GabonGabon enjoys a per capita income four times that of most ofsub-Saharan African nations. 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 currency by 50% in January1994 sparked a one-time inflationary surge, to 35%; the rate droppedto 6% in 1996. The IMF provided a one-year standby arrangement in1994-95, a three-year Enhanced Financing Facility (EFF) at nearcommercial rates beginning in late 1995, and stand-by credit of $119million in October 2000. Those agreements mandate progress inprivatization and fiscal discipline. France provided additionalfinancial support in January 1997 after Gabon had met IMF targetsfor mid-1996. In 1997, an IMF mission to Gabon criticized thegovernment for overspending on off-budget items, overborrowing fromthe central bank, and slipping on its schedule for privatization andadministrative reform. The rebound of oil prices in 1999-2000 helpedgrowth, but drops in production hampered Gabon from fully realizingpotential gains. In December 2000, Gabon signed a new agreement withthe Paris Club to reschedule its official debt. A follow-upbilateral repayment agreement with the US was signed in December2001. Gabon signed a 14 month Stand-By Arrangement with the IMF inMay 2004, and received Paris Club debt rescheduling later that year.Short-term progress depends on an upbeat world economy and fiscaland other adjustments in line with IMF policies.
Gambia, TheThe Gambia has no significant mineral or naturalresource deposits and has a limited agricultural base. About 75% ofthe population 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 saw substantially lower prices andsales. Despite an announced program to begin privatizing keyparastatals, no plans have been made public that would indicate thatthe government intends to follow through on its promises.Unemployment and underemployment rates remain extremely high;short-run economic progress depends on sustained bilateral andmultilateral aid, on responsible government economic management, oncontinued technical assistance from the IMF and bilateral donors,and on expected growth in the construction sector.
Gaza StripHigh population density, limited land access, and strictinternal and external controls have kept economic conditions in theGaza Strip - the smaller of the two areas under the PalestinianAuthority - even more degraded than in the West Bank. An anticipatedIsraeli withdrawal from the Gaza Strip in 2005 may offer somemedium-term opportunities for economic growth. The beginning of thesecond intifadah in September 2000 sparked an economic downturn,largely the result of Israeli closure policies; these policies,which were imposed in response to security interests in Israel,disrupted labor and commodity relationships with the Gaza Strip. In2001, and even more severely in 2003, Israeli military measures inPalestinian Authority areas resulted in the destruction of muchcapital plant, the disruption of administrative structure, andwidespread business closures. Including the West Bank, the UNestimates that more than 100,000 Palestinians out of the 125,000 whoused to work in Israel or in joint industrial zones have lost theirjobs. International aid of $2 billion to Gaza Strip and the WestBank in 2004 prevented the complete collapse of the economy andallowed some reforms in the government's financial operations.Meanwhile unemployment has continued at half the labor force.ARAFAT's death in 2004 leaves open more political options that couldaffect the economy.
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 has suffered fromlimited resources due to a chronic failure to collect tax revenues.Georgia's new government is making progress in reforming the taxcode, enforcing taxes, and cracking down on corruption. Georgia alsosuffers from energy shortages; it privatized the T'bilisielectricity distribution network in 1998, but payment collectionrates remain low, both in T'bilisi and throughout the regions. Thecountry is pinning its hopes for long-term growth on its role as atransit state for pipelines and trade. The construction on theBaku-T'bilisi-Ceyhan oil pipeline and the Baku-T'bilisi-Erzerum gaspipeline have brought much-needed investment and job opportunities.
GermanyGermany's affluent and technologically powerful economy -the fifth largest in the world - has become one of the slowestgrowing economies in the euro zone. A quick turnaround is not in theoffing in the foreseeable future. Growth in 2001-03 fell short of1%, rising to 1.7% in 2004. 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 aging 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. In the short run, however, the fall in governmentrevenues and the rise in expenditures have raised the deficit abovethe 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 34% 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. Priorities include tighter monetary andfiscal policies, accelerated privatization, and improvement ofsocial services. Receipts from the gold sector helped sustain GDPgrowth in 2004. Inflation should ease, but remain a major internalproblem.
GibraltarSelf-sufficient Gibraltar benefits from an extensiveshipping trade, offshore banking, and its position as aninternational conference center. The British military presence hasbeen sharply reduced and now contributes about 7% to the localeconomy, compared with 60% in 1984. The financial sector, tourism(almost 5 million visitors in 1998), shipping services fees, andduties on consumer goods also generate revenue. The financialsector, the shipping sector, and tourism each contribute 25%-30% ofGDP. Telecommunications accounts for another 10%. In recent years,Gibraltar has seen major structural change from a public to aprivate sector economy, but changes in government spending stillhave a major impact on the level of employment.
Glorioso Islandsno economic activity
GreeceGreece has a 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 will need to include privatizing ofseveral state enterprises, undertaking pension and other reforms,and minimizing bureaucratic 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.Other 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 -account for about 55% of total income in this tiny, prosperousChannel Island economy. Tourism, manufacturing, and horticulture,mainly tomatoes and cut flowers, have been declining. Light tax anddeath duties make Guernsey a popular tax haven. The evolvingeconomic integration of the EU nations is changing the environmentunder which 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, aggravating a loss in investorconfidence. Foreign mining companies have reduced expatriate staff.Panic buying has created food shortages and inflation and causedriots in local markets. Guinea is not receiving multilateral aid.The IMF and World Bank cut off most assistance in 2003. Growth roseslightly in 2004, primarily due to increases in global demand andcommodity prices on world markets.
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. In December 2003, the World Bank, IMF, and UNDPwere forced to step in to provide emergency budgetary support in theamount of $107 million for 2004, representing over 80% of the totalnational budget. Government drift and indecision, however, haveresulted in continued low growth in 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 2003and came back gradually in 2004, buoyed largely by increased exportearnings. Chronic problems include a shortage of skilled labor and adeficient infrastructure. The government is juggling a sizableexternal debt against the urgent need for expanded publicinvestment. The bauxite mining sector should benefit in the nearterm from restructuring and partial privatization.
HaitiIn this poorest country in the Western Hemisphere, 80% of thepopulation lives in abject poverty, and natural disasters frequentlysweep the nation. Two-thirds of all Haitians depend on theagriculture sector, which consists mainly of small-scale subsistencefarming. Following legislative elections in May 2000, fraught withirregularities, international donors - including the US and EU -suspended almost all aid to Haiti. The economy shrank an estimated1.2% in 2001, 0.9% in 2002, grew 0.4% in 2003, and shrank by 3.5% in2004. 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. Inearly 2005 Haiti paid its arrears to the World Bank, paving the wayto reengagement with the Bank. The resumption of aid flows from alldonors is alleviating but not ending the nation's bitter economicproblems. Civil strife in 2004 combined with extensive damage fromflooding in southern Haiti in May 2004 and Tropical Storm Jeanne innorthwestern Haiti in September 2004 further impoverished 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 (known as Peter's Pence); by the saleof postage stamps, coins, medals, and tourist mementos; by fees foradmission to museums; and by the sale of publications. Investmentsand real estate income also account for a sizable portion ofrevenue. The incomes and living standards of lay workers arecomparable to those of counterparts who work in the city of Rome.
HondurasHonduras, one of the poorest countries in the WesternHemisphere with an extraordinarily unequal distribution of incomeand massive unemployment, is banking on expanded trade under theU.S.-Central America Free Trade Agreement (CAFTA) and on debt reliefunder the Heavily Indebted Poor Countries (HIPC) initiative. Thecountry has met most of its macroeconomic targets, and began athree-year IMF Poverty Reduction and Growth Facility (PGRF) programin February 2004. Growth remains dependent on the economy of the US,its largest trading partner, on commodity prices, particularlycoffee, and on reduction of the high crime rate.
Hong KongHong Kong has a free market, entrepot economy, highlydependent on international trade. Natural resources are limited, andfood and raw materials must be imported. Gross imports and exports(i.e., including reexports to and from third countries) each exceedGDP in dollar value. Even before Hong Kong reverted to Chineseadministration on 1 July 1997, it had extensive trade and investmentties with China. Hong Kong has been further integrating its economywith China because China's growing openness to the world economy hasmade manufacturing in China much more cost effective. Hong Kong'sreexport business to and from China is a major driver of growth. Percapita GDP is comparable to that of the four big economies ofWestern Europe. GDP growth averaged a strong 5% from 1989 to 1997,but Hong Kong suffered two recessions in the past six years becauseof the Asian financial crisis in 1998 and the global downturn in2001 and 2002. Although the Severe Acute Respiratory Syndrome (SARS)outbreak also battered Hong Kong's economy, a boom in tourism fromthe mainland because of China's easing of travel restrictions, areturn of consumer confidence, and a solid rise in exports resultedin the resumption of strong growth in late 2003 and in 2004.
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 acceded to 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 and together with theCzech Republic holds the highest rating among the Central Europeantransition economies; however, ratings agencies have expressedconcerns over Hungary's unsustainable budget and current accountdeficits. Inflation has declined from 14% in 1998 to 7% in 2004.Unemployment has persisted around the 6% level, but Hungary's laborforce participation rate of 57% is one of the lowest in the OECD.Germany is by far Hungary's largest economic partner. Policychallenges include cutting the public sector deficit to 3% of GDP by2008, from about 5% in 2004, and orchestrating an orderly interestrate reduction without sparking capital outflows.
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 8% 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, andestimates call for strong growth until 2007, slowly dropping untilthe end of the decade.
IndiaIndia's diverse economy encompasses traditional villagefarming, modern agriculture, handicrafts, a wide range of modernindustries, and a multitude of services. Services are the majorsource of economic growth, though two-thirds of the workforce is inagriculture. The UPA government has committed to furthering economicreforms and developing basic infrastructure to improve the lives ofthe rural poor and boost economic performance. Government controlson foreign trade and investment have been reduced in some areas, buthigh tariffs (averaging 20% in 2004) and limits on foreign directinvestment are still in place. The government has indicated it willdo more to liberalize investment in civil aviation, telecom, andinsurance sectors in the near term. Privatization ofgovernment-owned industries has proceeded slowly, and continues togenerate political debate; continued social, political, and economicrigidities hold back needed initiatives. The economy has posted anexcellent average growth rate of 6.8% since 1994, reducing povertyby about 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 thecombined state and federal budget deficit, running at approximately9% of GDP. The huge and growing population is the fundamentalsocial, economic, and environmental problem. In late December 2004,a major tsunami took nearly 11,000 lives, left almost 6,000 missing,destroyed $1.2 billion worth of property, and severely damaged thefishing fleet.
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, has restored financialstability and pursued sober fiscal policies since the Asianfinancial crisis, but many economic development problems remain,including high unemployment, a fragile banking sector, endemiccorruption, inadequate infrastructure, a poor investment climate,and unequal resource distribution among regions. Indonesia became anet oil importer in 2004 due to declining production and lack of newexploration investment. As a result, Jakarta is not reaping thebenefits of high world oil prices, and the cost of subsidizingdomestic fuel prices has placed an increasing strain on the budget.Keys to future growth remain internal reform, building up theconfidence of international and domestic investors, and strongglobal economic growth. In late December 2004, a major tsunami tooknearly 127,000 lives, left more than 93,000 missing and nearly441,000 displaced, and destroyed $4.5 to $5.0 billion worth ofproperty.
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 $30 billion in foreignexchange reserves, but have not eased economic hardships such ashigh unemployment and inflation. The proportion of the economydevoted to the development of weapons of mass destruction remains acontentious issue with leading Western nations.
IraqIraq's economy is dominated by the oil sector, which hastraditionally provided about 95% of foreign exchange earnings.Iraq's seizure of Kuwait in August 1990, subsequent internationaleconomic sanctions, and damage from military action by aninternational coalition beginning in January 1991 drasticallyreduced economic activity. Although government policies supportinglarge military and internal security forces and allocating resourcesto key supporters of the regime hurt the economy, implementation ofthe UN's oil-for-food program beginning in December 1996 helpedimprove conditions for the average Iraqi citizen. Iraq was allowedto export limited amounts of oil in exchange for food, medicine, andsome infrastructure 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. Although a comparatively small amount ofcapital plant was damaged during the hostilities, looting, insurgentattacks, and sabotage have undermined efforts to rebuild theeconomy. Despite continuing political uncertainty, the Iraqi InterimGovernment (IG) has founded the institutions needed to implementeconomic policy, and has successfully concluded a debt reductionagreement with the Paris Club. The high percentage gain estimatedfor GDP in 2004 is the result of starting from a low base.
IrelandIreland is a small, modern, trade-dependent economy withgrowth averaging a robust 7% in 1995-2004. Agriculture, once themost important sector, is now dwarfed by industry and services.Industry accounts for 46% of GDP, about 80% of exports, and 29% ofthe labor force. Although exports remain the primary engine forIreland's growth, the economy has also benefited from a rise inconsumer spending, construction, and business investment. Per capitaGDP is 10% above that of the four big European economies and thesecond highest in the EU behind Luxembourg. Over the past decade,the Irish Government has implemented a series of national economicprograms designed to curb price and wage inflation, reducegovernment spending, increase labor force skills, and promoteforeign investment. Ireland joined in circulating the euro on 1January 2002 along with 11 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 3.9%.
ItalyItaly has a diversified industrial economy with roughly thesame total and per capita output as France and the UK. Thiscapitalistic economy remains divided into a developed industrialnorth, dominated by private companies, and a less developed,welfare-dependent agricultural south, with 20% unemployment. Mostraw materials needed by industry and more than 75% of energyrequirements are imported. Over the past decade, Italy has pursued atight fiscal policy in order to meet the requirements of theEconomic and Monetary Unions and has benefited from lower interestand inflation rates. The current government has enacted numerousshort-term reforms aimed at improving competitiveness and long-termgrowth. Italy has moved slowly, however, on implementing neededstructural reforms, such as lightening the high tax burden andoverhauling Italy's rigid labor market and over-generous pensionsystem, because of the current economic slowdown and opposition fromlabor unions. But the leadership faces a severe economic constraint:the budget has breached the 3% EU deficit ceiling.
JamaicaThe Jamaican economy is heavily dependent on services, whichnow account for 60% of GDP. The country continues to derive most ofits foreign exchange from tourism, remittances, and bauxite/alumina.The global economic slowdown, particularly after the terroristattacks in the US on 11 September 2001, stunted economic growth; theeconomy rebounded moderately in 2003-04, with brisk tourist seasons.But the economy faces serious long-term problems: high interestrates; increased foreign competition; a pressured, sometimessliding, exchange rate; a sizable merchandise trade deficit;large-scale unemployment; and a growing internal debt, the result ofgovernment bailouts to ailing sectors of the economy. The ratio ofdebt to GDP is close to 150%. Inflation, previously a bright spot,is expected to remain in the double digits. Uncertain economicconditions have led to increased civil unrest, including gangviolence fueled by the drug trade. In 2004, the government faced thedifficult prospect of having to achieve fiscal discipline in orderto maintain debt payments while simultaneously attacking a seriousand growing crime problem which is hampering economic growth.Attempts at deficit control were derailed by Hurricane Ivan inSeptember 2004, which required substantial government spending torepair the damage. Despite the hurricane, tourism looks set to enjoysolid growth for the foreseeable future.
Jan MayenJan Mayen is a volcanic island with no exploitable naturalresources. Economic activity is limited to providing services foremployees of Norway's radio and meteorological stations on theisland.
JapanGovernment-industry cooperation, a strong work ethic, masteryof high technology, and a comparatively small defense allocation (1%of GDP) helped Japan advance with extraordinary rapidity to the rankof second most technologically-powerful economy in the world afterthe US and third-largest economy after the US and China, measured ona purchasing power parity (PPP) basis. (Using market exhange ratesrather than PPP rates, Japan's economy is larger than China's.) Onenotable characteristic of the economy is the working together ofmanufacturers, suppliers, and distributors in closely-knit groupscalled keiretsu. A second basic feature has been the guarantee oflifetime employment for a substantial portion of the urban laborforce. Both features are now eroding. Industry, the most importantsector of the economy, is heavily dependent on imported rawmaterials and fuels. The tiny agricultural sector is highlysubsidized and protected, with crop yields among the highest in theworld. Usually self sufficient in rice, Japan must import about 50%of its requirements of other grain and fodder crops. Japan maintainsone of the world's largest fishing fleets and accounts for nearly15% of the global catch. For three decades overall real economicgrowth had been spectacular: a 10% average in the 1960s, a 5%average in the 1970s, and a 4% average in the 1980s. Growth slowedmarkedly in the 1990s, averaging just 1.7%, largely because of theafter effects of overinvestment during the late 1980s andcontractionary domestic policies intended to wring speculativeexcesses from the stock and real estate markets. From 2000 to 2003,government efforts to revive economic growth met with little successand were further hampered by the slowing of the US, European, andAsian economies. In 2004, growth improved and the lingering fears ofdeflation in prices and economic activity lessened. Japan's hugegovernment debt, which totals more than 160% of GDP, and the agingof the population are two major long-run problems. A rise in taxescould be viewed as endangering the revival of growth. Roboticsconstitutes a key long-term economic strength with Japan possessing410,000 of the world's 720,000 "working robots." Internal conflictover the proper way to reform the ailing banking system continues.
Jarvis Islandno economic activity
JerseyThe Channel Island economy is based on internationalfinancial services, agriculture, and tourism. In 1996 the financesector accounted for about 60% of the island's output. Potatoes,cauliflower, tomatoes, and especially flowers are important exportcrops, shipped mostly to the UK. The Jersey breed of dairy cattle isknown worldwide and represents an important export income earner.Milk products go to the UK and other EU countries. Tourism accountsfor 24% of GDP. In recent years, the government has encouraged lightindustry to locate in Jersey, with the result that an electronicsindustry has developed alongside the traditional manufacturing ofknitwear. All raw material and energy requirements are imported, aswell as a large share of Jersey's food needs. Light taxes and deathduties make the island a popular tax haven. Living standards comeclose to those of the UK.
Johnston AtollEconomic activity is limited to providing services toUS military personnel and contractors located on the island. Allfood and manufactured goods must be imported.
JordanJordan is a small Arab country with inadequate supplies ofwater and other natural resources such as oil. Debt, poverty, andunemployment are fundamental problems, but King ABDALLAH, sinceassuming the throne in 1999, has undertaken some broad economicreforms in a long-term effort to improve living standards. Amman inthe past three years has worked closely with the IMF, practicedcareful monetary policy, and made substantial headway withprivatization. The government also has liberalized the trade regimesufficiently to secure Jordan's membership in the WTO (2000), a freetrade accord with the US (2001), and an association agreement withthe EU (2001). These measures have helped improve productivity andhave put Jordan on the foreign investment map. Jordan imported mostof its oil from Iraq, but the US-led war in Iraq in 2003 made Jordanmore dependent on oil from other Gulf nations forcing the Jordaniangovernment to raise retail petroleum product prices and the salestax base. Jordan's export market, which is heavily dependent onexports to Iraq, was also affected by the war but recovered quicklywhile contributing to the Iraq recovery effort. The main challengesfacing Jordan are reducing dependence on foreign grants, reducingthe budget deficit, and creating investment incentives to promotejob creation.
Juan de Nova IslandUp to 12,000 tons of guano are mined per year.
KazakhstanKazakhstan, the largest of the former Soviet republics interritory, excluding Russia, possesses enormous fossil fuel reservesas well as plentiful supplies of other minerals and metals. It alsohas a large agricultural sector featuring livestock and grain.Kazakhstan's industrial sector rests on the extraction andprocessing of these natural resources and also on a growingmachine-building sector specializing in construction equipment,tractors, agricultural machinery, and some defense items. Thebreakup of the USSR in December 1991 and the collapse in demand forKazakhstan's traditional heavy industry products resulted in ashort-term contraction of the economy, with the steepest annualdecline occurring in 1994. In 1995-97, the pace of the governmentprogram of economic reform and privatization quickened, resulting ina substantial shifting of assets into the private sector. Kazakhstanenjoyed double-digit growth in 2000-01 - and a solid 9.5% in 2002 -thanks largely to its booming energy sector, but also to economicreform, good harvests, and foreign investment. Growth remained atthe high 9% level in 2003 and 2004. The opening of the CaspianConsortium pipeline in 2001, from western Kazakhstan's Tengizoilfield to the Black Sea, substantially raised export capacity. Thecountry has embarked upon an industrial policy designed to diversifythe economy away from overdependence on the oil sector, bydeveloping light industry. Additionally, the policy aims to reducethe influence of foreign investment and foreign personnel; thegovernment has engaged in several disputes with foreign oilcompanies over the terms of production agreements, and tensionscontinue.
KenyaThe regional hub for trade and finance in East Africa, Kenyahas been hampered by corruption and by reliance upon several primarygoods whose prices have remained low. In 1997, the IMF suspendedKenya's Enhanced Structural Adjustment Program due to thegovernment's failure to maintain reforms and curb corruption. Asevere drought from 1999 to 2000 compounded Kenya's problems,causing water and energy rationing and reducing agricultural output.As a result, GDP contracted by 0.2% in 2000. The IMF, which hadresumed loans in 2000 to help Kenya through the drought, againhalted lending in 2001 when the government failed to instituteseveral anticorruption measures. Despite the return of strong rainsin 2001, weak commodity prices, endemic corruption, and lowinvestment limited Kenya's economic growth to 1.2%. Growth lagged at1.1% in 2002 because of erratic rains, low investor confidence,meager donor support, and political infighting up to the elections.In the key 27 December 2002 elections, Daniel Arap MOI's 24-year-oldreign ended, and a new opposition government took on the formidableeconomic problems facing the nation. In 2003, progress was made inrooting out corruption and encouraging donor support, with GDPgrowth edging up to 1.7%. GDP grew a moderate 2.2% in 2004.
Kingman Reefno economic activity
KiribatiA remote country of 33 scattered coral atolls, Kiribati hasfew natural resources. Commercially viable phosphate deposits wereexhausted at the time of independence from the UK in 1979. Copra andfish now represent the bulk of production and exports. The economyhas fluctuated widely in recent years. Economic development isconstrained by a shortage of skilled workers, weak infrastructure,and remoteness from international markets. Tourism provides morethan one-fifth of GDP. The financial sector is at an early stage ofdevelopment as is the expansion of private sector initiatives.Foreign financial aid from UK, Japan, Australia, New Zealand, andChina equals 25%-50% of GDP. Remittances from workers abroad accountfor more than $5 million each year.
Korea, NorthNorth Korea, one of the world's most centrally plannedand isolated economies, faces desperate economic conditions.Industrial capital stock is nearly beyond repair as a result ofyears of underinvestment and spare parts shortages. Industrial andpower output have declined in parallel. The nation has suffered itseleventh year of food shortages because of a lack of arable land,collective farming, weather-related problems, and chronic shortagesof fertilizer and fuel. Massive international food aid deliverieshave allowed the regime to escape mass starvation since 1995, butthe population remains the victim of prolonged malnutrition anddeteriorating living conditions. Large-scale military spending eatsup resources needed for investment and civilian consumption. In July2002, the government took limited steps toward a freer marketeconomy. In 2004, heightened political tensions with key donorcountries and general donor fatigue threatened the flow ofdesperately needed food aid and fuel aid. Black market prices havecontinued to rise following the increase in official prices andwages in the summer of 2002, leaving some vulnerable groups, such asthe elderly and unemployed, less able to buy goods. In 2004, theregime allowed private markets to sell a wider range of goods andpermitted private farming on an experimental basis in an effort toboost agricultural output. Firm political control remains theCommunist government's overriding concern, which will constrain anyfurther loosening of economic regulations.
Korea, SouthSince the early 1960s, South Korea has achieved anincredible record of growth and integration into the high-techmodern world economy. Four decades ago GDP per capita was comparablewith levels in the poorer countries of Africa and Asia. In 2004, itjoined the trillion dollar club of world economies. Today its GDPper capita is 14 times North Korea's and equal to the lessereconomies of the European Union. This success through the late 1980swas achieved by a system of close government/business ties,including directed credit, import restrictions, sponsorship ofspecific industries, and a strong labor effort. The governmentpromoted the import of raw materials and technology at the expenseof consumer goods and encouraged savings and investment overconsumption. The Asian financial crisis of 1997-99 exposedlongstanding weaknesses in South Korea's development model,including high debt/equity ratios, massive foreign borrowing, and anundisciplined financial sector. Growth plunged to a negative 6.9% in1998, then strongly recovered to 9.5% in 1999 and 8.5% in 2000.Growth fell back to 3.3% in 2001 because of the slowing globaleconomy, falling exports, and the perception that much-neededcorporate and financial reforms had stalled. Led by consumerspending and exports, growth in 2002 was an impressive 7.0%, despiteanemic global growth. Economic growth fell to 3.1% in 2003 becauseof a downturn in consumer spending and recovered to an estimated4.6% in 2004 on the strength of rapid export growth. The governmentplans to boost infrastructure spending in 2005. Moderate inflation,low unemployment, an export surplus, and fairly equal distributionof income characterize this solid economy.
KuwaitKuwait is a small, rich, relatively open economy with provedcrude oil reserves of about 96 billion barrels - 10% of worldreserves. Petroleum accounts for nearly half of GDP, 95% of exportrevenues, and 80% of government income. Kuwait's climate limitsagricultural development. Consequently, with the exception of fish,it depends almost wholly on food imports. About 75% of potable watermust be distilled or imported. Kuwait continues its discussions withforeign oil companies to develop fields in the northern part of thecountry.
KyrgyzstanKyrgyzstan is a poor, mountainous country with apredominantly agricultural economy. Cotton, tobacco, wool, and meatare the main agricultural products, although only tobacco and cottonare exported in any quantity. Industrial exports include gold,mercury, uranium, and natural gas and electricity. Kyrgyzstan hasbeen fairly progressive in carrying out market reforms, such as animproved regulatory system and land reform. Kyrgyzstan was the firstCIS country to be accepted into the World Trade Organization. Withfits and starts, inflation has been lowered to an estimated 7% in2001, 2.1% in 2002, 4% in 2003, and 3.2% in 2004. Much of thegovernment's stock in enterprises has been sold. Drops in productionhad been severe after the breakup of the Soviet Union in December1991, but by mid-1995 production began to recover and exports beganto increase. Kyrgyzstan has distinguished itself by adoptingrelatively liberal economic policies. The drop in output at theKumtor gold mine sparked a 0.5% decline in GDP in 2002, but GDPgrowth bounced back to 6% in 2003 and 2004. The government has madesteady strides in controlling its substantial fiscal deficit andaims to reduce the deficit to 3% of GDP in 2004. The government andthe international financial institutions have been engaged in acomprehensive medium-term poverty reduction and economic growthstrategy. Further restructuring of domestic industry and success inattracting foreign investment are keys to future growth.
LaosThe government of Laos - one of the few remaining officialCommunist states - began decentralizing control and encouragingprivate enterprise in 1986. The results, starting from an extremelylow base, were striking - growth averaged 6% in 1988-2004 exceptduring the short-lived drop caused by the Asian financial crisisbeginning in 1997. Despite this high growth rate, Laos remains acountry with a primitive infrastructure; it has no railroads, arudimentary road system, and limited external and internaltelecommunications. The government has sponsored major improvementsin the road system. Electricity is available in only a few urbanareas. Subsistence agriculture accounts for half of GDP and provides80% of total employment. The economy will continue to benefit fromaid from the IMF and other international sources and from newforeign investment in food processing and mining. In late 2004, Laosgained Normal Trade Relations status with the US, allowingLaos-based producers to face lower tariffs on their exports; thismay help spur growth.
LatviaLatvia's transitional economy recovered from the 1998 Russianfinancial crisis, largely due to the government's budget stringencyand a gradual reorientation of exports toward EU countries,lessening Latvia's trade dependency on Russia. The majority ofcompanies, banks, and real estate have been privatized, although thestate still holds sizable stakes in a few large enterprises. Latviaofficially joined the World Trade Organization in February 1999. EUmembership, a top foreign policy goal, came in May 2004. The currentaccount and internal government deficits remain major concerns, butthe government's efforts to increase efficiency in revenuecollection may lessen the budget deficit. A growing perception thatmany of Latvia's banks facilitate illicit activity could damage thecountry's vibrant financial sector.
LebanonThe 1975-91 civil war seriously damaged Lebanon's economicinfrastructure, cut national output by half, and all but endedLebanon's position as a Middle Eastern entrepot and banking hub. Inthe years since, Lebanon has rebuilt much of its war-torn physicaland financial infrastructure by borrowing heavily - mostly fromdomestic banks. In an attempt to reduce the ballooning nationaldebt, the HARIRI government began an austerity program, reining ingovernment expenditures, increasing revenue collection, andprivatizing state enterprises. In November 2002, the government metwith international donors at the Paris II conference to seekbilateral assistance in restructuring its massive domestic debt atlower rates of interest. Substantial receipts from donor nationsstabilized government finances in 2003, but did little to reduce thedebt, which stood at nearly 180% of GDP. In 2004 the HARIRIgovernment issued Eurobonds in an effort to manage maturing debt,and the KARAMI government has continued this practice. However,privatization of state-owned enterprises had not occurred by the endof 2004, as promised during the Paris II conference.
LesothoSmall, landlocked, and mountainous, Lesotho relies onremittances from miners employed in South Africa and customs dutiesfrom the Southern Africa Customs Union for the majority ofgovernment revenue, but the government has strengthened its taxsystem to reduce dependency on customs duties. Completion of a majorhydropower facility in January 1998 now permits the sale of water toSouth Africa, also generating royalties for Lesotho. As the numberof mineworkers has declined steadily over the past several years, asmall manufacturing base has developed based on farm products thatsupport the milling, canning, leather, and jute industries and arapidly growing apparel-assembly sector. The garment industry hasgrown significantly, mainly due to Lesotho qualifying for the tradebenefits contained in the Africa Growth and Opportunity Act. Theeconomy is still primarily based on subsistence agriculture,especially livestock, although drought has decreased agriculturalactivity. The extreme inequality in the distribution of incomeremains a major drawback. Lesotho has signed an Interim PovertyReduction and Growth Facility with the IMF.
LiberiaCivil war and government mismanagement have destroyed muchof Liberia's economy, especially the infrastructure in and aroundMonrovia, while continued international sanctions on diamonds andtimber exports will limit growth prospects for the foreseeablefuture. Many businessmen have fled the country, taking capital andexpertise with them. Some have returned, but many will not. Richlyendowed with water, mineral resources, forests, and a climatefavorable to agriculture, Liberia had been a producer and exporterof basic products - primarily raw timber and rubber. Localmanufacturing, mainly foreign owned, had been small in scope. Thedeparture of the former president, Charles TAYLOR, to Nigeria inAugust 2003, the establishment of the all-inclusive TransitionalGovernment, and the arrival of a UN mission are all necessary forthe eventual end of the political crisis, but thus far have donelittle to encourage economic development. The reconstruction ofinfrastructure and the raising of incomes in this ravaged economywill largely depend on generous financial support and technicalassistance from donor countries.
LibyaThe Libyan economy depends primarily upon revenues from theoil sector, which contribute practically all export earnings andabout one-quarter of GDP. These oil revenues and a small populationgive Libya one of the highest per capita GDPs in Africa, but littleof this income flows down to the lower orders of society. Libyanofficials in the past four years have made progress on economicreforms as part of a broader campaign to reintegrate the countryinto the international fold. This effort picked up steam after UNsanctions were lifted in September 2003 and as Libya announced inDecember 2003 that it would abandon programs to build weapons ofmass destruction. Almost all US unilateral sanctions against Libyawere removed in April 2004. Libya faces a long road ahead inliberalizing the socialist-oriented economy, but initial steps -including applying for WTO membership, reducing some subsidies, andannouncing plans for privatization - are laying the groundwork for atransition to a more market-based economy. The non-oil manufacturingand construction sectors, which account for about 20% of GDP, haveexpanded from processing mostly agricultural products to include theproduction of petrochemicals, iron, steel, and aluminum. Climaticconditions and poor soils severely limit agricultural output, andLibya imports about 75% of its food.
LiechtensteinDespite its small size and limited natural resources,Liechtenstein has developed into a prosperous, highlyindustrialized, free-enterprise economy with a vital financialservice sector and living standards on a par with its large Europeanneighbors. The Liechtenstein economy is widely diversified with alarge number of small businesses. Low business taxes - the maximumtax rate is 20% - and easy incorporation rules have induced manyholding or so-called letter box companies to establish nominaloffices in Liechtenstein, providing 30% of state revenues. Thecountry participates in a customs union with Switzerland and usesthe Swiss franc as its national currency. It imports more than 90%of its energy requirements. Liechtenstein has been a member of theEuropean Economic Area (an organization serving as a bridge betweenthe European Free Trade Association (EFTA) and the EU) since May1995. The government is working to harmonize its economic policieswith those of an integrated Europe.
LithuaniaLithuania, the Baltic state that has conducted the mosttrade with Russia, has slowly rebounded from the 1998 Russianfinancial crisis. Unemployment dropped from 11% in 2003 to 8% in2004. Growing domestic consumption and increased investment havefurthered recovery. Trade has been increasingly oriented toward theWest. Lithuania has gained membership in the World TradeOrganization and joined the EU in May 2004. Privatization of thelarge, state-owned utilities, particularly in the energy sector, isnearing completion. Overall, more than 80% of enterprises have beenprivatized. Foreign government and business support have helped inthe transition from the old command economy to a market economy.
LuxembourgThis stable, high-income economy - in between France,Belgium, and Germany - features solid growth, low inflation, and lowunemployment. The industrial sector, initially dominated by steel,has become increasingly diversified to include chemicals, rubber,and other products. Growth in the financial sector, which nowaccounts for about 22% of GDP, has more than compensated for thedecline in steel. Most banks are foreign-owned and have extensiveforeign dealings. Agriculture is based on small family-owned farms.The economy depends on foreign and cross-border workers for morethan 30% of its labor force. Although Luxembourg, like all EUmembers, has suffered from the global economic slump, the countryenjoys an extraordinarily high standard of living.
MacauMacau's well-to-do economy has remained one of the most openin the world since its reversion to China in 1999. Apparel exportsand tourism are mainstays of the economy. Although the territory washit hard by the 1998 Asian financial crisis and the global downturnin 2001, its economy grew 9.5% in 2002 and 15.6% in 2003. During thefirst three quarters of 2004, Macau registered year-on-year GDPincreases of more than 20 percent. A rapid rise in the number ofmainland visitors because of China's easing of restrictions ontravel, increased public works expenditures, and significantinvestment inflows associated with the liberalization of Macau'sgaming industry drove the recovery. The budget also returned tosurplus in 2002 because of the surge in visitors from China and ahike in taxes on gambling profits, which generated about 70% ofgovernment revenue. The three companies awarded gambling licenseshave pledged to invest $2.2 billion in the territory, which willboost GDP growth. Much of Macau's textile industry may move to themainland as the Multi-Fiber Agreement is phased out. The territorymay have to rely more on gambling and trade-related services togenerate growth. Two new casinos were opened by new foreign gamblinglicensees in 2004; development of new infrastructure and facilitiesin preparation for Macau's hosting of the 2005 East Asian Games willbolster the construction sector. The Closer Economic PartnershipAgreement (CEPA) between Macau and mainland China that came intoeffect on 1 January 2004 offers many Macau-made products tariff-freeaccess to the mainland, and the range of products covered by CEPAwas to be expanded on 1 January 2005.
MacedoniaAt independence in September 1991, Macedonia was the leastdeveloped of the Yugoslav republics, producing a mere 5% of thetotal federal output of goods and services. The collapse ofYugoslavia ended transfer payments from the center and eliminatedadvantages from inclusion in a de facto free trade area. An absenceof infrastructure, UN sanctions on the down-sized Yugoslavia, one ofits largest markets, and a Greek economic embargo over a disputeabout the country's constitutional name and flag hindered economicgrowth until 1996. GDP subsequently rose each year through 2000.However, the leadership's commitment to economic reform, free trade,and regional integration was undermined by the ethnic Albanianinsurgency of 2001. The economy shrank 4.5% because of decreasedtrade, intermittent border closures, increased deficit spending onsecurity needs, and investor uncertainty. Growth barely recovered in2002 to 0.9%, then rose by a moderate 3.4% in 2003, and is estimatedat 1.3% in 2004. Unemployment at one-third of the workforce remainsa critical economic problem. Much of the extensive grey marketactivity falls outside official statistics.
MadagascarHaving discarded past socialist economic policies,Madagascar has since the mid 1990s followed a World Bank and IMF ledpolicy of privatization and liberalization. This strategy has placedthe country on a slow and steady growth path from an extremely lowlevel. Agriculture, including fishing and forestry, is a mainstay ofthe economy, accounting for more than one-fourth of GDP andemploying 80% of the population. Exports of apparel have boomed inrecent years primarily due to duty-free access to the United States.Deforestation and erosion, aggravated by the use of firewood as theprimary source of fuel are serious concerns. President RAVALOMANANAhas worked aggressively to revive the economy following the 2002political crisis, which triggered a 12% drop in GDP that year.Poverty reduction and combating corruption will be the centerpiecesof economic policy for the next few years.
MalawiLandlocked Malawi ranks among the world's least developedcountries. The economy is predominately agricultural, with about 90%of the population living in rural areas. Agriculture accounted fornearly 40% of GDP and 88% of export revenues in 2001. Theperformance of the tobacco sector is key to short-term growth astobacco accounts for over 50% of exports. The economy depends onsubstantial inflows of economic assistance from the IMF, the WorldBank, and individual donor nations. In late 2000, Malawi wasapproved for relief under the Heavily Indebted Poor Countries (HIPC)program. The government faces strong challenges, includingdeveloping a market economy, improving educational facilities,facing up to environmental problems, dealing with the rapidlygrowing problem of HIV/AIDS, and satisfying foreign donors thatfiscal discipline is being tightened. In 2005, the anticorruptioncampaign championed by President MUTHARIKA may help encourageinvestment and economic growth.
MalaysiaMalaysia, a middle-income country, transformed itself from1971 through the late 1990's from a producer of raw materials intoan emerging multi-sector economy. Growth was almost exclusivelydriven by exports - particularly of electronics. As a result,Malaysia was hard hit by the global economic downturn and the slumpin the information technology (IT) sector in 2001 and 2002. GDP in2001 grew only 0.5% due to an estimated 11% contraction in exports,but a substantial fiscal stimulus package equal to US $1.9 billionmitigated the worst of the recession and the economy rebounded in2002 with a 4.1% increase. The economy grew 4.9% in 2003,notwithstanding a difficult first half, when external pressures fromSARS and the Iraq War led to caution in the business community.Growth topped 7% in 2004. Healthy foreign exchange reserves, lowinflation, and a small external debt are all strengths that make itunlikely that Malaysia will experience a financial crisis similar tothe one in 1997. The economy remains dependent on continued growthin the US, China, and Japan, top export destinations and key sourcesof foreign investment.
MaldivesTourism, Maldives' largest industry, accounts for 20% ofGDP and more than 60% of the Maldives' foreign exchange receipts.Over 90% of government tax revenue comes from import duties andtourism-related taxes. Fishing is a second leading sector. TheMaldivian Government began an economic reform program in 1989initially by lifting import quotas and opening some exports to theprivate sector. Subsequently, it has liberalized regulations toallow more foreign investment. Agriculture and manufacturingcontinue to play a lesser role in the economy, constrained by thelimited availability of cultivable land and the shortage of domesticlabor. Most staple foods must be imported. Industry, which consistsmainly of garment production, boat building, and handicrafts,accounts for about 18% of GDP. Maldivian authorities worry about theimpact of erosion and possible global warming on their low-lyingcountry; 80% of the area is one meter or less above sea level. Inlate December 2004, a major tsunami left more than 100 dead, 12,000displaced, and property damage exceeding $300 million.
MaliMali is among the poorest countries in the world, with 65% ofits land area desert or semidesert and with a highly unequaldistribution of income. Economic activity is largely confined to theriverine area irrigated by the Niger. About 10% of the population isnomadic and some 80% of the labor force is engaged in farming andfishing. Industrial activity is concentrated on processing farmcommodities. Mali is heavily dependent on foreign aid and vulnerableto fluctuations in world prices for cotton, its main export, alongwith gold. The government has continued its successfulimplementation of an IMF-recommended structural adjustment programthat is helping the economy grow, diversify, and attract foreigninvestment. Mali's adherence to economic reform and the 50%devaluation of the African franc in January 1994 have pushed upeconomic growth to a sturdy 5% average in 1996-2004. Workerremittances and external trade routes have been jeopardized bycontinued unrest in neighboring Cote d'Ivoire.
MaltaMajor resources are limestone, a favorable geographiclocation, and a productive labor force. Malta produces only about20% of its food needs, has limited fresh water supplies, and has nodomestic energy sources. The economy is dependent on foreign trade,manufacturing (especially electronics and textiles), and tourism.Continued sluggishness in the European economy is holding backexports, tourism, and overall growth.
Man, Isle ofOffshore banking, manufacturing, and tourism are keysectors of the economy. The government's policy of offeringincentives to high-technology companies and financial institutionsto locate on the island has paid off in expanding employmentopportunities in high-income industries. As a result, agricultureand fishing, once the mainstays of the economy, have declined intheir shares of GDP. Trade is mostly with the UK. The Isle of Manenjoys free access to EU markets.
Marshall IslandsUS Government assistance is the mainstay of thistiny island economy. Agricultural production, primarily subsistence,is concentrated on small farms; the most important commercial cropsare coconuts and breadfruit. Small-scale industry is limited tohandicrafts, tuna processing, and copra. The tourist industry, now asmall source of foreign exchange employing less than 10% of thelabor force, remains the best hope for future added income. Theislands have few natural resources, and imports far exceed exports.Under the terms of the Amended Compact of Free Association, the USwill provide millions of dollars per year to the Marshall Islands(RMI) through 2023, at which time a Trust Fund made up of US and RMIcontributions will begin perpetual annual payouts. Governmentdownsizing, drought, a drop in construction, the decline in tourismand foreign investment due to the Asian financial difficulties, andless income from the renewal of fishing vessel licenses have heldGDP growth to an average of 1% over the past decade.