PeruPeru's economy reflects its varied geography - an arid coastalregion, the Andes further inland, and tropical lands borderingColombia and Brazil. Abundant mineral resources are found in themountainous areas, and Peru's coastal waters provide excellentfishing grounds. However, overdependence on minerals and metalssubjects the economy to fluctuations in world prices, and a lack ofinfrastructure deters trade and investment. After several years ofinconsistent economic performance, the Peruvian economy was one ofthe fastest growing in Latin America in 2002 and 2003, growing by 5%and 4%, respectively, with the exchange rate stable and an annualinflation lower than 2%. Foreign direct investment also was strong,thanks to the ongoing Camisea natural gas pipeline project(scheduled to begin operations in 2004) and investments in goldmining. Risk premiums on Peruvian bonds on secondary markets reachedhistorically low levels in late 2003, reflecting investor optimismand the government's fiscal restraint. Despite the strongmacroeconomic performance, political intrigue and allegations ofcorruption continued to swirl in 2003, with the TOLEDOadministration growing increasingly unpopular, and local and foreignconcern rising that the political turmoil could place the country'shard-won fiscal and financial stability at risk. Moreover, as oflate 2003, unemployment had yet to respond to the strong growth ineconomic activity, owing in part to rigid labor market regulationsthat act as an impediment to hiring.
PhilippinesThe Philippines was less severely affected by the Asianfinancial crisis of 1998 than its neighbors, aided in part by annualremittances of $6-7 billion from overseas workers. From a 0.6%decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in 2000, butslowed to 3.2% in 2001 in the context of a global economic slowdown,an export slump, and political and security concerns. GDP growthaccelerated to 4.4% in 2002 and 4.2% in 2003, reflecting thecontinued resilience of the service sector, gains in industrialoutput, and improved exports. Nonetheless, it will take a higher,sustained growth path to make appreciable progress in povertyalleviation given the Philippines' high annual population growthrate and unequal distribution of income. The MACAPAGAL-ARROYOAdministration has promised to continue economic reforms to help thePhilippines match the pace of development in the newlyindustrialized countries of East Asia. The strategy includesimproving the infrastructure, strengthening tax collection tobolster government revenues, furthering deregulation andprivatization of the economy, enhancing the viability of thefinancial system, and increasing trade integration with the region.Prospects for 2004 will depend on the economic performance of twomajor trading partners, the US and Japan, and on increasedconfidence on the part of the international investment community.
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. Reforms in health care,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 a nationwide referendum in November 2003, 77% of thevoters voted in favor of Poland's EU accession, now scheduled forMay 2004. Improving Poland's export competitiveness and containingthe internal budget deficit are top priorities. Due to politicaluncertainty, the zloty has recently depreciated in relation to theeuro, while currencies of the other euro-zone aspirants have beenappreciating. GDP per capita equals that of the three 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 Economic and Monetary Union (EMU) in 1998 andbegan circulating the euro on 1 January 2002 along with 11 other EUmember economies. Economic growth has been above the EU average formuch of the past decade, but fell back in 2001-03. GDP per capitastands at 70% of that of the leading EU economies. A pooreducational system, in particular, has been an obstacle to greaterproductivity and growth. Portugal has been increasingly overshadowedby lower-cost producers in Central Europe and Asia as a target forforeign direct investment. The coalition government faces toughchoices in its attempts to boost Portugal's economic competitivenessand to keep the 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 2001-03, 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 about 80% of that of the leading WestEuropean industrial countries. Proved oil reserves of 14.5 billionbarrels should ensure continued output at current levels for 23years. Qatar's proved reserves of natural gas exceed 17.9 trillioncubic meters, more than 5% of the world total and third largest inthe world. Long-term goals feature the development of offshorenatural gas reserves to offset the ultimate decline in oilproduction. Since 2000, Qatar has consistently posted tradesurpluses largely because of high oil prices and increased naturalgas 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, was accompanied byslow but palpable gains in privatization, deficit reduction, and thecurbing of inflation. The IMF Board approved Romania's completion ofthe standby agreement in October 2003, the first time Romania hadsuccessfully concluded an IMF agreement since the 1989 revolution.In July 2004, the Executive Board of the IMF approved a 24-monthstandby arrangement for $367 million. The Romanian authorities donot intend to draw on this arrangement, viewing it as a precaution.Meanwhile, recent macroeconomic gains have done little to addressRomania's widespread poverty, and corruption and red tape handicapthe business environment.
RussiaRussia ended 2003 with its fifth straight year of growth,averaging 6.5% annually since the financial crisis of 1998. Althoughhigh oil prices and a relatively cheap ruble are important driversof this economic rebound, since 2000 investment and consumer-drivendemand have played a noticeably increasing role. Real fixed capitalinvestments have averaged gains greater than 10% over the last fouryears and real personal incomes have averaged increases over 12%.Russia has also improved its international financial position sincethe 1998 financial crisis, with its foreign debt declining from 90%of GDP to around 28%. Strong oil export earnings have allowed Russiato increase its foreign reserves from only $12 billion to some $80billion. These achievements, along with a renewed government effortto advance structural reforms, have raised business and investorconfidence in Russia's economic prospects. Nevertheless, seriousproblems persist. Oil, natural gas, metals, and timber account formore than 80% of exports, leaving the country vulnerable to swingsin world prices. Russia's manufacturing base is dilapidated and mustbe replaced or modernized if the country is to achieve broad-basedeconomic 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. Inaddition, a string of investigations launched against a majorRussian oil company, culminating with the arrest of its CEO in thefall of 2003, have raised concerns by some observers that PresidentPUTIN is granting more influence to forces within his governmentthat desire to reassert state control over the economy.
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 aid money andwas approved for IMF-World Bank Heavily Indebted Poor Country (HIPC)initiative debt relief in late 2000. But Kigali's high defenseexpenditures cause tension between the government and internationaldonors 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 11 September 2001 terrorist attackshas eroded government finances. The opening of a 1,000+ bed Marriotthotel in February 2003 was expected to bring in much-needed revenue.
Saint LuciaChanges in the EU import preference regime and theincreased competition from Latin American bananas have made economicdiversification increasingly important in Saint Lucia. The islandnation has been able to attract foreign business and investment,especially in its offshore banking and tourism industries. Themanufacturing sector is the most diverse in the Eastern Caribbeanarea, and the government is trying to revitalize the bananaindustry. Economic fundamentals remain solid.
Saint Pierre and MiquelonThe inhabitants have traditionally earnedtheir livelihood by fishing and by servicing fishing fleetsoperating off the coast of Newfoundland. The economy has beendeclining, however, because of disputes with Canada over fishingquotas and a steady decline in the number of ships stopping at SaintPierre. In 1992, an arbitration panel awarded the islands anexclusive economic zone of 12,348 sq km to settle a longstandingterritorial dispute with Canada, although it represents only 25% ofwhat France had sought. The islands are heavily subsidized by Franceto the great betterment of living standards. The government hopes anexpansion of tourism will boost economic prospects. Recent testdrilling for oil may pave the way for development of the energysector.
Saint Vincent and the GrenadinesEconomic growth in thislower-middle-income country hinges upon seasonal variations in theagricultural and tourism sectors. Tropical storms wiped outsubstantial portions of crops in 1994, 1995, and 2002, and tourismin the Eastern Caribbean has suffered low arrivals following 11September 2001. Saint Vincent is home to a small offshore bankingsector and has moved to adopt international regulatory standards.Saint Vincent is also a large producer of marijuana and is beingused as a transshipment point for illegal narcotics from SouthAmerica.
SamoaThe economy of Samoa has traditionally been dependent ondevelopment aid, family remittances from overseas, and agricultureand fishing. The country is vulnerable to devastating storms.Agriculture employs two-thirds of the labor force, and furnishes 90%of exports, featuring coconut cream, coconut oil, and copra. Themanufacturing sector mainly processes agricultural products. Thedecline of fish stocks in the area is a continuing problem. Tourismis an expanding sector, accounting for 25% of GDP; about 88,000tourists visited the islands in 2001. The Samoan Government hascalled for deregulation of the financial sector, encouragement ofinvestment, and continued fiscal discipline, meantime protecting theenvironment. Observers point to the flexibility of the labor marketas a basic strength for future economic advances. Foreign reservesare in a relatively healthy state, the external debt is stable, andinflation is low.
San MarinoThe tourist sector contributes over 50% of GDP. In 2000more than 3 million tourists visited San Marino. The key industriesare banking, wearing apparel, electronics, and ceramics. Mainagricultural products are wine and cheeses. The per capita level ofoutput and standard of living are comparable to those of the mostprosperous regions of Italy, which supplies much of its food.
Sao Tome and PrincipeThis small poor island economy has becomeincreasingly dependent on cocoa since independence 29 years ago.Cocoa production has substantially declined in recent years becauseof drought and mismanagement, but strengthening prices helped boostexport earnings in 2003. Sao Tome has to import all fuels, mostmanufactured goods, consumer goods, and a substantial amount offood. Over the years, it has been unable to service its externaldebt and has had to depend on concessional aid and debtrescheduling. Sao Tome benefited from $200 million in debt relief inDecember 2000 under the Highly Indebted Poor Countries (HIPC)program. Sao Tome's success in implementing structural reforms hasbeen rewarded by international donors, who pledged increasedassistance in 2001. Considerable potential exists for development ofa tourist industry, and the government has taken steps to expandfacilities in recent years. The government also has attempted toreduce price controls and subsidies. Sao Tome is optimistic aboutthe development of petroleum resources in its territorial waters inthe oil-rich Gulf of Guinea; production could begin as early as 2004.
Saudi ArabiaThis is an oil-based economy with strong governmentcontrols over major economic activities. Saudi Arabia has thelargest reserves of petroleum in the world (25% of the provedreserves), ranks as the largest exporter of petroleum, and plays aleading role in OPEC. The petroleum sector accounts for roughly 75%of budget revenues, 45% of GDP, and 90% of export earnings. About40% of GDP comes from the private sector. Roughly five and a halfmillion foreign workers play an important role in the Saudi economy,for example, in the oil and service sectors. The government in 1999announced plans to begin privatizing the electricity companies,which follows the ongoing privatization of the telecommunicationscompany. The government is encouraging private sector growth tolessen the kingdom's dependence on oil and increase employmentopportunities for the swelling Saudi population. Priorities forgovernment spending in the short term include additional funds foreducation and for the water and sewage systems. Economic reformsproceed cautiously because of deep-rooted political and socialconservatism.
SenegalIn January 1994, Senegal undertook a bold and ambitiouseconomic reform program with the support of the international donorcommunity. This reform began with a 50% devaluation of Senegal'scurrency, the CFA franc, which was linked at a fixed rate to theFrench franc. Government price controls and subsidies have beensteadily dismantled. After seeing its economy contract by 2.1% in1993, Senegal made an important turnaround, thanks to the reformprogram, with real growth in GDP averaging 5% annually during1995-2003. Annual inflation had been pushed down to the low singledigits. As a member of the West African Economic and Monetary Union(WAEMU), Senegal is working toward greater regional integration witha unified external tariff. Senegal also realized full Internetconnectivity in 1996, creating a miniboom in informationtechnology-based services. Private activity now accounts for 82% ofGDP. On the negative side, Senegal faces deep-seated urban problemsof chronic unemployment, trade union militancy, juveniledelinquency, and drug addiction.
Serbia and MontenegroMILOSEVIC-era mismanagement of the economy, anextended period of economic sanctions, and the damage toYugoslavia's infrastructure and industry during the NATO airstrikesin 1999 have left the economy only half the size it was in 1990.After the ousting of former Federal Yugoslav President MILOSEVIC inOctober 2000, the Democratic Opposition of Serbia (DOS) coalitiongovernment implemented stabilization measures and embarked on anaggressive market reform program. After renewing its membership inthe IMF in December 2000, Yugoslavia continued to reintegrate intothe international community by rejoining the World Bank (IBRD) andthe European Bank for Reconstruction and Development (EBRD). A WorldBank-European Commission sponsored Donors' Conference held in June2001 raised $1.3 billion for economic restructuring. An agreementrescheduling the country's $4.5 billion Paris Club government debtswas concluded in November 2001; it wrote off 66% of the debt. Thesmaller republic of Montenegro severed its economy from federalcontrol and from Serbia during the MILOSEVIC era and continues tomaintain its own central bank, uses the euro instead of the Yugoslavdinar as official currency, collects customs tariffs, and managesits own budget. Kosovo, while technically still part of the FederalRepublic of Yugoslavia (now Serbia and Montenegro) according toUnited Nations Security Council Resolution 1244, is largelyautonomous under United Nations Interim Administration Mission inKosovo (UNMIK) and is greatly dependent on the internationalcommunity and the diaspora for financial and technical assistance.The euro and the Yugoslav dinar are official currencies, and UNMIKcollects taxes and manages the budget. The complexity of Serbia andMontenegro political relationships, slow progress in privatization,legal uncertainty over property rights, and scarcity offoreign-investment are holding back Serbia and Montenegro's economy.Arrangements with the IMF, especially requirements for fiscaldiscipline, are an important element in policy formation. Severeunemployment remains a key political economic problem.
SeychellesSince independence in 1976, per capita output in thisIndian Ocean archipelago has expanded to roughly seven times the oldnear-subsistence level. Growth has been led by the tourist sector,which employs about 30% of the labor force and provides more than70% of hard currency earnings, and by tuna fishing. In recent yearsthe government has encouraged foreign investment in order to upgradehotels and other services. At the same time, the government hasmoved to reduce the dependence on tourism by promoting thedevelopment of farming, fishing, and small-scale manufacturing. Asharp drop illustrated the vulnerability of the tourist sector in1991-92 due largely to the Gulf war, and once again following the 11September 2001 terrorist attacks on the US. Other issues facing thegovernment are the curbing of the budget deficit, including thecontainment of social welfare costs, and further privatization ofpublic enterprises. Growth slowed in 1998-2002, due to sluggishtourist and tuna sectors. Also, tight controls on exchange rates andthe scarcity of foreign exchange have impaired short-term economicprospects. The black market value of the Seychelles rupee is halfthe official exchange rate; without a devaluation of the currencythe tourist sector should remain sluggish as vacationers seekcheaper destinations such as Comoros, Mauritius, and Madagascar.
Sierra LeoneSierra Leone is an extremely poor African nation withtremendous inequality in income distribution. It does havesubstantial mineral, agricultural, and fishery resources. However,the economic and social infrastructure is not well developed, andserious social disorders continue to hamper economic development,following a 11-year civil war. About two-thirds of the working-agepopulation engages in subsistence agriculture. Manufacturingconsists mainly of the processing of raw materials and of lightmanufacturing for the domestic market. Plans continue to reopenbauxite and rutile mines shut down during the conflict. The majorsource of hard currency consists of the mining of diamonds. The fateof the economy depends upon the maintenance of domestic peace andthe continued receipt of substantial aid from abroad, which isessential to offset the severe trade imbalance and to supplementgovernment revenues.
SingaporeSingapore, a highly developed and successful free marketeconomy, enjoys a remarkably open and corruption-free environment,stable prices, and a high per capita GDP. The economy dependsheavily on exports, particularly in electronics and manufacturing.It was hard hit in 2001-03 by the global recession and the slump inthe technology sector. The government hopes to establish a newgrowth path that will be less vulnerable to the external businesscycle but is unlikely to abandon efforts to establish Singapore asSoutheast Asia's financial and high-tech hub. Fiscal stimulus, lowinterest rates, and global economic recovery should lead to muchimproved growth in 2004.
SlovakiaSlovakia has mastered much of the difficult transition froma centrally planned economy to a modern market economy. The DZURINDAgovernment made excellent progress during 2001-03 in macroeconomicstabilization and structural reform. Major privatizations are nearlycomplete, the banking sector is almost completely in foreign hands,and foreign investment has picked up. Slovakia's economy exceededexpectations in 2001-03, despite the general European slowdown.Unemployment, at an unacceptable 15% in 2003, remains the economy'sAchilles heel. The government faces other strong challenges in 2004,especially cutting the budget deficit, containing inflation, andstrengthening the health care system.
SloveniaSlovenia, with its historical ties to Western Europe,enjoys a GDP per capita substantially higher than that of the othertransitioning economies of Central Europe. In March 2004, Sloveniabecame the first transition country to graduate from borrower statusto donor partner at the World Bank. Privatization of the economyproceeded at an accelerated pace in 2002-03, and the budget deficitdropped from 3.0% of GDP in 2002 to 1.6% in 2003. Despite theeconomic slowdown in Europe in 2001-03, Slovenia maintained 3%growth. Structural reforms to improve the business environment allowfor greater foreign participation in Slovenia's economy and help tolower unemployment. Further measures to curb inflation are alsoneeded. Corruption and the high degree of coordination betweengovernment, business, and central bank policy are issues of concernin the run-up to Slovenia's scheduled 1 May 2004 accession to theEuropean Union.
Solomon IslandsThe bulk of the population depends on agriculture,fishing, and forestry for at least part of their livelihood. Mostmanufactured goods and petroleum products must be imported. Theislands are rich in undeveloped mineral resources such as lead,zinc, nickel, and gold. However, severe ethnic violence, the closingof key business enterprises, and an empty government treasury haveled to serious economic disarray, indeed near collapse. Tankerdeliveries of crucial fuel supplies (including those for electricalgeneration) have become sporadic due to the government's inabilityto pay and attacks against ships. Telecommunications are threatenedby the nonpayment of bills and by the lack of technical andmaintenance staff many of whom have left the country. Thedisintegration of law and order left the economy in tatters bymid-2003, and on 24 July 2003 more than 2000 Australian soldiersentered the Solomon Islands to restore order and to facilitate therestoration of basic services.
SomaliaSomalia's economic fortunes are being driven by its deeppolitical divisions. The northern area has declared its independenceas "Somaliland"; the central area, Puntland, is a self-declaredautonomous state; and the remaining southern portion is riddled withthe struggles of rival factions. Economic life continues, in partbecause much activity is local and relatively easily protected.Agriculture is the most important sector, with livestock normallyaccounting for about 40% of GDP and about 65% of export earnings,but Saudi Arabia's recent ban on Somali livestock, because of RiftValley Fever concerns, has severely hampered the sector. Nomads andsemi-nomads, who are dependent upon livestock for their livelihood,make up a large portion of the population. Livestock, hides, fish,charcoal, and bananas are Somalia's principal exports, while sugar,sorghum, corn, qat, and machined goods are the principal imports.Somalia's small industrial sector, based on the processing ofagricultural products, has largely been looted and sold as scrapmetal. Despite the seeming anarchy, Somalia's service sector hasmanaged to survive and grow. Telecommunication firms providewireless services in most major cities and offer the lowestinternational call rates on the continent. In the absence of aformal banking sector, money exchange services have sproutedthroughout the country, handling between $200 million and $500million in remittances annually. Mogadishu's main market offers avariety of goods from food to the newest electronic gadgets. Hotelscontinue to operate, and militias provide security. The ongoingcivil disturbances and clan rivalries, however, have interfered withany broad-based economic development and international aidarrangements. In 2002 Somalia's overdue financial obligations to theIMF continued to grow. Statistics on Somalia's GDP, growth, percapita income, and inflation should be viewed skeptically.
South AfricaSouth Africa is a middle-income, emerging market withan abundant supply of natural resources; well-developed financial,legal, communications, energy, and transport sectors; a stockexchange that ranks among the 10 largest in the world; and a moderninfrastructure supporting an efficient distribution of goods tomajor urban centers throughout the region. However, growth has notbeen strong enough to lower South Africa's high unemployment rate;and daunting economic problems remain from the apartheid era,especially poverty and lack of economic empowerment among thedisadvantaged groups. High crime and HIV/AIDS infection rates alsodeter investment. South African economic policy is fiscallyconservative, but pragmatic, focusing on targeting inflation andliberalizing trade as means to increase job growth and householdincome.
South Georgia and the South Sandwich IslandsSome fishing takesplace in adjacent waters. Fees from fishing licenses and relatedactivities traditionally account for around 90% of South Georgia'srevenue (about $5.6 million in 2004). There is a potential source ofincome from harvesting finfish and krill. The islands receive incomefrom postage stamps produced in the UK, sale of fishing licenses,and harbor and landing fees from tourist vessels. Tourism fromspecialized cruise ships is increasing rapidly. Annual touristvolume hovers around 3,000 arrivals.
Southern OceanFisheries in 2000-01 (1 July to 30 June) landed112,934 metric tons, of which 87% was krill and 11% Patagoniantoothfish. International agreements were adopted in late 1999 toreduce illegal, unreported, and unregulated fishing, which in the2000-01 season landed, by one estimate, 8,376 metric tons ofPatagonian and antarctic toothfish. In the 2000-01 antarctic summer12,248 tourists, most of them seaborne, visited the Southern Oceanand Antarctica, compared to 14,762 the previous year.
SpainSpain's mixed capitalist economy supports a GDP that on a percapita basis is 80% that of the four leading West Europeaneconomies. The center-right government of former President AZNARsuccessfully worked to gain admission to the first group ofcountries launching the European single currency (the euro) on 1January 1999. The AZNAR administration continued to advocateliberalization, privatization, and deregulation of the economy andintroduced some tax reforms to that end. Unemployment fell steadilyunder the AZNAR administration but remains high at 11.7%. Growth of2.4% in 2003 was satisfactory given the background of a falteringEuropean economy. Incoming President RODRIGUEZ ZAPATERO, whose partywon the election three days after the Madrid train bombings inMarch, plans to reduce government intervention in business, combattax fraud, and support innovation, research and development, butalso intends to reintroduce labor market regulations that had beenscrapped by the AZNAR government. Adjusting to the monetary andother economic policies of an integrated Europe - and reducingunemployment - will pose challenges to Spain over the next few years.
Spratly IslandsEconomic activity is limited to commercial fishing.The proximity to nearby oil- and gas-producing sedimentary basinssuggests the potential for oil and gas deposits, but the region islargely unexplored; there are no reliable estimates of potentialreserves; commercial exploitation has yet to be developed.
Sri LankaIn 1977, Colombo abandoned statist economic policies andits import substitution trade policy for market-oriented policiesand export-oriented trade. Sri Lanka's most dynamic sectors now arefood processing, textiles and apparel, food and beverages,telecommunications, and insurance and banking. In 2003, plantationcrops made up only 15% of exports (compared with 93% in 1970), whiletextiles and garments accounted for 63%. GDP grew at an averageannual rate of 5.5% in the early 1990s until a drought and adeteriorating security situation lowered growth to 3.8% in 1996. Theeconomy rebounded in 1997-2000 with average growth of 5.3%, but 2001saw the first contraction in the country's history, -1.4%, due to acombination of power shortages, severe budgetary problems, theglobal slowdown, and continuing civil strife. Growth recovered to4.0% in 2002 and 5.2% in 2003. About 800,000 Sri Lankans workabroad, 90% in the Middle East. They send home about $1 billion ayear. The struggle by the Tamil Tigers of the north and east for alargely independent homeland continues to cast a shadow over theeconomy.
SudanSudan has turned around a struggling economy with soundeconomic policies and infrastructure investments, yet it still facesformidable economic problems, starting from its low level of percapita output and extending to its devastating civil stife. From1997 to date, Sudan has been implementing IMF macroeconomic reforms.In 1999, Sudan began exporting crude oil and in the last quarter of1999 recorded its first trade surplus, which, along with monetarypolicy, has stabilized the exchange rate. Increased oil production,revived light industry, and expanded export processing zones helpedsustain GDP growth at 6.1% in 2003 and 7% in 2004. Agricultureproduction remains Sudan's most important sector, employing 80% ofthe work force and contributing 39% of GDP, but most farms remainrain-fed and susceptible to drought. Chronic instability - includingthe long-standing civil war between the Muslim north and theChristian/pagan south, the ethnic purges in Darfur, adverse weather,and weak world agricultural prices - ensure that much of thepopulation will remain at or below the poverty line for years.
SurinameThe economy is dominated by the bauxite industry, whichaccounts for more than 15% of GDP and 70% of export earnings.Suriname's economic prospects for the medium term will depend onrenewed commitment to responsible monetary and fiscal policies andto the introduction of structural reforms to liberalize markets andpromote competition. The government of Ronald VENETIAAN has begun anausterity program, raised taxes, and attempted to control spending.However, in 2002, President VENETIAAN agreed to a large pay raisefor civil servants, which threatens his earlier gains in stabilizingthe economy. The Dutch Government has agreed to restart the aidflow, which will allow Suriname to access international developmentfinancing. The short-term economic outlook depends on thegovernment's ability to control inflation and on the development ofprojects in the bauxite and gold mining sectors.
SvalbardCoal mining is the major economic activity on Svalbard. Thetreaty of 9 February 1920 gives the 41 signatories equal rights toexploit mineral deposits, subject to Norwegian regulation. AlthoughUS, UK, Dutch, and Swedish coal companies have mined in the past,the only companies still mining are Norwegian and Russian. Thesettlements on Svalbard are essentially company towns. The Norwegianstate-owned coal company employs nearly 60% of the Norwegianpopulation on the island, runs many of the local services, andprovides most of the local infrastructure. There is also somehunting of seal, reindeer, and fox.
SwazilandIn this small, landlocked economy, subsistence agricultureoccupies more than 80% of the population. The manufacturing sectorhas diversified since the mid-1980s. Sugar and wood pulp remainimportant foreign exchange earners. Mining has declined inimportance in recent years with only coal and quarry stone minesremaining active. Surrounded by South Africa, except for a shortborder with Mozambique, Swaziland is heavily dependent on SouthAfrica from which it receives about nine-tenths of its imports andto which it sends nearly three-quarters of its exports. Customsduties from the Southern African Customs Union and workerremittances from South Africa substantially supplement domesticallyearned income. The government is trying to improve the atmospherefor foreign investment. Overgrazing, soil depletion, drought, andsometimes floods persist as problems for the future. More thanone-fourth of the population needed emergency food aid in 2002because of drought, and more than one-third of the adult populationwas infected by HIV/AIDS.
SwedenAided by peace and neutrality for the whole 20th century,Sweden has achieved an enviable standard of living under a mixedsystem of high-tech capitalism and extensive welfare benefits. Ithas a modern distribution system, excellent internal and externalcommunications, and a skilled labor force. Timber, hydropower, andiron ore constitute the resource base of an economy heavily orientedtoward foreign trade. Privately owned firms account for about 90% ofindustrial output, of which the engineering sector accounts for 50%of output and exports. Agriculture accounts for only 2% of GDP and2% of the jobs. The government's commitment to fiscal disciplineresulted in a substantial budgetary surplus in 2001, which was cutby more than half in 2002, due to the global economic slowdown,declining revenue, and increased spending. The Swedish central bank(the Riksbank) is focusing on price stability with its inflationtarget of 2%. Growth remained sluggish in 2003. On September 14,2003, Swedish voters turned down entry into the euro system,concerned about the impact on democracy and sovereignty.
SwitzerlandSwitzerland is a prosperous and stable modern marketeconomy with low unemployment, a highly skilled labor force, and aper capita GDP larger than that of the big Western Europeaneconomies. The Swiss in recent years have brought their economicpractices largely into conformity with the EU's to enhance theirinternational competitiveness. Switzerland remains a safe haven forinvestors, because it has maintained a degree of bank secrecy andhas kept up the franc's long-term external value. Reflecting theanemic economic conditions of Europe, GDP growth dropped in 2001 toabout 0.8%, to 0.2% in 2002, and to -0.3% in 2003.
SyriaSyria's predominantly statist economy lately has been growingmore slowly than its 2.4% annual population growth rate. Recentlegislation allows private banks to operate in Syria, although aprivate banking sector will take years and further governmentcooperation to develop. Factors, including the war between theUS-led coalition and Iraq, probably drove real annual GDP growthlevels back below 1% in 2003 following growth of 3.5% in 2001 and4.5% in 2002. A long-run economic constraint is the pressure onwater supplies caused by rapid population growth, industrialexpansion, and increased water pollution.
TaiwanTaiwan has a dynamic capitalist economy with graduallydecreasing guidance of investment and foreign trade by governmentauthorities. In keeping with this trend, some large government-ownedbanks and industrial firms are being privatized. Exports haveprovided the primary impetus for industrialization. The tradesurplus is substantial, and foreign reserves are the world's thirdlargest. Agriculture contributes 2% to GDP, down from 32% in 1952.While Taiwan is a major investor throughout Southeast Asia, Chinahas become the largest destination for investment and has overtakenthe US to become Taiwan's largest export market. Because of itsconservative financial approach and its entrepreneurial strengths,Taiwan suffered little compared with many of its neighbors from theAsian financial crisis in 1998. The global economic downturn,combined with problems in policy coordination by the administrationand bad debts in the banking system, pushed Taiwan into recession in2001, the first year of negative growth ever recorded. Unemploymentalso reached record levels. Output recovered moderately in 2002 inthe face of continued global slowdown, fragile consumer confidence,and bad bank loans. Growing economic ties with China are a dominantlong-term factor. Exports to China - mainly parts and equipment forthe assembly of goods for export to developed countries - droveTaiwan's economic recovery in 2002. Although the SARS epidemic,Typhoon Maemi, corporate scandals, and a drop in consumer spendingcaused GDP growth to contract to 3.2% in 2003, increasingly strongexport performance kept Taiwan's economy on track, and thegovernment expects Taiwan's economy to grow 4.1% in 2004.
TajikistanTajikistan has the lowest per capita GDP among the 15former Soviet republics. Only 5% to 6% of the land area is arable.Cotton is the most important crop. Mineral resources, varied butlimited in amount, include silver, gold, uranium, and tungsten.Industry consists only of a large aluminum plant, hydropowerfacilities, and small obsolete factories mostly in light industryand food processing. The civil war (1992-97) severely damaged thealready weak economic infrastructure and caused a sharp decline inindustrial and agricultural production. Even though 60% of itspeople continue to live in abject poverty, Tajikistan hasexperienced steady economic growth since 1997. Continuedprivatization of medium and large state-owned enterprises willfurther increase productivity. Tajikistan's economic situation,however, remains fragile due to uneven implementation of structuralreforms, weak governance, widespread unemployment, and the externaldebt burden. A debt restructuring agreement was reached with Russiain December 2002, including an interest rate of 4%, a 3-year graceperiod, and a US $49.8 million credit to the Central Bank ofTajikistan.
TanzaniaTanzania is one of the poorest countries in the world. Theeconomy depends heavily on agriculture, which accounts for abouthalf of GDP, provides 85% of exports, and employs 80% of the workforce. Topography and climatic conditions, however, limit cultivatedcrops to only 4% of the land area. Industry traditionally featuredthe processing of agricultural products and light consumer goods.The World Bank, the International Monetary Fund, and bilateraldonors have provided funds to rehabilitate Tanzania's out-of-dateeconomic infrastructure and to alleviate poverty. Growth in1991-2002 featured a pickup in industrial production and asubstantial increase in output of minerals, led by gold. Oil and gasexploration and development played an important role in this growth.Recent banking reforms have helped increase private sector growthand investment. Continued donor assistance and solid macroeconomicpolicies supported real GDP growth of more than 5.2% in 2004.
ThailandThailand has a free-enterprise economy and welcomes foreigninvestment. Exports feature textiles and footwear, fishery products,rice, rubber, jewelry, automobiles, computers and electricalappliances. Thailand has recovered from the 1997-98 Asian FinancialCrisis and was one of East Asia's best performers in 2002. Increasedconsumption and investment spending and strong export growth pushedGDP growth up to 6.3% in 2003 despite a sluggish global economy. Thehighly popular government has pushed an expansionist policy,including major support of village economic development.
TogoThis small sub-Saharan economy is heavily dependent on bothcommercial and subsistence agriculture, which provides employmentfor 65% of the labor force. Some basic foodstuffs must still beimported. Cocoa, coffee, and cotton generate about 40% of exportearnings, with cotton being the most important cash crop. Togo isthe world's fourth-largest producer of phosphate, but productionfell an estimated 22% in 2002 due to power shortages and the cost ofdeveloping new deposits. The government's decade-long effort,supported by the World Bank and the IMF, to implement economicreform measures, encourage foreign investment, and bring revenues inline with expenditures has moved slowly. Progress depends onfollowing through on privatization, increased openness in governmentfinancial operations, progress toward legislative elections, andcontinued support from foreign donors.
TokelauTokelau's small size (three villages), isolation, and lackof resources greatly restrain economic development and confineagriculture to the subsistence level. The people rely heavily on aidfrom New Zealand - about $4 million annually - to maintain publicservices, with annual aid being substantially greater than GDP. Theprincipal sources of revenue come from sales of copra, postagestamps, souvenir coins, and handicrafts. Money is also remitted tofamilies from relatives in New Zealand.
TongaTonga, a small, open, South Pacific island economy, has anarrow export base in agricultural goods. Squash, coconuts, bananas,and vanilla beans are the main crops, and agricultural exports makeup two-thirds of total exports. The country must import a highproportion of its food, mainly from New Zealand. Tourism is thesecond-largest source of hard currency earnings followingremittances. The country remains dependent on external aid andremittances from Tongan communities overseas to offset its tradedeficit. The government is emphasizing the development of theprivate sector, especially the encouragement of investment, and iscommitting increased funds for health and education. Tonga has areasonably sound basic infrastructure and well-developed socialservices. High unemployment among the young and the continuingupturn in inflation are major issues facing the government.
Trinidad and TobagoTrinidad and Tobago, the leading Caribbeanproducer of oil and gas, has earned a reputation as an excellentinvestment site for international businesses. Tourism is a growingsector, although not proportionately as important as in many otherCaribbean islands. The economy benefits from low inflation and agrowing trade surplus. Prospects for growth in 2004 are good asprices for oil, petrochemicals, and liquified natural gas areexpected to remain high, and foreign direct investment continues togrow to support expanded capacity in the energy sector. Thegovernment is coping with a rise in violent crime.
Tromelin Islandno economic activity
TunisiaTunisia has a diverse economy, with important agricultural,mining, energy, tourism, and manufacturing sectors. Governmentalcontrol of economic affairs while still heavy has gradually lessenedover the past decade with increasing privatization, simplificationof the tax structure, and a prudent approach to debt. Real growth,averaging 5% for the latter half of the last decade, slowed to a15-year low of 1.9% in 2002 because of agricultural drought, slowinvestment, and lackluster tourism. Better rains in 2003, however,pushed GDP growth up to an estimated 6 percent, and tourism alsorecovered after the end of combat operations in Iraq. GDP growthremained at 6% in 2004. Tunisia has agreed to gradually removebarriers to trade with the European Union over the next decade.Broader privatization, further liberalization of the investment codeto increase foreign investment, improvements in governmentefficiency, and reduction of the trade deficit are among thechallenges for the future.
TurkeyTurkey's dynamic economy is a complex mix of modern industryand commerce along with a traditional agriculture sector that in2001 still accounted for 40% of employment. It has a strong andrapidly growing private sector, yet the state still plays a majorrole in basic industry, banking, transport, and communication. Thelargest industrial sector is textiles and clothing, which accountsfor one-third of industrial employment; it faces stiff competitionin international markets with the end of the global quota system.However, other sectors, notably the automotive and electonicsindustries, are rising in importance within Turkey's export mix. Inrecent years the economic situation has been marked by erraticeconomic growth and serious imbalances. Real GNP growth has exceeded6% in many years, but this strong expansion has been interrupted bysharp declines in output in 1994, 1999, and 2001. Meanwhile, thepublic sector fiscal deficit has regularly exceeded 10% of GDP - duein large part to the huge burden of interest payments, whichaccounted for more than 40% of central government spending in 2003.Inflation, in recent years in the high double-digit range, fell to11.3% in 2004. Perhaps because of these problems, foreign directinvestment in Turkey remains low - less than $1 billion annually.Results in 2002-04 improved, because of strong financial supportfrom the IMF and tighter fiscal policy. A major political andeconomic issue over the next decade is whether or not Turkey willbecome a member of the EU.
TurkmenistanTurkmenistan is largely desert country with intensiveagriculture in irrigated oases and large gas and oil resources.One-half of its irrigated land is planted in cotton, making it atone time the world's tenth-largest producer. Poor harvests in recentyears have led to a nearly 46% decline in cotton exports. With anauthoritarian ex-Communist regime in power and a tribally basedsocial structure, Turkmenistan has taken a cautious approach toeconomic reform, hoping to use gas and cotton sales to sustain itsinefficient economy. Privatization goals remain limited. In1998-2003, Turkmenistan suffered from the continued lack of adequateexport routes for natural gas and from obligations on extensiveshort-term external debt. At the same time, however, total exportsrose by 38% in 2003, largely because of higher international oil andgas prices. Overall prospects in the near future are discouragingbecause of widespread internal poverty, the burden of foreign debt,and the unwillingness of the government to adopt market-orientedreforms. However, Turkmenistan's cooperation with the internationalcommunity in transporting humanitarian aid to Afghanistan mayforeshadow a change in the atmosphere for foreign investment, aid,and technological support. Turkmenistan's economic statistics arestate secrets, and GDP and other figures are subject to wide marginsof error. In particular, the 20% rate of GDP growth is a guess.
Turks and Caicos IslandsThe Turks and Caicos economy is based ontourism, fishing, and offshore financial services. Most capitalgoods and food for domestic consumption are imported. The US is theleading source of tourists, accounting for more than half of the93,000 visitors in the late 1990s. Major sources of governmentrevenue include fees from offshore financial activities and customsreceipts. Tourism fell by 6% in 2002.
TuvaluTuvalu consists of a densely populated, scattered group ofnine coral atolls with poor soil. The country has no known mineralresources and few exports. Subsistence farming and fishing are theprimary economic activities. Fewer than 1,000 tourists, on average,visit Tuvalu annually. Government revenues largely come from thesale of stamps and coins and worker remittances. About 1,000Tuvaluans work in Nauru in the phosphate mining industry. Nauru hasbegun repatriating Tuvaluans, however, as phosphate resourcesdecline. Substantial income is received annually from aninternational trust fund established in 1987 by Australia, NZ, andthe UK and supported also by Japan and South Korea. Thanks to wiseinvestments and conservative withdrawals, this Fund has grown froman initial $17 million to over $35 million in 1999. The USgovernment is also a major revenue source for Tuvalu, because ofpayments from a 1988 treaty on fisheries. In an effort to reduce itsdependence on foreign aid, the government is pursuing public sectorreforms, including privatization of some government functions andpersonnel cuts of up to 7%. In 1998, Tuvalu began deriving revenuefrom use of its area code for "900" lines and in 2000, from thelease of its ".tv" Internet domain name. Royalties from these newtechnology sources could increase substantially over the nextdecade. With merchandise exports only a fraction of merchandiseimports, continued reliance must be placed on fishing andtelecommunications license fees, remittances from overseas workers,official transfers, and investment income from overseas assets.
UgandaUganda has substantial natural resources, including fertilesoils, regular rainfall, and sizable mineral deposits of copper andcobalt. Agriculture is the most important sector of the economy,employing over 80% of the work force. Coffee accounts for the bulkof export revenues. Since 1986, the government - with the support offoreign countries and international agencies - has acted torehabilitate and stabilize the economy by undertaking currencyreform, raising producer prices on export crops, increasing pricesof petroleum products, and improving civil service wages. The policychanges are especially aimed at dampening inflation and boostingproduction and export earnings. During 1990-2001, the economy turnedin a solid performance based on continued investment in therehabilitation of infrastructure, improved incentives for productionand exports, reduced inflation, gradually improved domesticsecurity, and the return of exiled Indian-Ugandan entrepreneurs.Corruption within the government and slippage in the government'sdetermination to press reforms raise doubts about the continuationof strong growth. In 2000, Uganda qualified for enhanced HighlyIndebted Poor Countries (HIPC) debt relief worth $1.3 billion andParis Club debt relief worth $145 million. These amounts combinedwith the original HIPC debt relief added up to about $2 billion.Growth for 2001-02 was solid despite continued decline in the priceof coffee, Uganda's principal export. Solid growth in 2003 reflectedan upturn in Uganda's export markets.
UkraineAfter Russia, the Ukrainian republic was far and away themost important economic component of the former Soviet Union,producing about four times the output of the next-ranking republic.Its fertile black soil generated more than one-fourth of Sovietagricultural output, and its farms provided substantial quantitiesof meat, milk, grain, and vegetables to other republics. Likewise,its diversified heavy industry supplied the unique equipment (forexample, large diameter pipes) and raw materials to industrial andmining sites (vertical drilling apparatus) in other regions of theformer USSR. Ukraine depends on imports of energy, especiallynatural gas, to meet some 85% of its annual energy requirements.Shortly after independence in December 1991, the UkrainianGovernment liberalized most prices and erected a legal framework forprivatization, but widespread resistance to reform within thegovernment and the legislature soon stalled reform efforts and ledto some backtracking. Output by 1999 had fallen to less than 40% ofthe 1991 level. Loose monetary policies pushed inflation tohyperinflationary levels in late 1993. Ukraine's dependence onRussia for energy supplies and the lack of significant structuralreform have made the Ukrainian economy vulnerable to externalshocks. President KUCHMA had pledged to reduce the number ofgovernment agencies, streamline the regulatory process, create alegal environment to encourage entrepreneurs, and enact acomprehensive tax overhaul. Reforms in the more politicallysensitive areas of structural reform and land privatization arestill lagging. Outside institutions - particularly the IMF - haveencouraged Ukraine to quicken the pace and scope of reforms. GDP in2000 showed strong export-based growth of 6% - the first growthsince independence - and industrial production grew 12.9%. Theeconomy continued to expand in 2001 as real GDP rose 9% andindustrial output grew by over 14%. Growth of 4.6% in 2002 was moremoderate, in part a reflection of faltering growth in the developedworld. In general, growth has been undergirded by strong domesticdemand, low inflation, and solid consumer and investor confidence.Growth was a sturdy 9.3% in 2003 and a remarkable 12% in 2004,despite a loss of momentum in needed economic reforms.
United Arab EmiratesThe UAE has an open economy with a high percapita income and a sizable annual trade surplus. Its wealth isbased on oil and gas output (about 33% of GDP), and the fortunes ofthe economy fluctuate with the prices of those commodities. Since1973, the UAE has undergone a profound transformation from animpoverished region of small desert principalities to a modern statewith a high standard of living. At present levels of production, oiland gas reserves should last for more than 100 years. The governmenthas increased spending on job creation and infrastructure expansionand is opening up its utilities to greater private sectorinvolvement.
United KingdomThe UK, a leading trading power and financial center,is one of the quartet of trillion dollar economies of WesternEurope. Over the past two decades the government has greatly reducedpublic ownership and contained the growth of social welfareprograms. Agriculture is intensive, highly mechanized, and efficientby European standards, producing about 60% of food needs with only1% of the labor force. The UK has large coal, natural gas, and oilreserves; primary energy production accounts for 10% of GDP, one ofthe highest shares of any industrial nation. Services, particularlybanking, insurance, and business services, account by far for thelargest proportion of GDP while industry continues to decline inimportance. GDP growth slipped in 2001-03 as the global downturn,the high value of the pound, and the bursting of the "new economy"bubble hurt manufacturing and exports. Still, the economy is one ofthe strongest in Europe; inflation, interest rates, and unemploymentremain low. The relatively good economic performance has complicatedthe BLAIR government's efforts to make a case for Britain to jointhe European Economic and Monetary Union (EMU). Critics point out,however, that the economy is doing well outside of EMU, and theypoint to public opinion polls that continue to show a majority ofBritons opposed to the euro. Meantime, the government has beenspeeding up the improvement of education, transport, and healthservices, at a cost in higher taxes. The war in March-April 2003between a US-led coalition and Iraq, together with the subsequentproblems of restoring the economy and the polity, involve a heavycommitment of British military forces.
United StatesThe US has the largest and most technologicallypowerful economy in the world, with a per capita GDP of $37,800. Inthis market-oriented economy, private individuals and business firmsmake most of the decisions, and the federal and state governmentsbuy needed goods and services predominantly in the privatemarketplace. US business firms enjoy considerably greaterflexibility than their counterparts in Western Europe and Japan indecisions to expand capital plant, to lay off surplus workers, andto develop new products. At the same time, they face higher barriersto entry in their rivals' home markets than the barriers to entry offoreign firms in US markets. US firms are at or near the forefrontin technological advances, especially in computers and in medical,aerospace, and military equipment; their advantage has narrowedsince the end of World War II. The onrush of technology largelyexplains the gradual development of a "two-tier labor market" inwhich those at the bottom lack the education and theprofessional/technical skills of those at the top and, more andmore, fail to get comparable pay raises, health insurance coverage,and other benefits. Since 1975, practically all the gains inhousehold income have gone to the top 20% of households. The years1994-2000 witnessed solid increases in real output, low inflationrates, and a drop in unemployment to below 5%. The year 2001 saw theend of boom psychology and performance, with output increasing only0.3% and unemployment and business failures rising substantially.The response to the terrorist attacks of 11 September 2001 showedthe remarkable resilience of the economy. Moderate recovery tookplace in 2002 with the GDP growth rate rising to 2.4%. A majorshort-term problem in first half 2002 was a sharp decline in thestock market, fueled in part by the exposure of dubious accountingpractices in some major corporations. The war in March/April 2003between a US-led coalition and Iraq shifted resources to themilitary. In 2003, growth in output and productivity and therecovery of the stock market to above 10,000 for the Dow JonesIndustrial Average were promising signs. Unemployment stayed at the6% level, however, and began to decline only at the end of the year.Long-term problems include inadequate investment in economicinfrastructure, rapidly rising medical and pension costs of an agingpopulation, sizable trade and budget deficits, and stagnation offamily income in the lower economic groups.
UruguayUruguay's well-to-do economy is characterized by anexport-oriented agricultural sector, a well-educated workforce, andhigh levels of social spending. After averaging growth of 5%annually during 1996-98, in 1999-2002 the economy suffered a majordownturn, stemming largely from the spillover effects of theeconomic problems of its large neighbors, Argentina and Brazil. Forinstance, in 2001-02 massive withdrawals by Argentina of dollarsdeposited in Uruguayan banks led to a plunge in the Uruguyan pesoand a massive rise in unemployment. Total GDP in these four yearsdropped by nearly 20%, with 2002 the worst year due to the seriousbanking crisis. Unemployment rose to nearly 20% in 2002, inflationsurged, and the burden of external debt doubled. Cooperation withthe IMF and the US has limited the damage. The debt swap withprivate creditors carried out in 2003, which extended the maturitydates on nearly half of Uruguay's $11.3 billion in public debt,substantially alleviated the country's amortization burden in thecoming years and restored public confidence. The economy is expectedto resume growth in 2004 (perhaps 4% or more) as a result of highcommodity prices for Uruguayan exports, the weakness of the dollaragainst the euro, growth in the region, low international interestrates, and greater export competitiveness. On the negative side, inDecember 2003 the electorate voted to repeal the law permitting acautious liberalization of the energy industry.
UzbekistanUzbekistan is a dry, landlocked country of which 11%consists of intensely cultivated, irrigated river valleys. More than60% of its population lives in densely populated rural communities.Uzbekistan is now the world's second-largest cotton exporter, alarge producer of gold and oil, and a regionally significantproducer of chemicals and machinery. Following independence inDecember 1991, the government sought to prop up its Soviet-stylecommand economy with subsidies and tight controls on production andprices. Uzbekistan responded to the negative external conditionsgenerated by the Asian and Russian financial crises by emphasizingimport substitute industrialization and by tightening export andcurrency controls within its already largely closed economy. Thegovernment, while aware of the need to improve the investmentclimate, sponsors measures that often increase, not decrease, thegovernment's control over business decisions. A sharp increase inthe inequality of income distribution has hurt the lower ranks ofsociety since independence. In 2003, the government accepted theobligations of Article VIII under the International Monetary Fund(IMF), providing for full currency convertibility. However, strictcurrency controls and tightening of borders have lessened theeffects of convertibility and have also lead to some shortages whichhave further stifled economic activity.
VanuatuThis South Pacific island economy is based primarily onsmall-scale agriculture, which provides a living for 65% of thepopulation. Fishing, offshore financial services, and tourism, withabout 50,000 visitors in 1997, are other mainstays of the economy.Mineral deposits are negligible; the country has no known petroleumdeposits. A small light industry sector caters to the local market.Tax revenues come mainly from import duties. Economic development ishindered by dependence on relatively few commodity exports,vulnerability to natural disasters, and long distances from mainmarkets and between constituent islands. A severe earthquake inNovember 1999 followed by a tsunami, caused extensive damage to thenorthern island of Pentecote and left thousands homeless. Anotherpowerful earthquake in January 2002 caused extensive damage in thecapital, Port-Vila, and surrounding areas, and also was followed bya tsunami. GDP growth rose less than 3% on average in the 1990s. Inresponse to foreign concerns, the government has promised to tightenregulation of its offshore financial center. In mid-2002 thegovernment stepped up efforts to boost tourism. Agriculture,especially livestock farming, is a second target for growth.Australia and New Zealand are the main suppliers of tourists andforeign aid. Growth expanded moderately in 2003.
VenezuelaVenezuela continues to be highly dependent on thepetroleum sector, which accounts for roughly one-third of GDP,around 80% of export earnings, and more than half of governmentoperating revenues. Despite higher oil prices at the end of 2002 andinto 2003, domestic political instability, culminating in adisastrous two-month national oil strike from December 2002 toFebruary 2003, temporarily halted economic activity. The economyremained in depression in 2003, declining by 9.2% after an 8.9% fallin 2002. In late 2003, President CHAVEZ committed himself to $1billion in new social programs, money the government does not have.