Micronesia, Federated States of Economic activity consists primarily of subsistence farming and fishing. The islands have few mineral deposits worth exploiting, except for high-grade phosphate. The potential for a tourist industry exists, but the remote location, a lack of adequate facilities, and limited air connections hinder development. The Amended Compact of Free Association with the US guarantees the Federated States of Micronesia (FSM) millions of dollars in annual aid through 2023, and establishes a Trust Fund into which the US and the FSM make annual contributions in order to provide annual payouts to the FSM in perpetuity after 2023. The country's medium-term economic outlook appears fragile due not only to the reduction in US assistance but also to the slow growth of the private sector.
Midway IslandsThe economy is based on providing support servicesfor the national wildlife refuge activities located on the islands.All food and manufactured goods must be imported.
MoldovaMoldova remains one of the poorest countries in Europedespite recent progress from its small economic base. It enjoys afavorable climate and good farmland but has no major mineraldeposits. As a result, the economy depends heavily on agriculture,featuring fruits, vegetables, wine, and tobacco. Moldova must importalmost all of its energy supplies. Energy shortages contributed tosharp production declines after the breakup of the Soviet Union inDecember 1991. As part of an ambitious reform effort afterindependence, Moldova introduced a convertible currency, freedprices, stopped issuing preferential credits to state enterprises,backed steady land privatization, removed export controls, and freedinterest rates. The government entered into agreements with theWorld Bank and the IMF to promote growth and reduce poverty. Theeconomy returned to positive growth in 2000, and has remained at orabove 6% every year since. Further reforms will come slowly becauseof strong political forces backing government controls. The economyremains vulnerable to higher fuel prices, poor agricultural weather,and the skepticism of foreign investors.
MonacoMonaco, bordering France on the Mediterranean coast, is apopular resort, attracting tourists to its casino and pleasantclimate. In 2001, a major construction project extended the pierused by cruise ships in the main harbor. The principality hassuccessfully sought to diversify into services and small,high-value-added, nonpolluting industries. The state has no incometax and low business taxes and thrives as a tax haven both forindividuals who have established residence and for foreign companiesthat have set up businesses and offices. The state retainsmonopolies in a number of sectors, including tobacco, the telephonenetwork, and the postal service. Living standards are high, roughlycomparable to those in prosperous French metropolitan areas.
MongoliaEconomic activity in Mongolia has traditionally been basedon herding and agriculture. Mongolia has extensive mineral deposits.Copper, coal, molybdenum, tin, tungsten and gold account for a largepart of industrial production. Soviet assistance, at its heightone-third of GDP, disappeared almost overnight in 1990 and 1991 atthe time of the dismantlement of the USSR. The following decade sawMongolia endure both deep recession due to political inaction andnatural disasters, as well as economic growth because ofreform-embracing, free-market economics and extensive privatizationof the formerly state-run economy. Severe winters and summerdroughts in 2000-2002 resulted in massive livestock die-off and zeroor negative GDP growth. This was compounded by falling prices forMongolia's primary sector exports and widespread opposition toprivatization. Growth was 10.6% in 2004 and 5.5% in 2005, largelybecause of high copper prices and new gold production. Mongolia'seconomy continues to be heavily influenced by its neighbors. Forexample, Mongolia purchases 80% of its petroleum products and asubstantial amount of electric power from Russia, leaving itvulnerable to price increases. China is Mongolia's chief exportpartner and a main source of the "shadow" or "grey" economy. TheWorld Bank and other international financial institutions estimatethe grey economy to be at least equal to that of the officialeconomy, but the former's actual size is difficult to calculatesince the money does not pass through the hands of tax authoritiesor the banking sector. Remittances from Mongolians working abroadboth legally and illegally are sizeable, and money laundering is agrowing concern. Mongolia settled its $11 billion debt with Russiaat the end of 2003 on favorable terms. Mongolia, which joined theWorld Trade Organization in 1997, seeks to expand its participationand integration into Asian regional economic and trade regimes.
MontenegroThe republic of Montenegro severed its economy fromfederal control and from Serbia during the MILOSEVIC era andcontinues to maintain its own central bank, uses the euro instead ofthe Yugoslav dinar as official currency, collects customs tariffs,and manages its own budget. The dissolution of the loose politicalunion between Serbia and Montenegro in 2006 led to separatemembership in several international financial institutions, such asthe IMF, World Bank, and the European Bank for Reconstruction andDevelopment. Montenegro is pursuing its own membership in the WorldTrade Organization as well as negotiating a Stabilization andAssociation agreement with the European Union in anticipation ofeventual membership. Severe unemployment remains a key political andeconomic problem for this entire region. Montenegro has privatizedits large aluminum complex - the dominant industry - as well as mostof its financial sector, and has begun to attract foreign directinvestment in the tourism sector.
MontserratSevere volcanic activity, which began in July 1995, hasput a damper on this small, open economy. A catastrophic eruption inJune 1997 closed the airports and seaports, causing further economicand social dislocation. Two-thirds of the 12,000 inhabitants fledthe island. Some began to return in 1998, but lack of housinglimited the number. The agriculture sector continued to be affectedby the lack of suitable land for farming and the destruction ofcrops. Prospects for the economy depend largely on developments inrelation to the volcanic activity and on public sector constructionactivity. The UK has launched a three-year $122.8 million aidprogram to help reconstruct the economy. Half of the island isexpected to remain uninhabitable for another decade.
MoroccoMoroccan economic policies brought macroeconomic stabilityto the country in the early 1990s but have not spurred growthsufficient to reduce unemployment that nears 20% in urban areas.Poverty has actually increased due to the volatile nature of GDP,Morocco's continued dependence on foreign energy, and its inabilityto promote the growth of small and medium size enterprises. Despitestructural adjustment programs supported by the IMF, the World Bank,and the Paris Club, the dirham is only fully convertible for currentaccount transactions and Morocco's financial sector is rudimentary.Moroccan authorities understand that reducing poverty and providingjobs is key to domestic security and development. In 2004, Moroccanauthorities instituted measures to boost foreign direct investmentand trade by signing a free trade agreement with the US and sellinggovernment shares in the state telecommunications company and in thelargest state-owned bank. The Free Trade agreement went into effectin January 2006. In 2005, GDP growth slipped to 1.2% and the budgetdeficit rose sharply - to 7.5% of GDP - because of substantialincreases in wages and oil subsidies. Long-term challenges includepreparing the economy for freer trade with the US and EuropeanUnion, improving education and job prospects for Morocco's youth,and raising living standards, which the government hopes to achieveby increasing tourist arrivals and boosting competitiveness intextiles.
MozambiqueAt independence in 1975, Mozambique was one of theworld's poorest countries. Socialist mismanagement and a brutalcivil war from 1977-92 exacerbated the situation. In 1987, thegovernment embarked on a series of macroeconomic reforms designed tostabilize the economy. These steps, combined with donor assistanceand with political stability since the multi-party elections in1994, have led to dramatic improvements in the country's growthrate. Inflation was reduced to single digits during the late 1990salthough it returned to double digits in 2000-03. Fiscal reforms,including the introduction of a value-added tax and reform of thecustoms service, have improved the government's revenue collectionabilities. In spite of these gains, Mozambique remains dependentupon foreign assistance for much of its annual budget, and themajority of the population remains below the poverty line.Subsistence agriculture continues to employ the vast majority of thecountry's work force. A substantial trade imbalance persistsalthough the opening of the Mozal aluminum smelter, the country'slargest foreign investment project to date, has increased exportearnings. In late 2005, and after years of negotiations, thegovernment signed an agreement to gain Portugal's majority share ofthe Cahora Bassa Hydroelectricity (HCB) company, a dam that was nottransferred to Mozambique at independence because of the ensuingcivil war and unpaid debts. More power is needed for additionalinvestment projects in titanium extraction and processing andgarment manufacturing that could further close the import/exportgap. Mozambique's once substantial foreign debt has been reducedthrough forgiveness and rescheduling under the IMF's HeavilyIndebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and isnow at a manageable level.
NamibiaThe economy is heavily dependent on the extraction andprocessing of minerals for export. Mining accounts for 20% of GDP.Rich alluvial diamond deposits make Namibia a primary source forgem-quality diamonds. Namibia is the fourth-largest exporter ofnonfuel minerals in Africa, the world's fifth-largest producer ofuranium, and the producer of large quantities of lead, zinc, tin,silver, and tungsten. The mining sector employs only about 3% of thepopulation while about half of the population depends on subsistenceagriculture for its livelihood. Namibia normally imports about 50%of its cereal requirements; in drought years food shortages are amajor problem in rural areas. A high per capita GDP, relative to theregion, hides the world's worst inequality of income distribution.The Namibian economy is closely linked to South Africa with theNamibian dollar pegged one-to-one to the South African rand.Privatization of several enterprises in coming years may stimulatelong-run foreign investment. Increased fish production and mining ofzinc, copper, uranium, and silver spurred growth in 2003-05.
NauruRevenues of this tiny island have traditionally come fromexports of phosphates, now significantly depleted. An Australiancompany in 2005 entered into an agreement intended to exploitremaining supplies. Few other resources exist with most necessitiesbeing imported, mainly from Australia, its former occupier and latermajor source of support. The rehabilitation of mined land and thereplacement of income from phosphates are serious long-termproblems. In anticipation of the exhaustion of Nauru's phosphatedeposits, substantial amounts of phosphate income were invested intrust funds to help cushion the transition and provide for Nauru'seconomic future. As a result of heavy spending from the trust funds,the government faces virtual bankruptcy. To cut costs the governmenthas frozen wages and reduced overstaffed public service departments.In 2005, the deterioration in housing, hospitals, and other capitalplant continued, and the cost to Australia of keeping the governmentand economy afloat continued to climb. Few comprehensive statisticson the Nauru economy exist, with estimates of Nauru's GDP varyingwidely.
Navassa IslandSubsistence fishing and commercial trawling occurwithin refuge waters.
NepalNepal is among the poorest and least developed countries inthe world with almost one-third of its population living below thepoverty line. Agriculture is the mainstay of the economy, providinga livelihood for three-fourths of the population and accounting for38% of GDP. Industrial activity mainly involves the processing ofagricultural produce including jute, sugarcane, tobacco, and grain.Security concerns relating to the Maoist conflict have led to adecrease in tourism, a key source of foreign exchange. Nepal hasconsiderable scope for exploiting its potential in hydropower andtourism, areas of recent foreign investment interest. Prospects forforeign trade or investment in other sectors will remain poor,however, because of the small size of the economy, its technologicalbackwardness, its remoteness, its landlocked geographic location,its civil strife, and its susceptibility to natural disaster.
NetherlandsThe Netherlands has a prosperous and open economy, whichdepends heavily on foreign trade. The economy is noted for stableindustrial relations, moderate unemployment and inflation, a sizablecurrent account surplus, and an important role as a Europeantransportation hub. Industrial activity is predominantly in foodprocessing, chemicals, petroleum refining, and electrical machinery.A highly mechanized agricultural sector employs no more than 2% ofthe labor force but provides large surpluses for the food-processingindustry and for exports. The Netherlands, along with 11 of its EUpartners, began circulating the euro currency on 1 January 2002. Thecountry continues to be one of the leading European nations forattracting foreign direct investment. Economic growth slowedconsiderably in 2001-05, as part of the global economic slowdown,but for the four years before that, annual growth averaged nearly4%, well above the EU average.
Netherlands AntillesTourism, petroleum refining, and offshorefinance are the mainstays of this small economy, which is closelytied to the outside world. Although GDP has declined or grownslightly in each of the past eight years, the islands enjoy a highper capita income and a well-developed infrastructure compared withother countries in the region. Almost all consumer and capital goodsare imported, the US and Mexico being the major suppliers. Poorsoils and inadequate water supplies hamper the development ofagriculture. Budgetary problems hamper reform of the health andpension systems of an aging population.
New CaledoniaNew Caledonia has about 25% of the world's knownnickel resources. Only a small amount of the land is suitable forcultivation, and food accounts for about 20% of imports. In additionto nickel, substantial financial support from France - equal to morethan one-fourth of GDP - and tourism are keys to the health of theeconomy. Substantial new investment in the nickel industry, combinedwith the recovery of global nickel prices, brightens the economicoutlook for the next several years.
New ZealandOver the past 20 years the government has transformedNew Zealand from an agrarian economy dependent on concessionaryBritish market access to a more industrialized, free market economythat can compete globally. This dynamic growth has boosted realincomes (but left behind many at the bottom of the ladder),broadened and deepened the technological capabilities of theindustrial sector, and contained inflationary pressures. Per capitaincome has risen for six consecutive years and was more than $24,000in 2005 in purchasing power parity terms. New Zealand is heavilydependent on trade - particularly in agricultural products - todrive growth. Exports are equal to about 22% of GDP. Thus far theeconomy has been resilient, and the Labor Government promises thatexpenditures on health, education, and pensions will increaseproportionately to output.
NicaraguaNicaragua, one of the Western Hemisphere's poorestcountries, has low per capita income, widespread underemployment,and a heavy external debt burden. Distribution of income is one ofthe most unequal on the globe. While the country has progressedtoward macroeconomic stability in the past few years, GDP annualgrowth has been far too low to meet the country's needs, forcing thecountry to rely on international economic assistance to meet fiscaland debt financing obligations. Nicaragua qualified in early 2004for some $4.5 billion in foreign debt reduction under the HeavilyIndebted Poor Countries (HIPC) initiative because of its earliersuccessful performances under its International Monetary Fund policyprogram and other efforts. In October 2005, Nicaragua ratified theUS-Central America Free Trade Agreement (CAFTA), which will providean opportunity for Nicaragua to attract investment, create jobs, anddeepen economic development. High oil prices helped drive inflationto 9.6% in 2005, leading to a fall in real GDP growth to 4% fromover 5% in 2004.
NigerNiger is one of the poorest countries in the world, rankinglast on the United Nations Development Fund index of humandevelopment. It is a landlocked, Sub-Saharan nation, whose economycenters on subsistence crops, livestock, and some of the world'slargest uranium deposits. Drought cycles, desertification, a 2.9%population growth rate, and the drop in world demand for uraniumhave undercut the economy. Niger shares a common currency, the CFAfranc, and a common central bank, the Central Bank of West AfricanStates (BCEAO), with seven other members of the West AfricanMonetary Union. In December 2000, Niger qualified for enhanced debtrelief under the International Monetary Fund program for HighlyIndebted Poor Countries (HIPC) and concluded an agreement with theFund on a Poverty Reduction and Growth Facility (PRGF). Debt reliefprovided under the enhanced HIPC initiative significantly reducesNiger's annual debt service obligations, freeing funds forexpenditures on basic health care, primary education, HIV/AIDSprevention, rural infrastructure, and other programs geared atpoverty reduction. In December 2005, it was announced that Niger hadreceived 100% multilateral debt relief from the IMF, whichtranslates into the forgiveness of approximately $86 million USD indebts to the IMF, excluding the remaining assistance under HIPC.Nearly half of the government's budget is derived from foreign donorresources. Future growth may be sustained by exploitation of oil,gold, coal, and other mineral resources. Uranium prices haverecovered somewhat in the last few years. A drought and locustinfestation in 2005 led to food shortages for as many as 2.5 millionNigerians.
NigeriaOil-rich Nigeria, long hobbled by political instability,corruption, inadequate infrastructure, and poor macroeconomicmanagement, is undertaking some reforms under a new reform-mindedadministration. Nigeria's former military rulers failed to diversifythe economy away from its overdependence on the capital-intensiveoil sector, which provides 20% of GDP, 95% of foreign exchangeearnings, and about 65% of budgetary revenues. The largelysubsistence agricultural sector has failed to keep up with rapidpopulation growth - Nigeria is Africa's most populous country - andthe country, once a large net exporter of food, now must importfood. Following the signing of an IMF stand-by agreement in August2000, Nigeria received a debt-restructuring deal from the Paris Cluband a $1 billion credit from the IMF, both contingent on economicreforms. Nigeria pulled out of its IMF program in April 2002, afterfailing to meet spending and exchange rate targets, making itineligible for additional debt forgiveness from the Paris Club. Inthe last year the government has begun showing the political will toimplement the market-oriented reforms urged by the IMF, such as tomodernize the banking system, to curb inflation by blockingexcessive wage demands, and to resolve regional disputes over thedistribution of earnings from the oil industry. In 2003, thegovernment began deregulating fuel prices, announced theprivatization of the country's four oil refineries, and institutedthe National Economic Empowerment Development Strategy, adomestically designed and run program modeled on the IMF's PovertyReduction and Growth Facility for fiscal and monetary management.GDP rose strongly in 2005, based largely on increased oil exportsand high global crude prices. In November 2005, Abuja won Paris Clubapproval for a historic debt-relief deal that by March 2006 shouldeliminate $30 billion worth of Nigeria's total $37 billion externaldebt. The deal first requires that Nigeria repay roughly $12 billionin arrears to its bilateral creditors. Nigeria would then be allowedto buy back its remaining debt stock at a discount. The deal alsocommits Nigeria to more intensified IMF reviews.
NiueThe economy suffers from the typical Pacific island problems ofgeographic isolation, few resources, and a small population.Government expenditures regularly exceed revenues, and the shortfallis made up by critically needed grants from New Zealand that areused to pay wages to public employees. Niue has cut governmentexpenditures by reducing the public service by almost half. Theagricultural sector consists mainly of subsistence gardening,although some cash crops are grown for export. Industry consistsprimarily of small factories to process passion fruit, lime oil,honey, and coconut cream. The sale of postage stamps to foreigncollectors is an important source of revenue. The island in recentyears has suffered a serious loss of population because ofemigration to New Zealand. Efforts to increase GDP include thepromotion of tourism and a financial services industry, although theInternational Banking Repeal Act of 2002 resulted in the terminationof all offshore banking licenses. Economic aid from New Zealand in2002 was about US$2 million. Niue suffered a devastating typhoon inJanuary 2004, which decimated nascent economic programs. While inthe process of rebuilding, Niue has been dependent on foreign aid.
Norfolk IslandTourism, the primary economic activity, has steadilyincreased over the years and has brought a level of prosperityunusual among inhabitants of the Pacific islands. The agriculturalsector has become self-sufficient in the production of beef,poultry, and eggs.
Northern Mariana IslandsThe economy benefits substantially fromfinancial assistance from the US. The rate of funding has declinedas locally generated government revenues have grown. The key touristindustry employs about 50% of the work force and accounts forroughly one-fourth of GDP. Japanese tourists predominate. Annualtourist entries have exceeded one-half million in recent years, butfinancial difficulties in Japan have caused a temporary slowdown.The agricultural sector is made up of cattle ranches and small farmsproducing coconuts, breadfruit, tomatoes, and melons. Garmentproduction is by far the most important industry with the employmentof 17,500 mostly Chinese workers and sizable shipments to the USunder duty and quota exemptions.
NorwayThe Norwegian economy is a prosperous bastion of welfarecapitalism, featuring a combination of free market activity andgovernment intervention. The government controls key areas such asthe vital petroleum sector (through large-scale state enterprises).The country is richly endowed with natural resources - petroleum,hydropower, fish, forests, and minerals - and is highly dependent onits oil production and international oil prices, with oil and gasaccounting for one-third of exports. Only Saudi Arabia and Russiaexport more oil than Norway. Norway opted to stay out of the EUduring a referendum in November 1994; nonetheless, it contributessizably to the EU budget. The government has moved ahead withprivatization. Although Norwegian oil production peaked in 2000,natural gas production is still rising. Norwegians realize that oncetheir gas production peaks they will eventually face declining oiland gas revenues; accordingly, Norway has been saving itsoil-and-gas-boosted budget surpluses in a Government Petroleum Fund,which is invested abroad and now is valued at more than $250billion. After lackluster growth of 1% in 2002 and 0.5% in 2003, GDPgrowth picked up to 3.3% in 2004 and to 3.7% in 2005.
OmanOman is a middle-income economy in the Middle East with notableoil and gas resources, a substantial trade surplus, and lowinflation. Work on a new liquefied natural gas (LNG) facilityprogressed in 2005 and will contribute to slightly higher oil andgas exports in 2006. Oman continues to liberalize its markets andjoined the World Trade Organization (WTO) in November 2000. Toreduce unemployment and limit dependence on foreign labor, thegovernment is encouraging the replacement of foreign expatriateworkers with local workers. Training in information technology,business management, and English support this objective. Industrialdevelopment plans focus on gas resources, metal manufacturing,petrochemicals, and international transshipment ports. In 2005, Omansigned agreements with several foreign investors to boost oilreserves, build and operate a power plant, and develop a secondmobile phone network in the country.
Pacific OceanThe Pacific Ocean is a major contributor to the worldeconomy and particularly to those nations its waters directly touch.It provides low-cost sea transportation between East and West,extensive fishing grounds, offshore oil and gas fields, minerals,and sand and gravel for the construction industry. In 1996, over 60%of the world's fish catch came from the Pacific Ocean. Exploitationof offshore oil and gas reserves is playing an ever-increasing rolein the energy supplies of the US, Australia, NZ, China, and Peru.The high cost of recovering offshore oil and gas, combined with thewide swings in world prices for oil since 1985, has led tofluctuations in new drillings.
PakistanPakistan, an impoverished and underdeveloped country, hassuffered from decades of internal political disputes, low levels offoreign investment, and a costly, ongoing confrontation withneighboring India. However, IMF-approved government policies,bolstered by generous foreign assistance and renewed access toglobal markets since 2001, have generated solid macroeconomicrecovery the last four years. The government has made substantialmacroeconomic reforms since 2000, although progress on morepolitically sensitive reforms has slowed. For example, in the budgetfor fiscal year 2006, Islamabad did not impose taxes on theagriculture or real estate sectors, despite Pakistan's chronicallylow tax-to-GDP ratio. While long-term prospects remain uncertain,given Pakistan's low level of development, medium-term prospects forjob creation and poverty reduction are the best in more than adecade. Islamabad has raised development spending from about 2% ofGDP in the 1990s to 4% in 2003, a necessary step towards reversingthe broad underdevelopment of its social sector. GDP growth, spurredby double-digit gains in industrial production over the past year,has become less dependent on agriculture, and remained above 7% in2004 and 2005. Inflation remains the biggest threat to the economy,jumping to more than 9% in 2005. The World Bank and AsianDevelopment Bank announced that they would provide US $1 billioneach in aid to help Pakistan rebuild areas hit by the October 2005earthquake in Kashmir. Foreign exchange reserves continued to reachnew levels in 2005, supported by steady worker remittances. In thenear term, growth probably cannot be sustained at the 7% level;however, massive international aid, increased government spending,lower taxes, and pay increases for government workers will helpPakistan maintain strong GDP growth over the longer term.
PalauThe economy consists primarily of tourism, subsistenceagriculture, and fishing. The government is the major employer ofthe work force, relying heavily on financial assistance from the US.Business and tourist arrivals numbered 63,000 in 2003. Thepopulation enjoys a per capita income twice that of the Philippinesand much of Micronesia. Long-run prospects for the key touristsector have been greatly bolstered by the expansion of air travel inthe Pacific, the rising prosperity of leading East Asian countries,and the willingness of foreigners to finance infrastructuredevelopment.
Palmyra Atollno economic activity
PanamaPanama's dollarised economy rests primarily on awell-developed services sector that accounts for three-fourths ofGDP. Services include operating the Panama Canal, banking, the ColonFree Zone, insurance, container ports, flagship registry, andtourism. A slump in the Colon Free Zone and agricultural exports,the global slowdown, and the withdrawal of US military forces heldback economic growth in 2000-03; growth picked up in 2004 and 2005led by export-oriented services and a construction boom stimulatedby tax incentives. The government has implemented tax reforms, aswell as social security reforms, and backs regional trade agreementsand development of tourism. Unemployment remains high.
Papua New GuineaPapua New Guinea is richly endowed with naturalresources, but exploitation has been hampered by rugged terrain andthe high cost of developing infrastructure. Agriculture provides asubsistence livelihood for 85% of the population. Mineral deposits,including oil, copper, and gold, account for nearly two-thirds ofexport earnings. The economy has improved over the past three yearsbecause of high commodity prices following a prolonged period ofinstability. The government of Prime Minister SOMARE has expendedmuch of its energy remaining in power and should be the firstgovernment in decades to serve a full five-year term. The governmenthas also brought stability to the national budget thus far, largelythrough expenditure control. Numerous challenges still face thegovernment including regaining investor confidence, restoringintegrity to state institutions, promoting economic efficiency byprivatizing moribund state institutions, and balancing relationswith Australia, the former colonial ruler. Other socio-culturalchallenges include the HIV/Aids epidemic, law and order, and landtenure issues. Australia annually supplies $240 million in aid,which accounts for nearly 20% of the national budget.
Paracel IslandsChina announced plans in 1997 to open the islandsfor tourism.
ParaguayLandlocked Paraguay has a market economy marked by a largeinformal sector. This sector features both reexport of importedconsumer goods to neighboring countries, as well as the activitiesof thousands of microenterprises and urban street vendors. Becauseof the importance of the informal sector, accurate economic measuresare difficult to obtain. A large percentage of the populationderives its living from agricultural activity, often on asubsistence basis. The formal economy grew by an average of about 3%annually in 1995-97, but averaged near-zero growth in 1998-2001 andcontracted by 2.3 percent in 2002, in response to regional contagionand an outbreak of hoof-and-mouth disease. On a per capita basis,real income has stagnated at 1980 levels. Most observers attributeParaguay's poor economic performance to political uncertainty,corruption, lack of progress on structural reform, substantialinternal and external debt, and deficient infrastructure. Aided by afirmer exchange rate and perhaps a greater confidence in theeconomic policy of the DUARTE FRUTOS administration, the economyrebounded between 2003 and 2005, posting modest growth each year.
PeruPeru's economy reflects its varied geography - an arid coastalregion, the Andes further inland, and tropical lands borderingColombia and Brazil. Abundant mineral resources are found in themountainous areas, and Peru's coastal waters provide excellentfishing grounds. However, overdependence on minerals and metalssubjects the economy to fluctuations in world prices, and a lack ofinfrastructure deters trade and investment. After several years ofinconsistent economic performance, the Peruvian economy grew by morethan 4 percent per year during the period 2002-2005, with a stableexchange rate and low inflation. Risk premiums on Peruvian bonds onsecondary markets reached historically low levels in late 2004,reflecting investor optimism regarding the government's prudentfiscal policies and openness to trade and investment. Despite thestrong macroeconomic performance, the TOLEDO administration remainedunpopular in 2005, and unemployment and poverty have stayedpersistently high. Economic growth will be driven by the Camiseanatural gas megaproject and by exports of minerals, textiles, andagricultural products. Peru is expected to sign a free-tradeagreement with the United States in early 2006.
PhilippinesThe Philippines was less severely affected by the Asianfinancial crisis of 1998 than its neighbors, aided in part by itshigh level of annual remittances from overseas workers, and nosustained runup in asset prices or foreign borrowing prior to thecrisis. From a 0.6% decline in 1998, GDP expanded by 2.4% in 1999,and 4.4% in 2000, but slowed to 3.2% in 2001 in the context of aglobal economic slowdown, an export slump, and political andsecurity concerns. GDP growth accelerated to about 5% between 2002and 2005 reflecting the continued resilience of the service sector,and improved exports and agricultural output. Nonetheless, it willtake a higher, sustained growth path to make appreciable progress inthe alleviation of poverty given the Philippines' high annualpopulation growth rate and unequal distribution of income. ThePhilippines also faces higher oil prices, higher interest rates onits dollar borrowings, and higher inflation. Fiscal constraintslimit Manila's ability to finance infrastructure and socialspending. The Philippines' consistently large budget deficit hasproduced a high debt level, and this situation has forced Manila tospend a large portion of the national government budget on debtservice. Large unprofitable public enterprises, especially in theenergy sector, contribute to the government's debt because of slowprogress on privatization. Credit rating agencies have at timesexpressed concern about the Philippines' ability to service thedebt, though central bank reserves appear adequate and largeremittance inflows appear stable. The implementation of the expandedValue Added Tax (VAT) in November 2005 boosted confidence in thegovernment's fiscal capacity and helped to strengthen the peso,which gained 5.7 percent year-on-year, making it East Asia's bestperforming currency in 2005. Investors and credit ratinginstitutions will continue to look for effective implementation ofthe new VAT and continued improvement in the government's overallfiscal capacity in the coming year.
Pitcairn IslandsThe inhabitants of this tiny isolated economy existon fishing, subsistence farming, handicrafts, and postage stamps.The fertile soil of the valleys produces a wide variety of fruitsand vegetables, including citrus, sugarcane, watermelons, bananas,yams, and beans. Bartering is an important part of the economy. Themajor sources of revenue are the sale of postage stamps tocollectors and the sale of handicrafts to passing ships. In October2004, more than one-quarter of Pitcairn's small labor force wasarrested, putting the economy in a bind, since their services wererequired as lighter crew to load or unload passing ships.
PolandPoland has steadfastly pursued a policy of economicliberalization throughout the 1990s and today stands out as asuccess story among transition economies. Even so, much remains tobe done, especially in bringing down the unemployment rate -currently the highest in the EU. The privatization of small- andmedium-sized state-owned companies and a liberal law on establishingnew firms has encouraged the development of the private businesssector, but legal and bureaucratic obstacles alongside persistentcorruption are hampering its further development. Poland'sagricultural sector remains handicapped by surplus labor,inefficient small farms, and lack of investment. Restructuring andprivatization of "sensitive sectors" (e.g., coal, steel, railroads,and energy), while recently initiated, have stalled. Reforms inhealth care, education, the pension system, and state administrationhave resulted in larger-than-expected fiscal pressures. Furtherprogress in public finance depends mainly on reducing losses inPolish state enterprises, restraining entitlements, and overhaulingthe tax code to incorporate the growing gray economy and farmers,most of whom pay no tax. The previous Socialist-led governmentintroduced a package of social and administrative spending cuts toreduce public spending by about $17 billion through 2007, but fullimplementation of the plan was trumped by election-year politics in2005. The right-wing Law and Justice party won parliamentaryelections in September, and Lech KACZYNSKI won the presidentialelection in October 2005, running on a state-interventionist fiscaland monetary platform. Poland joined the EU in May 2004, and surgingexports to the EU contributed to Poland's strong growth in 2004,though its competitiveness could be threatened by the zloty'sappreciation. GDP per capita roughly equals that of the three Balticstates. Poland stands to benefit from nearly $23.2 billion in EUfunds, available through 2006. Farmers have already begun to reapthe rewards of membership via booming exports, higher food prices,and EU agricultural subsidies.
PortugalPortugal has become a diversified and increasinglyservice-based economy since joining the European Community in 1986.Over the past decade, successive governments have privatized manystate-controlled firms and liberalized key areas of the economy,including the financial and telecommunications sectors. The countryqualified for the European Monetary Union (EMU) in 1998 and begancirculating the euro on 1 January 2002 along with 11 other EU membereconomies. Economic growth had been above the EU average for much ofthe past decade, but fell back in 2001-05. GDP per capita stands attwo-thirds that of the Big Four EU economies. A poor educationalsystem, in particular, has been an obstacle to greater productivityand growth. Portugal has been increasingly overshadowed bylower-cost producers in Central Europe and Asia as a target forforeign direct investment. The government faces tough choices in itsattempts to boost Portugal's economic competitiveness while keepingthe budget deficit within the eurozone's 3%-of-GDP ceiling.
Puerto RicoPuerto Rico has one of the most dynamic economies in theCaribbean region. A diverse industrial sector has far surpassedagriculture as the primary locus of economic activity and income.Encouraged by duty-free access to the US and by tax incentives, USfirms have invested heavily in Puerto Rico since the 1950s. USminimum wage laws apply. Sugar production has lost out to dairyproduction and other livestock products as the main source of incomein the agricultural sector. Tourism has traditionally been animportant source of income, with estimated arrivals of nearly 5million tourists in 2004. Growth fell off in 2001-03, largely due tothe slowdown in the US economy, and has recovered in 2004-2005.
QatarOil and gas account for more than 60% of GDP, roughly 85% ofexport earnings, and 70% of government revenues. Oil and gas havegiven Qatar a per capita GDP about 80% of that of the leading WestEuropean industrial countries. Proved oil reserves of 16 billionbarrels should ensure continued output at current levels for 23years. Qatar's proved reserves of natural gas exceed 25 trillioncubic meters, more than 5% of the world total and third largest inthe world. Qatar has permitted substantial foreign investment in thedevelopment of its gas fields during the last decade and is expectedto become the world's top liquefied natural gas (LNG) exporter by2007. In recent years, Qatar has consistently posted trade surpluseslargely because of high oil prices and increased natural gasexports, becoming one of the world's fastest growing and highestper-capita income countries.
ReunionThe economy has traditionally been based on agriculture, butservices now dominate. Sugarcane has been the primary crop for morethan a century, and in some years it accounts for 85% of exports.The government has been pushing the development of a touristindustry to relieve high unemployment, which amounts to one-third ofthe labor force. The gap in Reunion between the well-off and thepoor is extraordinary and accounts for the persistent socialtensions. The white and Indian communities are substantially betteroff than other segments of the population, often approachingEuropean standards, whereas minority groups suffer the poverty andunemployment typical of the poorer nations of the African continent.The outbreak of severe rioting in February 1991 illustrated theseriousness of socioeconomic tensions. The economic well-being ofReunion depends heavily on continued financial assistance fromFrance.
RomaniaRomania began the transition from Communism in 1989 with alargely obsolete industrial base and a pattern of output unsuited tothe country's needs. The country emerged in 2000 from a punishingthree-year recession thanks to strong demand in EU export markets.Despite the global slowdown in 2001-02, strong domestic activity inconstruction, agriculture, and consumption have kept GDP growthabove 4%. An IMF standby agreement, signed in 2001, has beenaccompanied by slow but palpable gains in privatization, deficitreduction, and the curbing of inflation. The IMF Board approvedRomania's completion of the standby agreement in October 2003, thefirst time Romania has successfully concluded an IMF agreement sincethe 1989 revolution. In July 2004, the executive board of the IMFapproved a 24-month standby agreement for $367 million. IMF concernsabout Romania's tax policy and budget deficit led to a breakdown ofthis agreement in 2005. In the past, the IMF has criticized thegovernment's fiscal, wage, and monetary policies. Meanwhile,macroeconomic gains have only recently started to spur creation of amiddle class and address Romania's widespread poverty, whilecorruption and red tape continue to handicap the businessenvironment. Romanian government confidence in continuingdisinflation was underscored by its currency revaluation in 2005,making 10,000 "old" lei equal 1 "new" leu.
RussiaRussia ended 2005 with its seventh straight year of growth,averaging 6.4% annually since the financial crisis of 1998. Althoughhigh oil prices and a relatively cheap ruble are important driversof this economic rebound, since 2000 investment and consumer-drivendemand have played a noticeably increasing role. Real fixed capitalinvestments have averaged gains greater than 10% over the last fiveyears, and real personal incomes have realized average increasesover 12%. During this time, poverty has declined steadily and themiddle class has continued to expand. Russia has also improved itsinternational financial position since the 1998 financial crisis,with its foreign debt declining from 90% of GDP to around 31%.Strong oil export earnings have allowed Russia to increase itsforeign reserves from only $12 billion to some $180 billion atyearend 2005. These achievements, along with a renewed governmenteffort to advance structural reforms, have raised business andinvestor confidence in Russia's economic prospects. Nevertheless,serious problems persist. Economic growth slowed to 5.9% for 2005while inflation remains high. Oil, natural gas, metals, and timberaccount for more than 80% of exports, leaving the country vulnerableto swings in world prices. Russia's manufacturing base isdilapidated and must be replaced or modernized if the country is toachieve broad-based economic growth. Other problems include a weakbanking system, a poor business climate that discourages bothdomestic and foreign investors, corruption, and widespread lack oftrust in institutions. In addition, a string of investigationslaunched against a major Russian oil company, culminating with thearrest of its CEO in the fall of 2003 and the acquisition of thecompany by a state owned firm, have raised concerns by someobservers that President PUTIN is granting more influence to forceswithin his government that desire to reassert state control over theeconomy. State control has increased in the past year with a numberof large acquisitions. Most fundamentally, Russia has made littleprogress in building the rule of law, the bedrock of a modern marketeconomy.
RwandaRwanda is a poor rural country with about 90% of thepopulation engaged in (mainly subsistence) agriculture. It is themost densely populated country in Africa and is landlocked with fewnatural resources and minimal industry. Primary foreign exchangeearners are coffee and tea. The 1994 genocide decimated Rwanda'sfragile economic base, severely impoverished the population,particularly women, and eroded the country's ability to attractprivate and external investment. However, Rwanda has madesubstantial progress in stabilizing and rehabilitating its economyto pre-1994 levels, although poverty levels are higher now. GDP hasrebounded and inflation has been curbed. Despite Rwanda's fertileecosystem, food production often does not keep pace with populationgrowth, requiring food imports. Rwanda continues to receivesubstantial aid money and obtained IMF-World Bank Heavily IndebtedPoor Country (HIPC) initiative debt relief in 2005. Kigali's highdefense expenditures have caused tension between the government andinternational donors and lending agencies. An energy shortage andinstability in neighboring states may slow growth in 2006, while thelack of adequate transportation linkages to other countriescontinues to handicap export growth.
Saint HelenaThe economy depends largely on financial assistancefrom the UK, which amounted to about $5 million in 1997 or almostone-half of annual budgetary revenues. The local population earnsincome from fishing, raising livestock, and sales of handicrafts.Because there are few jobs, 25% of the work force has left to seekemployment on Ascension Island, on the Falklands, and in the UK.
Saint Kitts and NevisSugar was the traditional mainstay of theSaint Kitts economy until the 1970s. Although the crop stilldominates the agricultural sector, activities such as tourism,export-oriented manufacturing, and offshore banking have assumedlarger roles in the economy. Tourism revenues are now the chiefsource of the islands' foreign exchange; about 40,000 touristvisited Nevis during the 2003-2004 season. Additional touristfacilities, including a second cruise ship pier, hotels, and golfcourses are under construction.
Saint LuciaChanges in the EU import preference regime and theincreased competition from Latin American bananas have made economicdiversification increasingly important in Saint Lucia. The islandnation has been able to attract foreign business and investment,especially in its offshore banking and tourism industries. Themanufacturing sector is the most diverse in the Eastern Caribbeanarea, and the government is trying to revitalize the bananaindustry. Economic fundamentals remain solid, even thoughunemployment needs to be cut.
Saint Pierre and MiquelonThe inhabitants have traditionally earnedtheir livelihood by fishing and by servicing fishing fleetsoperating off the coast of Newfoundland. The economy has beendeclining, however, because of disputes with Canada over fishingquotas and a steady decline in the number of ships stopping at SaintPierre. In 1992, an arbitration panel awarded the islands anexclusive economic zone of 12,348 sq km to settle a longstandingterritorial dispute with Canada, although it represents only 25% ofwhat France had sought. The islands are heavily subsidized by Franceto the great betterment of living standards. The government hopes anexpansion of tourism will boost economic prospects. Recent testdrilling for oil may pave the way for development of the energysector.
Saint Vincent and the GrenadinesEconomic growth in thislower-middle-income country hinges upon seasonal variations in theagricultural and tourism sectors. Tropical storms wiped outsubstantial portions of crops in 1994, 1995, and 2002, and tourismin the Eastern Caribbean has suffered low arrivals following 11September 2001. Saint Vincent is home to a small offshore bankingsector and has moved to adopt international regulatory standards.Saint Vincent is also a producer of marijuana and is being used as atransshipment point for illegal narcotics from South America.
SamoaThe economy of Samoa has traditionally been dependent ondevelopment aid, family remittances from overseas, agriculture, andfishing. The country is vulnerable to devastating storms.Agriculture employs two-thirds of the labor force, and furnishes 90%of exports, featuring coconut cream, coconut oil, and copra. Themanufacturing sector mainly processes agricultural products. Thedecline of fish stocks in the area is a continuing problem. Tourismis an expanding sector, accounting for 25% of GDP; about 88,000tourists visited the islands in 2001. One factory in the ForeignTrade Zone employs 3,000 people to make automobile electricalharnesses for an assembly plant in Australia. The Samoan Governmenthas called for deregulation of the financial sector, encouragementof investment, and continued fiscal discipline, while at the sametime protecting the environment. Observers point to the flexibilityof the labor market as a basic strength for future economicadvances. Foreign reserves are in a relatively healthy state, theexternal debt is stable, and inflation is low.
San MarinoThe tourist sector contributes over 50% of GDP. In 2000more than 3 million tourists visited San Marino. The key industriesare banking, wearing apparel, electronics, and ceramics. Mainagricultural products are wine and cheeses. The per capita level ofoutput and standard of living are comparable to those of the mostprosperous regions of Italy, which supplies much of its food.
Sao Tome and PrincipeThis small, poor island economy has becomeincreasingly dependent on cocoa since independence in 1975. Cocoaproduction has substantially declined in recent years because ofdrought and mismanagement, but strengthening prices helped boostexport earnings in 2003. Sao Tome has to import all fuels, mostmanufactured goods, consumer goods, and a substantial amount offood. Over the years, it has had difficulty servicing its externaldebt and has relied heavily on concessional aid and debtrescheduling. Sao Tome benefited from $200 million in debt relief inDecember 2000 under the Highly Indebted Poor Countries (HIPC)program, and is expected to benefit from an additional round of HIPCdebt relief in early 2006, to help bring down the country's $300million debt burden. In August 2005, Sao Tome signed on to a new3-year IMF Poverty Reduction and Growth Facility (PRGF) programworth $4.3 million. Considerable potential exists for development ofa tourist industry, and the government has taken steps to expandfacilities in recent years. The government also has attempted toreduce price controls and subsidies. Sao Tome is optimistic aboutthe development of petroleum resources in its territorial waters inthe oil-rich Gulf of Guinea, which are being jointly developed in a60-40 split with Nigeria. The first production licenses were sold in2004, though a dispute over licensing with Nigeria delayed SaoTome's receipt of more than $20 million in signing bonuses foralmost a year. Real GDP growth reached 6% in 2004, and also probablyin 2005, as a result of increases in public expenditures andoil-related capital investment.
Saudi ArabiaThis is an oil-based economy with strong governmentcontrols over major economic activities. Saudi Arabia possesses 25%of the world's proven petroleum reserves, ranks as the largestexporter of petroleum, and plays a leading role in OPEC. Thepetroleum sector accounts for roughly 75% of budget revenues, 45% ofGDP, and 90% of export earnings. About 40% of GDP comes from theprivate sector. Roughly 5.5 million foreign workers play animportant role in the Saudi economy, particularly, in the oil andservice sectors. The government is encouraging private sector growthto lessen the kingdom's dependence on oil and increase employmentopportunities for the swelling Saudi population. The government hasbegun to permit private sector and foreign investor participation inthe power generation and telecom sectors. As part of its effort toattract foreign investment and diversify the economy, Saudi Arabiaacceded to the WTO in 2005 after many years of negotiations. Withhigh oil revenues enabling the government to post large budgetsurpluses, Riyadh has been able to substantially boost spending onjob training and education, infrastructure development, andgovernment salaries.
SenegalIn January 1994, Senegal undertook a bold and ambitiouseconomic reform program with the support of the international donorcommunity. This reform began with a 50% devaluation of Senegal'scurrency, the CFA franc, which was linked at a fixed rate to theFrench franc. Government price controls and subsidies have beensteadily dismantled. After seeing its economy contract by 2.1% in1993, Senegal made an important turnaround, thanks to the reformprogram, with real growth in GDP averaging over 5% annually during1995-2004. Annual inflation had been pushed down to the low singledigits. As a member of the West African Economic and Monetary Union(WAEMU), Senegal is working toward greater regional integration witha unified external tariff and a more stable monetary policy.However, Senegal still relies heavily upon outside donor assistance.Under the IMF's Highly Indebted Poor Countries (HIPC) debt reliefprogram, Senegal will benefit from eradication of two-thirds of itsbilateral, multilateral, and private-sector debt.
SerbiaMILOSEVIC-era mismanagement of the economy, an extendedperiod of economic sanctions, and the damage to Yugoslavia'sinfrastructure and industry during the NATO airstrikes in 1999 leftthe economy only half the size it was in 1990. After the ousting offormer Federal Yugoslav President MILOSEVIC in October 2000, theDemocratic Opposition of Serbia (DOS) coalition governmentimplemented stabilization measures and embarked on a market reformprogram. After renewing its membership in the IMF in December 2000,a down-sized Yugoslavia continued to reintegrate into theinternational community by rejoining the World Bank (IBRD) and theEuropean Bank for Reconstruction and Development (EBRD). A WorldBank-European Commission sponsored Donors' Conference held in June2001 raised $1.3 billion for economic restructuring. In November2001, the Paris Club agreed to reschedule the country's $4.5 billionpublic debt and wrote off 66% of the debt. In July 2004, the LondonClub of private creditors forgave $1.7 billion of debt, just overhalf the total owed. Belgrade has made only minimal progress inrestructuring and privatizing its holdings in major sectors of theeconomy, including energy and telecommunications. It has madehalting progress towards EU membership and is currently pursuing aStabilization and Association Agreement with Brussels. Serbia isalso pursuing membership in the World Trade Organization.Unemployment remains an ongoing political and economic problem. TheRepublic of Montenegro severed its economy from Serbia during theMILOSEVIC era; therefore, the formal separation of Serbia andMontenegro in June 2006 had little real impact on either economy.Kosovo's economy continues to transition to a market-based systemand is largely dependent on the international community and thediaspora for financial and technical assistance. The euro and theYugoslav dinar are both accepted currencies in Kosovo. Whilemaintaining ultimate oversight, UNMIK continues to work with the EUand Kosovo's local provisional government to accelerate economicgrowth, lower unemployment, and attract foreign investment to helpKosovo integrate into regional economic structures. The complexityof Serbia and Kosovo's political and legal relationships has createduncertainty over property rights and hindered the privatization ofstate-owned assets in Kosovo. Most of Kosovo's population lives inrural towns outside of the largest city, Pristina. Inefficient,near-subsistence farming is common.note: economic data for Serbia currently reflects information forthe former Serbia and Montenegro, unless otherwise noted; data forSerbia alone will be added when available
SeychellesSince independence in 1976, per capita output in thisIndian Ocean archipelago has expanded to roughly seven times the oldnear-subsistence level. Growth has been led by the tourist sector,which employs about 30% of the labor force and provides more than70% of hard currency earnings, and by tuna fishing. In recent yearsthe government has encouraged foreign investment in order to upgradehotels and other services. At the same time, the government hasmoved to reduce the dependence on tourism by promoting thedevelopment of farming, fishing, and small-scale manufacturing.Sharp drops illustrated the vulnerability of the tourist sector in1991-92 due largely to the Gulf War, and once again following the 11September 2001 terrorist attacks on the US. Growth slowed in1998-2002, and fell in 2003, due to sluggish tourist and tunasectors, but resumed in 2004, erasing a persistent budget deficit.Growth turned negative again in 2005. Tight controls on exchangerates and the scarcity of foreign exchange have impaired short-termeconomic prospects. The black-market value of the Seychelles rupeeis half the official exchange rate; without a devaluation of thecurrency, the tourist sector may remain sluggish as vacationers seekcheaper destinations such as Comoros, Mauritius, and Madagascar.
Sierra LeoneSierra Leone is an extremely poor African nation withtremendous inequality in income distribution. While it possessessubstantial mineral, agricultural, and fishery resources, itseconomic and social infrastructure is not well developed, andserious social disorders continue to hamper economic development.About two-thirds of the working-age population engages insubsistence agriculture. Manufacturing consists mainly of theprocessing of raw materials and of light manufacturing for thedomestic market. Alluvial diamond mining remains the major source ofhard currency earnings, accounting for nearly half of Sierra Leone'sexports. The fate of the economy depends upon the maintenance ofdomestic peace and the continued receipt of substantial aid fromabroad, which is essential to offset the severe trade imbalance andsupplement government revenues. The IMF has completed a PovertyReduction and Growth Facility program that helped stabilize economicgrowth and reduce inflation. A recent increase in politicalstability has led to a revival of economic activity, such as therehabilitation of bauxite mining.
SingaporeSingapore, a highly-developed and successful free-marketeconomy, enjoys a remarkably open and corruption-free environment,stable prices, and a per capita GDP equal to that of the fourlargest West European countries. The economy depends heavily onexports, particularly in electronics and manufacturing. It was hardhit in 2001-03 by the global recession, by the slump in thetechnology sector, and by an outbreak of Severe Acute RespiratorySyndrome (SARS) in 2003, which curbed tourism and consumer spending.The government hopes to establish a new growth path that will beless vulnerable to the external business cycle and will continueefforts to establish Singapore as Southeast Asia's financial andhigh-tech hub. Fiscal stimulus, low interest rates, a surge inexports, and internal flexibility led to vigorous growth in 2004,with real GDP rising by 8% - by far the economy's best performancesince 2000 - but growth slowed to 5.7% in 2005.
SlovakiaSlovakia has mastered much of the difficult transition froma centrally planned economy to a modern market economy. The DZURINDAgovernment made excellent progress during 2001-04 in macroeconomicstabilization and structural reform. Major privatizations are nearlycomplete, the banking sector is almost completely in foreign hands,and the government has helped facilitate a foreign investment boomwith business-friendly policies, such as labor market liberalizationand a 19% flat tax. Foreign investment in the automotive sector hasbeen strong. Slovakia's economic growth exceeded expectations in2001-05, despite the general European slowdown. Unemployment, at anunacceptable 18% in 2003-04, dropped to 16.4% in 2005, but remainsthe economy's Achilles heel. Slovakia joined the EU on 1 May 2004.
SloveniaWith its small transition economy and population ofapproximately two million, Slovenia is a model of economic successand stability for its neighbors in the former Yugoslavia. Thecountry, which joined the EU in 2004, has excellent infrastructure,a well-educated work force, and an excellent central location. Itenjoys a GDP per capita substantially higher than any of the othertransitioning economies of Central Europe. In March 2004, Sloveniabecame the first transition country to graduate from borrower statusto donor partner at the World Bank. Slovenia plans to adopt the euroby 2007 and has met the EU's Maastricht criteria for inflation.Despite its economic success, Slovenia faces growing challenges.Much of the economy remains in state hands and foreign directinvestment (FDI) in Slovenia is one of the lowest in the EU on a percapita basis. Taxes are relatively high, the labor market is oftenseen as inflexible, and legacy industries are losing sales to morecompetitive firms in China, India, and elsewhere. The currentcenter-right government, elected in October 2004, has pledged toaccelerate privatization of a number of large state holdings and isinterested in increasing FDI in Slovenia. In late 2005, thegovernment's new Committee for Economic Reforms was elevated tocabinet-level status. The Committee's program includes plans forlowering the tax burden, privatizing state-controlled firms,improving the flexibility of the labor market, and increasing thegovernment's efficiency.
Solomon IslandsThe bulk of the population depends on agriculture,fishing, and forestry for at least part of its livelihood. Mostmanufactured goods and petroleum products must be imported. Theislands are rich in undeveloped mineral resources such as lead,zinc, nickel, and gold. Prior to the arrival of the RegionalAssistance Mission to the Solomon Islands (RAMSI), severe ethnicviolence, the closing of key businesses, and an empty governmenttreasury culminated in economic collapse. RAMSI has enabled a returnto law and order, a new period of economic stability, and modestgrowth as the economy rebuilds.
SomaliaSomalia's economic fortunes are driven by its deep politicaldivisions. The northwestern area has declared its independence asthe "Republic of Somaliland"; the northeastern region of Puntland isa semi-autonomous state; and the remaining southern portion isriddled with the struggles of rival factions. Economic lifecontinues, in part because much activity is local and relativelyeasily protected. Agriculture is the most important sector, withlivestock normally accounting for about 40% of GDP and about 65% ofexport earnings, but Saudi Arabia's ban on Somali livestock, due toRift Valley Fever concerns, has severely hampered the sector. Nomadsand semi-nomads, who are dependent upon livestock for theirlivelihood, make up a large portion of the population. Livestock,hides, fish, charcoal, and bananas are Somalia's principal exports,while sugar, sorghum, corn, qat, and machined goods are theprincipal imports. Somalia's small industrial sector, based on theprocessing of agricultural products, has largely been looted andsold as scrap metal. Despite the seeming anarchy, Somalia's servicesector has managed to survive and grow. Telecommunication firmsprovide wireless services in most major cities and offer the lowestinternational call rates on the continent. In the absence of aformal banking sector, money exchange services have sproutedthroughout the country, handling between $500 million and $1 billionin remittances annually. Mogadishu's main market offers a variety ofgoods from food to the newest electronic gadgets. Hotels continue tooperate, and militias provide security. The ongoing civildisturbances and clan rivalries, however, have interfered with anybroad-based economic development and international aid arrangements.Somalia's arrears to the IMF continued to grow in 2005. Statisticson Somalia's GDP, growth, per capita income, and inflation should beviewed skeptically. In late December 2004, a major tsunami caused anestimated 150 deaths and resulted in destruction of property incoastal areas.
South AfricaSouth Africa is a middle-income, emerging market withan abundant supply of natural resources; well-developed financial,legal, communications, energy, and transport sectors; a stockexchange that ranks among the 10 largest in the world; and a moderninfrastructure supporting an efficient distribution of goods tomajor urban centers throughout the region. However, growth has notbeen strong enough to lower South Africa's high unemployment rate,and daunting economic problems remain from the apartheid era -especially poverty and lack of economic empowerment among thedisadvantaged groups. South African economic policy is fiscallyconservative, but pragmatic, focusing on targeting inflation andliberalizing trade as means to increase job growth and householdincome.
South Georgia and the South Sandwich IslandsSome fishing takesplace in adjacent waters. There is a potential source of income fromharvesting finfish and krill. The islands receive income frompostage stamps produced in the UK, sale of fishing licenses, andharbor and landing fees from tourist vessels. Tourism fromspecialized cruise ships is increasing rapidly.
Southern OceanFisheries in 2003-04 landed 136,262 metric tons, ofwhich 87% (118,166 tons) was krill and 8% (11,182 tons) Patagoniantoothfish, compared to 142,555 tons in 2002-03 of which 83% (117,728tons) was krill and 12% (16,479 tons) Patagonian toothfish(estimated fishing from the area covered by the Convention of theConservation of Antarctic Marine Living Resources (CCAMLR), whichextends slightly beyond the Southern Ocean area). Internationalagreements were adopted in late 1999 to reduce illegal, unreported,and unregulated fishing, which in the 2000-01 season landed, by oneestimate, 8,376 metric tons of Patagonian and Antarctic toothfish.In the 2004-05 Antarctic summer 28,202 tourists, most of themseaborne (approximately 97%), visited the Southern Ocean andAntarctica, compared to 14,762 in 1999-2000.