Bouvet Islandno economic activity; declared a nature reserve
BrazilCharacterized by large and well-developed agricultural,mining, manufacturing, and service sectors, Brazil's economyoutweighs that of all other South American countries and isexpanding its presence in world markets. From 2001-03 real wagesfell and Brazil's economy grew, on average only 2.2% per year, asthe country absorbed a series of domestic and international economicshocks. That Brazil absorbed these shocks without financial collapseis a tribute to the resiliency of the Brazilian economy and theeconomic program put in place by former President CARDOSO andstrengthened by President LULA DA SILVA. In 2004, Brazil enjoyedmore robust growth that yielded increases in employment and realwages. The three pillars of the economic program are a floatingexchange rate, an inflation-targeting regime, and tight fiscalpolicy, all reinforced by a series of IMF programs. The currencydepreciated sharply in 2001 and 2002, which contributed to adramatic current account adjustment; in 2003 to 2005, Brazil ranrecord trade surpluses and recorded its first current accountsurpluses since 1992. Productivity gains - particularly inagriculture - also contributed to the surge in exports, and Brazilin 2005 surpassed the previous year's record export level. Whileeconomic management has been good, there remain important economicvulnerabilities. The most significant are debt-related: thegovernment's largely domestic debt increased steadily from 1994 to2003 - straining government finances - before falling as apercentage of GDP in 2005, while Brazil's foreign debt (a mix ofprivate and public debt) is large in relation to Brazil's small (butgrowing) export base. Another challenge is maintaining economicgrowth over a period of time to generate employment and make thegovernment debt burden more manageable.
British Indian Ocean TerritoryAll economic activity is concentratedon the largest island of Diego Garcia, where joint UK-US defensefacilities are located. Construction projects and various servicesneeded to support the military installations are done by militaryand contract employees from the UK, Mauritius, the Philippines, andthe US. There are no industrial or agricultural activities on theislands. When the Ilois return, they plan to reestablish sugarcaneproduction and fishing. The country makes money by selling fishinglicenses and postage stamps.
British Virgin IslandsThe economy, one of the most stable andprosperous in the Caribbean, is highly dependent on tourism,generating an estimated 45% of the national income. An estimated350,000 tourists, mainly from the US, visited the islands in 1998.Tourism suffered in 2002 because of the lackluster US economy. Inthe mid-1980s, the government began offering offshore registrationto companies wishing to incorporate in the islands, andincorporation fees now generate substantial revenues. Roughly400,000 companies were on the offshore registry by yearend 2000. Theadoption of a comprehensive insurance law in late 1994, whichprovides a blanket of confidentiality with regulated statutorygateways for investigation of criminal offenses, made the BritishVirgin Islands even more attractive to international business.Livestock raising is the most important agricultural activity; poorsoils limit the islands' ability to meet domestic food requirements.Because of traditionally close links with the US Virgin Islands, theBritish Virgin Islands has used the US dollar as its currency since1959.
BruneiThis small, well-to-do economy encompasses a mixture offoreign and domestic entrepreneurship, government regulation,welfare measures, and village tradition. Crude oil and natural gasproduction account for nearly half of GDP and more than 90% ofgovernment revenues. Per capita GDP is far above most other ThirdWorld countries, and substantial income from overseas investmentsupplements income from domestic production. The government providesfor all medical services and free education through the universitylevel and subsidizes rice and housing. Brunei's leaders areconcerned that steadily increased integration in the world economywill undermine internal social cohesion, although it became a moreprominent player by serving as chairman for the 2000 APEC (AsianPacific Economic Cooperation) forum. Plans for the future includeupgrading the labor force, reducing unemployment, strengthening thebanking and tourist sectors, and, in general, further widening theeconomic base beyond oil and gas.
BulgariaBulgaria, a former communist country soon to enter theEuropean Union, has experienced macroeconomic stability and stronggrowth since a major economic downturn in 1996 led to the fall ofthe then socialist government. As a result, the government becamecommitted to economic reform and responsible fiscal planning.Minerals, including coal, copper, and zinc, play an important rolein industry. In 1997, macroeconomic stability was reinforced by theimposition of a fixed exchange rate of the lev against the GermanD-mark - the currency is now fixed against the euro - and thenegotiation of an IMF standby agreement. Low inflation and steadyprogress on structural reforms improved the business environment;Bulgaria has averaged 4% growth since 2000 and has begun to attractsignificant amounts of foreign direct investment. Corruption in thepublic administration, a weak judiciary, and the presence oforganized crime remain the largest challenges for Bulgaria.
Burkina FasoOne of the poorest countries in the world, landlockedBurkina Faso has few natural resources and a weak industrial base.About 90% of the population is engaged in subsistence agriculture,which is vulnerable to harsh climatic conditions. Cotton is the keycrop and the government has joined with other cotton producingcountries in the region to lobby for improved access to Westernmarkets. GDP growth has largely been driven by increases in worldcotton prices. Industry remains dominated by unprofitablegovernment-controlled corporations. Following the CFA franc currencydevaluation in January 1994, the government updated its developmentprogram in conjunction with international agencies; exports andeconomic growth have increased. The government devolvedmacroeconomic policy and inflation targeting to the West Africanregional central bank (BCEAO), but maintains control over fiscal andmicroeconomic policies, including implementing reforms to encourageprivate investment. The bitter internal crisis in neighboring Coted'Ivoire continues to hurt trade and industrial prospects anddeepens the need for international assistance.
BurmaBurma, a resource-rich country, suffers from pervasivegovernment controls, inefficient economic policies, and ruralpoverty. The junta took steps in the early 1990s to liberalize theeconomy after decades of failure under the "Burmese Way toSocialism," but those efforts stalled, and some of theliberalization measures were rescinded. Burma does not have monetaryor fiscal stability, so the economy suffers from seriousmacroeconomic imbalances - including inflation, multiple officialexchange rates that overvalue the Burmese kyat, and a distortedinterest rate regime. Most overseas development assistance ceasedafter the junta began to suppress the democracy movement in 1988 andsubsequently refused to honor the results of the 1990 legislativeelections. In response to the government of Burma's attack in May2003 on AUNG SAN SUU KYI and her convoy, the US imposed new economicsanctions against Burma - including a ban on imports of Burmeseproducts and a ban on provision of financial services by US persons.A poor investment climate further slowed the inflow of foreignexchange. The most productive sectors will continue to be inextractive industries, especially oil and gas, mining, and timber.Other areas, such as manufacturing and services, are struggling withinadequate infrastructure, unpredictable import/export policies,deteriorating health and education systems, and corruption. A majorbanking crisis in 2003 shuttered the country's 20 private banks anddisrupted the economy. As of December 2005, the largest privatebanks operate under tight restrictions limiting the private sector'saccess to formal credit. Official statistics are inaccurate.Published statistics on foreign trade are greatly understatedbecause of the size of the black market and unofficial border trade- often estimated to be as large as the official economy. Burma'strade with Thailand, China, and India is rising. Though the Burmesegovernment has good economic relations with its neighbors, betterinvestment and business climates and an improved political situationare needed to promote foreign investment, exports, and tourism.
BurundiBurundi is a landlocked, resource-poor country with anunderdeveloped manufacturing sector. The economy is predominantlyagricultural with more than 90% of the population dependent onsubsistence agriculture. Economic growth depends on coffee and teaexports, which account for 90% of foreign exchange earnings. Theability to pay for imports, therefore, rests primarily on weatherconditions and international coffee and tea prices. The Tutsiminority, 14% of the population, dominates the government and thecoffee trade at the expense of the Hutu majority, 85% of thepopulation. An ethnic-based war that lasted for over a decaderesulted in more than 200,000 deaths, forced more than 48,000refugees into Tanzania, and displaced 140,000 others internally.Only one in two children go to school, and approximately one in 10adults has HIV/AIDS. Food, medicine, and electricity remain in shortsupply. Political stability and the end of the civil war haveimproved aid flows and economic activity has increased, butunderlying weaknesses - a high poverty rate, poor education rates, aweak legal system, and low administrative capacity - riskundermining planned economic reforms.
CambodiaIn 1999, the first full year of peace in 30 years, thegovernment made progress on economic reforms. The US and Cambodiasigned a Bilateral Textile Agreement, which gave Cambodia aguaranteed quota of US textile imports and established a bonus forimproving working conditions and enforcing Cambodian labor laws andinternational labor standards in the industry. From 2001 to 2004,the economy grew at an average rate of 6.4%, driven largely by anexpansion in the garment sector and tourism. With the January 2005expiration of a WTO Agreement on Textiles and Clothing,Cambodia-based textile producers were forced to compete directlywith lower-priced producing countries such as China and India.Although initial 2005 GDP growth estimates were less than 3%,better-than-expected garment sector performance led the IMF toforecast 6% growth in 2005. Faced with the possibility that itsvibrant garment industry, with more than 200,000 jobs, could be inserious danger, the Cambodian government has committed itself to apolicy of continued support for high labor standards in an attemptto maintain favor with buyers. The tourism industry continues togrow rapidly, with foreign visitors surpassing 1 million for theyear by September 2005. In 2005, exploitable oil and natural gasdeposits were found beneath Cambodia's territorial waters,representing a new revenue stream for the government once commercialextraction begins in the coming years. The long-term development ofthe economy remains a daunting challenge. The Cambodian governmentcontinues to work with bilateral and multilateral donors, includingthe World Bank and IMF, to address the country's many pressingneeds. In December 2004, official donors pledged $504 million in aidfor 2005 on the condition that the Cambodian government implementsteps to reduce corruption. The major economic challenge forCambodia over the next decade will be fashioning an economicenvironment in which the private sector can create enough jobs tohandle Cambodia's demographic imbalance. More than 50% of thepopulation is 20 years or younger. The population lacks educationand productive skills, particularly in the poverty-riddencountryside, which suffers from an almost total lack of basicinfrastructure. Fully 75% of the population remains engaged insubsistence farming.
CameroonBecause of its oil resources and favorable agriculturalconditions, Cameroon has one of the best-endowed primary commodityeconomies in sub-Saharan Africa. Still, it faces many of the seriousproblems facing other underdeveloped countries, such as a top-heavycivil service and a generally unfavorable climate for businessenterprise. Since 1990, the government has embarked on various IMFand World Bank programs designed to spur business investment,increase efficiency in agriculture, improve trade, and recapitalizethe nation's banks. In June 2000, the government completed anIMF-sponsored, three-year structural adjustment program; however,the IMF is pressing for more reforms, including increased budgettransparency, privatization, and poverty reduction programs.International oil and cocoa prices have considerable impact on theeconomy.
CanadaAs an affluent, high-tech industrial society in the trilliondollar class, Canada resembles the US in its market-orientedeconomic system, pattern of production, and affluent livingstandards. Since World War II, the impressive growth of themanufacturing, mining, and service sectors has transformed thenation from a largely rural economy into one primarily industrialand urban. The 1989 US-Canada Free Trade Agreement (FTA) and the1994 North American Free Trade Agreement (NAFTA) (which includesMexico) touched off a dramatic increase in trade and economicintegration with the US. Given its great natural resources, skilledlabor force, and modern capital plant, Canada enjoys solid economicprospects. Top-notch fiscal management has produced consecutivebalanced budgets since 1997, although public debate continues overhow to manage the rising cost of the publicly funded healthcaresystem. Exports account for roughly a third of GDP. Canada enjoys asubstantial trade surplus with its principal trading partner, theUS, which absorbs more than 85% of Canadian exports. Canada is theUS' largest foreign supplier of energy, including oil, gas, uranium,and electric power.
Cape VerdeThis island economy suffers from a poor natural resourcebase, including serious water shortages exacerbated by cycles oflong-term drought. The economy is service-oriented, with commerce,transport, tourism, and public services accounting for 66% of GDP.Although nearly 70% of the population lives in rural areas, theshare of agriculture in GDP in 2004 was only 12%, of which fishingaccounted for 1.5%. About 82% of food must be imported. The fishingpotential, mostly lobster and tuna, is not fully exploited. CapeVerde annually runs a high trade deficit, financed by foreign aidand remittances from emigrants; remittances supplement GDP by morethan 20%. Economic reforms are aimed at developing the privatesector and attracting foreign investment to diversify the economy.Future prospects depend heavily on the maintenance of aid flows, theencouragement of tourism, remittances, and the momentum of thegovernment's development program.
Cayman IslandsWith no direct taxation, the islands are a thrivingoffshore financial center. More than 40,000 companies wereregistered in the Cayman Islands as of 1998, including almost 600banks and trust companies; banking assets exceed $500 billion. Astock exchange was opened in 1997. Tourism is also a mainstay,accounting for about 70% of GDP and 75% of foreign currencyearnings. The tourist industry is aimed at the luxury market andcaters mainly to visitors from North America. Total tourist arrivalsexceeded 1.2 million in 1997, with 600,000 from the US. About 90% ofthe islands' food and consumer goods must be imported. TheCaymanians enjoy one of the highest outputs per capita and one ofthe highest standards of living in the world.
Central African RepublicSubsistence agriculture, together withforestry, remains the backbone of the economy of the Central AfricanRepublic (CAR), with more than 70% of the population living inoutlying areas. The agricultural sector generates half of GDP.Timber has accounted for about 16% of export earnings and thediamond industry, for 40%. Important constraints to economicdevelopment include the CAR's landlocked position, a poortransportation system, a largely unskilled work force, and a legacyof misdirected macroeconomic policies. Factional fighting betweenthe government and its opponents remains a drag on economicrevitalization, with GDP growth at only 0.5% in 2004 and 2.5% in2005. Distribution of income is extraordinarily unequal. Grants fromFrance and the international community can only partially meethumanitarian needs.
ChadChad's primarily agricultural economy will continue to beboosted by major foreign direct investment projects in the oilsector that began in 2000. Over 80% of Chad's population relies onsubsistence farming and livestock raising for its livelihood. Chad'seconomy has long been handicapped by its landlocked position, highenergy costs, and a history of instability. Chad relies on foreignassistance and foreign capital for most public and private sectorinvestment projects. A consortium led by two US companies has beeninvesting $3.7 billion to develop oil reserves - estimated at 1billion barrels - in southern Chad. The nation's total oil reserveshas been estimated to be 2 billion barrels. Oil production came onstream in late 2003. Chad began to export oil in 2004. Cotton,cattle, and gum arabic provide the bulk of Chad's non-oil exportearnings.
ChileChile has a market-oriented economy characterized by a highlevel of foreign trade. During the early 1990s, Chile's reputationas a role model for economic reform was strengthened when thedemocratic government of Patricio AYLWIN - which took over from themilitary in 1990 - deepened the economic reform initiated by themilitary government. Growth in real GDP averaged 8% during 1991-97,but fell to half that level in 1998 because of tight monetarypolicies implemented to keep the current account deficit in checkand because of lower export earnings - the latter a product of theglobal financial crisis. A severe drought exacerbated the recessionin 1999, reducing crop yields and causing hydroelectric shortfallsand electricity rationing, and Chile experienced negative economicgrowth for the first time in more than 15 years. Despite the effectsof the recession, Chile maintained its reputation for strongfinancial institutions and sound policy that have given it thestrongest sovereign bond rating in South America. By the end of1999, exports and economic activity had begun to recover, and growthrebounded to 4.2% in 2000. Growth fell back to 3.1% in 2001 and 2.1%in 2002, largely due to lackluster global growth and the devaluationof the Argentine peso. Chile's economy began a slow recovery in2003, growing 3.2%, and accelerated to 6.1% in 2004-05, while Chilemaintained a low rate of inflation. GDP growth benefited from highcopper prices, solid export earnings (particularly forestry,fishing, and mining), and stepped-up foreign direct investment.Unemployment, however, remains stubbornly high. Chile deepened itslongstanding commitment to trade liberalization with the signing ofa free trade agreement with the US, which took effect on 1 January2004. Chile signed a free trade agreement with China in November2005, and it already has several trade deals signed with othernations and blocs, including the European Union, Mercosur, SouthKorea, and Mexico. Record-high copper prices helped to strengthenthe peso to a 5½-year high, as of December 2005, and will boost GDPin 2006.
China China's economy during the last quarter century has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy. Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment. China has generally implemented reforms in a gradualist or piecemeal fashion. The process continues with key moves in 2005 including the sale of equity in China's largest state banks to foreign investors and refinements in foreign exchange and bond markets. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis, China in 2005 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income and 150 million Chinese fall below international poverty lines. Economic development has generally been more rapid in coastal provinces than in the interior, and there are large disparities in per capita income between regions. The government has struggled to: (a) sustain adequate job growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force; (b) reduce corruption and other economic crimes; and (c) contain environmental damage and social strife related to the economy's rapid transformation. From 100 to 150 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time, low-paying jobs. One demographic consequence of the "one child" policy is that China is now one of the most rapidly aging countries in the world. Another long-term threat to growth is the deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the north. China continues to lose arable land because of erosion and economic development. China has benefited from a huge expansion in computer Internet use, with more than 100 million users at the end of 2005. Foreign investment remains a strong element in China's remarkable expansion in world trade and has been an important factor in the growth of urban jobs. In July 2005, China revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. Reports of shortages of electric power in the summer of 2005 in southern China receded by September-October and did not have a substantial impact on China's economy. More power generating capacity is scheduled to come on line in 2006 as large scale investments are completed. Thirteen years in construction at a cost of $24 billion, the immense Three Gorges Dam across the Yangtze River will be essentially completed in 2006 and will revolutionize electrification and flood control in the area. The Central Committee of the Chinese Communist Party in October 2005 approved the draft 11th Five-Year Plan and the National People's Congress is expected to give final approval in March 2006. The plan calls for a 20% reduction in energy consumption per unit of GDP by 2010 and an estimated 45% increase in GDP by 2010. The plan states that conserving resources and protecting the environment are basic goals, but it lacks details on the policies and reforms necessary to achieve these goals.
Christmas IslandPhosphate mining had been the only significanteconomic activity, but in December 1987 the Australian Governmentclosed the mine. In 1991, the mine was reopened. With the support ofthe government, a $34 million casino opened in 1993. The casinoclosed in 1998. The Australian Government in 2001 agreed to supportthe creation of a commercial space-launching site on the island,projected to begin operations in the near future.
Clipperton IslandAlthough 115 species of fish have been identifiedin the territorial waters of Clipperton Island, the only economicactivity is tuna fishing.
Cocos (Keeling) IslandsGrown throughout the islands, coconuts arethe sole cash crop. Small local gardens and fishing contribute tothe food supply, but additional food and most other necessities mustbe imported from Australia. There is a small tourist industry.
ColombiaColombia's economy has been on a recovery trend during thepast two years despite a serious armed conflict. The economycontinues to improve thanks to austere government budgets, focusedefforts to reduce public debt levels, an export-oriented growthstrategy, and an improved security situation in the country. Ongoingeconomic problems facing President URIBE range from reforming thepension system to reducing high unemployment. New exploration isneeded to offset declining oil production. On the positive side,several international financial institutions have praised theeconomic reforms introduced by URIBE, which succeeded in reducingthe public-sector deficit below 1.5% of GDP. The government'seconomic policy and democratic security strategy have engendered agrowing sense of confidence in the economy, particularly within thebusiness sector. Coffee prices have recovered from previous lows asthe Colombian coffee industry pursues greater market shares indeveloped countries such as the United States.
ComorosOne of the world's poorest countries, Comoros is made up ofthree islands that have inadequate transportation links, a young andrapidly increasing population, and few natural resources. The loweducational level of the labor force contributes to a subsistencelevel of economic activity, high unemployment, and a heavydependence on foreign grants and technical assistance. Agriculture,including fishing, hunting, and forestry, contributes 40% to GDP,employs 80% of the labor force, and provides most of the exports.The country is not self-sufficient in food production; rice, themain staple, accounts for the bulk of imports. The government -which is hampered by internal political disputes - is struggling toupgrade education and technical training, privatize commercial andindustrial enterprises, improve health services, diversify exports,promote tourism, and reduce the high population growth rate.Increased foreign support is essential if the goal of 4% annual GDPgrowth is to be met. Remittances from 150,000 Comorans abroad helpsupplement GDP.
Congo, Democratic Republic of theThe economy of the DemocraticRepublic of the Congo - a nation endowed with vast potential wealth- has declined drastically since the mid-1980s. The war, which beganin August 1998, dramatically reduced national output and governmentrevenue, increased external debt, and resulted in the deaths ofperhaps 3.5 million people from violence, famine, and disease.Foreign businesses curtailed operations due to uncertainty about theoutcome of the conflict, lack of infrastructure, and the difficultoperating environment. Conditions improved in late 2002 with thewithdrawal of a large portion of the invading foreign troops. Thetransitional government has reopened relations with internationalfinancial institutions and international donors, and PresidentKABILA has begun implementing reforms. Much economic activity liesoutside the GDP data. Economic stability improved in 2003-05,although an uncertain legal framework, corruption, and a lack ofopenness in government policy continues to hamper growth. In 2005,renewed activity in the mining sector, the source of most exports,boosted Kinshasa's fiscal position and GDP growth. Business andeconomic prospects are expected to improve once a new government isinstalled after elections.
Congo, Republic of theThe economy is a mixture of villageagriculture and handicrafts, an industrial sector based largely onoil, support services, and a government characterized by budgetproblems and overstaffing. Oil has supplanted forestry as themainstay of the economy, providing a major share of governmentrevenues and exports. In the early 1980s, rapidly rising oilrevenues enabled the government to finance large-scale developmentprojects with GDP growth averaging 5% annually, one of the highestrates in Africa. The government has mortgaged a substantial portionof its oil earnings through oil-backed loans that have contributedto a growing debt burden and chronic revenue shortfalls. Economicreform efforts have been undertaken with the support ofinternational organizations, notably the World Bank and the IMF.However, the reform program came to a halt in June 1997 when civilwar erupted. Denis SASSOU-NGUESSO, who returned to power when thewar ended in October 1997, publicly expressed interest in movingforward on economic reforms and privatization and in renewingcooperation with international financial institutions. Economicprogress was badly hurt by slumping oil prices and the resumption ofarmed conflict in December 1998, which worsened the republic'sbudget deficit. The current administration presides over an uneasyinternal peace and faces difficult economic challenges ofstimulating recovery and reducing poverty. Recovery of oil priceshas boosted the economy's GDP and near-term prospects. The Republicof Congo may be eligible for an IMF-World Bank heavily indebted poorcountries (HIPC) initiative in early 2006, provided it meets thestrict fiscal and monetary targets set out for it under a newthree-year Poverty Reduction and Growth Facility (PRGF) with the IMF.
Cook IslandsLike many other South Pacific island nations, the CookIslands' economic development is hindered by the isolation of thecountry from foreign markets, the limited size of domestic markets,lack of natural resources, periodic devastation from naturaldisasters, and inadequate infrastructure. Agriculture, employingabout 70% of the working population, provides the economic base withmajor exports made up of copra and citrus fruit. Black pearls arethe Cook Island's leading export. Manufacturing activities arelimited to fruit processing, clothing, and handicrafts. Tradedeficits are offset by remittances from emigrants and by foreignaid, overwhelmingly from New Zealand. In the 1980s and 1990s, thecountry lived beyond its means, maintaining a bloated public serviceand accumulating a large foreign debt. Subsequent reforms, includingthe sale of state assets, the strengthening of economic management,the encouragement of tourism, and a debt restructuring agreement,have rekindled investment and growth.
Coral Sea Islandsno economic activity
Costa RicaCosta Rica's basically stable economy depends on tourism,agriculture, and electronics exports. Poverty has been substantiallyreduced over the past 15 years, and a strong social safety net hasbeen put into place. Foreign investors remain attracted by thecountry's political stability and high education levels, and tourismcontinues to bring in foreign exchange. Low prices for coffee andbananas have hurt the agricultural sector. The government continuesto grapple with its large internal and external deficits and sizableinternal debt. The reduction of inflation remains a difficultproblem because of rises in the price of imports, labor marketrigidities, and fiscal deficits. The country also needs to reformits tax system and its pattern of public expenditure. Costa Rica isthe only signatory to the US-Central American Free Trade Agreement(CAFTA) that has not ratified it. CAFTA implementation would resultin economic reforms and an improved investment climate.
Cote d'IvoireCote d'Ivoire is among the world's largest producersand exporters of coffee, cocoa beans, and palm oil. Consequently,the economy is highly sensitive to fluctuations in internationalprices for these products and weather conditions. Despite governmentattempts to diversify the economy, it is still heavily dependent onagriculture and related activities, engaging roughly 68% of thepopulation. Growth was negative in 2000-03 because of the difficultyof meeting the conditions of international donors, continued lowprices of key exports, and severe civil war. In November 2004, thesituation deteriorated when President GBAGBO's troops attacked andkilled nine French peacekeeping forces, and the UN imposed an armsembargo. Political turmoil damaged the economy in 2005, with fearamong Ivorians spreading, foreign investment shriveling, Frenchbusinesses and expats fleeing, travel within the country falling,and criminal elements that traffic in weapons and diamonds gainingground. The government will continue to survive financially off ofthe sale of cocoa, which represents 90% of foreign exchangeearnings. Though the 2005 harvest was largely unaffected by pastfighting, the government will likely lose between 10% and 20% of itscocoa harvest to northern rebels, who smuggle the cocoa they controlto neighboring countries where cocoa prices are higher. Thegovernment remains hopeful that ongoing exploration of Coted'Ivoire's offshore oil reserves will result in significantproduction that could boost daily crude output from roughly 33,000barrels per day (b/d) to over 200,000 b/d by the end of the decade.
CroatiaBefore the dissolution of Yugoslavia, the Republic ofCroatia, after Slovenia, was the most prosperous and industrializedarea with a per capita output perhaps one-third above the Yugoslavaverage. The economy emerged from a mild recession in 2000 withtourism, banking, and public investments leading the way.Unemployment remains high, at about 18%, with structural factorsslowing its decline. While macroeconomic stabilization has largelybeen achieved, structural reforms lag because of deep resistance onthe part of the public and lack of strong support from politicians.Growth, while impressive at about 3% to 4% for the last severalyears, has been stimulated, in part, through high fiscal deficitsand rapid credit growth. The EU accession process should acceleratefiscal and structural reform.
CubaThe government continues to balance the need for economicloosening against a desire for firm political control. It has rolledback limited reforms undertaken in the 1990s to increase enterpriseefficiency and alleviate serious shortages of food, consumer goods,and services. The average Cuban's standard of living remains at alower level than before the downturn of the 1990s, which was causedby the loss of Soviet aid and domestic inefficiencies. Thegovernment in 2005 strengthened its controls over dollars cominginto the economy from tourism, remittances, and trade. Externalfinancing has helped growth in the mining, oil, construction, andtourism sectors.
CyprusThe Republic of Cyprus has a market economy dominated by theservice sector, which accounts for 76% of GDP. Tourism and financialservices are the most important sectors; erratic growth rates overthe past decade reflect the economy's reliance on tourism, whichoften fluctuates with political instability in the region andeconomic conditions in Western Europe. Nevertheless, the economygrew a healthy 3.7% per year in 2004 and 2005, well above the EUaverage. Cyprus joined the European Exchange Rate Mechanism (ERM2)in May 2005. The government has initiated an aggressive austerityprogram, which has cut the budget deficit to below 3% but continuedfiscal discipline is necessary if Cyprus is to meet its goal ofadopting the euro on 1 January 2008. As in the area administered byTurkish Cypriots, water shortages are a perennial problem; a fewdesalination plants are now on line. After 10 years of drought, thecountry received substantial rainfall from 2001-03 alleviatingimmediate concerns. The Turkish Cypriot economy has roughlyone-third of the per capita GDP of the south, and economic growthtends to be volatile, given north Cyprus's relative isolation,bloated public sector, reliance on the Turkish lira, and smallmarket size. The Turkish Cypriot economy grew 15.4% in 2004, fueledby growth in the construction and education sectors, as well asincreased employment of Turkish Cypriots in the Republic of Cyprus.The Turkish Cypriots are heavily dependent on transfers from theTurkish Government. Under the 2003-06 economic protocol, Ankaraplans to provide around $550 million to the "TRNC." Agriculture andservices, together, employ more than half of the work force.
Czech RepublicThe Czech Republic is one of the most stable andprosperous of the post-Communist states of Central and EasternEurope. Growth in 2000-05 was supported by exports to the EU,primarily to Germany, and a strong recovery of foreign and domesticinvestment. Domestic demand is playing an ever more important rolein underpinning growth as interest rates drop and the availabilityof credit cards and mortgages increases. The current account deficithas declined to around 3% of GDP as demand for Czech products in theEuropean Union has increased. Inflation is under control. Recentaccession to the EU gives further impetus and direction tostructural reform. In early 2004 the government passed increases inthe Value Added Tax (VAT) and tightened eligibility for socialbenefits with the intention to bring the public finance gap down to4% of GDP by 2006, but more difficult pension and healthcare reformswill have to wait until after the next elections. Privatization ofthe state-owned telecommunications firm Cesky Telecom took place in2005. Intensified restructuring among large enterprises,improvements in the financial sector, and effective use of availableEU funds should strengthen output growth.
DenmarkThis thoroughly modern market economy features high-techagriculture, up-to-date small-scale and corporate industry,extensive government welfare measures, comfortable living standards,a stable currency, and high dependence on foreign trade. Denmark isa net exporter of food and energy and enjoys a comfortable balanceof payments surplus. Government objectives include streamlining thebureaucracy and further privatization of state assets. Thegovernment has been successful in meeting, and even exceeding, theeconomic convergence criteria for participating in the third phase(a common European currency) of the European Economic and MonetaryUnion (EMU), but Denmark has decided not to join 12 other EU membersin the euro. Nonetheless, the Danish krone remains pegged to theeuro. Economic growth gained momentum in 2004 and the upturnaccelerated through 2005. Because of high GDP per capita, welfarebenefits, a low Gini index, and political stability, the Danishpeople enjoy living standards topped by no other nation. A majorlong-term issue will be the sharp decline in the ratio of workers toretirees.
DhekeliaEconomic activity is limited to providing services to themilitary and their families located in Dhekelia. All food andmanufactured goods must be imported.
DjiboutiThe economy is based on service activities connected withthe country's strategic location and status as a free trade zone innortheast Africa. Two-thirds of the inhabitants live in the capitalcity; the remainder are mostly nomadic herders. Scanty rainfalllimits crop production to fruits and vegetables, and most food mustbe imported. Djibouti provides services as both a transit port forthe region and an international transshipment and refueling center.Djibouti has few natural resources and little industry. The nationis, therefore, heavily dependent on foreign assistance to helpsupport its balance of payments and to finance development projects.An unemployment rate of at least 50% continues to be a majorproblem. While inflation is not a concern, due to the fixed tie ofthe Djiboutian franc to the US dollar, the artificially high valueof the Djiboutian franc adversely affects Djibouti's balance ofpayments. Per capita consumption dropped an estimated 35% over thelast seven years because of recession, civil war, and a highpopulation growth rate (including immigrants and refugees). Facedwith a multitude of economic difficulties, the government has fallenin arrears on long-term external debt and has been struggling tomeet the stipulations of foreign aid donors.
DominicaThe Dominican economy depends on agriculture, primarilybananas, and remains highly vulnerable to climatic conditions andinternational economic developments. Production of bananas droppedprecipitously in 2003, a major reason for the 1% decline in GDP.Tourism increased in 2003 as the government sought to promoteDominica as an "ecotourism" destination. Development of the tourismindustry remains difficult, however, because of the ruggedcoastline, lack of beaches, and the absence of an internationalairport. The government began a comprehensive restructuring of theeconomy in 2003 - including elimination of price controls,privatization of the state banana company, and tax increases - toaddress Dominica's economic crisis and to meet IMF targets. In orderto diversify the island's production base, the government isattempting to develop an offshore financial sector and is planningto construct an oil refinery on the eastern part of the island.
Dominican RepublicThe Dominican Republic is a Caribbeanrepresentative democracy that enjoyed strong GDP growth until 2003.Although the country has long been viewed primarily as an exporterof sugar, coffee, and tobacco, in recent years the service sectorhas overtaken agriculture as the economy's largest employer due togrowth in tourism and free trade zones. Growth turned negative in2003 with reduced tourism, a major bank fraud, and limited growth inthe US economy (the source of about 80% of export revenues), butrecovered in 2004 and 2005. With the help of strict fiscal targetsagreed in the 2004 renegotiation of an IMF standby loan, PresidentFERNANDEZ has stabilized the country's financial situation. Althoughthe economy continues to grow at a respectable rate, unemploymentremains an important challenge. The country suffers from markedincome inequality; the poorest half of the population receives lessthan one-fifth of GNP, while the richest 10% enjoys nearly 40% ofnational income. The Dominican Republic's development prospectsimproved with the ratification of the Central America-DominicanRepublic Free Trade Agreement (CAFTA-DR) in September 2005.
East TimorIn late 1999, about 70% of the economic infrastructure ofEast Timor was laid waste by Indonesian troops and anti-independencemilitias, and 300,000 people fled westward. Over the next threeyears, however, a massive international program, manned by 5,000peacekeepers (8,000 at peak) and 1,300 police officers, led tosubstantial reconstruction in both urban and rural areas. By the endof 2005, all refugees either returned or resettled in Indonesia.Non-petroleum GDP growth was held back in 2003 by extensive droughtand the gradual winding down of the international presence butrecovered somewhat in 2004. The country faces great challenges incontinuing the rebuilding of infrastructure, strengthening theinfant civil administration, and generating jobs for young peopleentering the work force. The development of oil and gas resources innearby waters has begun to supplement government revenues ahead ofschedule and above expectations - the result of high petroleumprices - but the technology-intensive industry does little to createjobs for the unemployed, because there are no production facilitiesin Timor and the gas is piped to Australia. The parliament in June2005 unanimously approved the creation of a Petroleum Fund to serveas a repository for all petroleum revenues and preserve the value ofEast Timor's petroleum wealth for future generations.
EcuadorEcuador has substantial petroleum resources, which haveaccounted for 40% of the country's export earnings and one-third ofcentral government budget revenues in recent years. Consequently,fluctuations in world market prices can have a substantial domesticimpact. In the late 1990s, Ecuador suffered its worst economiccrisis, with natural disasters and sharp declines in world petroleumprices driving Ecuador's economy into free fall in 1999. Real GDPcontracted by more than 6%, with poverty worsening significantly.The banking system also collapsed, and Ecuador defaulted on itsexternal debt later that year. The currency depreciated by some 70%in 1999, and, on the brink of hyperinflation, the MAHAUD governmentannounced it would dollarize the economy. A coup, however, oustedMAHAUD from office in January 2000, and after a short-lived juntafailed to garner military support, Vice President Gustavo NOBOA tookover the presidency. In March 2000, Congress approved a series ofstructural reforms that also provided the framework for the adoptionof the US dollar as legal tender. Dollarization stabilized theeconomy, and growth returned to its pre-crisis levels in the yearsthat followed. Under the administration of Lucio GUTIERREZ - January2003 to April 2005 - Ecuador benefited from higher world petroleumprices. However, the government under Alfredo PALACIO has reversedeconomic reforms that reduced Ecuador's vulnerability to petroleumprice swings and financial crises, allowing the central governmentgreater access to oil windfalls and disbursing surplus retirementfunds.
EgyptOccupying the northeast corner of the African continent, Egyptis bisected by the highly fertile Nile valley, where most economicactivity takes place. In the last 30 years, the government hasreformed the highly centralized economy it inherited from PresidentNASSER. In 2005, Prime Minister Ahmed NAZIF reduced personal andcorporate tax rates, reduced energy subsidies, and privatizedseveral enterprises. The stock market boomed, and GDP grew nearly5%. Despite these achievements, the government has failed to raiseliving standards for the average Egyptian, and has had to continueproviding subsidies for basic necessities. The subsidies havecontributed to a growing budget deficit - more than 8% of GDP in2005 - and represent a significant drain on the economy. Foreigndirect investment remains low. To achieve higher GDP growth theNAZIF government will need to continue its aggressive pursuit ofreform, especially in the energy sector. Egypt's export sectors -particularly natural gas - have bright prospects.
El SalvadorThe smallest country in Central America, El Salvador hasthe third largest economy, but growth has been minimal in recentyears. Hoping to stimulate the sluggish economy, the government isstriving to open new export markets, encourage foreign investment,and modernize the tax and healthcare systems. Implementation in 2006of the Central America-Dominican Republic Free Trade Agreement,which El Salvador was the first to ratify, is viewed as a key policyto help achieve these objectives. The trade deficit has been offsetby annual remittances from Salvadorans living abroad - 16.6% of GDPin 2005 - and external aid. With the adoption of the US dollar asits currency in 2001, El Salvador has lost control over monetarypolicy and must concentrate on maintaining a disciplined fiscalpolicy.
Equatorial GuineaThe discovery and exploitation of large oilreserves have contributed to dramatic economic growth in recentyears. Forestry, farming, and fishing are also major components ofGDP. Subsistence farming predominates. Although pre-independenceEquatorial Guinea counted on cocoa production for hard currencyearnings, the neglect of the rural economy under successive regimeshas diminished potential for agriculture-led growth (the governmenthas stated its intention to reinvest some oil revenue intoagriculture). A number of aid programs sponsored by the World Bankand the IMF have been cut off since 1993, because of corruption andmismanagement. No longer eligible for concessional financing becauseof large oil revenues, the government has been trying to agree on a"shadow" fiscal management program with the World Bank and IMF.Businesses, for the most part, are owned by government officials andtheir family members. Undeveloped natural resources includetitanium, iron ore, manganese, uranium, and alluvial gold. Growthremained strong in 2005, led by oil. Equatorial Guinea now has thesecond highest per capita income in the world, after Luxembourg.
EritreaSince independence from Ethiopia in 1993, Eritrea has facedthe economic problems of a small, desperately poor country. Like theeconomies of many African nations, the economy is largely based onsubsistence agriculture, with 80% of the population involved infarming and herding. The Ethiopian-Eritrea war in 1998-2000 severelyhurt Eritrea's economy. GDP growth fell to zero in 1999 and to-12.1% in 2000. The May 2000 Ethiopian offensive into northernEritrea caused some $600 million in property damage and loss,including losses of $225 million in livestock and 55,000 homes. Theattack prevented planting of crops in Eritrea's most productiveregion, causing food production to drop by 62%. Even during the war,Eritrea developed its transportation infrastructure, asphalting newroads, improving its ports, and repairing war-damaged roads andbridges. Since the war ended, the government has maintained a firmgrip on the economy, expanding the use of the military andparty-owned businesses to complete Eritrea's development agenda.Erratic rainfall and the delayed demobilization of agriculturalistsfrom the military kept cereal production well below normal, holdingdown growth in 2002-05. Eritrea's economic future depends upon itsability to master social problems such as illiteracy, unemployment,and low skills, as well as the willingness to open its economy toprivate enterprise so that the diaspora's money and expertise canfoster economic growth.
EstoniaEstonia, as a new member of the World Trade Organization andthe European Union, has transitioned effectively to a modern marketeconomy with strong ties to the West, including the pegging of itscurrency to the euro. The economy benefits from strong electronicsand telecommunications sectors and is greatly influenced bydevelopments in Finland, Sweden, and Germany, three major tradingpartners. The current account deficit remains high; however, thestate budget is essentially in balance, and public debt is low.
EthiopiaEthiopia's poverty-stricken economy is based onagriculture, accounting for half of GDP, 60% of exports, and 80% oftotal employment. The agricultural sector suffers from frequentdrought and poor cultivation practices. Coffee is critical to theEthiopian economy with exports of some $156 million in 2002, buthistorically low prices have seen many farmers switching to qat tosupplement income. The war with Eritrea in 1998-2000 and recurrentdrought have buffeted the economy, in particular coffee production.In November 2001, Ethiopia qualified for debt relief from the HighlyIndebted Poor Countries (HIPC) initiative, and in December 2005 theInternational Monetary Fund voted to forgive Ethiopia's debt to thebody. Under Ethiopia's land tenure system, the government owns allland and provides long-term leases to the tenants; the systemcontinues to hamper growth in the industrial sector as entrepreneursare unable to use land as collateral for loans. Drought struck againlate in 2002, leading to a 2% decline in GDP in 2003. Normal weatherpatterns late in 2003 helped agricultural and GDP growth recover in2004-05.
Europa Islandno economic activity
European UnionDomestically, the European Union attempts to lowertrade barriers, adopt a common currency, and move toward convergenceof living standards. Internationally, the EU aims to bolsterEurope's trade position and its political and economic power.Because of the great differences in per capita income (from $15,000to $56,000) and historic national animosities, the EuropeanCommunity faces difficulties in devising and enforcing commonpolicies. For example, since 2003 Germany and France have floutedthe member states' treaty obligation to prevent their nationalbudgets from running more than a 3% deficit. In 2004, the EUadmitted 10 central and eastern European countries that are, ingeneral, less advanced technologically and economically than theother 15. Twelve EU member states introduced the euro as theircommon currency on 1 January 1999, but the UK, Sweden, and Denmarkdo not participate. The 10 new member states may choose to adopt theeuro when they meet the EU's fiscal and monetary criteria and theother euro states so agree.
Falkland Islands (Islas Malvinas) The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987 the government began selling fishing licenses to foreign trawlers operating within the Falkland Islands' exclusive fishing zone. These license fees total more than $40 million per year, which goes to support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defense. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date, no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.
Faroe IslandsThe Faroese economy has had a strong performance since1994, mostly as a result of increasing fish landings and high andstable export prices. Unemployment is minimal and there are signs oflabor shortages in several sectors. The positive economicdevelopment has helped the Faroese Home Rule Government produceincreasing budget surpluses, which in turn have helped reduce thelarge public debt, most of it owed to Denmark. However, the totaldependence on fishing makes the Faroese economy extremelyvulnerable, and the present fishing efforts appear in excess of whatis a sustainable level of fishing in the long term. Oil finds closeto the Faroese area give hope for deposits in the immediate Faroesearea, which may eventually lay the basis for a more diversifiedeconomy and thus lessen dependence on Danish economic assistance.Aided by a substantial annual subsidy (about 15% of GDP) fromDenmark, the Faroese have a standard of living not far below theDanes and other Scandinavians.
FijiFiji, endowed with forest, mineral, and fish resources, is oneof the most developed of the Pacific island economies, though stillwith a large subsistence sector. Sugar exports, remittances fromFijians working abroad, and a growing tourist industry - with300,000 to 400,000 tourists annually - are the major sources offoreign exchange. Fiji's sugar has special access to European Unionmarkets, but will be harmed by the EU's decision to cut sugarsubsidies. Sugar processing makes up one-third of industrialactivity but is not efficient. Long-term problems include lowinvestment, uncertain land ownership rights, and the government'sability to manage its budget. Yet, because of a tourist boom,short-run economic prospects are good, provided tensions do notagain erupt between indigenous Fijians and Indo-Fijians. Overseasremittances from Fijians working in Kuwait and Iraq have increasedsignificantly.
FinlandFinland has a highly industrialized, largely free-marketeconomy with per capita output roughly that of the UK, France,Germany, and Italy. Its key economic sector is manufacturing -principally the wood, metals, engineering, telecommunications, andelectronics industries. Trade is important; exports equal two-fifthsof GDP. Finland excels in high-tech exports, e.g., mobile phones.Except for timber and several minerals, Finland depends on importsof raw materials, energy, and some components for manufacturedgoods. Because of the climate, agricultural development is limitedto maintaining self-sufficiency in basic products. Forestry, animportant export earner, provides a secondary occupation for therural population. Rapidly increasing integration with Western Europe- Finland was one of the 12 countries joining the European Economicand Monetary Union (EMU) - will dominate the economic picture overthe next several years. High unemployment remains a persistentproblem.
FranceFrance is in the midst of transition from a well-to-do moderneconomy that has featured extensive government ownership andintervention to one that relies more on market mechanisms. Thegovernment has partially or fully privatized many large companies,banks, and insurers. It retains controlling stakes in severalleading firms, including Air France, France Telecom, Renault, andThales, and is dominant in some sectors, particularly power, publictransport, and defense industries. The telecommunications sector isgradually being opened to competition. France's leaders remaincommitted to a capitalism in which they maintain social equity bymeans of laws, tax policies, and social spending that reduce incomedisparity and the impact of free markets on public health andwelfare. The government has lowered income taxes and introducedmeasures to boost employment and reform the pension system. Inaddition, it is focusing on the problems of the high cost of laborand labor market inflexibility resulting from the 35-hour workweekand restrictions on lay-offs. The tax burden remains one of thehighest in Europe (nearly 50% of GDP in 2005). The lingeringeconomic slowdown and inflexible budget items have pushed the budgetdeficit above the eurozone's 3%-of-GDP limit; unemployment stands at10%.
French GuianaThe economy is tied closely to the much larger Frencheconomy through subsidies and imports. Besides the French spacecenter at Kourou (which accounts for 25% of GDP), fishing andforestry are the most important economic activities. Forest andwoodland cover 90% of the country. The large reserves of tropicalhardwoods, not fully exploited, support an expanding sawmillindustry that provides sawn logs for export. Cultivation of crops islimited to the coastal area, where the population is largelyconcentrated; rice and manioc are the major crops. French Guiana isheavily dependent on imports of food and energy. Unemployment is aserious problem, particularly among younger workers.
French PolynesiaSince 1962, when France stationed militarypersonnel in the region, French Polynesia has changed from asubsistence agricultural economy to one in which a high proportionof the work force is either employed by the military or supports thetourist industry. With the halt of French nuclear testing in 1996,the military contribution to the economy fell sharply. Tourismaccounts for about one-fourth of GDP and is a primary source of hardcurrency earnings. Other sources of income are pearl farming anddeep-sea commercial fishing. The small manufacturing sectorprimarily processes agricultural products. The territory benefitssubstantially from development agreements with France aimedprincipally at creating new businesses and strengthening socialservices.
French Southern and Antarctic LandsEconomic activity is limited toservicing meteorological and geophysical research stations andFrench and other fishing fleets. The fish catches landed on IlesKerguelen by foreign ships are exported to France and Reunion.
GabonGabon enjoys a per capita income four times that of 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 mandated progress inprivatization and fiscal discipline. France provided additionalfinancial support in January 1997 after Gabon met IMF targets formid-1996. In 1997, an IMF mission to Gabon criticized the governmentfor overspending on off-budget items, overborrowing from the centralbank, 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.Despite an announced program to begin privatizing key parastatals,no plans have been made public that would indicate that thegovernment intends to follow through on its promises. Unemploymentand underemployment rates remain extremely high; short-run economicprogress depends on sustained bilateral and multilateral aid, onresponsible government economic management, on continued technicalassistance from the IMF and bilateral donors, and on expected growthin 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 (PA)- even more degraded than in the West Bank. Thebeginning of the second intifadah in September 2000 sparked aneconomic downturn, largely the result of Israeli closure policies;these policies, which were imposed in response to security interestsin Israel, disrupted labor and commodity relationships with the GazaStrip. In 2001, and even more severely in 2003, Israeli militarymeasures in PA areas resulted in the destruction of much capitalplant, the disruption of administrative structure, and widespreadbusiness closures. Including the West Bank, the UN estimates thatmore than 100,000 Palestinians out of the 125,000 who used to workin Israel or in joint industrial zones have lost their jobs. Halfthe labor force is unemployed. Israeli withdrawal from the GazaStrip in September 2005 offers some medium-term opportunities foreconomic growth, especially given the removal of restrictions oninternal movement. In addition, recent agreements and continuingnegotiations on the administration of Gaza's border crossingsincrease the prospects for trade.
GeorgiaGeorgia's main economic activities include the cultivationof agricultural products such as grapes, citrus fruits, andhazelnuts; 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. It hassizeable but underdeveloped hydropower capacity. 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 2000, achieving positive GDP growth and curtailinginflation. Georgia had suffered from a chronic failure to collecttax revenues; however, the new government is making progress and hasreformed the tax code, improved tax administration, increased taxenforcement, and cracked down on corruption. In addition, thereinvigorated privatization process has met with success,supplementing government expenditures on infrastructure, defense,and poverty reduction. Despite customs and financial (tax)enforcement improvements, smuggling is a drain on the economy.Georgia also suffers from energy shortages due to aging and badlymaintained infrastructure, as well as poor management. Due toconcerted reform efforts, collection rates have improvedconsiderably to roughly 60%, both in T'bilisi and throughout theregions. Continued reform in the management of state-owned powerentities is essential to successful privatization and onwardsustainability in this sector. The country is pinning its hopes forlong-term growth on its role as a transit state for pipelines andtrade. The construction on the Baku-T'bilisi-Ceyhan oil pipeline andthe Baku-T'bilisi-Erzerum gas pipeline have brought much-neededinvestment and job opportunities. Nevertheless, high energy pricesin 2006 will compound the pressure on the country's inefficientenergy sector. Restructuring the sector and finding energy supplyalternatives to Russia remain major challenges.
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 before falling back to 0.9% in 2005. Themodernization and integration of the eastern German economycontinues to be a costly long-term process, with annual transfersfrom west to east amounting to roughly $70 billion. Germany's agingpopulation, combined with high unemployment, has pushed socialsecurity outlays to a level exceeding contributions from workers.Structural rigidities in the labor market - including strictregulations on laying off workers and the setting of wages on anational basis - have made unemployment a chronic problem. Corporaterestructuring and growing capital markets are setting thefoundations that could allow Germany to meet the long-termchallenges of European economic integration and globalization,particularly if labor market rigidities are further addressed. Inthe short run, however, the fall in government revenues and the risein expenditures have raised the deficit above the EU's 3% debt limit.
GhanaWell endowed with natural resources, Ghana has roughly twicethe per capita output of the poorer countries in West Africa. Evenso, Ghana remains heavily dependent on international financial andtechnical assistance. Gold, timber, and cocoa production are majorsources of foreign exchange. The domestic economy continues torevolve around subsistence agriculture, which accounts for 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, but was included in a G-8 debt reliefprogram decided upon at the Gleneagles Summit in July 2005.Priorities under its current $38 million Poverty Reduction andGrowth Facility (PRGF) include tighter monetary and fiscal policies,accelerated privatization, and improvement of social services.Receipts from the gold sector helped sustain GDP growth in 2005along with record high prices for Ghana's largest cocoa crop todate. Inflation should ease but remains a major internal problem.Ghana also remains a candidate country to benefit from MillenniumChallenge Corporation (MCC) funding that could assist intransforming Ghana's agricultural export sector. A final decision onits MCC bid is expected in spring 2006.