Korea, SouthAs one of the Four Tigers of East Asia, South Korea hasachieved an incredible record of growth and integration into thehigh-tech modern world economy. Three decades ago GDP per capita wascomparable with levels in the poorer countries of Africa and Asia.Today its GDP per capita is 18 times North Korea's and equal to thelesser economies of the European Union. This success through thelate 1980s was achieved by a system of close government/businessties, including directed credit, import restrictions, sponsorship ofspecific industries, and a strong labor effort. The governmentpromoted the import of raw materials and technology at the expenseof consumer goods and encouraged savings and investment overconsumption. The Asian financial crisis of 1997-99 exposedlongstanding weaknesses in South Korea's development model,including high debt/equity ratios, massive foreign borrowing, and anundisciplined financial sector. Growth plunged to a negative 6.6% in1998, then strongly recovered to 10.8% in 1999 and 9.2% in 2000.Growth fell back to 3.3% in 2001 because of the slowing globaleconomy, falling exports, and the perception that much-neededcorporate and financial reforms had stalled. Led by consumerspending and exports, growth in 2002 was an impressive 6.2%, despiteanemic global growth, followed by moderate 2.8% growth in 2003. In2003 the six-day work week was reduced to five days.
KuwaitKuwait is a small, rich, relatively open economy with provedcrude oil reserves of about 98 billion barrels - 10% of worldreserves. Petroleum accounts for nearly half of GDP, 95% of exportrevenues, and 80% of government income. Kuwait's climate limitsagricultural development. Consequently, with the exception of fish,it depends almost wholly on food imports. About 75% of potable watermust be distilled or imported. Kuwait continues its discussions withforeign oil companies to develop fields in the northern part of thecountry. Oil production declined by an estimated 8% in 2002 but isexpected to return to the 2001 level in 2003.
KyrgyzstanKyrgyzstan is a small, poor, mountainous country with apredominantly agricultural economy. Cotton, tobacco, wool, and meatare the main agricultural products, although only tobacco and cottonare exported in any quantity. Industrial exports include gold,mercury, uranium, and natural gas and electricity. Kyrgyzstan hasbeen fairly progressive in carrying out market reforms, such as animproved regulatory system and land reform. Kyrgyzstan was the firstCIS country to be accepted into the World Trade Organization. Withfits and starts, inflation has been lowered to an estimated 7% in2001, 2.1% in 2002, and 4.0% in 2003. Much of the government's stockin enterprises has been sold. Drops in production had been severeafter the breakup of the Soviet Union in December 1991, but bymid-1995 production began to recover and exports began to increase.Growth was held down to 2.1% in 1998 largely because of thespillover from Russia's economic difficulties, but moved ahead to3.6% in 1999, 5% in 2000, and 5% again in 2001. The drop in outputat the Kumtor gold mine sparked a 0.5% decline in GDP in 2002 andagain in 2003. On the positive side, the government and theinternational financial institutions have been engaged in acomprehensive medium-term poverty reduction and economic growthstrategy. Further restructuring of domestic industry and success inattracting foreign investment are keys to future growth.
LaosThe government of Laos - one of the few remaining officialCommunist states - began decentralizing control and encouragingprivate enterprise in 1986. The results, starting from an extremelylow base, were striking - growth averaged 7% in 1988-2001 exceptduring the short-lived drop caused by the Asian financial crisisbeginning in 1997. Despite this high growth rate, Laos remains acountry with a primitive infrastructure; it has no railroads, arudimentary road system, and limited external and internaltelecommunications. Electricity is available in only a few urbanareas. Subsistence agriculture accounts for half of GDP and provides80% of total employment. The economy will continue to benefit fromaid from the IMF and other international sources and from newforeign investment in food processing and mining.
LatviaLatvia's transitional economy recovered from the 1998 Russianfinancial crisis, largely due to the SKELE government's budgetstringency and a gradual reorientation of exports toward EUcountries, lessening Latvia's trade dependency on Russia. Themajority of companies, banks, and real estate have been privatized,although the state still holds sizable stakes in a few largeenterprises. Latvia officially joined the World Trade Organizationin February 1999. Preparing for EU membership continues as a topforeign policy goal. The current account and internal governmentdeficits remain major concerns, but the government's efforts toincrease efficiency in revenue collection may lessen the budgetdeficit.
LebanonThe 1975-91 civil war seriously damaged Lebanon's economicinfrastructure, cut national output by half, and all but endedLebanon's position as a Middle Eastern entrepot and banking hub.Peace enabled the central government to restore control in Beirut,begin collecting taxes, and regain access to key port and governmentfacilities. Economic recovery was helped by a financially soundbanking system and resilient small- and medium-scale manufacturers.Family remittances, banking services, manufactured and farm exports,and international aid provided the main sources of foreign exchange.Lebanon's economy made impressive gains since the launch in 1993 of"Horizon 2000," the government's $20 billion reconstruction program.Real GDP grew 8% in 1994, 7% in 1995, 4% in 1996 and in 1997, butslowed to 1.2% in 1998, -1.6% in 1999, -0.6% in 2000, 0.8% in 2001,and 1.5% in 2002. During the 1990s annual inflation fell to almost0% from more than 100%. Lebanon has rebuilt much of its war-tornphysical and financial infrastructure. The government nonethelessfaces serious challenges in the economic arena. It has fundedreconstruction by borrowing heavily - mostly from domestic banks. Inorder to reduce the ballooning national debt, the re-installedHARIRI government began an economic austerity program to rein ingovernment expenditures, increase revenue collection, and privatizestate enterprises. The HARIRI government met with internationaldonors at the Paris II conference in November 2002 to seek bilateralassistance restructuring its domestic debt at lower rates ofinterest. While privatization of state-owned enterprises had notoccurred by the end of 2002, the government had successfully avoideda currency devaluation and debt default in 2002.
LesothoSmall, landlocked, and mountainous, Lesotho relies onremittances from miners employed in South Africa and customs dutiesfrom the Southern Africa Customs Union for the majority ofgovernment revenue, but the government has strengthened its taxsystem to reduce dependency on customs duties. Completion of a majorhydropower facility in January 1998 now permits the sale of water toSouth Africa, also generating royalties for Lesotho. As the numberof mineworkers has declined steadily over the past several years, asmall manufacturing base has developed based on farm products thatsupport the milling, canning, leather, and jute industries and arapidly growing apparel-assembly sector. The economy is stillprimarily based on subsistence agriculture, especially livestock,although drought has decreased agricultural activity. The extremeinequality in the distribution of income remains a major drawback.Lesotho has signed an Interim Poverty Reduction and Growth Facilitywith the IMF.
LiberiaCivil war and misgovernment have destroyed much of Liberia'seconomy, especially the infrastructure in and around Monrovia. Manybusinessmen have fled the country, taking capital and expertise withthem. Some have returned; many will not. Richly endowed with water,mineral resources, forests, and a climate favorable to agriculture,Liberia had been a producer and exporter of basic products -primarily raw timber and rubber. Local manufacturing, mainly foreignowned, had been small in scope. The restoration of theinfrastructure and the raising of incomes in this ravaged economydepend on the settlement of civil warfare, the implementation ofsound macro- and micro-economic policies, including theencouragement of foreign investment, and generous support from donorcountries.
LibyaThe socialist-oriented economy depends primarily upon revenuesfrom the oil sector, which contribute practically all exportearnings and about one-quarter of GDP. These oil revenues and asmall population give Libya one of the highest per capita GDPs inAfrica, but little of this income flows down to the lower orders ofsociety. Import restrictions and inefficient resource allocationshave led to periodic shortages of basic goods and foodstuffs. Thenonoil manufacturing and construction sectors, which account forabout 20% of GDP, have expanded from processing mostly agriculturalproducts to include the production of petrochemicals, iron, steel,and aluminum. Climatic conditions and poor soils severely limitagricultural output, and Libya imports about 75% of its food. Higheroil prices in the last three years led to an increase in exportrevenues, which has improved macroeconomic balances but has donelittle to stimulate broad-based economic growth. Libya is makingslow progress toward economic liberalization and the upgrading ofeconomic infrastructure, but truly market-based reforms will be slowin coming.
LiechtensteinDespite its small size and limited natural resources,Liechtenstein has developed into a prosperous, highlyindustrialized, free-enterprise economy with a vital financialservice sector and living standards on a par with its large Europeanneighbors. The Liechtenstein economy is widely diversified with alarge number of small businesses. Low business taxes - the maximumtax rate is 20% - and easy incorporation rules have induced manyholding or so-called letter box companies to establish nominaloffices in Liechtenstein, providing 30% of state revenues. Thecountry participates in a customs union with Switzerland and usesthe Swiss franc as its national currency. It imports more than 90%of its energy requirements. Liechtenstein has been a member of theEuropean Economic Area (an organization serving as a bridge betweenthe European Free Trade Association (EFTA) and the EU) since May1995. The government is working to harmonize its economic policieswith those of an integrated Europe.
LithuaniaLithuania, the Baltic state that has conducted the mosttrade with Russia, has slowly rebounded from the 1998 Russianfinancial crisis. Unemployment remains high, still 10.7% in 2003,but is improving. Growing domestic consumption and increasedinvestment have furthered recovery. Trade has been increasinglyoriented toward the West. Lithuania has gained membership in theWorld Trade Organization and has moved ahead with plans to join theEU. Privatization of the large, state-owned utilities, particularlyin the energy sector, is nearing completion. Overall, more than 80%of enterprises have been privatized. Foreign government and businesssupport have helped in the transition from the old command economyto a market economy.
LuxembourgThis stable, high-income economy features solid growth,low inflation, and low unemployment. The industrial sector,initially dominated by steel, has become increasingly diversified toinclude chemicals, rubber, and other products. Growth in thefinancial sector, which now accounts for about 22% of GDP, has morethan compensated for the decline in steel. Most banks areforeign-owned and have extensive foreign dealings. Agriculture isbased on small family-owned farms. The economy depends on foreignand trans-border workers for more than 30% of its labor force.Although Luxembourg, like all EU members, has suffered from theglobal economic slump, the country has maintained a fairly stronggrowth rate and enjoys an extraordinarily high standard of living.
MacauMacau's economy four years after reversion to China remainsone of the most open in the world. The territory's net exports ofgoods and services account for 39% of GDP with tourism and apparelexports as the mainstays. Although the territory was hit hard by the1998 Asian financial crisis and the global downturn in 2001, itseconomy grew an estimated 9.5% in 2002. A rapid rise in the numberof mainland visitors because of China's easing of restrictions ontravel drove the recovery. The budget also returned to surplus in2002 because of the surge in visitors from China and a hike in taxeson gambling profits, which generated about 63% of governmentrevenue. The liberalization of Macao's gambling monopoly maycontribute to GDP growth, as the three companies awarded gamblinglicenses have pledged to invest $2.2 billion - roughly 33% of GDP -in the territory. Much of Macau's textile industry may move to themainland as the Multi-Fiber Agreement is phased out. The territorymay have to rely more on gambling and trade-related services togenerate growth. Growth fell to 4% in 2003, according to earlygovernment forecasts, with the drop in large measure due to concernsover the Severe Acute Respiratory Syndrome (SARS).
Macedonia, The Former Yugoslav Republic ofAt independence inNovember 1991, Macedonia was the least developed of the Yugoslavrepublics, producing a mere 5% of the total federal output of goodsand services. The collapse of Yugoslavia ended transfer paymentsfrom the center and eliminated advantages from inclusion in a defacto free trade area. An absence of infrastructure, UN sanctions onYugoslavia, one of its largest markets, and a Greek economic embargoover a dispute about the country's constitutional name and flaghindered economic growth until 1996. GDP subsequently rose each yearthrough 2000. However, the leadership's commitment to economicreform, free trade, and regional integration was undermined by theethnic Albanian insurgency of 2001. The economy shrank 4.5% becauseof decreased trade, intermittent border closures, increased deficitspending on security needs, and investor uncertainty. Growth barelyrecovered in 2002 to 0.3%, then rose to 2.8% in 2003. Unemploymentat one-third of the workforce remains the most critical economicproblem. But even this issue is overshadowed by the fragilepolitical situation.
MadagascarHaving discarded past socialist economic policies,Madagascar has since the mid 1990s followed a World Bank and IMF ledpolicy of privatization and liberalization, which has placed thecountry on a slow and steady growth path. Agriculture, includingfishing and forestry, is a mainstay of the economy, accounting forone-fourth of GDP and employing four-fifths of the population.Export earnings primarily are earned in the small industrial sector,which features textile manufacturing and agriculture processing.Deforestation and erosion, aggravated by the use of firewood as theprimary source of fuel are serious concerns. The separatistpolitical crisis of 2002 undermined macroeconomic stability, withthe estimated drop in output being subject to a wide margin oferror. Poverty reduction will be the centerpiece of economic policyfor the next few years.
MalawiLandlocked Malawi ranks among the world's least developedcountries. The economy is predominately agricultural, with about 90%of the population living in rural areas. Agriculture accounted fornearly 40% of GDP and 88% of export revenues in 2001. The economydepends on substantial inflows of economic assistance from the IMF,the World Bank, and individual donor nations. In late 2000, Malawiwas approved for relief under the Heavily Indebted Poor Countries(HIPC) program. In November 2002 the World Bank approved a $50million drought recovery package, which is to be used for faminerelief. The government faces strong challenges, e.g., to fullydevelop a market economy, to improve educational facilities, to faceup to environmental problems, to deal with the rapidly growingproblem of HIV/AIDS, and to satisfy foreign donors that fiscaldiscipline is being tightened. The performance of the tobacco sectoris key to short-term growth as tobacco accounts for over 50% ofexports.
MalaysiaMalaysia, a middle-income country, transformed itself from1971 through the late 1990s from a producer of raw materials into anemerging multi-sector economy. Growth was almost exclusively drivenby exports - particularly of electronics - and, as a result Malaysiawas hard hit by the global economic downturn and the slump in theInformation Technology (IT) sector in 2001. GDP in 2001 grew only0.5% due to an estimated 11% contraction in exports, but asubstantial fiscal stimulus package mitigated the worst of therecession and the economy rebounded in 2002. Healthy foreignexchange reserves and relatively small external debt make itunlikely that Malaysia will experience a crisis similar to the onein 1997, but the economy remains vulnerable to a more protractedslowdown in Japan and the US, top export destinations and keysources of foreign investment.
MaldivesTourism, Maldives largest industry, accounts for 20% of GDPand more than 60% of the Maldives' foreign exchange receipts. Over90% of government tax revenue comes from import duties andtourism-related taxes. Almost 400,000 tourists visited the islandsin 1998. Fishing is a second leading sector. The MaldivianGovernment began an economic reform program in 1989 initially bylifting import quotas and opening some exports to the privatesector. Subsequently, it has liberalized regulations to allow moreforeign investment. Agriculture and manufacturing continue to play alesser role in the economy, constrained by the limited availabilityof cultivable land and the shortage of domestic labor. Most staplefoods must be imported. Industry, which consists mainly of garmentproduction, boat building, and handicrafts, accounts for about 18%of GDP. Maldivian authorities worry about the impact of erosion andpossible global warming on their low-lying country; 80% of the areais one meter or less above sea level.
MaliMali is among the poorest countries in the world, with 65% ofits land area desert or semidesert and with a highly unequaldistribution of income. Economic activity is largely confined to theriverine area irrigated by the Niger. About 10% of the population isnomadic and some 80% of the labor force is engaged in farming andfishing. Industrial activity is concentrated on processing farmcommodities. Mali is heavily dependent on foreign aid and vulnerableto fluctuations in world prices for cotton, its main export, alongwith gold. The government has continued its successfulimplementation of an IMF-recommended structural adjustment programthat is helping the economy grow, diversify, and attract foreigninvestment. Mali's adherence to economic reform and the 50%devaluation of the African franc in January 1994 have pushed upeconomic growth to a sturdy 5% average in 1996-2002. Workerremittances and external trade routes have been jeopardized bycontinued unrest in neighboring Cote d'Ivoire.
MaltaMajor resources are limestone, a favorable geographiclocation, and a productive labor force. Malta produces only about20% of its food needs, has limited fresh water supplies, and has nodomestic energy sources. The economy is dependent on foreign trade,manufacturing (especially electronics and textiles), and tourism.Malta is privatizing state-controlled firms and liberalizing marketsin order to prepare for membership in the European Union. The islandremains divided politically, however, over the question of joiningthe EU. Continued sluggishness in the global economy is holding backexports, tourism, and overall growth.
Man, Isle ofOffshore banking, manufacturing, and tourism are keysectors of the economy. The government's policy of offeringincentives to high-technology companies and financial institutionsto locate on the island has paid off in expanding employmentopportunities in high-income industries. As a result, agricultureand fishing, once the mainstays of the economy, have declined intheir shares of GDP. Trade is mostly with the UK. The Isle of Manenjoys free access to EU markets.
Marshall IslandsUS Government assistance is the mainstay of thistiny island economy. Agricultural production is primarilysubsistence and is concentrated on small farms; the most importantcommercial crops are coconuts and breadfruit. Small-scale industryis limited to handicrafts, tuna processing, and copra. The touristindustry, now a small source of foreign exchange employing less than10% of the labor force, remains the best hope for future addedincome. The islands have few natural resources, and imports farexceed exports. Under the terms of the Compact of Free Association,the US has provided more than $1 billion in aid since 1986.Negotiations have continued for an extended agreement. Governmentdownsizing, drought, a drop in construction, the decline in tourismand foreign investment due to the Asian financial difficulties, andless income from the renewal of fishing vessel licenses have heldGDP growth to an average of 1% over the past decade.
MartiniqueThe economy is based on sugarcane, bananas, tourism, andlight industry. Agriculture accounts for about 6% of GDP and thesmall industrial sector for 11%. Sugar production has declined, withmost of the sugarcane now used for the production of rum. Bananaexports are increasing, going mostly to France. The bulk of meat,vegetable, and grain requirements must be imported, contributing toa chronic trade deficit that requires large annual transfers of aidfrom France. Tourism, which employs more than 11,000 people, hasbecome more important than agricultural exports as a source offoreign exchange.
MauritaniaHalf the population still depends on agriculture andlivestock for a livelihood, even though many of the nomads andsubsistence farmers were forced into the cities by recurrentdroughts in the 1970s and 1980s. Mauritania has extensive depositsof iron ore, which account for nearly 40% of total exports. Thedecline in world demand for this ore, however, has led to cutbacksin production. The nation's coastal waters are among the richestfishing areas in the world, but overexploitation by foreignersthreatens this key source of revenue. The country's first deepwaterport opened near Nouakchott in 1986. In the past, drought andeconomic mismanagement resulted in a buildup of foreign debt. InFebruary 2000, Mauritania qualified for debt relief under theHeavily Indebted Poor Countries (HIPC) initiative and in December2001 received strong support from donor and lending countries at atriennial Consultative Group review. In 2001, exploratory oil wellsin tracts 80 km offshore indicated potential extraction at currentworld oil prices. A new investment code approved in December 2001improved the opportunities for direct foreign investment. Ongoingnegotiations with the IMF involve problems of economic reforms andfiscal discipline. Substantial oil production and exports probablywill not begin until 2005.
MauritiusSince independence in 1968, Mauritius has developed from alow-income, agriculturally based economy to a middle-incomediversified economy with growing industrial, financial, and touristsectors. For most of the period, annual growth has been in the orderof 5% to 6%. This remarkable achievement has been reflected in moreequitable income distribution, increased life expectancy, loweredinfant mortality, and a much-improved infrastructure. Sugarcane isgrown on about 90% of the cultivated land area and accounts for 25%of export earnings. The government's development strategy centers onforeign investment. Mauritius has attracted more than 9,000 offshoreentities, many aimed at commerce in India and South Africa, andinvestment in the banking sector alone has reached over $1 billion.Mauritius, with its strong textile sector and responsible fiscalmanagement, has been well poised to take advantage of the AfricaGrowth and Opportunity Act (AGOA). The government is encouragingforeign investment in the information technology field.
MayotteEconomic activity is based primarily on the agriculturalsector, including fishing and livestock raising. Mayotte is notself-sufficient and must import a large portion of its foodrequirements, mainly from France. The economy and future developmentof the island are heavily dependent on French financial assistance,an important supplement to GDP. Mayotte's remote location is anobstacle to the development of tourism.
MexicoMexico has a free market economy with a mixture of modern andoutmoded industry and agriculture, increasingly dominated by theprivate sector. Recent administrations have expanded competition inseaports, railroads, telecommunications, electricity, natural gasdistribution, and airports. Income distribution remains highlyunequal. Trade with the US and Canada has tripled since theimplementation of NAFTA in 1994. Following 6.9% growth in 2000, realGDP fell 0.3% in 2001, recovering to only a plus 1% in 2002, withthe US slowdown the principal cause. Mexico implemented free tradeagreements with Guatemala, Honduras, El Salvador, and the EuropeanFree Trade Area in 2001, putting more than 90% of trade under freetrade agreements. Foreign direct investment reached $25 billion in2001, of which $12.5 billion came from the purchase of Mexico'ssecond-largest bank, Banamex, by Citigroup.
Micronesia, Federated States ofEconomic activity consists primarilyof subsistence farming and fishing. The islands have few mineraldeposits worth exploiting, except for high-grade phosphate. Thepotential for a tourist industry exists, but the remote location, alack of adequate facilities, and limited air connections hinderdevelopment. In November 2002, the country experienced a furtherreduction in future revenues from the Compact of Free Association -the agreement with the US in which Micronesia received $1.3 billionin financial and technical assistance over a 15-year period until2001. The country's medium-term economic outlook appears fragile duenot only to the reduction in US assistance but also to the slowgrowth of the private sector. Geographical isolation and a poorlydeveloped infrastructure remain major impediments to long-termgrowth.
Midway IslandsThe economy is based on providing support servicesfor the national wildlife refuge activities located on the islands.All food and manufactured goods must be imported.
MoldovaMoldova remains a very poor country despite recent progressfrom its small economic base. It enjoys a favorable climate and goodfarmland but has no major mineral deposits. As a result, the economydepends heavily on agriculture, featuring fruits, vegetables, wine,and tobacco. Moldova must import all of its supplies of oil, coal,and natural gas, largely from Russia. Energy shortages contributedto sharp production declines after the breakup of the Soviet Unionin 1991. As part of an ambitious reform effort, Moldova introduced aconvertible currency, freed all prices, stopped issuing preferentialcredits to state enterprises, backed steady land privatization,removed export controls, and freed interest rates. The governmententered into agreements with the World Bank and the IMF to promotegrowth and reduce poverty. The economy returned to positive growth,of 2.1% in 2000, 6.1% in 2001, 7.2% in 2002, and 5.3% in 2003.Further reforms will come slowly because of strong political forcesbacking government controls. The economy remains vulnerable tohigher fuel prices, poor agricultural weather, and the skepticism offoreign investors.
MonacoMonaco, situated on the French Mediterranean coast, is apopular resort, attracting tourists to its casino and pleasantclimate. In 2001, a major new construction project will extend thepier used by cruise ships in the main harbor. The principality hassuccessfully sought to diversify into services and small,high-value-added, nonpolluting industries. The state has no incometax and low business taxes and thrives as a tax haven both forindividuals who have established residence and for foreign companiesthat have set up businesses and offices. The state retainsmonopolies in a number of sectors, including tobacco, the telephonenetwork, and the postal service. Living standards are high, roughlycomparable to those in prosperous French metropolitan areas. Monacodoes not publish national income figures; the estimates below areextremely rough.
MongoliaEconomic activity traditionally has been based onagriculture and breeding of livestock. Mongolia also has extensivemineral deposits; copper, coal, molybdenum, tin, tungsten, and goldaccount for a large part of industrial production. Sovietassistance, at its height one-third of GDP, disappeared almostovernight in 1990-1991 at the time of the dismantlement of the USSR.Mongolia was driven into deep recession, prolonged by the MongolianPeople's Revolutionary Party's (MPRP) reluctance to undertakeserious economic reform. The Democratic Coalition (DC) governmentembraced free-market economics, eased price controls, liberalizeddomestic and international trade, and attempted to restructure thebanking system and the energy sector. Major domestic privatizationprograms were undertaken, as well as the fostering of foreigninvestment through international tender of the oil distributioncompany, a leading cashmere company, and banks. Reform was held backby the ex-Communist MPRP opposition and by the political instabilitybrought about through four successive governments under the DC.Economic growth picked up in 1997-1999 after stalling in 1996 due toa series of natural disasters and declines in world prices of copperand cashmere. In August and September 1999, the economy sufferedfrom a temporary Russian ban on exports of oil and oil products, andMongolia remains vulnerable in this sector. Mongolia joined theWorld Trade Organization (WTrO) in 1997. The international donorcommunity pledged over $300 million per year at the ConsultativeGroup Meeting, held in Ulaanbaatar in June 1999. The MPRPgovernment, elected in July 2000, is anxious to improve theinvestment climate; it must also deal with a heavy burden ofexternal debt. Falling prices for Mongolia's mainly primary sectorexports, widespread opposition to privatization, and adverse effectsof weather on agriculture in early 2000 and 2001 restrained real GDPgrowth in 2000-2001. Despite drought problems in 2002, GDP rose4.0%, followed by a solid 5.0% increase in 2003. The firstapplications under the land privatization law have been marked by anumber of disputes over particular sites. Russia claims Mongoliaowes it $11 billion from the old Soviet period; any settlement couldsubstantially increase Mongolia's foreign debt burden.
MontserratSevere volcanic activity, which began in July 1995, hasput a damper on this small, open economy. A catastrophic eruption inJune 1997 closed the airports and seaports, causing further economicand social dislocation. Two-thirds of the 12,000 inhabitants fledthe island. Some began to return in 1998, but lack of housinglimited the number. The agriculture sector continued to be affectedby the lack of suitable land for farming and the destruction ofcrops. Prospects for the economy depend largely on developments inrelation to the volcano and on public sector construction activity.The UK has launched a three-year $122.8 million aid program to helpreconstruct the economy. Half of the island is expected to remainuninhabitable for another decade.
MoroccoMorocco faces the problems typical of developing countries -restraining government spending, reducing constraints on privateactivity and foreign trade, and achieving sustainable economicgrowth. Following structural adjustment programs supported by theIMF, World Bank, and the Paris Club, the dirham is now fullyconvertible for current account transactions, and reforms of thefinancial sector have been implemented. Droughts depressed activityin the key agricultural sector and contributed to a stagnant economyin 1999 and 2000. During that time, however, Morocco reported largeforeign exchange inflows from the sale of a mobile telephone licenseand partial privatization of the state-owned telecommunicationscompany. Favorable rainfall in 2001 led to a growth of 6.5%. Goodharvest conditions continued to support GDP growth in 2002.Formidable long-term challenges include: servicing the externaldebt; modernizing the industrial sector; preparing the economy forfreer trade with the EU and US; and improving education andattracting foreign investment to boost living standards and jobprospects for Morocco's youth.
MozambiqueAt independence in 1975, Mozambique was one of theworld's poorest countries. Socialist mismanagement and a brutalcivil war from 1977-92 exacerbated the situation. In 1987, thegovernment embarked on a series of macroeconomic reforms designed tostabilize the economy. These steps, combined with donor assistanceand with political stability since the multi-party elections in1994, have led to dramatic improvements in the country's growthrate. Inflation was brought to single digits during the late 1990salthough it returned to double digits in 2000-02. Fiscal reforms,including the introduction of a value-added tax and reform of thecustoms service, have improved the government's revenue collectionabilities. In spite of these gains, Mozambique remains dependentupon foreign assistance for much of its annual budget, and themajority of the population remains below the poverty line.Subsistence agriculture continues to employ the vast majority of thecountry's workforce. A substantial trade imbalance persists althoughthe opening of the MOZAL aluminum smelter, the country's largestforeign investment project to date has increased export earnings.Additional investment projects in titanium extraction and processingand garment manufacturing should further close the import/exportgap. Mozambique's once substantial foreign debt has been reducedthrough forgiveness and rescheduling under the IMF's HeavilyIndebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and isnow at a manageable level.
NamibiaThe economy is heavily dependent on the extraction andprocessing of minerals for export. Mining accounts for 20% of GDP.Rich alluvial diamond deposits make Namibia a primary source forgem-quality diamonds. Namibia is the fourth-largest exporter ofnonfuel minerals in Africa, the world's fifth-largest producer ofuranium, and the producer of large quantities of lead, zinc, tin,silver, and tungsten. The mining sector employs only about 3% of thepopulation while about half of the population depends on subsistenceagriculture for its livelihood. Namibia normally imports about 50%of its cereal requirements; in drought years food shortages are amajor problem in rural areas. A high per capita GDP, relative to theregion, hides the great inequality of income distribution; nearlyone-third of Namibians had annual incomes of less than $1400 inconstant 1994 dollars, according to a 1993 study. The Namibianeconomy is closely linked to South Africa with the Namibian dollarpegged to the South African rand. Privatization of severalenterprises in coming years may stimulate long-run foreigninvestment.
NauruRevenues of this tiny island have come from exports ofphosphates, but reserves are expected to be exhausted within a fewyears. Phosphate production has declined since 1989, as demand hasfallen in traditional markets and as the marginal cost of extractingthe remaining phosphate increases, making it less internationallycompetitive. While phosphates have given Nauruans one of the highestper capita incomes in the Third World, few other resources existwith most necessities being imported, including fresh water fromAustralia. The rehabilitation of mined land and the replacement ofincome from phosphates are serious long-term problems. Inanticipation of the exhaustion of Nauru's phosphate deposits,substantial amounts of phosphate income have been invested in trustfunds to help cushion the transition and provide for Nauru'seconomic future. The government has been borrowing heavily from thetrusts to finance fiscal deficits. To cut costs the government hascalled for a freeze on wages, a reduction of over-staffed publicservice departments, privatization of numerous government agencies,and closure of some overseas consulates. In recent years Nauru hasencouraged the registration of offshore banks and corporations. Tensof billions of dollars have been channeled through their accounts.Few comprehensive statistics on the Nauru economy exist, withestimates of Nauru's GDP varying widely.
Navassa Islandno economic activity
NepalNepal is among the poorest and least developed countries inthe world with 42% of its population living below the poverty line.Agriculture is the mainstay of the economy, providing a livelihoodfor over 80% of the population and accounting for 40% of GDP.Industrial activity mainly involves the processing of agriculturalproduce including jute, sugarcane, tobacco, and grain. Textile andcarpet production, accounting for about 80% of foreign exchangeearnings in recent years, contracted in 2001-02 due to the overallslowdown in the world economy and pressures by Maoist insurgents onfactory owners and workers. Security concerns in the wake of theMaoist conflict and the September 11, 2001 terrorist attacks in theUS have led to a decrease in tourism, another key source of foreignexchange. Since 1991, the government has been moving forward witheconomic reforms, e.g., by reducing business licenses andregistration requirements to simplify investment procedures,reducing subsidies, privatizing state industries, and laying offcivil servants. Nepal has considerable scope for exploiting itspotential in hydropower and tourism, areas of recent foreigninvestment interest. Prospects for foreign trade or investment inother sectors will remain poor, however, because of the small sizeof the economy, its technological backwardness, its remoteness, itslandlocked geographic location, and its susceptibility to naturaldisaster. The international community's role of funding more than60% of Nepal's development budget and more than 28% of totalbudgetary expenditures will likely continue as a major ingredient ofgrowth.
NetherlandsThe Netherlands is a prosperous and open economydepending heavily on foreign trade. The economy is noted for stableindustrial relations, moderate unemployment and inflation, a sizablecurrent account surplus, and an important role as a Europeantransportation hub. Industrial activity is predominantly in foodprocessing, chemicals, petroleum refining, and electrical machinery.A highly mechanized agricultural sector employs no more than 4% ofthe labor force but provides large surpluses for the food-processingindustry and for exports. The Netherlands, along with 11 of its EUpartners, began circulating the euro currency on 1 January 2002. Thecountry continues to be one of the leading European nations forattracting foreign direct investment. Economic growth slowedconsiderably in 2001-03, as part of the global economic slowdown,but for the four years before that, annual growth averaged nearly4%, well above the EU average. The government is wrestling with adeteriorating budget position, and is moving toward the EU 3% limit.
Netherlands AntillesTourism, petroleum refining, and offshorefinance are the mainstays of this small economy, which is closelytied to the outside world. Although GDP has declined or remainedeven in each of the past six years, the islands enjoy a high percapita income and a well-developed infrastructure compared withother countries in the region. Almost all consumer and capital goodsare imported, the US and Mexico being the major suppliers. Poorsoils and inadequate water supplies hamper the development ofagriculture.
New CaledoniaNew Caledonia has about 25% of the world's knownnickel resources. Only a small amount of the land is suitable forcultivation, and food accounts for about 20% of imports. In additionto nickel, substantial financial support from France - equal to morethan one-fourth of GDP - and tourism are keys to the health of theeconomy. Substantial new investment in the nickel industry, combinedwith the recovery of global nickel prices, brightens the economicoutlook for the next several years.
New ZealandSince 1984 the government has accomplished majoreconomic restructuring, transforming New Zealand from an agrarianeconomy dependent on concessionary British market access to a moreindustrialized, free market economy that can compete globally. Thisdynamic growth has boosted real incomes (but left behind many at thebottom of the ladder), broadened and deepened the technologicalcapabilities of the industrial sector, and contained inflationarypressures. While per capita incomes have been rising, however, theyremain below the level of the four largest EU economies, and thereis some government concern that New Zealand is not closing the gap.New Zealand is heavily dependent on trade - particularly inagricultural products - to drive growth, and it has been affected bythe global economic slowdown and the slump in commodity prices. Thusfar the New Zealand economy has been relatively resilient, althoughgrowth may slow to 2.5% in 2003.
NicaraguaNicaragua, one of the hemisphere's poorest countries,faces low per capita income, flagging socio-economic indicators, andhuge external debt. Distribution of income is one of the mostunequal on the globe. While the country has made progress towardmacroeconomic stability over the past few years, a banking crisisand scandal has shaken the economy. Nicaragua will continue to bedependent on international aid and debt relief under the HeavilyIndebted Poor Countries (HIPC) initiative. Donors have made aidconditional on the openness of government financial operation,poverty alleviation, and human rights. Nicaragua met the conditionsfor additional debt service relief in December 2000. Growth shouldmove up moderately in 2003 because of increased private investmentand exports.
NigerNiger is a poor, landlocked Sub-Saharan nation, whose economycenters on subsistence agriculture, animal husbandry, and reexporttrade, and increasingly less on uranium, because of declining worlddemand. The 50% devaluation of the West African franc in January1994 boosted exports of livestock, cowpeas, onions, and the productsof Niger's small cotton industry. The government relies on bilateraland multilateral aid - which was suspended following the April 1999coup d'etat - for operating expenses and public investment. In2000-01, the World Bank approved a structural adjustment loan of$105 million to help support fiscal reforms. However, reforms couldprove difficult given the government's bleak financial situation.The IMF approved a $73 million poverty reduction and growth facilityfor Niger in 2000 and announced $115 million in debt relief underthe Heavily Indebted Poor Countries (HIPC) initiative. Furtherdisbursements of aid occurred in 2002. Future growth may besustained by exploitation of oil, gold, coal, and other mineralresources.
NigeriaThe oil-rich Nigerian economy, long hobbled by politicalinstability, corruption, and poor macroeconomic management, isundergoing substantial reform under the new civilian administration.Nigeria's former military rulers failed to diversify the economyaway from overdependence on the capital-intensive oil sector, whichprovides 20% of GDP, 95% of foreign exchange earnings, and about 65%of budgetary revenues. The largely subsistence agricultural sectorhas failed to keep up with rapid population growth, and Nigeria,once a large net exporter of food, now must import food. Followingthe signing of an IMF stand-by agreement in August 2000, Nigeriareceived a debt-restructuring deal from the Paris Club and a $1billion credit from the IMF, both contingent on economic reforms.The agreement was allowed to expire by the IMF in November 2001,however, and Nigeria apparently received much less multilateralassistance than expected in 2002. Nonetheless, increases in foreignoil investment and oil production kept growth at 3% in 2002. Thegovernment lacks the strength to implement the market-orientedreforms urged by the IMF, such as modernization of the bankingsystem; to curb inflation by blocking excessive wage demands; and toresolve regional disputes over the distribution of earnings from theoil industry. When the uncertainties in the global economy are addedin, estimates of Nigeria's prospects for 2003 must have a widemargin of error.
NiueThe economy suffers from the typical Pacific island problems ofgeographic isolation, few resources, and a small population.Government expenditures regularly exceed revenues, and the shortfallis made up by critically needed grants from New Zealand that areused to pay wages to public employees. Niue has cut governmentexpenditures by reducing the public service by almost half. Theagricultural sector consists mainly of subsistence gardening,although some cash crops are grown for export. Industry consistsprimarily of small factories to process passion fruit, lime oil,honey, and coconut cream. The sale of postage stamps to foreigncollectors is an important source of revenue. The island in recentyears has suffered a serious loss of population because of migrationof Niueans to New Zealand. Efforts to increase GDP include thepromotion of tourism and a financial services industry, althoughPremier LAKATANI announced in February 2002 that Niue will shut downthe offshore banking industry. Economic aid from New Zealand in 2002was about $2.6 million.
Norfolk IslandTourism, the primary economic activity, has steadilyincreased over the years and has brought a level of prosperityunusual among inhabitants of the Pacific islands. The agriculturalsector has become self-sufficient in the production of beef,poultry, and eggs.
Northern Mariana IslandsThe economy benefits substantially fromfinancial assistance from the US. The rate of funding has declinedas locally generated government revenues have grown. The key touristindustry employs about 50% of the work force and accounts forroughly one-fourth of GDP. Japanese tourists predominate. Annualtourist entries have exceeded one-half million in recent years, butfinancial difficulties in Japan have caused a temporary slowdown.The agricultural sector is made up of cattle ranches and small farmsproducing coconuts, breadfruit, tomatoes, and melons. Garmentproduction is by far the most important industry with employment of17,500 mostly Chinese workers and sizable shipments to the US underduty and quota exemptions.
NorwayThe Norwegian economy is a prosperous bastion of welfarecapitalism, featuring a combination of free market activity andgovernment intervention. The government controls key areas, such asthe 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 onits oil production and international oil prices; in 1999, oil andgas accounted for 35% of exports. Only Saudi Arabia and Russiaexport more oil than Norway. Norway opted to stay out of the EUduring a referendum in November 1994. The government has moved aheadwith privatization. With arguably the highest quality of lifeworldwide, Norwegians still worry about that time in the next twodecades when the oil and gas begin to run out. Accordingly, Norwayhas been saving its oil-boosted budget surpluses in a GovernmentPetroleum Fund, which is invested abroad and now is valued at morethan $43 billion. GDP growth was a lackluster 1% in 2002 and 2003against the background of a faltering European economy.
OmanOman's economic performance improved significantly in 2000 duelargely to the upturn in oil prices. The government is moving aheadwith privatization of its utilities, the development of a body ofcommercial law to facilitate foreign investment, and increasedbudgetary outlays. Oman continues to liberalize its markets andjoined the World Trade Organization (WTrO) in November 2000. GDPgrowth improved in 2001 despite the global slowdown and then fellback to 2.2% in 2002. In order to reduce unemployment, thegovernment is trying to replace expatriate workers with localworkers. Another government objective is the development of thenation's gas resources.
Pacific OceanThe Pacific Ocean is a major contributor to the worldeconomy 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. Exploitationof offshore oil and gas reserves is playing an ever-increasing rolein the energy supplies of US, Australia, NZ, China, and Peru. Thehigh cost of recovering offshore oil and gas, combined with the wideswings in world prices for oil since 1985, has slowed but notstopped new drillings.
PakistanPakistan, an impoverished and underdeveloped country,suffers from internal political disputes, low levels of foreigninvestment, and a costly, ongoing confrontation with neighboringIndia. Pakistan's economic prospects, although still marred by poorhuman development indicators, continued to improve in 2002 followingunprecedented inflows of foreign assistance beginning in 2001.Foreign exchange reserves have grown to record levels, supportedlargely by fast growth in recorded worker remittances. Trade levelsrebounded after a sharp decline in late 2001. The government hasmade significant inroads in macroeconomic reform since 2000, butprogress is beginning to slow. Although it is in the second year ofits $1.3 billion IMF Poverty Reduction and Growth Facility,Islamabad continues to require waivers for politically difficultreforms. Long-term prospects remain uncertain as developmentspending remains low, regional tensions remain high, and politicaltensions weaken Pakistan's commitment to lender-recommended economicreforms. GDP growth will continue to hinge on crop performance;dependence on foreign oil leaves the import bill vulnerable tofluctuating oil prices; and efforts to open and modernize theeconomy remain uneven.
PalauThe economy consists primarily of tourism, subsistenceagriculture and fishing. The government is the major employer of thework force, relying heavily on financial assistance from the US.Business and tourist arrivals numbered 50,000 in FY00/01. Thepopulation enjoys a per capita income twice that of the Philippinesand much of Micronesia. Long-run prospects for the key touristsector have been greatly bolstered by the expansion of air travel inthe Pacific, the rising prosperity of leading East Asian countries,and the willingness of foreigners to finance infrastructuredevelopment.
Palmyra Atollno economic activity
PanamaPanama's economy is based primarily on a well-developedservices sector that accounts for three-fourths of GDP. Servicesinclude operating the Panama Canal, banking, the Colon Free Zone,insurance, container ports, flagship registry, and tourism. A slumpin Colon Free Zone and agricultural exports, the global slowdown,and the withdrawal of US military forces held back economic growthin 2000-02. The government has been backing public works programs,tax reforms, new regional trade agreements, and development oftourism in order to stimulate growth.
Papua New GuineaPapua New Guinea is richly endowed with naturalresources, but exploitation has been hampered by rugged terrain andthe high cost of developing infrastructure. Agriculture provides asubsistence livelihood for 85% of the population. Mineral deposits,including oil, copper, and gold, account for 72% of export earnings.The economy has faltered over the past three years but will probablyimprove slightly in 2003. Former Prime Minister Mekere MORAUTA hadtried to restore integrity to state institutions, stabilize thekina, restore stability to the national budget, privatize publicenterprises where appropriate, and ensure ongoing peace onBougainville. The government has had considerable success inattracting international support, specifically gaining the backingof the IMF and the World Bank in securing development assistanceloans. Significant challenges face Prime Minister Michael SOMARE,including gaining further investor confidence, continuing efforts toprivatize government assets, and maintaining the support of membersof Parliament.
Paracel IslandsChina announced plans in 1997 to open the islandsfor tourism.
ParaguayParaguay has a market economy marked by a large informalsector. The informal sector features both reexport of importedconsumer goods to neighboring countries as well as the activities ofthousands of microenterprises and urban street vendors. Because ofthe importance of the informal sector, accurate economic measuresare difficult to obtain. A large percentage of the populationderives their living from agricultural activity, often on asubsistence basis. The formal economy grew by an average of about 3%annually in 1995-97; but GDP declined slightly in 1998, 1999, and2000, rose slightly in 2001, only to fall again in 2002. On a percapita basis, real income has stagnated at 1980 levels. Mostobservers attribute Paraguay's poor economic performance topolitical uncertainty, corruption, lack of progress on structuralreform, substantial internal and external debt, and deficientinfrastructure.
PeruThanks to foreign investment and the cooperation between thegovernment and the IMF and World Bank, growth was strong in 1994-97and inflation was brought under control. In 1998, El Nino's impacton agriculture, the financial crisis in Asia, and instability inBrazilian markets undercut growth. The following year was again leanyear for Peru, with the aftermath of El Nino and the Asian financialcrisis working its way through the economy. Political instabilityresulting from the presidential election and FUJIMORI's subsequentdeparture from office limited growth in 2000. The downturn in theglobal economy further curtailed growth in 2001. President TOLEDO,who assumed the presidency in July 2001, has been working toreinvigorate the economy and reduce unemployment. Economic growth in2002 is estimated at 4.8%, led by construction in the retail and gassectors.
PhilippinesIn 1998, the Philippine economy - a mixture ofagriculture, light industry, and supporting services - deterioratedas a result of spillover from the Asian financial crisis and poorweather conditions. Growth fell to 0.6% in 1998 from 5% in 1997, butrecovered to about 3.3% in 1999, 4.5% in 2000, and 4.5% in 2001. In2002, the Philippines recorded GDP growth of 4.4% but also incurreda record budget deficit. As a result, the Philippines is burdenedwith a public sector debt equal to more than 100% of GDP. Growtheased to 3.8% in 2003. The government has promised economic reformsincluding going forward with privatization, reforming the taxsystem, and promoting additional trade integration within itsregion. Considerable drive is required to update the educationalsystem and the road network.
Pitcairn IslandsThe inhabitants of this tiny isolated economy existon fishing, subsistence farming, handicrafts, and postage stamps.The fertile soil of the valleys produces a wide variety of fruitsand vegetables, including citrus, sugarcane, watermelons, bananas,yams, and beans. Bartering is an important part of the economy. Themajor sources of revenue are the sale of postage stamps tocollectors and the sale of handicrafts to passing ships.
PolandPoland has steadfastly pursued a policy of economicliberalization throughout the 1990s and today stands out as asuccess story among transition economies. Even so, much remains tobe done. The privatization of small and medium state-owned companiesand a liberal law on establishing new firms has encouraged thedevelopment of the private business sector, but legal andbureaucratic obstacles alongside persistent corruption are hamperingits further development. Poland's agricultural sector remainshandicapped by structural problems, surplus labor, inefficient smallfarms, and lack of investment. Restructuring and privatization of"sensitive sectors" (e.g., coal, steel, railroads, and energy),while recently initiated, have stalled due to a lack of politicalwill on the part of the government. Structural reforms in healthcare, education, the pension system, and state administration haveresulted in larger than expected fiscal pressures. Further progressin public finance depends mainly on privatization of Poland'sremaining state sector, the reduction of state employment, and anoverhaul of the tax code to incorporate the growing gray economy andfarmers most of whom pay no tax. The government's determination toenter the EU has shaped most aspects of its economic policy and newlegislation; in June 2003, 77% of the voters approved membership,now scheduled for May 2004. Improving Poland's exportcompetitiveness and containing the internal budget deficit are toppriorities. Due to political uncertainty, the zloty has recentlydepreciated in relation to the euro and the dollar while currenciesof the other euro-zone aspirants have been appreciating. GDP percapita equals that of the 3 Baltic states.
PortugalPortugal has become a diversified and increasinglyservice-based economy since joining the European Community in 1986.Over the past decade, successive governments have privatized manystate-controlled firms and liberalized key areas of the economy,including the financial and telecommunications sectors. The countryqualified for the European Monetary Union (EMU) in 1998 and begancirculating the euro on 1 January 2002 along with 11 other EU membereconomies. Economic growth has been above the EU average for much ofthe past decade, but fell back in 2001-03. GDP per capita stands at70% of that of the leading EU economies. A poor educational system,in particular, has been an obstacle to greater productivity andgrowth. Portugal has been increasingly overshadowed by lower-costproducers in Central Europe and Asia as a target for foreign directinvestment. The coalition government faces tough choices in itsattempts to boost Portugal's economic competitiveness and to keepthe budget deficit within the 3% EU ceiling.
Puerto RicoPuerto Rico has one of the most dynamic economies in theCaribbean region. A diverse industrial sector has far surpassedagriculture as the primary locus of economic activity and income.Encouraged by duty-free access to the US and by tax incentives, USfirms have invested heavily in Puerto Rico since the 1950s. USminimum wage laws apply. Sugar production has lost out to dairyproduction and other livestock products as the main source of incomein the agricultural sector. Tourism has traditionally been animportant source of income, with estimated arrivals of nearly 5million tourists in 1999. Growth fell off in 2001-02, largely due tothe slowdown in the US economy.
QatarOil and gas account for more than 55% of GDP, roughly 85% ofexport earnings, and 70% of government revenues. Oil and gas havegiven Qatar a per capita GDP comparable to that of the leading WestEuropean industrial countries. Proved oil reserves of 14.5 billionbarrels should ensure continued output at current levels for 23years. Production and export of natural gas are becomingincreasingly important to the economy. Qatar's proved reserves ofnatural gas exceed 17.9 trillion cubic meters, more than 5% of theworld total and third largest in the world. Long-term goals featurethe development of offshore natural gas reserves. Since 2000, Qatarhas consistently posted trade surpluses largely because of high oilprices and increased natural gas exports, and Qatar's economy isexpected to receive an added boost as it begins to increase liquidnatural gas exports.
ReunionThe economy has traditionally been based on agriculture, butservices now dominate. Sugarcane has been the primary crop for morethan a century, and in some years it accounts for 85% of exports.The government has been pushing the development of a touristindustry to relieve high unemployment, which amounts to one-third ofthe labor force. The gap in Reunion between the well-off and thepoor is extraordinary and accounts for the persistent socialtensions. The white and Indian communities are substantially betteroff than other segments of the population, often approachingEuropean standards, whereas minority groups suffer the poverty andunemployment typical of the poorer nations of the African continent.The outbreak of severe rioting in February 1991 illustrates theseriousness of socioeconomic tensions. The economic well-being ofReunion depends heavily on continued financial assistance fromFrance.
RomaniaRomania began the transition from Communism in 1989 with alargely obsolete industrial base and a pattern of output unsuited tothe country's needs. The country emerged in 2000 from a punishingthree-year recession thanks to strong demand in EU export markets.Despite the global slowdown in 2001-02, strong domestic activity inconstruction, agriculture, and consumption have kept growth above4%. An IMF Standby Agreement, signed in 2001, has been accompaniedby slow but palpable gains in privatization, deficit reduction, andthe curbing of inflation. Nonetheless, recent macroeconomic gainshave done little to address Romania's widespread poverty, whilecorruption and red tape hinder foreign investment.
RussiaA decade after the implosion of the Soviet Union in December1991, Russia is still struggling to establish a modern marketeconomy and achieve strong economic growth. In contrast to itstrading partners in Central Europe - which were able within 3 to 5years to overcome the initial production declines that accompaniedthe launch of market reforms - Russia saw its economy contract forfive years, as the executive and legislature dithered over theimplementation of many of the basic foundations of a market economy.Russia achieved a slight recovery in 1997, but the government'sstubborn budget deficits and the country's poor business climatemade it vulnerable when the global financial crisis swept through in1998. The crisis culminated in the August depreciation of the ruble,a debt default by the government, and a sharp deterioration inliving standards for most of the population. The economysubsequently has rebounded, growing by an average of more than 6%annually in 1999-2002 on the back of higher oil prices and the 60%depreciation of the ruble in 1998. These GDP numbers, along with arenewed government effort to advance lagging structural reforms,have raised business and investor confidence over Russia's prospectsin its second decade of transition. Yet serious problems persist.Oil, natural gas, metals, and timber account for more than 80% ofexports, leaving the country vulnerable to swings in world prices.Russia's industrial base is increasingly dilapidated and must bereplaced or modernized if the country is to maintain vigorouseconomic growth. Other problems include a weak banking system, apoor business climate that discourages both domestic and foreigninvestors, corruption, local and regional government intervention inthe courts, and widespread lack of trust in institutions. In 2003President PUTIN further tightened his control over the "oligarchs,"especially in the realm of political expression.
RwandaRwanda is a poor rural country with about 90% of thepopulation engaged in (mainly subsistence) agriculture. It is themost densely populated country in Africa; landlocked with fewnatural resources and minimal industry. Primary foreign exchangeearners are coffee and tea. The 1994 genocide decimated Rwanda'sfragile economic base, severely impoverished the population,particularly women, and eroded the country's ability to attractprivate and external investment. However, Rwanda has madesubstantial progress in stabilizing and rehabilitating its economyto pre-1994 levels, although poverty levels are higher now. GDP hasrebounded, and inflation has been curbed. Export earnings, however,have been hindered by low beverage prices, depriving the country ofmuch needed hard currency. Attempts to diversify intonon-traditional agriculture exports such as flowers and vegetableshave been stymied by a lack of adequate transportationinfrastructure. Despite Rwanda's fertile ecosystem, food productionoften does not keep pace with population growth, requiring food tobe imported. Rwanda continues to receive substantial amounts of aidmoney and was approved for IMF-World Bank Heavily Indebted PoorCountry (HIPC) initiative debt relief in late 2000. But Kigali'shigh defense expenditures cause tension between the government andinternational donors and lending agencies.
Saint HelenaThe economy depends largely on financial assistancefrom the UK, which amounted to about $5 million in 1997 or almostone-half of annual budgetary revenues. The local population earnsincome from fishing, the raising of livestock, and sales ofhandicrafts. Because there are few jobs, 25% of the work force hasleft to seek employment on Ascension Island, on the Falklands, andin the UK.
Saint Kitts and NevisSugar was the traditional mainstay of theSaint Kitts economy until the 1970s. Although the crop stilldominates the agricultural sector, activities such as tourism,export-oriented manufacturing, and offshore banking have assumedlarger roles in the economy. As tourism revenues are now the chiefsource of the islands' foreign exchange, a decline in stopovertourist arrivals following the September 11, 2001 terrorist attackshas eroded government finances. The opening of a 1,000+ bed Marriotthotel in February 2003 is expected to bring in much-needed revenue.