China In late 1978 the Chinese leadership began moving the economy from a sluggish, inefficient, Soviet-style centrally planned economy to a more market-oriented system. Whereas the system operates within a political framework of strict Communist control, the economic influence of non-state organizations and individual citizens has been steadily increasing. The authorities switched to a system of household and village responsibility in agriculture in place of the old collectivization, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprises in services and light manufacturing, and opened the economy to increased foreign trade and investment. The result has been a quadrupling of GDP since 1978. Measured on a purchasing power parity (PPP) basis, China in 2003 stood as the second-largest economy in the world after the US, although in per capita terms the country is still poor. Agriculture and industry have posted major gains especially in coastal areas near Hong Kong, opposite Taiwan, and in Shanghai, where foreign investment has helped spur output of both domestic and export goods. The leadership, however, often has experienced - as a result of its hybrid system - the worst results of socialism (bureaucracy and lassitude) and of capitalism (growing income disparities and rising unemployment). China thus has periodically backtracked, retightening central controls at intervals. The government has struggled to (a) sustain adequate jobs growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force; (b) reduce corruption and other economic crimes; and (c) keep afloat the large state-owned enterprises, many of which had been shielded from competition by subsidies and had been losing the ability to pay full wages and pensions. From 80 to 120 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time, low-paying jobs. Popular resistance, changes in central policy, and loss of authority by rural cadres have weakened China's population control program, which is essential to maintaining long-term growth in living standards. Another long-term threat to growth is the deterioration in the environment, notably air pollution, soil erosion, and the steady fall of the water table especially in the north. China continues to lose arable land because of erosion and economic development. Beijing says it will intensify efforts to stimulate growth through spending on infrastructure - such as water supply and power grids - and poverty relief and through rural tax reform. Accession to the World Trade Organization helps strengthen its ability to maintain strong growth rates but at the same time puts additional pressure on the hybrid system of strong political controls and growing market influences. China has benefited from a huge expansion in computer internet use. Foreign investment remains a strong element in China's remarkable economic growth. Growing shortages of electric power and raw materials will hold back the expansion of industrial output in 2004.
Christmas IslandPhosphate mining had been the only significanteconomic activity, but in December 1987 the Australian Governmentclosed the mine. In 1991, the mine was reopened. With the support ofthe government, a $34 million casino opened in 1993. The casinoclosed in 1998. The Australian Government in 2001 agreed to supportthe creation of a commercial space-launching site on the island,projected to begin operations in mid-2004
Clipperton IslandAlthough 115 species of fish have been identifiedin the territorial waters of Clipperton Island, the only economicactivity is tuna fishing.
Cocos (Keeling) IslandsGrown throughout the islands, coconuts arethe sole cash crop. Small local gardens and fishing contribute tothe food supply, but additional food and most other necessities mustbe imported from Australia. There is a small tourist industry.
ColombiaColombia's economy suffers from weak domestic and foreigndemand, austere government budgets, and serious internal armedconflict, but seems poised for recovery. Other economic problemsfacing President URIBE range from reforming the pension system toreducing high unemployment. Two of Colombia's leading exports, oiland coffee, face an uncertain future; new exploration is needed tooffset declining oil production, while coffee harvests and pricesare depressed. On the positive side, several international financialinstitutions have praised the economic reforms introduced by URIBE,which includes measures designed to reduce the public-sector deficitbelow 2.5% of GDP in 2004. The government's economic policy anddemocratic security strategy have engendered a growing sense ofconfidence in the economy, particularly within the business sector,and GDP growth in 2003 was among the highest in Latin America.
ComorosOne of the world's poorest countries, Comoros is made up ofthree islands that have inadequate transportation links, a young andrapidly increasing population, and few natural resources. The loweducational level of the labor force contributes to a subsistencelevel of economic activity, high unemployment, and a heavydependence 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, themain staple, accounts for the bulk of imports. The government -which is hampered by internal political disputes - is struggling toupgrade education and technical training, to privatize commercialand industrial enterprises, to improve health services, to diversifyexports, to promote tourism, and to reduce the high populationgrowth rate. Increased foreign support is essential if the goal of4% annual GDP growth is to be met. Remittances from 150,000 Comoransabroad help supplement GDP.
Congo, Democratic Republic of theThe economy of the DemocraticRepublic of the Congo - a nation endowed with vast potential wealth- has declined drastically since the mid-1980s. The war, which beganin August 1998, has dramatically reduced national output andgovernment revenue, has increased external debt, and has resulted inthe deaths from war, famine, and disease of perhaps 3.5 millionpeople. Foreign businesses have curtailed operations due touncertainty about the outcome of the conflict, lack ofinfrastructure, and the difficult operating environment. The war hasintensified the impact of such basic problems as an uncertain legalframework, corruption, inflation, and lack of openness in governmenteconomic policy and financial operations. Conditions improved inlate 2002 with the withdrawal of a large portion of the invadingforeign troops. Several IMF and World Bank missions have met withthe government to help it develop a coherent economic plan, andPresident KABILA has begun implementing reforms. Much economicactivity lies outside the GDP data. Economic stability, aided byinternational donors, improved in 2003. New mining contracts havebeen approved, which - combined with high mineral and metal prices -could improve Kinshasa's fiscal position and GDP growth.
Congo, Republic of theThe economy is a mixture of villageagriculture and handicrafts, an industrial sector based largely onoil, support services, and a government characterized by budgetproblems and overstaffing. Oil has supplanted forestry as themainstay of the economy, providing a major share of governmentrevenues and exports. In the early 1980s, rapidly rising oilrevenues enabled the government to finance large-scale developmentprojects with GDP growth averaging 5% annually, one of the highestrates in Africa. The government has mortgaged a substantial portionof its oil earnings, contributing to a shortage of revenues. The 12January 1994 devaluation of Franc Zone currencies by 50% resulted ininflation of 61% in 1994, but inflation has subsided since. Economicreform efforts continued with the support of internationalorganizations, notably the World Bank and the IMF. The reformprogram came to a halt in June 1997 when civil war erupted. DenisSASSOU-NGUESSO, who returned to power when the war ended in October1997, publicly expressed interest in moving forward on economicreforms and privatization and in renewing cooperation withinternational financial institutions. However, economic progress wasbadly hurt by slumping oil prices and the resumption of armedconflict in December 1998, which worsened the republic's budgetdeficit. The current administration presides over an uneasy internalpeace and faces difficult economic problems of stimulating recoveryand reducing poverty.
Cook IslandsLike many other South Pacific island nations, the CookIslands' economic development is hindered by the isolation of thecountry from foreign markets, the limited size of domestic markets,lack of natural resources, periodic devastation from naturaldisasters, and inadequate infrastructure. Agriculture provides theeconomic base with major exports made up of copra and citrus fruit.Manufacturing activities are limited to fruit processing, clothing,and handicrafts. Trade deficits are offset by remittances fromemigrants and by foreign aid, overwhelmingly from New Zealand. Inthe 1980s and 1990s, the country lived beyond its means, maintaininga bloated public service and accumulating a large foreign debt.Subsequent reforms, including the sale of state assets, thestrengthening of economic management, the encouragement of tourism,and a debt restructuring agreement, have rekindled investment andgrowth.
Coral Sea Islandsno economic activity
Costa RicaCosta Rica's basically stable economy depends on tourism,agriculture, and electronics exports. Poverty has been substantiallyreduced over the past 15 years, and a strong social safety net hasbeen put into place. Foreign investors remain attracted by thecountry's political stability and high education levels, and tourismcontinues to bring in foreign exchange. Low prices for coffee andbananas have hurt the agricultural sector. The government continuesto grapple with its large deficit and massive internal debt. Thereduction of inflation remains a difficult problem because of risesin the price of imports, labor market rigidities, and fiscaldeficits. Costa Rica recently concluded negotiations to participatein the US - Central American Free Trade Agreement, which, ifratified by the Costa Rican Legislature, would result in economicreforms and an improved investment climate.
Cote d'IvoireCote d'Ivoire is among the world's largest producersand exporters of coffee, cocoa beans, and palm oil. Consequently,the economy is highly sensitive to fluctuations in internationalprices for these products and to weather conditions. Despitegovernment attempts to diversify the economy, it is still heavilydependent on agriculture and related activities, which engageroughly 68% of the population. After several years of laggingperformance, the Ivorian economy began a comeback in 1994, due tothe 50% devaluation of the CFA franc and improved prices for cocoaand coffee, growth in nontraditional primary exports such aspineapples and rubber, limited trade and banking liberalization,offshore oil and gas discoveries, and generous external financingand debt rescheduling by multilateral lenders and France. Moreover,government adherence to donor-mandated reforms led to a jump ingrowth to 5% annually during 1996-99. Growth was negative in 2000-03because of the difficulty of meeting the conditions of internationaldonors, continued low prices of key exports, and severe civil war.Political uncertainty will continue to cloud the economic outlook in2004, but rising world prices for cocoa will help both the currentaccount and the government balances.
CroatiaBefore the dissolution of Yugoslavia, the Republic ofCroatia, after Slovenia, was the most prosperous and industrializedarea, with a per capita output perhaps one-third above the Yugoslavaverage. The economy emerged from a mild recession in 2000 withtourism, banking, and public investments leading the way.Unemployment remains high, at over 13 percent, with structuralfactors slowing its decline. While macroeconomic stabilization haslargely been achieved, structural reforms lag because of deepresistance on the part of the public and lack of strong support frompoliticians. Growth, while impressively over 4% for the last severalyears, has been achieved through high fiscal and current accountdeficits. The government is gradually reducing a heavy back log ofcivil cases, many involving land tenure. The EU accession processshould accelerate fiscal and structural reform.
CubaThe government continues to balance the need for economicloosening against a desire for firm political control. It hasundertaken limited reforms to increase enterprise efficiency andalleviate serious shortages of food, consumer goods, and services. Amajor feature of the economy is the dichotomy between relativelyefficient export enclaves and inefficient domestic sectors. Theaverage Cuban's standard of living remains at a lower level thanbefore the depression of the 1990s, which was caused by the loss ofSoviet aid and domestic inefficiencies. The government reluctantlyallows a large dollar market sector, fueled by tourism andremittances from Cubans abroad.
CyprusThe Greek Cypriot economy is prosperous but highlysusceptible to external shocks. Erratic growth rates over the pastdecade reflect the economy's vulnerability to swings in touristarrivals, caused by political instability in the region andfluctuations in economic conditions in Western Europe. Economicpolicy is focused on meeting the criteria for admission to the EU.EU-driven tax reforms in 2003 have introduced fiscal imbalances,which, coupled with a sluggish tourism sector, have resulted ingrowing fiscal deficits. As in the Turkish sector, water shortagesare a perennial problem; a few desalination plants are now on-line.After 10 years of drought, the country received substantial rainfallfrom 2001-03, alleviating immediate concerns. The Turkish Cyprioteconomy has roughly one-third of the per capita GDP of the south.Because it is recognized only by Turkey, it has had much difficultyarranging foreign financing and investment. It remains heavilydependent on agriculture and government service, which togetheremploy about half of the work force. To compensate for the economy'sweakness, Turkey provides grants and loans to support economicdevelopment. Ankara provided $200 million in 2002 and pledged $450million for the 2003-05 period. Future events throughout the islandwill be highly influenced by the outcome of negotiations on theUN-sponsored agreement to unite the Greek and Turkish areas.
Czech RepublicOne of the most stable and prosperous of thepost-Communist states, the Czech Republic has been recovering fromrecession since mid-1999. Growth in 2000-03 was supported by exportsto the EU, primarily to Germany, and a near doubling of foreigndirect investment. Domestic demand is playing an ever more importantrole in underpinning growth as interest rates drop and theavailability of credit cards and mortgages increases. High currentaccount deficits - averaging around 5% of GDP in the last severalyears - could be a persistent problem. Inflation is under control.The EU put the Czech Republic just behind Poland and Hungary inpreparations for accession, which will give further impetus anddirection to structural reform. Moves to complete banking,telecommunications, and energy privatization will encourageadditional foreign investment, while intensified restructuring amonglarge enterprises and banks, and improvements in the financialsector, should strengthen output growth. Nonetheless, revival in theEuropean economies remains essential to stepped-up growth.
DenmarkThis thoroughly modern market economy features high-techagriculture, up-to-date small-scale and corporate industry,extensive government welfare measures, comfortable living standards,a stable currency, and high dependence on foreign trade. Denmark isa net exporter of food and energy and enjoys a comfortable balanceof payments surplus. Government objectives include streamlining thebureaucracy and further privatization of state assets. Thegovernment has been successful in meeting, and even exceeding, theeconomic convergence criteria for participating in the third phase(a common European currency) of the European Economic and MonetaryUnion (EMU), but Denmark has decided not to join 12 other EU membersin the euro; even so, the Danish Krone remains pegged to the euro.Given the sluggish state of the European economy, growth in 2003 wasa mere 0.3%.
DhekeliaEconomic activity is limited to providing services to themilitary and their families located in Dhekelia. All food andmanufactured goods must be imported.
DjiboutiThe economy is based on service activities connected withthe country's strategic location and status as a free trade zone innortheast Africa. Two-thirds of the inhabitants live in the capitalcity, the remainder being mostly nomadic herders. Scanty rainfalllimits crop production to fruits and vegetables, and most food mustbe imported. Djibouti provides services as both a transit port forthe region and an international transshipment and refueling center.It has few natural resources and little industry. The nation is,therefore, heavily dependent on foreign assistance to help supportits balance of payments and to finance development projects. Anunemployment rate of 50% continues to be a major problem. Inflationis not a concern, however, because of the fixed tie of the franc tothe US dollar. Per capita consumption dropped an estimated 35% overthe last seven years because of recession, civil war, and a highpopulation growth rate (including immigrants and refugees). Facedwith a multitude of economic difficulties, the government has fallenin arrears on long-term external debt and has been struggling tomeet the stipulations of foreign aid donors.
DominicaThe Dominican economy depends on agriculture, primarilybananas, and remains highly vulnerable to climatic conditions andinternational economic developments. Production of bananas droppedprecipitously in 2003, a major reason for the 1% decline in GDP.Tourism increased in 2003 as the government sought to promoteDominica as an "ecotourism" destination. Development of the tourismindustry remains difficult, however, because of the ruggedcoastline, lack of beaches, and the absence of an internationalairport. The government began a comprehensive restructuring of theeconomy in 2003 - including elimination of price controls,privatization of the state banana company, and tax increases - toaddress Dominica's economic crisis and to meet IMF targets. In orderto diversify the island's production base the government isattempting to develop an offshore financial sector and is planningto construct an oil refinery on the eastern part of the island.
Dominican RepublicThe Dominican Republic is a Caribbeanrepresentative democracy which enjoyed GDP growth of more than 7% in1998-2000. Growth subsequently plummeted as part of the globaleconomic slowdown. Although the country has long been viewedprimarily as an exporter of sugar, coffee, and tobacco, in recentyears the service sector has overtaken agriculture as the economy'slargest employer, due to growth in tourism and free trade zones. Thecountry suffers from marked income inequality; the poorest half ofthe population receives less than one-fifth of GNP, while therichest 10% enjoys nearly 40% of national income. Growth turnednegative in 2003 with reduced tourism, a major bank fraud, andlimited growth in the US economy, the source of 87% of exportrevenues. Resumption of a badly needed IMF loan was slowed due togovernment repurchase of electrical power plants.
East TimorIn late 1999, about 70% of the economic infrastructure ofEast Timor was laid waste by Indonesian troops and anti-independencemilitias, and 260,000 people fled westward. Over the next threeyears, however, a massive international program, manned by 5,000peacekeepers (8,000 at peak) and 1,300 police officers, led tosubstantial reconstruction in both urban and rural areas. Bymid-2002, all but about 50,000 of the refugees had returned. Growthwas held back in 2003 by extensive drought and the gradual windingdown of the international presence. The country faces greatchallenges in continuing the rebuilding of infrastructure,strengthening the infant civil administration, and generating jobsfor young people entering the workforce. One promising long-termproject is the planned development of oil and gas resources innearby waters, but the government faces a substantial financing gapover the next several years before these revenues start flowing intostate coffers.
EcuadorEcuador has substantial petroleum resources, which haveaccounted for 40% of the country's export earnings and one-fourth ofpublic sector revenues in recent years. Consequently, fluctuationsin world market prices can have a substantial domestic impact. Inthe late 1990s, Ecuador suffered its worst economic crisis, withnatural disasters and sharp declines in world petroleum pricesdriving Ecuador's economy into free fall in 1999. Real GDPcontracted by more than 6%, with poverty worsening significantly.The banking system also collapsed, and Ecuador defaulted on itsexternal debt later that year. The currency depreciated by some 70%in 1999, and, on the brink of hyperinflation, the MAHAUD governmentannounced it would dollarize the economy. A coup, however, oustedMAHAUD from office in January 2000, and after a short-lived juntafailed to garner military support, Vice President Gustavo NOBOA tookover the presidency. In March 2000, Congress approved a series ofstructural reforms that also provided the framework for the adoptionof the US dollar as legal tender. Dollarization stabilized theeconomy, and growth returned to its pre-crisis levels in the yearsthat followed. Under the administration of Lucio GUTIERREZ, who tookoffice in January 2003, Ecuador benefited from higher worldpetroleum prices, but the government has made little progress onfiscal reforms and reforms of state-owned enterprises necessary toreduce Ecuador's vulnerability to petroleum price swings andfinancial crises.
EgyptLack of substantial progress on economic reform since the mid1990s has limited foreign direct investment in Egypt and kept annualGDP growth in the range of 2-3 percent in 2001-03. Egyptianofficials in late 2003 and early 2004 proposed new privatization andcustoms reform measures, but the government is likely to pursuethese initiatives cautiously and gradually to avoid a publicbacklash over potential inflation or layoffs associated with thereforms. Monetary pressures on an overvalued Egyptian pound led thegovernment to float the currency in January 2003, leading to a sharpdrop in its value and consequent inflationary pressure. Theexistence of a black market for hard currency is evidence that thegovernment continues to influence the official exchange rate offeredin banks. In September 2003, Egyptian officials increased subsidieson basic foodstuffs, helping to calm a frustrated public butwidening an already deep budget deficit. Egypt's balance-of-paymentsposition was not hurt by the war in Iraq in 2003, as tourism andSuez Canal revenues fared well. The development of an export marketfor natural gas is a bright spot for future growth prospects, butimprovement in the capital-intensive hydrocarbons sector does littleto reduce Egypt's persistent unemployment.
El SalvadorWith the adoption of the US dollar as its currency, ElSalvador has lost control over monetary policy and must concentrateon maintaining a disciplined fiscal policy. GDP per capita isroughly only half that of Brazil, Argentina, and Chile, and thedistribution of income is highly unequal. The trade deficit has beenoffset by annual remittances of almost $2 billion from Salvadoransliving abroad and external aid. The government is striving to opennew export markets, encourage foreign investment, modernize the taxand healthcare systems, and stimulate the sluggish economy.
Equatorial GuineaThe discovery and exploitation of large oilreserves have contributed to dramatic economic growth in recentyears. Forestry, farming, and fishing are also major components ofGDP. Subsistence farming predominates. Although pre-independenceEquatorial Guinea counted on cocoa production for hard currencyearnings, the neglect of the rural economy under successive regimeshas diminished potential for agriculture-led growth (the governmenthas stated its intention to reinvest some oil revenue intoagriculture). A number of aid programs sponsored by the World Bankand the IMF have been cut off since 1993 because of corruption andmismanagement. No longer eligible for concessional financing becauseof large oil revenues, the government has been unsuccessfully tryingto agree on a "shadow" fiscal management program with the World Bankand IMF. Businesses, for the most part, are owned by governmentofficials and their family members. Undeveloped natural resourcesinclude titanium, iron ore, manganese, uranium, and alluvial gold.Growth will remain strong in 2004, led by oil.
EritreaSince independence from Ethiopia on 24 May 1993, Eritrea hasfaced the economic problems of a small, desperately poor country.Like the economies of many African nations, the economy is largelybased on subsistence agriculture, with 80% of the populationinvolved in farming and herding. The Ethiopian-Eritrea war in1998-2000 severely hurt Eritrea's economy. GDP growth fell to zeroin 1999 and to -12.1% in 2000. The May 2000 Ethiopian offensive intonorthern Eritrea caused some $600 million in property damage andloss, including losses of $225 million in livestock and 55,000homes. The attack prevented planting of crops in Eritrea's mostproductive region, causing food production to drop by 62%. Evenduring the war, Eritrea developed its transportation infrastructure,asphalting new roads, improving its ports, and repairing war damagedroads and bridges. Since the war ended, the government hasmaintained a firm grip on the economy, expanding the use of themilitary and party-owned businesses to complete Eritrea'sdevelopment agenda. Erratic rainfall and the delayed demobilizationof agriculturalists from the military kept cereal production wellbelow normal, holding down growth in 2002. Eritrea's economic futuredepends upon its ability to master social problems such asilliteracy, unemployment, and low skills, and to open its economy toprivate enterprise so the diaspora's money and expertise can fostereconomic growth.
EstoniaEstonia, as a new member of the World Trade Organization, issteadily moving toward a modern market economy with increasing tiesto the West, including the pegging of its currency to the euro. Theeconomy benefits from strong electronics and telecommunicationssectors. Estonia has been invited to join the European Union andwill do so in May 2004. The economy is greatly influenced bydevelopments in Finland, Sweden, Russia, and Germany, four majortrading partners. The high current account deficit remains aconcern. However, the state budget enjoyed a surplus of $130 millionin 2003.
EthiopiaEthiopia's poverty-stricken economy is based onagriculture, which accounts for half of GDP, 60% of exports, and 80%of total employment. The agricultural sector suffers from frequentdrought and poor cultivation practices. Coffee is critical to theEthiopian economy with exports of some $156 million in 2002, buthistorically low prices have seen many farmers switching to qat tosupplement income. The war with Eritrea in 1998-2000 and recurrentdrought have buffeted the economy, in particular coffee production.In November 2001 Ethiopia qualified for debt relief from the HighlyIndebted Poor Countries (HIPC) initiative. Under Ethiopia's landtenure system, the government owns all land and provides long-termleases to the tenants; the system continues to hamper growth in theindustrial sector as entrepreneurs are unable to use land ascollateral for loans. Drought struck again late in 2002, leading toa 2% decline in GDP in 2003. Return to normal weather patterns latein 2003 should help agricultural and GDP growth recover in 2004. Thegovernment estimates that annual growth of 7% is needed to reducepoverty.
Europa Islandno economic activity
European UnionDomestically, the European Union attempts to lowertrade barriers, adopt a common currency, and move toward convergenceof living standards. Internationally, the EU aims to bolsterEurope's trade position and its political and economic power.Because of the great differences in per capita income (from $10,000to $28,000) and historic national animosities, the EuropeanCommunity faces difficulties in devising and enforcing commonpolicies. For example, both Germany and France since 2003 haveflouted the member states' treaty obligation to prevent theirnational budgets from running more than a 3% deficit. In 2004, theEU admitted 10 central and eastern European countries that are, ingeneral, less advanced technologically and economically than theexisting 15. The Economic and Monetary Union (EMU), an associatedorganization, introduced the euro as the common currency on 1January 1999. The UK, Sweden, and Denmark do not now participate;the 10 new countries may choose to join the EMU when they meet itsfiscal and monetary criteria and the member states so agree.
Falkland Islands (Islas Malvinas) The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987 the government began selling fishing licenses to foreign trawlers operating within the Falklands exclusive fishing zone. These license fees total more than $40 million per year, which goes to support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defense. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.
Faroe IslandsThe Faroese economy has had a strong performance since1994, mostly as a result of increasing fish landings and high andstable export prices. Unemployment is falling and there are signs oflabor shortages in several sectors. The positive economicdevelopment has helped the Faroese Home Rule Government produceincreasing budget surpluses, which in turn help to reduce the largepublic debt, most of it owed to Denmark. However, the totaldependence on fishing makes the Faroese economy extremelyvulnerable, and the present fishing efforts appear in excess of whatis a sustainable level of fishing in the long term. Oil finds closeto the Faroese area give hope for deposits in the immediate Faroesearea, which may eventually lay the basis for a more diversifiedeconomy and thus lessen dependence on Danish economic assistance.Aided by a substantial annual subsidy (15% of GDP) from Denmark, theFaroese have a standard of living not far below the Danes and otherScandinavians.
FijiFiji, endowed with forest, mineral, and fish resources, is oneof the most developed of the Pacific island economies, though stillwith a large subsistence sector. Sugar exports and a growing touristindustry - with 300,000 to 400,000 tourists annually - are the majorsources of foreign exchange. Sugar processing makes up one-third ofindustrial activity. Long-term problems include low investment,uncertain land ownership rights, and the government's ability tomanage its budget. Yet short-run economic prospects are good,provided tensions do not again erupt between indigenous Fijians andIndo-Fijians.
FinlandFinland has a highly industrialized, largely free-marketeconomy, 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, andelectronics industries. Trade is important, with exports equalingone-third of GDP. Except for timber and several minerals, Finlanddepends on imports of raw materials, energy, and some components formanufactured goods. Because of the climate, agricultural developmentis limited to maintaining self-sufficiency in basic products.Forestry, an important export earner, provides a secondaryoccupation for the rural population. Rapidly increasing integrationwith Western Europe - Finland was one of the 12 countries joiningthe European Economic and Monetary Union (EMU) - will dominate theeconomic picture over the next several years. Growth in 2003 washeld back by the global slowdown but will pick up in 2004 providedthe world economy suffers no further blows.
FranceFrance is in the midst of transition, from a well-to-domodern economy that has featured extensive government ownership andintervention to one that relies more on market mechanisms. TheSocialist-led government partially or fully privatized many largecompanies, banks, and insurers, but the government retainscontrolling stakes in several leading firms, including Air France,France Telecom, Renault, and Thales, and is dominant in somesectors, particularly power, public transport, and defenseindustries. The telecommunications sector is gradually being openedto competition. France's leaders remain committed to a capitalism inwhich they maintain social equity by means of laws, tax policies,and social spending that reduce income disparity and the impact offree markets on public health and welfare. The current governmenthas lowered income taxes and introduced measures to boostemployment. The government is focusing on the problems of the highcost of labor and labor market inflexibility resulting from the35-hour workweek and restrictions on lay-offs. The government isalso pushing for pension reforms and simplification ofadministrative procedures. The tax burden remains one of the highestin Europe (43.8% of GDP in 2003). The current economic slowdown andinflexible budget items have pushed the 2003 deficit to 4% of GDP,above the EU's 3% debt limit. Business investment remains listlessbecause of low rates of capital utilization, sluggish demand, highdebt, and the steep cost of capital.
French GuianaThe economy is tied closely to the larger Frencheconomy through subsidies and imports. Besides the French spacecenter at Kourou (which accounts for 25% of GDP), fishing andforestry are the most important economic activities. Forest andwoodland cover 90% of the country. The large reserves of tropicalhardwoods, not fully exploited, support an expanding sawmillindustry that provides sawn logs for export. Cultivation of crops islimited to the coastal area, where the population is largelyconcentrated; rice and manioc are the major crops. French Guiana isheavily dependent on imports of food and energy. Unemployment is aserious problem, particularly among younger workers.
French PolynesiaSince 1962, when France stationed militarypersonnel in the region, French Polynesia has changed from asubsistence agricultural economy to one in which a high proportionof the work force is either employed by the military or supports thetourist industry. With the halt of French nuclear testing in 1996,the military contribution to the economy fell sharply. Tourismaccounts for about one-fourth of GDP and is a primary source of hardcurrency earnings. Other sources of income are pearl farming anddeep-sea commercial fishing. The small manufacturing sectorprimarily processes agricultural products. The territory benefitssubstantially from development agreements with France aimedprincipally at creating new businesses and strengthening socialservices.
French Southern and Antarctic LandsEconomic activity is limited toservicing meteorological and geophysical research stations andFrench and other fishing fleets. The fish catches landed on IlesKerguelen by foreign ships are exported to France and Reunion.
GabonGabon enjoys a per capita income four times that of mostnations of sub-Saharan Africa. This has supported a sharp decline inextreme poverty; yet because of high income inequality a largeproportion of the population remains poor. Gabon depended on timberand manganese until oil was discovered offshore in the early 1970s.The oil sector now accounts for 50% of GDP. Gabon continues to facefluctuating prices for its oil, timber, and manganese exports.Despite the abundance of natural wealth, poor fiscal managementhobbles the economy. Devaluation of its Francophone currency by 50%on 12 January 1994 sparked a one-time inflationary surge, to 35%;the rate dropped to 6% in 1996. The IMF provided a one-year standbyarrangement in 1994-95, a three-year Enhanced Financing Facility(EFF) at near commercial rates beginning in late 1995, and stand-bycredit of $119 million in October 2000. Those agreements mandateprogress in privatization and fiscal discipline. France providedadditional financial support in January 1997 after Gabon had met IMFtargets for mid-1996. In 1997, an IMF mission to Gabon criticizedthe government for overspending on off-budget items, overborrowingfrom the central bank, and slipping on its schedule forprivatization and administrative reform. The rebound of oil pricesin 1999-2000 helped growth, but drops in production hampered Gabonfrom fully realizing potential gains. In December 2000, Gabon signeda new agreement with the Paris Club to reschedule its official debt.A follow-up bilateral repayment agreement with the US was signed inDecember 2001. Short-term progress depends on an upbeat worldeconomy and fiscal and other adjustments in line with IMF policies.
Gambia, TheThe Gambia has no important mineral or other naturalresources and has a limited agricultural base. About 75% of thepopulation depends on crops and livestock for its livelihood.Small-scale manufacturing activity features the processing ofpeanuts, fish, and hides. Reexport trade normally constitutes amajor segment of economic activity, but a 1999 government-imposedpreshipment inspection plan, and instability of the Gambian dalasi(currency) have drawn some of the reexport trade away from TheGambia. The government's 1998 seizure of the private peanut firmAlimenta eliminated the largest purchaser of Gambian groundnuts; thefollowing two marketing seasons have seen substantially lower pricesand sales. A decline in tourism in 2000 has also held back growth.Unemployment and underemployment rates are extremely high. Shortruneconomic progress remains highly dependent on sustained bilateraland multilateral aid, on responsible government economic managementas forwarded by IMF technical help and advice, and on expectedgrowth in the construction sector.
Gaza StripEconomic output in the Gaza Strip - under theresponsibility of the Palestinian Authority since the CairoAgreement of May 1994 - declined by about one-third between 1992 and1996. The downturn was largely the result of Israeli closurepolicies - the imposition of generalized border closures in responseto security incidents in Israel - which disrupted previouslyestablished labor and commodity market relationships between Israeland the WBGS (West Bank and Gaza Strip). The most serious negativesocial effect of this downturn was the emergence of highunemployment; unemployment in the WBGS during the 1980s wasgenerally under 5%; by 1995 it had risen to over 20%. Israel's useof comprehensive closures decreased during the next few years and,in 1998, Israel implemented new policies to reduce the impact ofclosures and other security procedures on the movement ofPalestinian goods and labor. These changes fueled an almostthree-year-long economic recovery in the West Bank and Gaza Strip;real GDP grew by 5% in 1998 and 6% in 1999. Recovery was upended inthe last quarter of 2000 with the outbreak of violence, triggeringtight Israeli closures of Palestinian self-rule areas and a severedisruption of trade and labor movements. In 2001, and even moreseverely in 2002, Israeli military measures in Palestinian Authorityareas resulted in the destruction of capital plant andadministrative structure, widespread business closures, and a sharpdrop in GDP. Including West Bank, the UN estimates that more than100,000 Palestinians out of the 125,000 who used to work in Israel,in Israeli settlements, or in joint industrial zones have lost theirjobs. In addition, about 80,000 Palestinian workers inside theTerritories are losing their jobs. International aid of $2 billionin 2001-02 to the West Bank and Gaza Strip prevented the completecollapse of the economy and allowed Finance Minister Salam FAYYAD toimplement several financial and economic reforms. Budgetary support,however, was not as forthcoming in 2003.
GeorgiaGeorgia's main economic activities include the cultivationof agricultural products such as citrus fruits, tea, hazelnuts, andgrapes; mining of manganese and copper; and output of a smallindustrial sector producing alcoholic and nonalcoholic beverages,metals, machinery, and chemicals. The country imports the bulk ofits energy needs, including natural gas and oil products. Its onlysizable internal energy resource is hydropower. Despite the severedamage the economy has suffered due to civil strife, Georgia, withthe help of the IMF and World Bank, has made substantial economicgains since 1995, achieving positive GDP growth and curtailinginflation. However, the Georgian Government suffers from limitedresources due to a chronic failure to collect tax revenues. Georgiaalso suffers from energy shortages; it privatized the T'bilisidistribution network in 1998, but collection rates are low, makingthe venture unprofitable. The country is pinning its hopes forlong-term growth on its role as a transit state for pipelines andtrade. The start of construction on the Baku-T'bilisi-Ceyhan oilpipeline and the Baku-T'bilisi-Erzerum gas pipeline will bringmuch-needed investment and job opportunities.
GermanyGermany's affluent and technologically powerful economy- thefifth largest national economy in the world - has become one of theslowest growing economies in the entire euro zone, and a quickturnaround is not in the offing in the foreseeable future. Growth in2001-03 fell short of 1%. The modernization and integration of theeastern German economy continues to be a costly long-term process,with annual transfers from west to east amounting to roughly $70billion. Germany's ageing population, combined with highunemployment, has pushed social security outlays to a levelexceeding contributions from workers. Structural rigidities in thelabor market - including strict regulations on laying off workersand the setting of wages on a national basis - have madeunemployment a chronic problem. Corporate restructuring and growingcapital markets are setting the foundations that could allow Germanyto meet the long-term challenges of European economic integrationand globalization, particularly if labor market rigidities arefurther addressed. The government is also starting long-neededstructural reforms designed to revitalize the country's economy. Inthe short run, however, the fall in government revenues and the risein expenditures have raised the deficit above the EU's 3% debt limit.
GhanaWell endowed with natural resources, Ghana has roughly twicethe per capita output of the poorer countries in West Africa. Evenso, Ghana remains heavily dependent on international financial andtechnical assistance. Gold, timber, and cocoa production are majorsources of foreign exchange. The domestic economy continues torevolve around subsistence agriculture, which accounts for 35% ofGDP and employs 60% of the work force, mainly small landholders.Ghana opted for debt relief under the Heavily Indebted Poor Country(HIPC) program in 2002. Policy priorities include tighter monetaryand fiscal policies, accelerated privatization, and improvement ofsocial services. Receipts from the gold sector should help sustainGDP growth in 2004. Inflation should ease, but remain a majorinternal problem.
GibraltarGibraltar benefits from an extensive shipping trade,offshore banking, and its position as an international conferencecenter. The British military presence has been sharply reduced andnow contributes about 7% to the local economy, compared with 60% in1984. The financial sector, tourism (almost 5 million visitors in1998), shipping services fees, and duties on consumer goods alsogenerate revenue. The financial sector, the shipping sector, andtourism each contribute 25%-30% of GDP. Telecommunications accountsfor another 10%. In recent years, Gibraltar has seen majorstructural change from a public to a private sector economy, butchanges in government spending still have a major impact on thelevel of employment.
Glorioso Islandsno economic activity
GreeceGreece has a mixed capitalist economy with the public sectoraccounting for about 40% of GDP and with per capita GDP 70% of theleading euro-zone economies. Tourism provides 15% of GDP. Immigrantsmake up nearly one-fifth of the work force, mainly in menial jobs.Greece is a major beneficiary of EU aid, equal to about 3.3% ofannual GDP. The Greek economy grew by about 4.0% for the past twoyears, largely because of an investment boom and infrastructureupgrades for the 2004 Athens Olympic Games. Despite strong growth,Greece has failed to meet the EU's Growth and Stability Pact budgetdeficit criteria of 3% of GDP since 2000; public debt, inflation,and unemployment are also above the eurozone average. Furtherrestructuring of the economy include privatizing several stateenterprises, undertaking pension and other reforms, and minimizingbureaucratic inefficiencies.
GreenlandThe economy remains critically dependent on exports offish and substantial support from the Danish Government, whichsupplies about half of government revenues. The public sector,including publicly-owned enterprises and the municipalities, playsthe dominant role in the economy. Despite several interestinghydrocarbon and minerals exploration activities, it will takeseveral years before production can materialize. Tourism is the onlysector offering any near-term potential, and even this is limiteddue to a short season and high costs.
GrenadaGrenada relies on tourism as its main source of foreignexchange, especially since the construction of an internationalairport in 1985. Strong performances in construction andmanufacturing, together with the development of an offshorefinancial industry, have also contributed to growth in nationaloutput.
GuadeloupeThe Caribbean economy depends on agriculture, tourism,light industry, and services. It also depends on France for largesubsidies and imports. Tourism is a key industry, with most touristsfrom the US; an increasingly large number of cruise ships visit theislands. The traditional sugarcane crop is slowly being replaced byother crops, such as bananas (which now supply about 50% of exportearnings), eggplant, and flowers. Other vegetables and root cropsare cultivated for local consumption, although Guadeloupe is stilldependent on imported food, mainly from France. Light industryfeatures sugar and rum production. Most manufactured goods and fuelare imported. Unemployment is especially high among the young.Hurricanes periodically devastate the economy.
GuamThe economy depends on US military spending, tourism, and theexport of fish and handicrafts. Total US grants, wage payments, andprocurement outlays amounted to $1 billion in 1998. Over the past 20years, the tourist industry has grown rapidly, creating aconstruction boom for new hotels and the expansion of older ones.More than 1 million tourists visit Guam each year. The industry hadrecently suffered setbacks because of the continuing Japaneseslowdown; the Japanese normally make up almost 90% of the tourists.Most food and industrial goods are imported. Guam faces the problemof building up the civilian economic sector to offset the impact ofmilitary downsizing.
GuatemalaGuatemala is the largest and most populous of the CentralAmerican countries with a GDP per capita roughly one-half that ofBrazil, Argentina, and Chile. The agricultural sector accounts forabout one-fourth of GDP, two-thirds of exports, and half of thelabor force. Coffee, sugar, and bananas are the main products. The1996 signing of peace accords, which ended 36 years of civil war,removed a major obstacle to foreign investment, but widespreadpolitical violence and corruption scandals continue to dampeninvestor confidence. The distribution of income remains highlyunequal, with perhaps 75% of the population below the poverty line.Ongoing challenges include increasing government revenues,negotiating further assistance from international donors, upgradingboth government and private financial operations, curtailing drugtrafficking, and narrowing the trade deficit.
GuernseyFinancial services - banking, fund management, insurance,etc. - account for about 55% of total income in this tiny ChannelIsland economy. Tourism, manufacturing, and horticulture, mainlytomatoes and cut flowers, have been declining. Light tax and deathduties make Guernsey a popular tax haven. The evolving economicintegration of the EU nations is changing the environment underwhich Guernsey operates.
GuineaGuinea possesses major mineral, hydropower, and agriculturalresources, yet remains an underdeveloped nation. The countrypossesses over 30% of the world's bauxite reserves and is thesecond-largest bauxite producer. The mining sector accounted forabout 75% of exports in 1999. Long-run improvements in governmentfiscal arrangements, literacy, and the legal framework are needed ifthe country is to move out of poverty. Fighting along the SierraLeonean and Liberian borders, as well as refugee movements, havecaused major economic disruptions, including a loss in investorconfidence. Foreign mining companies have reduced expatriate staff,while panic buying has created food shortages and inflation in localmarkets. Guinea is not receiving multilateral aid. The IMF and WorldBank cut off most assistance in 2003. Growth should strengthen in2004, however, because of a slowly improving security situation andincreased investor confidence.
Guinea-BissauOne of the 10 poorest countries in the world,Guinea-Bissau depends mainly on farming and fishing. Cashew cropshave increased remarkably in recent years, and the country now rankssixth in cashew production. Guinea-Bissau exports fish and seafoodalong with small amounts of peanuts, palm kernels, and timber. Riceis the major crop and staple food. However, intermittent fightingbetween Senegalese-backed government troops and a military juntadestroyed much of the country's infrastructure and caused widespreaddamage to the economy in 1998; the civil war led to a 28% drop inGDP that year, with partial recovery in 1999-2002. Before the war,trade reform and price liberalization were the most successful partof the country's structural adjustment program under IMFsponsorship. The tightening of monetary policy and the developmentof the private sector had also begun to reinvigorate the economy.Because of high costs, the development of petroleum, phosphate, andother mineral resources is not a near-term prospect. However,unexploited offshore oil reserves could provide much-needed revenuein the long run. The inequality of income distribution is one of themost extreme in the world. The government and international donorscontinue to work out plans to forward economic development from alamentably low base. Government drift and indecision, however, haveresulted in low growth in 2002-03 and dim prospects for 2004.
GuyanaThe Guyanese economy exhibited moderate economic growth in2001-02, based on expansion in the agricultural and mining sectors,a more favorable atmosphere for business initiatives, a morerealistic exchange rate, fairly low inflation, and the continuedsupport of international organizations. Growth then slowed in 2003.Chronic problems include a shortage of skilled labor and a deficientinfrastructure. The government is juggling a sizable external debtagainst the urgent need for expanded public investment. The bauxitemining sector should benefit in the near term by restructuring andpartial privatization.
HaitiIn this poorest country in the Western Hemisphere, 80% of thepopulation lives in abject poverty. Two-thirds of all Haitiansdepend on the agriculture sector, which consists mainly ofsmall-scale subsistence farming. Following legislative elections inMay 2000, fraught with irregularities, international donors -including the US and EU - suspended almost all aid to Haiti. Theeconomy shrank an estimated 1.2% in 2001 and an estimated 0.9% in2002. Suspended aid and loan disbursements totaled more than $500million at the start of 2003. Haiti also suffers from rampantinflation, a lack of investment, and a severe trade deficit. Theresumption of aid flows from all donors will alleviate but not endthe nation's bitter economic problems. Extensive civil strife inearly 2004, marked by the flight of President ARISTIDE, furtherimpoverished Haiti.
Heard Island and McDonald IslandsNo indigenous economic activity,but the Australian Government allows limited fishing around theislands.
Holy See (Vatican City)This unique, noncommercial economy issupported financially by an annual contribution from Roman Catholicdioceses throughout the world, as well as by special collections(known as Peter's Pence); the sale of postage stamps, coins, medals,and tourist mementos; fees for admission to museums; and the sale ofpublications. Investments and real estate income also account for asizable portion of revenue. The incomes and living standards of layworkers are comparable to those of counterparts who work in the cityof Rome.
HondurasHonduras, one of the poorest countries in the WesternHemisphere with an extraordinarily unequal distribution of incomeand massive unemployment, is banking on expanded trade privilegesunder the Enhanced Caribbean Basin Initiative and on debt reliefunder the Heavily Indebted Poor Countries (HIPC) initiative. Whilethe country has met most of its macroeconomic targets, it has failedto meet the IMF's goals to liberalize its energy andtelecommunications sectors. Growth remains dependent on the statusof the US economy, its major trading partner, on commodity prices,particularly coffee, and on reduction of the high crime rate.
Hong KongHong Kong has a free market economy highly dependent oninternational trade. Natural resources are limited, and food and rawmaterials must be imported. Imports and exports, includingreexports, each exceed GDP in dollar value. Even before Hong Kongreverted to Chinese administration on 1 July 1997 it had extensivetrade and investment ties with China. Hong Kong has been furtherintegrating its economy with China because China's growing opennessto the world economy has increased competitive pressure on HongKong's service industries, and Hong Kong's re-export business fromChina is a major driver of growth. Per capita GDP compares with thelevel in the four big economies of Western Europe. GDP growthaveraged a strong 5% in 1989-1997, but Hong Kong suffered tworecessions in the past 6 years because of the Asian financial crisisin 1998 and the global downturn of 2001-2002. The Severe AcuteRespiratory Syndrome (SARS) outbreak also battered Hong Kong'seconomy, but a boom in tourism from the mainland because of China'seasing of travel restrictions, a return of consumer confidence, anda solid rise in exports resulted in the resumption of strong growthin late 2003.
Howland Islandno economic activity
HungaryHungary has made the transition from a centrally planned toa market economy, with a per capita income one-half that of the BigFour European nations. Hungary continues to demonstrate strongeconomic growth and joined the European Union in May 2004. Theprivate sector accounts for over 80% of GDP. Foreign ownership ofand investment in Hungarian firms are widespread, with cumulativeforeign direct investment totaling more than $23 billion since 1989.Hungarian sovereign debt was upgraded in 2000 to the second-highestrating among all the Central European transition economies.Inflation has declined substantially, from 14% in 1998 to 4.7% in2003; unemployment has persisted around the 6% level. Germany is byfar Hungary's largest economic partner. Short-term issues includethe reduction of the public sector deficit and further increasingthe flexibility of the labor markets.
IcelandIceland's Scandinavian-type economy is basicallycapitalistic, yet with an extensive welfare system (includinggenerous housing subsidies), low unemployment, and remarkably evendistribution of income. In the absence of other natural resources(except for abundant geothermal power), the economy depends heavilyon the fishing industry, which provides 70% of export earnings andemploys 12% of the work force. The economy remains sensitive todeclining fish stocks as well as to fluctuations in world prices forits main exports: fish and fish products, aluminum, andferrosilicon. Government policies include reducing the budget andcurrent account deficits, limiting foreign borrowing, containinginflation, revising agricultural and fishing policies, diversifyingthe economy, and privatizing state-owned industries. The governmentremains opposed to EU membership, primarily because of Icelanders'concern about losing control over their fishing resources. Iceland'seconomy has been diversifying into manufacturing and serviceindustries in the last decade, and new developments in softwareproduction, biotechnology, and financial services are taking place.The tourism sector is also expanding, with the recent trends inecotourism and whale watching. Growth had been remarkably steady in1996-2001 at 3%-5%, but could not be sustained in 2002 in anenvironment of global recession. Growth resumed in 2003, andinflation dropped back from 5% to 2%.
IndiaIndia's economy encompasses traditional village farming,modern agriculture, handicrafts, a wide range of modern industries,and a multitude of support services. Government controls have beenreduced on foreign trade and investment, and privatization ofdomestic output has proceeded slowly. The economy has posted anexcellent average growth rate of 6% since 1990, reducing poverty byabout 10 percentage points. India is capitalizing on its largenumbers of well-educated people skilled in the English language tobecome a major exporter of software services and software workers.Despite strong growth, the World Bank and others worry about thecontinuing public-sector budget deficit, running at approximately60% of GDP.
Indian OceanThe Indian Ocean provides major sea routes connectingthe Middle East, Africa, and East Asia with Europe and the Americas.It carries a particularly heavy traffic of petroleum and petroleumproducts from the oilfields of the Persian Gulf and Indonesia. Itsfish are of great and growing importance to the bordering countriesfor domestic consumption and export. Fishing fleets from Russia,Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainlyfor shrimp and tuna. Large reserves of hydrocarbons are being tappedin the offshore areas of Saudi Arabia, Iran, India, and westernAustralia. An estimated 40% of the world's offshore oil productioncomes from the Indian Ocean. Beach sands rich in heavy minerals andoffshore placer deposits are actively exploited by borderingcountries, particularly India, South Africa, Indonesia, Sri Lanka,and Thailand.
IndonesiaIndonesia, a vast polyglot nation, faces economicdevelopment problems stemming from recent acts of terrorism, unequalresource distribution among regions, endemic corruption, the lack ofreliable legal recourse in contract disputes, weaknesses in thebanking system, and a generally poor climate for foreign investment.Indonesia withdrew from its IMF program at the end of 2003, butissued a "White Paper" that commits the government to maintainingfundamentally sound macroeconomic policies previously establishedunder IMF guidelines. Investors, however, continued to face a hostof on-the-ground microeconomic problems and an inadequate judicialsystem. Keys to future growth remain internal reform, building upthe confidence of international and domestic investors, and strongglobal economic growth.
IranIran's economy is marked by a bloated, inefficient statesector, over reliance on the oil sector, and statist policies thatcreate major distortions throughout. Most economic activity iscontrolled by the state. Private sector activity is typicallysmall-scale - workshops, farming, and services. President KHATAMIhas continued to follow the market reform plans of former PresidentRAFSANJANI, with limited progress. Relatively high oil prices inrecent years have enabled Iran to amass some $22 billion in foreignexchange reserves, but have not eased economic hardships such ashigh unemployment and inflation. In December 2003 a major earthquakedevastated the city of Bam in southeastern Iran, killing more than30,000 people.
IraqIraq's economy is dominated by the oil sector, which hastraditionally provided about 95% of foreign exchange earnings. Inthe 1980s financial problems caused by massive expenditures in theeight-year war with Iran and damage to oil export facilities by Iranled the government to implement austerity measures, borrow heavily,and later reschedule foreign debt payments; Iraq suffered economiclosses from that war of at least $100 billion. After hostilitiesended in 1988, oil exports gradually increased with the constructionof new pipelines and restoration of damaged facilities. Iraq'sseizure of Kuwait in August 1990, subsequent international economicsanctions, and damage from military action by an internationalcoalition beginning in January 1991 drastically reduced economicactivity. Although government policies supporting large military andinternal security forces and allocating resources to key supportersof the regime have hurt the economy, implementation of the UN'soil-for-food program beginning in December 1996 helped improveconditions for the average Iraqi citizen. Iraq was allowed to exportlimited amounts of oil in exchange for food, medicine, and someinfrastructure spare parts. In December 1999, the UN SecurityCouncil authorized Iraq to export under the program as much oil asrequired to meet humanitarian needs. The drop in GDP in 2001-02 waslargely the result of the global economic slowdown and lower oilprices. Per capita food imports increased significantly, whilemedical supplies and health care services steadily improved. Percapita output and living standards were still well below thepre-1991 level, but any estimates have a wide range of error. Themilitary victory of the US-led coalition in March-April 2003resulted in the shutdown of much of the central economicadministrative structure, but with the loss of a comparatively smallamount of capital plant. The rebuilding of oil, electricity, andother production is proceeding steadily at the start of 2004 withforeign support and despite the continuation of severe internalstrife. A joint UN and World Bank report released in the fall of2003 estimated that Iraq's key reconstruction needs through 2007would cost $55 billion. In October 2003, international donorspledged assistance worth more than $33 billion toward thisrebuilding effort.
IrelandIreland is a small, modern, trade-dependent economy withgrowth averaging a robust 8% in 1995-2002. The global slowdown,especially in the information technology sector, pressed growth downto 2.1% in 2003. Agriculture, once the most important sector, is nowdwarfed by industry and services. Industry accounts for 46% of GDPand about 80% of exports and employs 28% of the labor force.Although exports remain the primary engine for Ireland's growth, theeconomy has also benefited from a rise in consumer spending,construction, and business investment. Per capita GDP is 10% abovethat of the four big European economies and the second highest inthe sEU, behind Luxembourg. Over the past decade, the IrishGovernment has implemented a series of national economic programsdesigned to curb price and wage inflation, reduce governmentspending, increase labor force skills, and promote foreigninvestment. Ireland joined in launching the euro currency system inJanuary 1999 along with 10 other EU nations.
IsraelIsrael has a technologically advanced market economy withsubstantial government participation. It depends on imports of crudeoil, grains, raw materials, and military equipment. Despite limitednatural resources, Israel has intensively developed its agriculturaland industrial sectors over the past 20 years. Israel importssubstantial quantities of grain but is largely self-sufficient inother agricultural products. Cut diamonds, high-technologyequipment, and agricultural products (fruits and vegetables) are theleading exports. Israel usually posts sizable current accountdeficits, which are covered by large transfer payments from abroadand by foreign loans. Roughly half of the government's external debtis owed to the US, which is its major source of economic andmilitary aid. The bitter Israeli-Palestinian conflict; difficultiesin the high-technology, construction, and tourist sectors; andfiscal austerity in the face of growing inflation led to smalldeclines in GDP in 2001 and 2002. The economy grew at 1% in 2003,with improvements in tourism and foreign direct investment. In 2004,rising business and consumer confidence - as well as higher demandfor Israeli exports - boosted GDP by 2.7%.