidizes the islands to the great betterment of living standards. The government hopes an expansion of tourism will boost economic prospects. Fish farming, crab fishing, and agriculture are being developed to diversify the local economy. Recent test drilling for oil may pave the way for development of the energy sector.
Economic growth slowed in 2008 after reaching a 10-year high of nearly 7% in 2006, and will likely slow in 2009 with the global economic downturn, though it will be above average for Latin America. Success of the economy hinges upon seasonal variations in agriculture, tourism, and construction activity as well as remittance inflows. Much of the workforce is employed in banana production and tourism, but persistent high unemployment has prompted many to leave the islands. This lower-middle-income country is vulnerable to natural disasters - tropical storms wiped out substantial portions of crops in 1994, 1995, and 2002. In 2007, the islands had more than 200,000 tourist arrivals, mostly to the Grenadines. Saint Vincent is home to a small offshore banking sector and has moved to adopt international regulatory standards. The government's ability to invest in social programs and respond to external shocks is constrained by its high debt burden - 25% of current revenues are directed towards debt servicing. An agreement with Italy to write-off debt reduced the public debt-to-GDP ratio to about 70%. The GONSALVES administration is directing government resources to infrastructure projects, including a new international airport that is expected to be completed in 2011.
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 fish catch declined during the El Nino of 2002-03 but returned to normal by mid-2005. The manufacturing sector mainly processes agricultural products. One factory in the Foreign Trade Zone employs 3,000 people to make automobile electrical harnesses for an assembly plant in Australia. Tourism is an expanding sector accounting for 25% of GDP; 122,000 tourists visited the islands in 2007. 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.
San Marino's economy relies heavily on its tourism and banking industries, as well as from the manufacture and export of ceramics, clothing, fabrics, furniture, paints, spirits, tiles, and wine. The economy also benefits from foreign investment due to its relatively low corporate taxes and low taxes on interest earnings. The San Marino government, sworn in on 3 December 2008, will continue to work towards an economic cooperation agreement with Italy - a longstanding priority - as well as harmonizing its fiscal laws with EU members. 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.
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. 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, which helped 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. Potential exists for the development of petroleum resources in Sao Tome's territorial waters in the oil-rich Gulf of Guinea, which are being jointly developed in a 60-40 split with Nigeria, but any actual production is at least several years off. 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 averaged about 6% in 2006-08, as a result of increases in public expenditures and oil-related capital investment.
Saudi Arabia has an oil-based economy with strong government controls over major economic activities. It possesses more than 20% 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 80% of budget revenues, 45% of GDP, and 90% of export earnings. About 40% of GDP comes from the private sector. Roughly 6.4 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors. High oil prices through mid-2008 have boosted growth, government revenues, and Saudi ownership of foreign assets, while enabling Riyadh to pay down domestic debt. The government is encouraging private sector growth - especially in power generation, telecommunications, natural gas exploration, and petrochemicals - to lessen the kingdom's dependence on oil exports and to increase employment opportunities for the swelling Saudi population, nearly 40% of which are youths under 15 years old. Unemployment is high, and the large youth population generally lacks the education and technical skills the private sector needs. Riyadh has substantially boosted spending on job training and education, infrastructure development, and government salaries. As part of its effort to attract foreign investment and diversify the economy, Saudi Arabia acceded to the WTO in December 2005 after many years of negotiations. The government has announced plans to establish six "economic cities" in different regions of the country to promote development and diversification. The last five years of high oil prices have given the Kingdom ample financial reserves to manage the impact of the global financial crisis, but tight international credit, falling oil prices, and the global economic slowdown will reduce Saudi economic growth in 2009.
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 1995-2008. Annual inflation had been pushed down to the 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. High unemployment, however, continues to prompt illegal migrants to flee Senegal in search of better job opportunities in Europe. Senegal was also beset by an energy crisis that caused widespread blackouts in 2006 and 2007. The phosphate industry has struggled for two years to secure capital, and reduced output has directly impacted GDP. In 2007, Senegal signed agreements for major new mining concessions for iron, zircon, and gold with foreign companies. Firms from Dubai have agreed to manage and modernize Dakar's maritime port, and create a new special economic zone. Senegal still relies heavily upon outside donor assistance. Under the IMF's Highly Indebted Poor Countries (HIPC) debt relief program, Senegal has benefited from eradication of two-thirds of its bilateral, multilateral, and private-sector debt. In 2007, Senegal and the IMF agreed to a new, non-disbursing, Policy Support Initiative program.
MILOSEVIC-era mismanagement of the economy, an extended period of international 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 September 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, 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 progress in trade liberalization and enterprise restructuring and privatization, including telecommunications and small- and medium-size firms. It has made halting progress towards EU membership despite signing a Stabilization and Association Agreement with Brussels in May 2008. Serbia is also pursuing membership in the World Trade Organization. Unemployment and the large current account deficit remain ongoing political and economic problems.
Since independence in 1976, per capita output in this Indian Ocean archipelago has expanded to roughly seven times the pre-independence, near-subsistence level, moving the island into the upper-middle income group of countries. 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 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. GDP grew about 7-8% per year in 2006-07, driven by tourism and a boom in tourism-related construction. The Seychelles rupee was allowed to depreciate in 2006 after being overvalued for years and fell by 10% in the first 9 months of 2007. Despite these actions, the Seychelles economy has struggled to maintain its gains and in 2008 suffered from food and oil price shocks, a foreign exchange shortage, high inflation and large financing gaps, with GDP growth reduced to about 3% in 2008. In July 2008 the government defaulted on a Euro amortizing note worth roughly US$80 million, leading to a downgrading of Seychelles credit rating. Seychelles requested an IMF Stand-By Agreement in December 2008.
Sierra Leone is an extremely poor nation with tremendous inequality in income distribution. While it possesses substantial mineral, agricultural, and fishery resources, its physical and social infrastructure is not well developed, and serious social disorders continue to hamper economic development. Nearly half 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 and rutile mining.
Singapore has a highly developed and successful free-market economy. It enjoys a remarkably open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries. The economy depends heavily on exports, particularly in consumer electronics, information technology products, pharmaceuticals, and on a growing service sector. Real GDP growth averaged 7% between 2004 and 2007, but dropped to 1.1% in 2008 as a result of the global financial crisis. The economy contracted in the last three quarters of 2008. Prime Minister LEE and other senior officials have dampened expectations for a quick rebound in 2009. Over the longer term, the government hopes to establish a new growth path that will be less vulnerable to global demand cycles especially for information technology products. It has attracted major investments in pharmaceuticals and medical technology production and will continue efforts to establish Singapore as Southeast Asia's financial and high-tech hub.
Slovakia has made significant economic reforms since its separation from the Czech Republic in 1993. Reforms to the taxation, healthcare, pension, and social welfare systems helped Slovakia to consolidate its budget and get on track to join the EU in 2004 and to adopt the euro in January 2009. Major privatizations are nearly complete, the banking sector is almost entirely 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 and electronic sectors has been strong. Slovakia's economic growth exceeded expectations in 2001-08 despite the general European slowdown. Unemployment, at an unacceptable 18% in 2003-04, dropped to 8.4% in 2008 but remains the economy's Achilles heel. Despite its 2006 pre-election promises to loosen fiscal policy and reverse the previous DZURINDA government's pro-market reforms, FICO's cabinet has thus far been careful to keep a lid on spending in order to meet euro adoption criteria and has focused on regulating energy and food prices instead. The OECD expects Slovakia's GDP growth to be positive in 2009.
Slovenia, which on 1 January 2007 became the first 2004 European Union entrant to adopt the euro, is a model of economic success and stability for the region. With the highest per capita GDP in Central Europe, Slovenia has excellent infrastructure, a well-educated work force, and a strategic location between the Balkans and Western Europe. Privatization has lagged since 2002, and the economy has one of highest levels of state control in the EU. Structural reforms to improve the business environment have allowed for somewhat greater foreign participation in Slovenia's economy and have helped to lower unemployment. In March 2004, Slovenia became the first transition country to graduate from borrower status to donor partner at the World Bank. In December 2007, Slovenia was invited to begin the accession process for joining the OECD. Despite its economic success, foreign direct investment (FDI) in Slovenia has lagged behind the region average, and taxes remain relatively high. Furthermore, the labor market is often seen as inflexible, and legacy industries are losing sales to more competitive firms in China, India, and elsewhere.
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 RAMSI, severe ethnic violence, the closing of key businesses, and an empty government treasury culminated in economic collapse. RAMSI's efforts to restore law and order and economic stability have led to modest growth as the economy rebuilds.
Despite the lack of effective national governance, Somalia has maintained a healthy informal economy, largely based on livestock, remittance/money transfer companies, and telecommunications. Agriculture is the most important sector, with livestock normally accounting for about 40% of GDP and about 65% of export earnings. Nomads and semi-pastoralists, 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. Somalia's service sector also has grown. 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 transfer/remittance services have sprouted throughout the country, handling roughly $2 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 are supported with private-security militias. Somalia's arrears to the IMF continued to grow in 2008. Statistics on Somalia's GDP, growth, per capita income, and inflation should be viewed skeptically.
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 is 17th largest in the world; and modern infrastructure supporting an efficient distribution of goods to major urban centers throughout the region. Growth was robust from 2004 to 2008 as South Africa reaped the benefits of macroeconomic stability and a global commodities boom, but began to slow in the second half of 2008 due to the global financial crisis' impact on commodity prices and demand. However, unemployment remains high and outdated infrastructure has constrained growth. At the end of 2007, South Africa began to experience an electricity crisis because state power supplier Eskom suffered supply problems with aged plants, necessitating "load-shedding" cuts to residents and businesses in the major cities. Daunting economic problems remain from the apartheid era - especially poverty, lack of economic empowerment among the disadvantaged groups, and a shortage of public transportation. South African economic policy is fiscally conservative but pragmatic, focusing on controlling inflation, maintaining a budget surplus, and using state-owned enterprises to deliver basic services to low-income areas as a means to increase job growth and household income.
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.
Fisheries in 2006-07 landed 126,976 metric tons, of which 82% (104,586 tons) was krill (Euphausia superba) and 9.5% (12,027 tons) Patagonian toothfish (Dissostichus eleginoides - also known as Chilean sea bass), compared to 127,910 tons in 2005-06 of which 83% (106,591 tons) was krill and 9.7% (12,396 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 2007-08 Antarctic summer, 45,213 tourists visited the Southern Ocean, compared to 35,552 in 2006-2007, and 29,799 in 2005-2006 (estimates provided to the Antarctic Treaty by the International Association of Antarctica Tour Operators (IAATO), and does not include passengers on overflights and those flying directly in and out of Antarctica).
The Spanish economy grew every year from 1994 through 2008 before entering a recession that started in the third quarter of 2008. Spain's mixed capitalist economy supports a GDP that on a per capita basis is approaching that of the largest West European economies. The Socialist president, Jose Luis Rodriguez ZAPATERO, in office since 2004, has made mixed progress in carrying out key structural reforms. The economy was greatly affected, especially after Zapatero's second term began in April 2008, by the bursting of the housing bubble and construction boom that had fueled much of the economic growth between 2001 and 2007. The global financial crisis exacerbated the economic downturn. GDP growth in 2008 was 1.2%, well below the 3% or higher growth the country enjoyed from 1997 through 2007. The Spanish banking system is considered solid, thanks in part to conservative oversight by the European Central Bank, and government intervention to rescue banks on the scale seen elsewhere in Europe in 2008 was not necessary. After considerable success since the mid-1990s in reducing unemployment to a 2007 low of 8%, Spain suffered a major spike in unemployment in the last few months of 2008, finishing the year with an unemployment rate over 13%.
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.
In 1977, Colombo abandoned statist economic policies and its import substitution trade policy for more market-oriented policies, export-oriented trade, and encouragement of foreign investment. Recent changes in government, however, have brought some policy reversals. Currently, the ruling Sri Lanka Freedom Party has a more statist economic approach, which seeks to reduce poverty by steering investment to disadvantaged areas, developing small and medium enterprises, promoting agriculture, and expanding the already enormous civil service. The government has halted privatizations. Although suffering a brutal civil war that began in 1983, Sri Lanka saw GDP growth average 4.5% in the last 10 years with the exception of a recession in 2001. 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. Government spending on development and fighting the LTTE drove GDP growth to about 7% per year in 2006-07 before the global recession slow growth in 2008, but high government spending and high oil and commodity prices also raised inflation to around 15% in 2008. Sri Lanka's most dynamic sectors now are food processing, textiles and apparel, food and beverages, port construction, telecommunications, and insurance and banking. In 2008, plantation crops made up only about 20% of exports (compared with more than 90% in 1970), while textiles and garments accounted for more than 40%. About 1.5 million Sri Lankans work abroad, 90% of them in the Middle East. They send home more than $2.5 billion a year. The 25-year civil conflict between LTTE and the government of Sri Lanka has been a serious impediment to economic activities. By mid February 2009, the LTTE remained in control of small and shrinking area in the North. The conflict continues to cast a shadow over the economy.
Until the second half of 2008, Sudan's economy boomed on the back of increases in oil production, high oil prices, and large inflows of foreign direct investment. GDP growth registered more than 10% per year in 2006 and 2007. From 1997 to date, Sudan has been working with the IMF to implement macroeconomic reforms, including a managed float of the exchange rate. Sudan began exporting crude oil in the last quarter of 1999. Agricultural production remains important, because it employs 80% of the work force and contributes a third of GDP. The Darfur conflict, the aftermath of two decades of civil war in the south, the lack of basic infrastructure in large areas, and a reliance by much of the population on subsistence agriculture ensure much of the population will remain at or below the poverty line for years despite rapid rises in average per capita income. In January 2007, the government introduced a new currency, the Sudanese Pound, at an initial exchange rate of $1.00 equals 2 Sudanese Pounds.
The economy is dominated by the mining industry, with exports of alumina, gold, and oil accounting for about 85% of exports and 25% of government revenues, making the economy highly vulnerable to mineral price volatility. Prospects for local onshore oil production are good, and a drilling program is underway. Offshore oil drilling was given a boost in 2004 when the State Oil Company (Staatsolie) signed exploration agreements with several Western oil companies. Bidding on these new offshore blocks was completed in July 2006. 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, though investment in these projects may slow with the tightening of global credit markets. Suriname has received aid for these projects from Netherlands, Belgium, and the European Development Fund. 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. In 2000, the government of Ronald VENETIAAN, returned to office and inherited an economy with inflation of over 100% and a growing fiscal deficit. He quickly implemented an austerity program, raised taxes, attempted to control spending, and tamed inflation. The VENETIAAN administration also has created a stabilization fund to insulate future revenue from commodity shocks. These economic policies are likely to remain in effect during VENETIAAN's third term.
Coal mining is the major economic activity on Svalbard. The treaty of 9 February 1920 gave 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.
In this small, landlocked economy, subsistence agriculture occupies approximately 70% of the population. The manufacturing sector has diversified since the mid-1980s. Sugar and wood pulp remain important foreign exchange earners. In 2007, the sugar industry increased efficiency and diversification efforts, in response to a 17% decline in EU sugar prices. 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 more than nine-tenths of its imports and to which it sends 60% of its exports. Swaziland's currency is pegged to the South African rand, subsuming Swaziland's monetary policy to South Africa. Customs duties from the Southern African Customs Union, which may equal as much as 70% of government revenue this year, and worker remittances from South Africa substantially supplement domestically earned income. Swaziland is not poor enough to merit an IMF program; however, the country is struggling to reduce the size of the civil service and control costs at public enterprises. The government is trying to improve the atmosphere for foreign investment. With an estimated 40% unemployment rate, Swaziland's need to increase the number and size of small and medium enterprises and attract foreign direct investment is acute. 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 2006-07 because of drought, and nearly two-fifths of the adult population has been infected by HIV/AIDS.
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. In September 2003, Swedish voters turned down entry into the euro system concerned about the impact on the economy and sovereignty. 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 1% of GDP and of employment. Until 2008, Sweden was in the midst of a sustained economic upswing, boosted by increased domestic demand and strong exports. This and robust finances offered the center-right government considerable scope to implement its reform program aimed at increasing employment, reducing welfare dependence, and streamlining the state's role in the economy. Despite strong finances and underlying fundamentals, the Swedish economy slid into recession in the third quarter of 2008 and growth continued downward in the fourth as deteriorating global conditions reduced export demand and consumption. On 3 February 2009, the Swedish Government announced a $6 billon rescue package for the banking sector.
Switzerland is a peaceful, prosperous, and stable modern market economy with low unemployment, a highly skilled labor force, and a per capita GDP among the highest in the world. Switzerland's economy benefits from a highly developed service sector led by financial services and a manufacturing industry that specializes in high-technology, knowledge-based production. The Swiss in recent years have brought their economic practices largely into conformity with the EU's to enhance their international competitiveness, but some trade protectionism remains, particularly for its small agricultural sector. 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. The global financial crisis and resulting economic downturn could, however, put Switzerland in a recession in 2009, particularly as global export demand stalls. Switzerland's largest banks suffered significant losses in 2008 and the country's largest bank accepted a government rescue deal in late 2008. The Swiss National Bank, beginning in October 2008, cut interest rates on several consecutive occasions, effectively instituting a zero-rate policy in a bid to boost the economy.
The Syrian economy grew by an estimated 2.4% in real terms in 2008 led by the petroleum and agricultural sectors, which together account for about one-half of GDP. Higher crude oil prices countered declining oil production and led to higher budgetary and export receipts. Damascus has implemented modest economic reforms in the past few years, including cutting lending interest rates, opening private banks, consolidating all of the multiple exchange rates, raising prices on some subsidized items, most notably gasoline and cement, and establishing the Damascus Stock Exchange - which is set to begin operations in 2009. In October 2007, for example, Damascus raised the price of subsidized gasoline by 20%, then instituted a rationing system in 2008. In addition, President ASAD signed legislative decrees to encourage corporate ownership reform, and to allow the Central Bank to issue Treasury bills and bonds for government debt. Nevertheless, the economy remains highly controlled by the government. Long-run economic constraints include declining oil production, high unemployment and inflation, rising budget deficits, and increasing pressure on water supplies caused by heavy use in agriculture, rapid population growth, industrial expansion, and water pollution.
Taiwan has a dynamic capitalist economy with gradually decreasing government guidance of investment and foreign trade. In keeping with this trend, some large, state-owned banks and industrial firms have been privatized. Exports have provided the primary impetus for industrialization. The island runs a large trade surplus, and its foreign reserves are among the world's largest. Recently opened cross-strait travel, transportation, and tourism links are likely to increase Taiwan and China's economic interdependence. In 2008 China overtook the US to become Taiwan's second-largest source of imports, after Japan. China is also the island's number one destination for foreign direct investment. Growth fell to 0.1% in 2008 because of the global slowdown.
Tajikistan has one of the lowest per capita GDPs among the 15 former Soviet republics. Because of a lack of employment opportunities in Tajikistan, nearly half of the labor force works abroad, primarily in Russia, supporting families in Tajikistan through remittances. The exact number of labor migrants is unknown, but estimated at around 1 million. Less than 7% of the land area is arable. Cotton is the most important crop, but this sector is burdened with debt and obsolete infrastructure. Mineral resources 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. Tajikistan's economic situation remains fragile due to uneven implementation of structural reforms, corruption, weak governance, widespread unemployment, seasonal power shortages, 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. Completion of the Sangtuda I hydropower dam - built with Russian investment - and the Sangtuda II and Rogun dams will add substantially to electricity output. If finished according to Tajik plans, Rogun will be the world's tallest dam. Tajikistan has also received substantial infrastructure development loans from the Chinese government to improve roads and an electricity transmission network. To help increase north-south trade, the US funded a $36 million bridge which opened in August 2007 and links Tajikistan and Afghanistan. While, Tajikistan has experienced steady economic growth since 1997, nearly two-thirds of the population continues to live in poverty. Economic growth reached 10.6% in 2004, but dropped below 8% in 2005-08, as the effects of higher oil prices and then the international financial crisis began to register - mainly in the form of lower prices for key commodities and lower remittances from Tajiks working in Russia, due to the declining economic conditions in that country.
Tanzania is in the bottom ten percent of the world's economies in terms of per capita income. The economy depends heavily on agriculture, which accounts for more than 40% 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 IMF, 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 7.1% in 2008.
With a well-developed infrastructure, a free-enterprise economy, and generally pro-investment policies, Thailand was one of East Asia's best performers from 2002-04, averaging more than 6% annual real GDP growth. However, overall economic growth has fallen sharply - averaging 4.9% from 2005 to 2007 - as persistent political crisis stalled infrastructure mega-projects, eroded investor and consumer confidence, and damaged the country's international image. The growth rate fell to 2.6% in 2008. Exports were the key economic driver as foreign investment and consumer demand stalled. Export growth from January 2005 to November 2008 averaged 17.5% annually. Business uncertainty escalated, however, following the September 2006 coup when the military-installed government imposed capital controls and considered far-reaching changes to foreign investment rules and other business legislation. Although controversial capital controls have since been lifted and business rules largely remain unchanged, investor sentiment has not recovered. Moreover, the 2008 global financial crisis further darkened Thailand's economic horizon. Continued political uncertainty will hamper resumption of infrastructure mega-projects.
In late 1999, about 70% of the economic infrastructure of Timor-Leste was laid waste by Indonesian troops and anti-independence militias. Three hundred thousand people fled westward. Over the next three years 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, refugees had returned or had settled in Indonesia. The country continues to face great challenges in rebuilding its infrastructure, strengthening the civil administration, and generating jobs for young people entering the work force. The development of oil and gas resources in offshore waters has begun to supplement government revenues ahead of schedule and above expectations. The technology-intensive industry, however, has done little to create jobs for the unemployed because there are no production facilities in Timor. Gas is piped to Australia. In June 2005, the National Parliament unanimously approved the creation of a Petroleum Fund to serve as a repository for all petroleum revenues and preserve the value of Timor-Leste's petroleum wealth for future generations. The Fund held assets of US$3.9 billion as of October 2008. The economy is recovering from the mid-2006 outbreak of violence and civil unrest, which disrupted both private and public sector economic activity. The government in 2008 resettled tens of thousands of an estimated 100,000 internally displaced persons (IDPs) and planned for all IDPs to return home by early 2009. The underlying economic policy challenge the country faces remains how best to use oil-and-gas wealth to lift the non-oil economy onto a higher growth path and to reduce poverty.
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 Poverty Reduction and Growth Facility (PRGF) that could eventually lead to a debt reduction plan. Economic growth remains marginal due to declining cotton production, underinvestment in phosphate mining, and strained relations with donors.
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 has a small, open, South Pacific island economy. It has a narrow export base in agricultural goods. Squash, vanilla beans, and yams are the main crops. Agricultural exports, including fish, 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. Tonga had 41,000 visitors in 2004. 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.
Trinidad and Tobago has earned a reputation as an excellent investment site for international businesses and has one of the highest growth rates and per capita incomes in Latin America. Economic growth for the past seven years has averaged slightly over 8%, significantly above the regional average of about 3.7% for that same period; however, it has slowed down this year to about 5% and is expected to slow further with the global downturn. Growth has been fueled by investments in liquefied natural gas (LNG), petrochemicals, and steel. Additional petrochemical, aluminum, and plastics projects are in various stages of planning. Trinidad and Tobago is the leading Caribbean producer of oil and gas, and its economy is heavily dependent upon these resources but it also supplies manufactured goods, notably food and beverages, as well as cement to the Caribbean region. Oil and gas account for about 40% of GDP and 80% of exports, but only 5% of employment. The country is also a regional financial center, and tourism is a growing sector, although it is not proportionately as important as in many other Caribbean islands. The economy benefits from a growing trade surplus. The MANNING administration has benefited from fiscal surpluses fueled by the dynamic export sector; however, declines in oil and gas prices have reduced government revenues which will challenge his government's commitment to maintaining high levels of public investment.
Tunisia has a diverse economy, with important agricultural, mining, 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, which averaged almost 5% over the past decade, declined to 4.7% in 2008 and probably will decline further in 2009 because of economic contraction and slowing of import demand in Europe - Tunisia's largest export market. However, development of non-textile manufacturing, a recovery in agricultural production, and strong growth in the services sector somewhat mitigated the economic effect of slowing exports. Tunisia will need to reach even higher growth levels to create sufficient employment opportunities for an already large number of unemployed as well as the growing population of university graduates. The challenges ahead include: privatizing industry, liberalizing the investment code to increase foreign investment, improving government efficiency, reducing the trade deficit, and reducing socioeconomic disparities in the impoverished south and west.
Turkey's dynamic economy is a complex mix of modern industry and commerce along with a traditional agriculture sector that still accounts for about 30% of employment. It has a strong and rapidly growing private sector, yet the state remains a major participant 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 GDP growth has exceeded 6% in many years, but this strong expansion has been interrupted by sharp declines in output in 1994, 1999, and 2001. Due to global contractions, annual growth is estimated to have fallen to 1.1% in 2008. Inflation fell to 7.7% in 2005 - a 30-year low - but climbed to over 10% in 2008. Despite the strong economic gains from 2002-07, 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 external debt. Further economic and judicial reforms and prospective EU membership are expected to boost foreign direct investment. The stock value of FDI stood at nearly $130 billion at year-end 2008. Privatization sales are currently approaching $21 billion. Oil began to flow through the Baku-Tblisi-Ceyhan pipeline in May 2006, marking a major milestone that will bring up to 1 million barrels per day from the Caspian to market. In 2007 and 2008, Turkish financial markets weathered significant domestic political turmoil, including turbulence sparked by controversy over the selection of former Foreign Minister Abdullah GUL as Turkey's 11th president and the possible closure of the Justice and Development Party (AKP). Economic fundamentals are sound, marked by moderate economic growth and foreign direct investment. Nevertheless, the Turkish economy may be faced with more negative economic indicators in 2009 as a result of the global economic slowdown. In addition, Turkey's high current account deficit leaves the economy vulnerable to destabilizing shifts in investor confidence.
Turkmenistan is largely a desert country with intensive agriculture in irrigated oases and sizeable gas and oil resources. One-half of its irrigated land is planted in cotton; formerly it was the world's 10th-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. From 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 an average of roughly 15% per year from 2003-08, largely because of higher international oil and gas prices. A new pipeline to China, set to come online in late 2009 or early 2010, will give Turkmenistan an additional export route for its gas. Overall prospects in the near future are discouraging because of widespread internal poverty, a poor educational system, government misuse of oil and gas revenues, and Ashgabat's reluctance to adopt market-oriented reforms. In the past, Turkmenistan's economic statistics were state secrets. The new government has established a State Agency for Statistics, but GDP numbers and other figures are subject to wide margins of error. In particular, the rate of GDP growth is uncertain. Since his election, President BERDIMUHAMEDOW has sought to improve the health and education systems, unified the country's dual currency exchange rate, ordered the redenomination of the manat, reduced state subsidies for gasoline, increased Internet access both in schools and Internet cafes, ordered an independent audit of Turkmenistan's gas resources, and created a special tourism zone on the Caspian Sea. Although foreign investment is encouraged, numerous bureaucratic obstacles from the NYYZOW-era remain.
The Turks and Caicos economy is based on tourism, offshore financial services, and fishing. Most capital goods and food for domestic consumption are imported. The US is the leading source of tourists, accounting for more than three-quarters of the 175,000 visitors that arrived in 2004. Major sources of government revenue also include fees from offshore financial activities and customs receipts.
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 and is almost entirely dependent upon imported food and fuel. Subsistence farming and fishing are the primary economic activities. Fewer than 1,000 tourists, on average, visit Tuvalu annually. Job opportunities are scarce and public sector workers make up most of those employed. About 15% of the adult male population work as seamen on merchant ships abroad, and remittances are a vital source of income contributing around $4 million in 2006. Substantial income is received annually from the Tuvalu Trust Fund (TTF) 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 grew from an initial $17 million to an estimated value of $77 million in 2006. The TFF contributed nearly $9 million towards the government budget in 2006 and is an important cushion for meeting shortfalls in the government's budget. The US Government is also a major revenue source for Tuvalu because of payments from a 1988 treaty on fisheries. In an effort to ensure financial stability and sustainability, the government is pursuing public sector reforms, including privatization of some government functions and personnel cuts. Tuvalu also derives royalties from the lease of its ".tv" Internet domain name with revenue of more than $2 million in 2006. A minor source of government revenue comes from the sale of stamps and coins. 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. Growing income disparities and the vulnerability of the country to climatic change are among leading concerns for the nation.
Uganda has substantial natural resources, including fertile soils, regular rainfall, sizable mineral deposits of copper, cobalt, gold, and other minerals, and recently discovered oil. 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. Growth continues to be solid, despite variability in the price of coffee, Uganda's principal export, and a consistent upturn in Uganda's export markets. 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.
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. 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. Ukraine's dependence on Russia for energy supplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to external shocks. Ukraine depends on imports to meet about three-fourths of its annual oil and natural gas requirements. Ukraine concluded a deal with Russia in January 2006 that almost doubled the price Ukraine pays for Russian gas. Disputes with Russia over pricing have led to periodic gas cut-offs. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the pace and scope of reforms. 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. Ukraine's economy was buoyant despite political turmoil between the prime minister and president until mid-2008. Real GDP growth exceeded 7% in 2006-07, fueled by high global prices for steel - Ukraine's top export - and by strong domestic consumption, spurred by rising pensions and wages. The drop in steel prices and Ukraine's exposure to the global financial crisis due to aggressive foreign borrowing has lowered growth in 2008 and the economy probably will contract in 2009. Ukraine reached an agreement with the IMF for a $16.5 billion standby arrangement in November 2008 to deal with the economic crisis. However, political turmoil in Ukraine as well as deteriorating external conditions are likely to hamper efforts for economic recovery.
The UAE has an open economy with a high per capita income and a sizable annual trade surplus. Successful efforts at economic diversification have reduced the portion of GDP based on oil and gas output to 25%. 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. The government has increased spending on job creation and infrastructure expansion and is opening up utilities to greater private sector involvement. In April 2004, the UAE signed a Trade and Investment Framework Agreement with Washington and in November 2004 agreed to undertake negotiations toward a Free Trade Agreement with the US. The country's Free Trade Zones - offering 100% foreign ownership and zero taxes - are helping to attract foreign investors. Higher oil revenue, strong liquidity, housing shortages, and cheap credit in 2005-07 led to a surge in asset prices (shares and real estate) and consumer inflation. The global financial crisis and the resulting tight international credit market and falling oil prices have already begun to deflate asset prices and will result in slower economic growth for 2009. Dependence on oil and a large expatriate workforce are significant long-term challenges. The UAE's strategic plan for the next few years focuses on diversification and creating more opportunities for nationals through improved education and increased private sector employment.
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 resources, but its oil and natural gas reserves are declining and the UK became a net importer of energy in 2005; energy industries now contribute about 4% to GDP. Services, particularly banking, insurance, and business services, account by far for the largest proportion of GDP while industry continues to decline in importance. Since emerging from recession in 1992, Britain's economy enjoyed the longest period of expansion on record during which time growth outpaced most of Western Europe. The global economic slowdown, tight credit, and falling home prices, however, pushed Britain back into recession in the latter half of 2008 and prompted the BROWN government to implement a number of new measures to stimulate the economy and stabilize the financial markets; these include part-nationalizing the banking system, cutting taxes, suspending public sector borrowing rules, and bringing forward public spending on capital projects. The Bank of England periodically coordinates interest rate moves with the European Central Bank, but Britain remains outside the European Economic and Monetary Union (EMU), and opinion polls show a majority of Britons oppose joining the euro.
The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $46,900. 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 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. 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 between 2005 and the first half of 2008 threatened inflation and unemployment, as higher gasoline prices ate into consumers' budgets. 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 merchandise trade deficit reached a record $819 billion in 2007 and $821 billion in 2008. The global economic downturn, the sub-prime mortgage crisis, investment bank failures, falling home prices, and tight credit pushed the United States into a recession by mid-2008. To help stabilize financial markets, the US Congress established a $700 billion Troubled Asset Relief Program (TARP) in October 2008. The government used some of these funds to purchase equity in US banks and other industrial corporations. In January 2009 the US Congress passed and President Barack OBAMA signed a bill providing an additional $787 billion fiscal stimulus - two-thirds on additional spending and one-third on tax cuts - to create jobs and to help the economy recover.
Uruguay's 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. In 2001-02, Argentine citizens made massive withdrawals of dollars deposited in Uruguayan banks after bank deposits in Argentina were frozen, which led to a plunge in the Uruguayan peso, a banking crisis, and a sharp economic contraction. Real GDP fell in four years by nearly 20%, with 2002 the worst year. The unemployment rate rose, inflation surged, and the burden of external debt doubled. Financial assistance from the IMF helped stem the damage. Uruguay restructured its external debt in 2003 without asking creditors to accept a reduction on the principal. Economic growth for Uruguay resumed, and averaged 8% annually during the period 2004-08.
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 and has come under increasing international criticism for the use of child labor in its annual cotton harvest. 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 Article VIII obligations under the 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, as well as increased cooperation with South Korea in the realm of civil aviation, may boost growth prospects. In November 2005, Russian President Vladimir PUTIN and Uzbekistan President KARIMOV signed an "alliance," 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 2006, Uzbekistan took steps to rejoin the Collective Security Treaty Organization (CSTO) and the Eurasian Economic Community (EurASEC), which it subsequently left in 2008, both organizations dominated by Russia. Uzbek authorities have accused US and other foreign companies operating in Uzbekistan of violating Uzbek tax laws and have frozen their assets.
This South Pacific island economy is based primarily on small-scale agriculture, which provides a living for over 70% of the population. Fishing, offshore financial services, and tourism, with more than 167,000 visitors in 2007 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. 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 through improved air connections, resort development, and cruise ship facilities. Agriculture, especially livestock farming, is a second target for growth. Australia and New Zealand are the main suppliers of tourists and foreign aid.
Venezuela remains highly dependent on oil revenues, which account for roughly 90% of export earnings, about 50% of the federal budget revenues, and around 30% of GDP. A nationwide strike between December 2002 and February 2003 had far-reaching economic consequences - real GDP declined by around 9% in 2002 and 8% in 2003 - but economic output since then has recovered strongly. Fueled by high oil prices, record government spending helped to boost GDP by about 10% in 2006, 8% in 2007, and nearly 5% in 2008. This spending, combined with recent minimum wage hikes and improved access to domestic credit, has created a consumption boom but has come at the cost of higher inflation - roughly 20% in 2007 and more than 30% in 2008. Imports also have jumped significantly. Declining oil prices in the latter part of 2008 are expected to undermine the govenment's ability to continue the high rate of spending. President Hugo CHAVEZ in 2008 continued efforts to increase the government's contol of the economy by nationalizing firms in the cement and steel sectors. In 2007, he nationalized firms in the petroleum, communications, and electricity sectors. In July 2008, CHAVEZ implemented by decree a number of laws that further consolidate and centralize authority over the economy through his plan for "21st Century Socialism."
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. Since 2001, 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 increased 900% from 2001 to 2007. Vietnam joined the WTO in January 2007 following over a decade long negotiation process. WTO membership has provided Vietnam an anchor to the global market and reinforced the domestic economic reform process. Among other benefits, accession allows 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 less than 20% in 2008. Deep poverty has declined significantly and is now smaller than that of China, India, and the Philippines. Vietnam is working to create jobs to meet the challenge of a labor force that is growing by more than one-and-a-half million people every year. The global financial crisis, however, will constrain Vietnam's ability to create jobs and further reduce poverty. As global growth sharply drops in 2009, Vietnam's export-oriented economy - exports were 68% of GDP in 2007 - will suffer from lower exports, higher unemployment and corporate bankruptcies, and decreased foreign investment.
Tourism is the primary economic activity, accounting for 80% of GDP and employment. The islands hosted 2.6 million visitors in 2005. The manufacturing sector consists of petroleum refining, rum distilling, textiles, electronics, pharmaceuticals, and watch assembly. One of the world's largest petroleum refineries is at Saint Croix. The agricultural sector is small, with most food being imported. International business and financial services are small but growing components of the economy. The islands are vulnerable 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.
The economy is limited to traditional subsistence agriculture, with about 80% of 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 West Bank - the larger of the two areas comprising the Palestinian Authority (PA) - has experienced a general decline in economic conditions since the second intifada began in September 2000. The downturn has been largely a result of Israeli closure policies - the imposition of closures and access restrictions in response to security concerns in Israel - which disrupted labor and trading relationships. In 2001, and even more severely in 2002, Israeli military measures in PA areas resulted in the destruction of capital, the disruption of administrative structures, and widespread business closures. International aid of at least $1.14 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. Israel's and the international community's financial embargo of the PA when HAMAS ran the PA during March 2006 - June 2007 interrupted the provision of PA social services and the payment of PA salaries. Since then the FAYYAD government in the West Bank has restarted salary payments and the provision of services but would be unable to operate absent high levels of international assistance.
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. Incomes in Western Sahara are substantially below the Moroccan level. The Moroccan Government controls all trade and other economic activities in Western Sahara. Morocco and the EU signed a four-year agreement in July 2006 allowing European vessels to fish off the coast of Morocco, including the disputed waters off the coast of Western Sahara. Moroccan energy interests in 2001 signed contracts to explore for oil off the coast of Western Sahara, which has angered the Polisario. However, in 2006 the Polisario awarded similar exploration licenses in the disputed territory, which would come into force if Morocco and the Polisario resolve their dispute over Western Sahara.
Global output rose by 3.8% in 2008, down from 5.2% in 2007. Among major economies, growth was led by China (9.8%), Russia (7.4%), and India (7.3%). Worldwide, nations varied widely in their growth results, with Macau (15%), Azerbaijan (13.2%), and Angola (11.6%), registering the highest. Growth rates slowed in all the major industrial countries and most developing countries, because of uncertainties in the financial markets and lowered consumer confidence. 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 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. The complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continued through 2008.
Yemen, one of the poorest countries in the Arab world, reported average annual growth in the range of 3-4% from 2000 through 2007. In 2008, growth declined slightly as the price of oil dropped and the slowing global economy reduced demand for oil. Yemen's economic fortunes depend mostly on declining oil resources, but the country is trying to diversify its earnings. In 2006, Yemen began an economic reform program designed to bolster non-oil sectors of the economy and foreign investment. As a result of the program, international donors pledged about $5 billion for development projects. A liquefied natural gas facility is scheduled to open in 2009. Yemen has limited exposure to the international financial system and no capital markets, however, the global financial crisis probably will reduce international aid in 2009.
Zambia's economy has experienced strong growth in recent years, with real GDP growth in 2005-08 about 6% per year. Privatization of government-owned copper mines in the 1990s 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 foreign investment. In 2005, Zambia qualified for debt relief under the Highly Indebted Poor Country Initiative, consisting of approximately USD 6 billion in debt relief. Zambia experienced a bumper harvest in 2007, which helped to boost GDP and agricultural exports and contain inflation. Although poverty continues to be significant problem in Zambia, its economy has strengthened, featuring single-digit inflation, a relatively stable currency, decreasing interest rates, and increasing levels of trade. The decline in world commodity prices and demand will hurt GDP growth in 2009, and elections and campaign promises are likely to weaken Zambia's improved fiscal stance.
The government of Zimbabwe faces a wide variety of difficult economic problems as it struggles with an unsustainable fiscal deficit, an overvalued official exchange rate, hyperinflation, and bare store shelves. Its 1998-2002 involvement in the war in the Democratic Republic of the Congo drained hundreds of millions of dollars from the economy. 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 EU and the US provide food aid on humanitarian grounds. Badly needed support from the IMF has been suspended because of the government's arrears on past loans and the government's unwillingness to enact reforms that would stabilize the economy. The Reserve Bank of Zimbabwe routinely prints money to fund the budget deficit, causing the official annual inflation rate to rise from 32% in 1998, to 133% in 2004, 585% in 2005, past 1,000% in 2006, and 26,000% in November 2007, and to 11.2 million percent in 2008. Meanwhile, the official exchange rate fell from approximately 1 (revalued) Zimbabwean dollar per US dollar in 2003 to 30,000 per US dollar in September 2007.
The online Factbook is updated bi-weekly. ISSN 1553-8133
For additional information on government leaders in selected foreign countries, go to World Leaders.