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, 5.5% in 2005, and 7.5% in2006, largely because of high copper prices and new gold production.Mongolia's economy continues to be heavily influenced by itsneighbors. For example, Mongolia purchases 80% of its petroleumproducts and a substantial amount of electric power from Russia,leaving it vulnerable to price increases. China is Mongolia's chiefexport partner and a main source of the "shadow" or "grey" economy.The World Bank and other international financial institutionsestimate the grey economy to be at least equal to that of theofficial economy, but the former's actual size is difficult tocalculate since the money does not pass through the hands of taxauthorities or the banking sector. Remittances from Mongoliansworking abroad both legally and illegally are sizeable, and moneylaundering is a growing concern. Mongolia settled its $11 billiondebt with Russia at the end of 2003 on favorable terms. Mongolia,which joined the World Trade Organization in 1997, seeks to expandits participation and integration into Asian regional economic andtrade 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 European Bank for Reconstruction and Development. On January 18,2007, Montenegro joined the World Bank and IMF. Montenegro ispursuing its own membership in the World Trade Organization as wellas negotiating a Stabilization and Association agreement with theEuropean Union in anticipation of eventual membership. Severeunemployment remains a key political and economic problem for thisentire region. Montenegro has privatized its large aluminum complex- the dominant industry - as well as most of its financial sector,and has begun to attract foreign direct investment in the tourismsector.
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 increased due to the volatile nature of GDP, Morocco'scontinued dependence on foreign energy, and its inability to promotethe growth of small and medium size enterprises. However, GDP growthrebounded to 6.7% in 2006 due to high rainfall, which resulted in astrong second harvest. Despite structural adjustment programssupported by the IMF, the World Bank, and the Paris Club, the dirhamis only fully convertible for current account transactions andMorocco's financial sector is rudimentary. Moroccan authoritiesunderstand that reducing poverty and providing jobs is key todomestic security and development. In 2004, Moroccan authoritiesinstituted measures to boost foreign direct investment and trade bysigning a free trade agreement with the US, which entered into forcein January 2006, and sold government shares in the statetelecommunications company and in the largest state-owned bank.Long-term challenges include preparing the economy for freer tradewith the US and European Union, improving education and jobprospects for Morocco's youth, and raising living standards, whichthe government hopes to achieve by increasing tourist arrivals andboosting competitiveness in textiles.
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 2000-06. 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 2003-06.
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 2001-06, 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 15% of GDP - and tourism are keys to the health of the economy.Substantial new investment in the nickel industry, combined with therecovery of global nickel prices, brightens the economic outlook forthe 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 eight consecutive years and was more than$25,500 in 2006 in purchasing power parity terms. Consumer andgovernment spending have driven growth in recent years, and exportspicked up in 2006 after struggling for several years. Exports areequal to about 28% of GDP, down from 33 percent of GDP in 2001. Thusfar the economy has been resilient, and the Labor Governmentpromises that expenditures on health, education, and pensions willincrease proportionately to output.
NicaraguaNicaragua, the second poorest country in the WesternHemisphere, has low per capita income and widespreadunderemployment. Distribution of income is one of the most unequalon the globe. While the country has progressed toward macroeconomicstability in the past few years, GDP annual growth has been far toolow to meet the country's needs, forcing the country to rely oninternational economic assistance to meet fiscal and debt financingobligations. Nicaragua qualified in early 2004 for some $4.5 billionin foreign debt reduction under the Heavily Indebted Poor Countries(HIPC) initiative and in November 2006 obtained over $800 million indebt relief from the Inter-American Development Bank. In October2005, Nicaragua ratified the US-Central America Free Trade Agreement(CAFTA), which will provide an opportunity for Nicaragua to attractinvestment, create jobs, and deepen economic development. Energyshortages, however, are a serious bottleneck to growth.
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, and a2.9% population growth rate, have undercut the economy. Niger sharesa common currency, the CFA franc, and a common central bank, theCentral Bank of West African States (BCEAO), with seven othermembers of the West African Monetary Union. In December 2000, Nigerqualified for enhanced debt relief under the International MonetaryFund program for Highly Indebted Poor Countries (HIPC) and concludedan agreement with the Fund on a Poverty Reduction and GrowthFacility (PRGF). Debt relief provided under the enhanced HIPCinitiative significantly reduces Niger's annual debt serviceobligations, freeing funds for expenditures on basic health care,primary education, HIV/AIDS prevention, rural infrastructure, andother programs geared at poverty reduction. In December 2005, Nigerreceived 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 haveincreased sharply in the last few years. A drought and locustinfestation in 2005 led to food shortages for as many as 2.5 millionNigeriens.
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. InNovember 2005, Abuja won Paris Club approval for a debt-relief dealthat eliminated $18 billion of debt in exchange for $12 billion inpayments-a total package worth $30 billion of Nigeria's total $37billion external debt. The deal requires Nigeria to be subject tostringent IMF reviews. GDP rose strongly in 2006, based largely onincreased oil exports and high global crude prices.
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 less than 1% in 2002-03, GDPgrowth picked up to 3-4% in 2004-06. Norway's economy remainsbuoyant. Domestic economic activity is, and will continue to be, themain driver of growth, supported by high consumer confidence andstrong investment spending in the offshore oil and gas sector.
OmanOman is a middle-income economy in the Middle East with notableoil and gas resources, a substantial trade surplus, and lowinflation. Sustained high oil prices in recent years have helpedbuild Oman's budget and trade surpluses and foreign reserves. Omanjoined the World Trade Organization in November 2000 and continuesto liberalize its markets. To reduce unemployment and limitdependence on foreign labor, the government is encouraging thereplacement of foreign expatriate workers with local workers. Omanactively seeks private foreign investors, especially in theindustrial, information technology, tourism, and higher educationfields. Industrial development plans focus on gas resources, metalmanufacturing, petrochemicals, and international transshipment ports.
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 five years. The government has made substantialmacroeconomic reforms since 2000, most notably privatizing thebanking sector. Poverty levels have decreased by 10 percent since2001, and Islamabad has steadily raised development spending inrecent years, including a 52-percent real increase in the budgetallocation for development in fiscal year 2007, a necessary steptoward reversing the broad underdevelopment of its social sector.The fiscal deficit - the result of chronically low tax collectionand increased spending, including reconstruction costs from theOctober 2005 earthquake - appears manageable for now. GDP growth,spurred by gains in the industrial and service sectors, remained inthe 6-8% range in 2004-06. Inflation remains the biggest threat tothe economy, jumping to more than 9% in 2005 before easing to 7.9%in 2006. The central bank is pursuing tighter monetary policy -raising interest rates in 2006 - while trying to preserve growth.Foreign exchange reserves are bolstered by steady workerremittances, but a growing current account deficit - driven by awidening trade gap as import growth outstrips export expansion -could draw down reserves and dampen GDP growth in the medium 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 2004-06 led byexport-oriented services and a construction boom stimulated by taxincentives. The government has implemented tax reforms, as well associal security reforms, and backs regional trade agreements anddevelopment of tourism. Unemployment remains high. In October 2006,voters passed a referendum to expand the Panama Canal to accommodateships that are now too large to cross the transoceanic crossway. Nota CAFTA signatory, Panama in December 2006 independently negotiateda free trade agreement with the United States, which, whenimplemented, will help promote the country's economic growth.
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 could upend the economy including a worsening HIV/Aidsepidemic and chronic law and order and land tenure issues. Australiaannually 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 2006, 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 2002-2006, 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, underemployment and poverty havestayed persistently high. Economic growth continues to be driven bythe Camisea natural gas megaproject and by exports of minerals,textiles, and agricultural products. Upon taking office, PresidentGARCIA announced the formation of Sierria Exportadora, a programaimed at promoting economic growth in Southern Peru and thehighlands.
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 2006 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,making it East Asia's best performing currency in 2005-06. Investorsand credit rating institutions will continue to look for effectiveimplementation of the new VAT and continued improvement in thegovernment's overall fiscal 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 since 1990 and today stands out as a success storyamong transition economies. Even so, much remains to be done,especially in bringing down the unemployment rate - still thehighest in the EU despite recent improvement. The privatization ofsmall- and medium-sized state-owned companies and a liberal law onestablishing new firms has encouraged the development of the privatebusiness sector, but legal and bureaucratic obstacles alongsidepersistent corruption are hampering its further development.Poland's agricultural 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 benefited from nearly $23.2 billion in EU funds,which were available through 2006. Farmers have already begun toreap the rewards of membership via booming exports, higher foodprices, and EU agricultural subsidies.
PortugalPortugal has become a diversified and increasinglyservice-based economy since joining the European Community in 1986.Over the past two decades, successive governments have privatizedmany state-controlled firms and liberalized key areas of theeconomy, including the financial and telecommunications sectors. Thecountry qualified for the European Monetary Union (EMU) in 1998 andbegan circulating the euro on 1 January 2002 along with 11 other EUmember economies. Economic growth had been above the EU average formuch of the 1990s, but fell back in 2001-06. GDP per capita standsat roughly 70% of the EU-25 average. A poor educational system, inparticular, has been an obstacle to greater productivity and growth.Portugal has been increasingly overshadowed by lower-cost producersin Central Europe and Asia as a target for foreign directinvestment. The budget deficit surged to an all-time high of 6% ofGDP in 2005 but was reduced to 4.6% in 2006. The government facestough choices in its attempts to boost Portugal's economiccompetitiveness while keeping the budget deficit within theeurozone'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, recovered in 2004-05, but declinedagain in 2006.
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. Sustained high oil prices andincreased natural gas exports in recent years have helped buildQatar's budget and trade surpluses and foreign reserves. Proved oilreserves of more than 15 billion barrels should ensure continuedoutput at current levels for 23 years. Qatar's proved reserves ofnatural gas exceed 25 trillion cubic meters, more than 5% of theworld total and third largest in the world. Qatar has permittedsubstantial foreign investment in the development of its gas fieldsduring the last decade and is expected to become the world's topliquefied natural gas (LNG) exporter in 2007. Qatar is also tryingto attract foreign investment in the development of its non-energyprojects by further liberalizing the economy. Qatar has become oneof the world's fastest growing and highest per-capita incomecountries.
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%. However, macroeconomic gains have only recently started tospur creation of a middle class and address Romania's widespreadpoverty, while corruption and red tape continue to handicap thebusiness environment. Romanian government confidence in continuingdisinflation was underscored by its currency revaluation in 2005,making 10,000 "old" lei equal 1 "new" leu. The economy grew at 6.4%in 2006, the strongest growth in the last decade. Romania joined theEuropean Union on 1 January 2007, and the IMF has praised thecountry's recent reform efforts in preparation for EU accession.
RussiaRussia ended 2006 with its eighth straight year of growth,averaging 6.7% 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.Over the past several years, Russia has used its stabilization fundbased on oil taxes to prepay all Soviet-era sovereign debt to ParisClub creditors and the IMF. Foreign debt has decreased to 39% ofGDP, mainly due to decreasing state debt, while commercial debt toforeigners has risen strongly. Oil export earnings have allowedRussia to increase its foreign reserves from $12 billion in 1999 tosome $315 billion at yearend 2006, the third largest reserves in theworld. These achievements, along with a renewed government effort toadvance structural reforms and fiscal restraint, have raisedbusiness and investor confidence in Russia's economic prospects.Russia's economy grew 6.6% in 2006 and inflation growth was below10% for the first time in the past 10 years. Russia shows signs ofincreasing its ties to the global economy, having signed a bilateralmarket access agreement with the US as a prelude to possible WTOentry. Nevertheless, serious problems persist. Oil, natural gas,metals, and timber account for more than 80% of exports, leaving thecountry vulnerable to swings in world commodity prices. Russia'smanufacturing base is dilapidated and must be replaced or modernizedif the country is to achieve broad-based economic growth. Thebanking system, while growing at a high rate and increasing consumerlending, is still small relative to the banking sectors of Russia'semerging market peers. Domestic and foreign investor sentiment istempered by political uncertainties ahead of elections, corruption,and widespread lack of trust in institutions. President PUTINcontinues to grant more influence to forces within his governmentthat desire to reassert state control over the economy. Governmentspending has increased and risks becoming populist, most notably inthe form of the four "national projects" of agriculture, education,housing, and medicine. Russia has made little progress in buildingthe rule of law, the bedrock of a modern market economy.
RwandaRwanda is a poor rural country with about 90% of thepopulation engaged in (mainly subsistence) agriculture. It is themost densely populated country in Africa 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. Rwanda obtained debtrelief from the IMF and World Bank in 2006. Rwanda also receivedMillennium Challenge Account Threshold status in 2006. Energyshortages, instability in neighboring states, and lack of adequatetransportation linkages to other countries continue to handicapgrowth.
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. The government closed the sugarindustry following the 2005 harvest after decades of losses at thestate-run sugar company. To compensate, the government has embarkedon a program to diversify the agricultural sector and to stimulateother sectors of the economy. 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 341,800 touristsvisited Nevis in 2005. Additional tourist facilities, including asecond cruise ship pier, hotels, and golf courses are underconstruction.
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. Tourismis the main source of foreign exchange, with more than 700,000arrivals in 2005. The manufacturing sector is the most diverse inthe Eastern Caribbean area, and the government is trying torevitalize the banana industry. Economic fundamentals remain solid,even though unemployment 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 suffered low arrivals in the immediateaftermath of 11 September 2001. The islands had more than 160,000tourist arrivals in 2005, mostly to the Grenadines. Saint Vincent ishome to a small offshore banking sector and has moved to adoptinternational regulatory standards. Saint Vincent is also a producerof marijuana and is being used as a transshipment point for illegalnarcotics 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. Thefish catch declined during the El Nino of 2002-03, but returned tonormal by mid-2005. The manufacturing sector mainly processesagricultural products. One factory in the Foreign Trade Zone employs3,000 people to make automobile electrical harnesses for an assemblyplant in Australia. Tourism is an expanding sector, accounting for25% of GDP; about 100,000 tourists visited the islands in 2005. TheSamoan Government has called for deregulation of the financialsector, encouragement of investment, and continued fiscaldiscipline, while at the same time protecting the environment.Observers point to the flexibility of the labor market as a basicstrength for future economic advances. Foreign reserves are in arelatively healthy state, the external debt is stable, and inflationis low.
San MarinoThe tourist sector contributes over 50% of GDP. In 2006more than 2.1 million tourists visited San Marino. The keyindustries are banking, wearing apparel, electronics, and ceramics.Main agricultural products are wine and cheeses. The per capitalevel of output and standard of living are comparable to those ofthe most prosperous regions of Italy, which supplies much of itsfood.
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, which helped bring down the country's $300 million debtburden. In August 2005, Sao Tome signed on to a new 3-year IMFPoverty Reduction and Growth Facility (PRGF) program worth $4.3million. Considerable potential exists for development of a touristindustry, and the government has taken steps to expand facilities inrecent years. The government also has attempted to reduce pricecontrols and subsidies. Sao Tome is optimistic about the developmentof petroleum resources in its territorial waters in the oil-richGulf of Guinea, which are being jointly developed in a 60-40 splitwith Nigeria. The first production licenses were sold in 2004,though a dispute over licensing with Nigeria delayed Sao Tome'sreceipt of more than $20 million in signing bonuses for almost ayear. Real GDP growth exceeded 4% in 2006, as a result of increasesin public expenditures and oil-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 ispromoting private sector and foreign participation in the powergeneration, telecom, natural gas, and petrochemical industries. Aspart of its effort to attract foreign investment and diversify theeconomy, Saudi Arabia acceded to the WTO in December 2005 after manyyears of negotiations. With high oil revenues enabling thegovernment to post large budget surpluses, Riyadh has been able tosubstantially boost spending on job training and education,infrastructure development, and government 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 during1995-2006. 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. Highunemployment, however, continues to prompt illegal migrants to fleeSenegal in search of better job opportunities in Europe. Senegal wasalso beset by an energy crisis that caused widespread blackouts in2006. 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 theSerbian 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. Growth turned negative again in2005-06. Tight controls on exchange rates and the scarcity offoreign exchange have impaired short-term economic prospects. Theblack-market value of the Seychelles rupee is half the officialexchange rate; without a devaluation of the currency, the touristsector may remain sluggish as vacationers seek cheaper destinationssuch 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 and rutile 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 consumer electronics and informationtechnology products. It was hard hit in 2001-03 by the globalrecession, by the slump in the technology sector, and by an outbreakof Severe Acute Respiratory Syndrome (SARS) in 2003, which curbedtourism and consumer spending. Fiscal stimulus, low interest rates,a surge in exports, and internal flexibility led to vigorous growthin 2004-06, with real GDP growth averaging 7% annually. Thegovernment hopes to establish a new growth path that will be lessvulnerable to the global demand cycle for information technologyproducts - it has attracted major investments in pharmaceuticals andmedical technology production - and will continue efforts toestablish Singapore as Southeast Asia's financial and high-tech hub.
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 in2001-06, despite the general European slowdown. Unemployment, at anunacceptable 18% in 2003-04, dropped to 10.2% in 2006, but remainsthe economy's Achilles heel. Slovakia joined the EU on 1 May 2004.
SloveniaWith a GDP per capita substantially greater than the othertransitioning economies of Central Europe, Slovenia is a model ofeconomic success and stability for its neighbors in the formerYugoslavia. The country, which joined the EU in 2004 and joined theeurozone on 1 January 2007, has excellent infrastructure, awell-educated work force, and an excellent central location.Privatization of the economy proceeded at an accelerated pace in2002-05. Despite lackluster performance in Europe in 2001-05,Slovenia maintained moderate growth. Structural reforms to improvethe business environment have allowed for greater foreignparticipation in Slovenia's economy and have helped to lowerunemployment. In March 2004, Slovenia became the first transitioncountry to graduate from borrower status to donor partner at theWorld Bank. Despite its economic success, Slovenia faces growingchallenges. Much of the economy remains in state hands and foreigndirect investment (FDI) in Slovenia is one of the lowest in the EUon a per capita basis. Taxes are relatively high, the labor marketis often seen as inflexible, and legacy industries are losing salesto more competitive firms in China, India, and elsewhere. Thecurrent center-right government, elected in October 2004, haspledged to accelerate privatization of a number of large stateholdings and is interested in increasing FDI in Slovenia. In late2005, the government's new Committee for Economic Reforms waselevated to cabinet-level status. The Committee's program includesplans for lowering the tax burden, privatizing state-controlledfirms, improving the flexibility of the labor market, and increasingthe government'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's efforts to restorelaw and order and economic stability have led to modest growth asthe 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. The SCIC hasopened Mogadishu's main port and airport - closed for 15 years - andnow controls most of the ports and airfields in southern Somalia.Hotels continue to operate, and militias provide security. Theongoing civil disturbances and clan rivalries, however, haveinterfered with any broad-based economic development andinternational aid arrangements. Somalia's arrears to the IMFcontinued to grow in 2006. Statistics on Somalia's GDP, growth, percapita income, and inflation should be viewed skeptically. In lateDecember 2004, a major tsunami caused an estimated 150 deaths andresulted in destruction of property in coastal 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.
SpainThe Spanish economy boomed from 1986 to 1990, averaging 5%annual growth. After a European-wide recession in the early 1990s,the Spanish economy resumed moderate growth starting in 1994.Spain's mixed capitalist economy supports a GDP that on a per capitabasis is 80% that of the four leading West European economies. Thecenter-right government of former President AZNAR successfullyworked to gain admission to the first group of countries launchingthe European single currency (the euro) on 1 January 1999. The AZNARadministration continued to advocate liberalization, privatization,and deregulation of the economy and introduced some tax reforms tothat end. Unemployment fell steadily under the AZNAR administrationbut remains high at 8.7%. Growth averaging 3% annually during2003-06 was satisfactory given the background of a falteringEuropean economy. The Socialist president, RODRIGUEZ ZAPATERO, hasmade mixed progress in carrying out key structural reforms, whichneed to be accelerated and deepened to sustain Spain's strongeconomic growth. Despite the economy's relative solid footingsignificant downside risks remain, including Spain's continued lossof competitiveness, the potential for a housing market collapse, thecountry's changing demographic profile and a decline in EUstructural funds.
Spratly IslandsEconomic activity is limited to commercial fishing.The proximity to nearby oil- and gas-producing sedimentary basinssuggests the potential for oil and gas deposits, but the region islargely unexplored. There are no reliable estimates of potentialreserves. Commercial exploitation has yet to be developed.
Sri LankaIn 1977, Colombo abandoned statist economic policies andits import substitution trade policy for more market-orientedpolicies, export-oriented trade, and encouragement of foreigninvestment. Recent changes in government have brought some policyreversals, however. Currently, the ruling Sri Lanka Freedom Partyhas a more statist economic approach which seeks to reduce povertyby steering investment to disadvantaged areas, developing small andmedium enterprises, promoting agriculture, and expanding the alreadyenormous civil service. The government has halted mostprivatizations. Although suffering a brutal civil war that began in1983, Sri Lanka saw GDP growth average 4.5% in the last ten years,with a brief interruption during the global downturn in 2001. Inlate December 2004, a major tsunami took about 31,000 lives, leftmore than 6,300 missing and 443,000 displaced, and destroyed anestimated $1.5 billion worth of property. Growth, partly spurred byreconstruction, reached 5% in 2005 and more than 6% in 2006. SriLanka's most dynamic sectors now are food processing, textiles andapparel, food and beverages, port contstruction, telecommunications,and insurance and banking. In 2005, plantation crops made up onlyabout 15% of exports (compared with more than 90% in 1970), whiletextiles and garments accounted for more than 60%. About 800,000 SriLankans work abroad, 90% in the Middle East. They send home about $1billion a year. The struggle by the Tamil Tigers of the north andeast for a largely independent homeland continues to cast a shadowover the economy.