CubaThe government continues to balance the need for economicloosening against a desire for firm political control. It has rolledback limited reforms undertaken in the 1990s to increase enterpriseefficiency and alleviate serious shortages of food, consumer goods,and services. The average Cuban's standard of living remains at alower level than before the downturn of the 1990s, which was causedby the loss of Soviet aid and domestic inefficiencies. Since late2000, Venezuela has been providing oil on preferential terms, and itcurrently supplies about 100,000 barrels per day of petroleumproducts. Cuba has been paying for the oil, in part, with theservices of Cuban personnel in Venezuela, including some 20,000medical professionals. In 2007, high metals prices continued toboost Cuban earnings from nickel and cobalt production. Havanacontinued to invest in the country's energy sector to mitigateelectrical blackouts that had plagued the country since 2004.
CyprusThe area of the Republic of Cyprus under government controlhas a market economy dominated by the service sector, which accountsfor 78% of GDP. Tourism, financial services, and real estate are themost important sectors. Erratic growth rates over the past decadereflect the economy's reliance on tourism, which often fluctuateswith political instability in the region and economic conditions inWestern Europe. Nevertheless, the economy in the area undergovernment control grew by an average of 3.6% per year during theperiod of 2000-06, well above the EU average. Cyprus joined theEuropean Exchange Rate Mechanism (ERM2) in May 2005 and adopted theeuro as its national currency on 1 January 2008. An aggressiveausterity program in the preceding years, aimed at paving the wayfor the euro, helped turn a soaring fiscal deficit (6.3% in 2003)into a surplus of 1.5% in 2007. As in the area administered byTurkish Cypriots, water shortages are a perennial problem; a fewdesalination plants are now on line. After 10 years of drought, thecountry received substantial rainfall from 2001-04 alleviatingimmediate concerns. Rainfall in 2005 and 2006, however, was wellbelow average, making water rationing a necessity in 2007.
Czech RepublicThe Czech Republic is one of the most stable andprosperous of the post-Communist states of Central and EasternEurope. Growth in 2000-07 was supported by exports to the EU,primarily to Germany, and a strong recovery of foreign and domesticinvestment. Domestic demand is playing an ever more important rolein underpinning growth as the availability of credit cards andmortgages increases. The current account deficit has declined toaround 3.3% of GDP as demand for automotive and other products fromthe Czech Republic remains strong in the European Union. Risinginflation from higher food and energy prices are a risk to balancedeconomic growth. Significant increases in social spending in therun-up to June 2006 elections prevented, the government from meetingits goal of reducing its budget deficit to 3% of GDP in 2007.Negotiations on pension and additional healthcare reforms arecontinuing without clear prospects for agreement and implementation.Intensified restructuring among large enterprises, improvements inthe financial sector, and effective use of available EU funds shouldstrengthen output growth. The pro-business Civic DemocraticParty-led government approved reforms in 2007 designed to cutspending on some social welfare benefits and reform the tax systemwith the aim of eventually reducing the budget deficit to 2.3% ofGDP by 2010. Parliamentary approval for any additional reforms couldprove difficult, however, because of the parliament's even split.The government withdrew a 2010 target date for euro adoption andinstead aims to meet the eurozone criteria around 2012.
DenmarkThe Danish economy has in recent years undergone strongexpansion fueled primarily by private consumption growth, but alsosupported by exports and investments. This thoroughly modern marketeconomy features high-tech agriculture, up-to-date small-scale andcorporate industry, extensive government welfare measures,comfortable living standards, a stable currency, and high dependenceon foreign trade. Unemployment is low and capacity constraints arelimiting growth potential. Denmark is a net exporter of food andenergy and enjoys a comfortable balance of payments surplus.Government objectives include streamlining the bureaucracy andfurther privatization of state assets. The government has beensuccessful in meeting, and even exceeding, the economic convergencecriteria for participating in the third phase (a common Europeancurrency) of the European Economic and Monetary Union (EMU), but sofar Denmark has decided not to join 15 other EU members in the euro.Nonetheless, the Danish krone remains pegged to the euro. Economicgrowth gained momentum in 2004 and the upturn continued through2007. The controversy over caricatures of the Prophet Muhammadprinted in a Danish newspaper in September 2005 led to boycotts ofsome Danish exports to the Muslim world, especially exports of dairyproducts, but the boycotts did not have a significant impact on theoverall Danish economy. Because of high GDP per capita, welfarebenefits, a low Gini index, and political stability, the Danishliving standards are among the highest in the world. A majorlong-term issue will be the sharp decline in the ratio of workers toretirees.
DhekeliaEconomic activity is limited to providing services to themilitary and their families located in Dhekelia. All food andmanufactured goods must be imported.
DjiboutiThe economy is based on service activities connected withthe country's strategic location and status as a free trade zone inthe Horn of Africa. Two-thirds of Djibouti's inhabitants live in thecapital city; the remainder are mostly nomadic herders. Scantyrainfall limits crop production to fruits and vegetables, and mostfood must be imported. Djibouti provides services as both a transitport for the region and an international transshipment and refuelingcenter. Imports and exports from landlocked neighbor Ethiopiarepresent 85% of port activity at Djibouti's container terminal.Djibouti has few natural resources and little industry. The nationis, therefore, heavily dependent on foreign assistance to helpsupport its balance of payments and to finance development projects.An unemployment rate of nearly 60% continues to be a major problem.While inflation is not a concern, due to the fixed tie of theDjiboutian franc to the US dollar, the artificially high value ofthe Djiboutian franc adversely affects Djibouti's balance ofpayments. Per capita consumption dropped an estimated 35% between1999 and 2006 because of recession, civil war, and a high populationgrowth rate (including immigrants and refugees). Faced with amultitude of economic difficulties, the government has fallen inarrears on long-term external debt and has been struggling to meetthe stipulations of foreign aid donors.
DominicaThe Dominican economy depends on agriculture, primarilybananas, and remains highly vulnerable to climatic conditions andinternational economic developments. Tourism has increased as thegovernment seeks to promote Dominica as an "ecotourism" destination.In 2003, the government began a comprehensive restructuring of theeconomy - including elimination of price controls, privatization ofthe state banana company, and tax increases - to address Dominica'seconomic and financial crisis of 2001-02 and to meet IMF targets.This restructuring paved the way for the current economic recovery -real growth for 2006 reached a two-decade high - and will help toreduce the debt burden, which remains at about 100% of GDP. In orderto diversify the island's production base, the government isattempting to develop an offshore financial sector and isresearching Dominica's capability to export geothermal energy.
Dominican RepublicThe Dominican Republic has enjoyed strong GDPgrowth since 2005, with double digit growth in 2006. In 2007,exports were bolstered by the nearly 50% increase in nickel prices;however, prices are expected to fall in 2008, contributing to aslowdown in GDP growth for the year. Although the country has longbeen viewed primarily as an exporter of sugar, coffee, and tobacco,in recent years the service sector has overtaken agriculture as theeconomy's largest employer due to growth in tourism and free tradezones. The economy is highly dependent upon the US, the source ofnearly three-fourths of exports, and remittances represent about atenth of GDP, equivalent to almost half of exports andthree-quarters of tourism receipts. With the help of strict fiscaltargets agreed to in the 2004 renegotiation of an IMF standby loan,President FERNANDEZ has stabilized the country's financialsituation, lowering inflation to less than 6%. A fiscal expansion isexpected for 2008 prior to the elections in May and for TropicalStorm Noel reconstruction. Although the economy is growing at arespectable rate, high unemployment and underemployment remains animportant challenge. The country suffers from marked incomeinequality; the poorest half of the population receives less thanone-fifth of GNP, while the richest 10% enjoys nearly 40% ofnational income. The Central America-Dominican Republic Free TradeAgreement (CAFTA-DR) came into force in March 2007, which shouldboost investment and exports and reduce losses to the Asian garmentindustry.
EcuadorEcuador is substantially dependent on its petroleumresources, which have accounted for more than half of the country'sexport earnings and one-fourth of public sector revenues in recentyears. In 1999/2000, Ecuador suffered a severe economic crisis, withGDP contracted by more than 6%, with a significant increase inpoverty. The banking system also collapsed, and Ecuador defaulted onits external debt later that year. In March 2000, Congress approveda series of structural reforms that also provided for the adoptionof the US dollar as legal tender. Dollarization stabilized theeconomy, and positive growth returned in the years that followed,helped by high oil prices, remittances, and increasednon-traditional exports. From 2002-06 the economy grew 5.5%, thehighest five-year average in 25 years. The poverty rate declined butremained high at 38% in 2006. In 2006 the government of AlfredoPALACIO (2005-07) seized the assets of Occidental Petroleum foralleged contract violations and imposed a windfall revenue tax onforeign oil companies, leading to the suspension of free tradenegotiations with the US. These measures, combined with chronicunderinvestment in the state oil company, Petroecuador, led to adrop in petroleum production in 2007. PALACIO's successor, RafaelCORREA, raised the specter of debt default - but Ecuador has paidits debt on time. He also decreed a higher windfall revenue tax onprivate oil companies, then sought to renegotiate their contracts toovercome the debilitating effect of the tax. This generated economicuncertainty; private investment has dropped and economic growth hasslowed significantly.
EgyptOccupying the northeast corner of the African continent, Egyptis bisected by the highly fertile Nile valley, where most economicactivity takes place. In the last 30 years, the government hasreformed the highly centralized economy it inherited from PresidentGamel Abdel NASSER. In 2005, Prime Minister Ahmed NAZIF's governmentreduced personal and corporate tax rates, reduced energy subsidies,and privatized several enterprises. The stock market boomed, and GDPgrew about 5% per year in 2005-06, and topped 7% in 2007. Despitethese achievements, the government has failed to raise livingstandards for the average Egyptian, and has had to continueproviding subsidies for basic necessities. The subsidies havecontributed to a sizeable budget deficit - roughly 7.5% of GDP in2007 - and represent a significant drain on the economy. Foreigndirect investment has increased significantly in the past two years,but the NAZIF government will need to continue its aggressivepursuit of reforms in order to sustain the spike in investment andgrowth and begin to improve economic conditions for the broaderpopulation. Egypt's export sectors - particularly natural gas - havebright prospects.
El SalvadorThe smallest country in Central America, El Salvador hasthe third largest economy, but growth has been modest in recentyears. Robust growth in non-traditional exports have offset declinesin the maquila exports, while remittances and external aid offsetthe trade deficit from high oil prices and strong import demand forconsumer and intermediate goods. El Salvador leads the region inremittances per capita with inflows equivalent to nearly all exportincome. Implementation in 2006 of the Central America-DominicanRepublic Free Trade Agreement (CAFTA), which El Salvador was thefirst to ratify, has strengthened an already positive export trend.With the adoption of the US dollar as its currency in 2001, ElSalvador lost control over monetary policy and must concentrate onmaintaining a disciplined fiscal policy. The current government haspursued economic diversification, with some success in promotingtextile production, international port services, and tourism throughtax incentives. It is committed to opening the economy to trade andinvestment, and has embarked on a wave of privatizations extendingto telecom, electricity distribution, banking, and pension funds. Inlate 2006, the government and the Millennium Challenge Corporationsigned a five-year, $461 million compact to stimulate economicgrowth and reduce poverty in the country's northern region throughinvestments in education, public services, enterprise development,and transportation infrastructure.
Equatorial GuineaThe discovery and exploitation of large oilreserves have contributed to dramatic economic growth in recentyears. Forestry, farming, and fishing are also major components ofGDP. Subsistence farming predominates. Although pre-independenceEquatorial Guinea counted on cocoa production for hard currencyearnings, the neglect of the rural economy under successive regimeshas diminished potential for agriculture-led growth (the governmenthas stated its intention to reinvest some oil revenue intoagriculture). A number of aid programs sponsored by the World Bankand the IMF have been cut off since 1993, because of corruption andmismanagement. No longer eligible for concessional financing becauseof large oil revenues, the government has been trying to agree on a"shadow" fiscal management program with the World Bank and IMF.Government officials and their family members own most businesses.Undeveloped natural resources include titanium, iron ore, manganese,uranium, and alluvial gold. Growth remained strong in 2007, led byoil.
EritreaSince independence from Ethiopia in 1993, Eritrea has facedthe economic problems of a small, desperately poor country,accentuated by the recent implementation of restrictive economicpolicies. Eritrea has a command economy under the control of thesole political party, the People's Front for Democracy and Justice(PFDJ). Like the economies of many African nations, the economy islargely based on subsistence agriculture, with 80% of the populationinvolved in farming and herding. The Ethiopian-Eritrea war in1998-2000 severely hurt Eritrea's economy. GDP growth fell to zeroin 1999 and to -12.1% in 2000. The May 2000 Ethiopian offensive intonorthern Eritrea caused some $600 million in property damage andloss, including losses of $225 million in livestock and 55,000homes. The attack prevented planting of crops in Eritrea's mostproductive region, causing food production to drop by 62%. Evenduring the war, Eritrea developed its transportation infrastructure,asphalting new roads, improving its ports, and repairing war-damagedroads and bridges. Since the war ended, the government hasmaintained a firm grip on the economy, expanding the use of themilitary and party-owned businesses to complete Eritrea'sdevelopment agenda. The government strictly controls the use offoreign currency, limiting access and availability. Few privateenterprises remain in Eritrea. Eritrea's economy is heavilydependent on taxes paid by members of the diaspora. Erratic rainfalland the delayed demobilization of agriculturalists from the militarycontinue to interfere with agricultural production, and Eritrea'srecent harvests have not been able to meet the food needs of thecountry. The government continues to place its hope for additionalrevenue on the development of several international mining projects.Despite difficulties for international companies in working with theEritrean government, a Canadian mining company signed a contractwith the GSE in 2007 and plans to begin mineral extraction in 2010.Eritrea also anticipates opening a free trade zone at the port ofMassawa in 2008. Eritrea's economic future depends upon its abilityto master social problems such as illiteracy, unemployment, and lowskills, and more importantly, on the government's willingness tosupport a true market economy.
EstoniaEstonia, a 2004 European Union entrant, has a modernmarket-based economy and one of the highest per capita income levelsin Central Europe. The economy benefits from strong electronics andtelecommunications sectors and strong trade ties with Finland,Sweden, and Germany. The current government has pursued relativelysound fiscal policies, resulting in balanced budgets and low publicdebt. In 2007, however, a large current account deficit and risinginflation put pressure on Estonia's currency, which is pegged to theeuro, highlighting the need for growth in export-generatingindustries.
EthiopiaEthiopia's poverty-stricken economy is based onagriculture, accounting for almost half of GDP, 60% of exports, and80% of total employment. The agricultural sector suffers fromfrequent drought and poor cultivation practices. Coffee is criticalto the Ethiopian economy with exports of some $350 million in 2006,but historically low prices have seen many farmers switching to qatto supplement income. The war with Eritrea in 1998-2000 andrecurrent drought have buffeted the economy, in particular coffeeproduction. In November 2001, Ethiopia qualified for debt relieffrom the Highly Indebted Poor Countries (HIPC) initiative, and inDecember 2005 the IMF voted to forgive Ethiopia's debt to the body.Under Ethiopia's constitution, the state owns all land and provideslong-term leases to the tenants; the system continues to hampergrowth in the industrial sector as entrepreneurs are unable to useland as collateral for loans. Drought struck again late in 2002,leading to a 3.3% decline in GDP in 2003. Normal weather patternshelped agricultural and GDP growth recover during 2004-07.
European UnionInternally, the EU is attempting to lower tradebarriers, adopt a common currency, and move toward convergence ofliving standards. Internationally, the EU aims to bolster Europe'strade position and its political and economic power. Because of thegreat differences in per capita income among member states (from$7,000 to $69,000) and historic national animosities, the EU facesdifficulties in devising and enforcing common policies. For example,since 2003 Germany and France have flouted the member states' treatyobligation to prevent their national budgets from running more thana 3% deficit. In 2004 and 2007, the EU admitted 10 and twocountries, respectively, that are, in general, less advancedtechnologically and economically than the other 15. Elevenestablished EU member states introduced the euro as their commoncurrency on 1 January 1999 (Greece did so two years later), but theUK, Sweden, and Denmark chose not to participate. Of the 12 mostrecent member states, only Slovenia (1 January 2007) and Cyprus andMalta (1 January 2008) have adopted the euro; the remaining nine arelegally required to adopt the currency upon meeting EU's fiscal andmonetary convergence criteria.
Falkland Islands (Islas Malvinas) The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987, the government began selling fishing licenses to foreign trawlers operating within the Falkland Islands' exclusive fishing zone. These license fees total more than $40 million per year, which help support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defense. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date, no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.
Faroe IslandsThe Faroese economy is dependent on fishing, whichmakes the economy vulnerable to price swings. Since 2003 the Faroeseeconomy has picked up as a result of higher prices for fish and forhousing. Unemployment is minimal and government finances arerelatively sound. Oil finds close to the Islands give hope foreconomically recoverable deposits, which could eventually lay thebasis for a more diversified economy and lessen dependence on Danisheconomic assistance. Aided by a substantial annual subsidy (about15% of GDP) from Denmark, the Faroese have a standard of living notfar below the Danes and other Scandinavians.
FijiFiji, endowed with forest, mineral, and fish resources, is oneof the most developed of the Pacific island economies, though stillwith a large subsistence sector. Sugar exports, remittances fromFijians working abroad, and a growing tourist industry - with400,000 to 500,000 tourists annually - are the major sources offoreign exchange. Fiji's sugar has special access to European Unionmarkets, but will be harmed by the EU's decision to cut sugarsubsidies. Sugar processing makes up one-third of industrialactivity but is not efficient. Fiji's tourism industry was damagedby the December 2006 coup and is facing an uncertain recovery time.The coup has created a difficult business climate. Tourist arrivalsfor 2007 are estimated to be down almost 6%, with substantial joblosses in the service sector. In July 2007 the Reserve Bank of Fijiannounced the economy was expected to contract by 3.1% in 2007.Fiji's current account deficit reached 23% of GDP in 2006. The EUhas suspended all aid until the interim government takes stepstoward new elections. Long-term problems include low investment,uncertain land ownership rights, and the government's inability tomanage its budget. Overseas remittances from Fijians working inKuwait and Iraq have decreased significantly.
FinlandFinland has a highly industrialized, largely free-marketeconomy with per capita output roughly that of the UK, France,Germany, and Italy. Its key economic sector is manufacturing -principally the wood, metals, engineering, telecommunications, andelectronics industries. Trade is important; exports equal nearlytwo-fifths of GDP. Finland excels in high-tech exports, e.g., mobilephones. Except for timber and several minerals, Finland depends onimports of raw materials, energy, and some components formanufactured goods. Because of the climate, agricultural developmentis limited to maintaining self-sufficiency in basic products.Forestry, an important export earner, provides a secondaryoccupation for the rural population. High unemployment remains apersistent problem. In 2007 Russia announced plans to impose hightariffs on raw timber exported to Finland. The Finnish pulp andpaper industry will be threatened if these duties are put into placein 2008 and 2009, and the matter is now being handled by theEuropean Union.
FranceFrance is in the midst of transition from a well-to-do moderneconomy that has featured extensive government ownership andintervention to one that relies more on market mechanisms. Thegovernment has partially or fully privatized many large companies,banks, and insurers, and has ceded stakes in such leading firms asAir France, France Telecom, Renault, and Thales. It maintains astrong presence in some sectors, particularly power, publictransport, and defense industries. The telecommunications sector isgradually being opened to competition. France's leaders remaincommitted to a capitalism in which they maintain social equity bymeans of laws, tax policies, and social spending that reduce incomedisparity and the impact of free markets on public health andwelfare. Widespread opposition to labor reform has in recent yearshampered the government's ability to revitalize the economy. In2007, the government launched divisive labor reform efforts thatwill continue into 2008. France's tax burden remains one of thehighest in Europe (nearly 50% of GDP in 2005). France brought thebudget deficit within the eurozone's 3%-of-GDP limit for the firsttime in 2007 and has reduced unemployment to roughly 8%. With atleast 75 million foreign tourists per year, France is the mostvisited country in the world and maintains the third largest incomein the world from tourism.
French PolynesiaSince 1962, when France stationed militarypersonnel in the region, French Polynesia has changed from asubsistence agricultural economy to one in which a high proportionof the work force is either employed by the military or supports thetourist industry. With the halt of French nuclear testing in 1996,the military contribution to the economy fell sharply. Tourismaccounts for about one-fourth of GDP and is a primary source of hardcurrency earnings. Other sources of income are pearl farming anddeep-sea commercial fishing. The small manufacturing sectorprimarily processes agricultural products. The territory benefitssubstantially from development agreements with France aimedprincipally at creating new businesses and strengthening socialservices.
French Southern and Antarctic LandsEconomic activity is limited toservicing meteorological and geophysical research stations, militarybases, and French and other fishing fleets. The fish catches landedon Iles Kerguelen by foreign ships are exported to France andReunion.
GabonGabon enjoys a per capita income four times that of most ofsub-Saharan African nations. but because of high income inequality,a large proportion of the population remains poor. Gabon depended ontimber and manganese until oil was discovered offshore in the early1970s. The oil sector now accounts for 50% of GDP. Gabon continuesto face fluctuating prices for its oil, timber, and manganeseexports. Despite the abundance of natural wealth, poor fiscalmanagement hobbles the economy. The devaluation of the CFA franc -its currency - by 50% in January 1994 sparked a one-timeinflationary surge, to 35%; the rate dropped to 6% in 1996. The IMFprovided a one-year standby arrangement in 1994-95, a three-yearEnhanced Financing Facility (EFF) at near commercial rates beginningin late 1995, and stand-by credit of $119 million in October 2000.Those agreements mandated progress in privatization and fiscaldiscipline. France provided additional financial support in January1997 after Gabon met IMF targets for mid-1996. In 1997, an IMFmission to Gabon criticized the government for overspending onoff-budget items, overborrowing from the central bank, and slippingon its schedule for privatization and administrative reform. Therebound of oil prices since 1999 have helped growth, but drops inproduction have hampered Gabon from fully realizing potential gains,and will continue to temper the gains for most of this decade. InDecember 2000, Gabon signed a new agreement with the Paris Club toreschedule its official debt. A follow-up bilateral repaymentagreement with the US was signed in December 2001. Gabon signed a14-month Stand-By Arrangement with the IMF in May 2004, and receivedParis Club debt rescheduling later that year. Short-term progressdepends on an upbeat world economy and fiscal and other adjustmentsin line with IMF policies.
Gambia, TheThe Gambia has no confirmed mineral or natural resourcedeposits and has a limited agricultural base. About 75% of thepopulation depends on crops and livestock for its livelihood.Small-scale manufacturing activity features the processing ofpeanuts, fish, and hides. Reexport trade normally constitutes amajor segment of economic activity, but a 1999 government-imposedpreshipment inspection plan, and instability of the Gambian dalasi(currency) have drawn some of the reexport trade away from TheGambia. The Gambia's natural beauty and proximity to Europe has madeit one of the larger markets for tourism in West Africa. Thegovernment's 1998 seizure of the private peanut firm Alimentaeliminated the largest purchaser of Gambian groundnuts. Despite anannounced program to begin privatizing key parastatals, no planshave been made public that would indicate that the governmentintends to follow through on its promises. Unemployment andunderemployment rates remain extremely high; short-run economicprogress depends on sustained bilateral and multilateral aid, onresponsible government economic management, on continued technicalassistance from the IMF and bilateral donors, and on expected growthin the construction sector.
Gaza StripHigh population density, limited land access, and strictinternal and external security controls have kept economicconditions in the Gaza Strip - the smaller of the two areas underthe Palestinian Authority (PA)- even more degraded than in the WestBank. The beginning of the second intifada in September 2000 sparkedan economic downturn, largely the result of Israeli closurepolicies; these policies, which were imposed to address securityconcerns in Israel, disrupted labor and trade access to and from theGaza Strip. In 2001, and even more severely in 2003, Israelimilitary measures in PA areas resulted in the destruction ofcapital, the disruption of administrative structures, and widespreadbusiness closures. The Israeli withdrawal from the Gaza Strip inSeptember 2005 offered some medium-term opportunities for economicgrowth, but continued Israeli-imposed crossings closures, whichbecame more restrictive after Hamas violently took over theterritory in June 2007, have resulted in widespread private sectorlayoffs and shortages of most goods.
GeorgiaGeorgia's economy has sustained robust GDP growth of closeto 10% in 2006 and 12% in 2007, based on strong inflows of foreigninvestment and robust government spending. However, a widening tradedeficit and higher inflation are emerging risks to the economy.Areas of recent improvement include increasing foreign directinvestment as well as growth in the construction, banking servicesand mining sectors. Georgia's main economic activities include thecultivation of agricultural products such as grapes, citrus fruits,and hazelnuts; mining of manganese and copper; and output of a smallindustrial sector producing alcoholic and nonalcoholic beverages,metals, machinery, aircraft and chemicals. The country importsnearly all its needed supplies of natural gas and oil products. Ithas sizeable hydropower capacity, a growing component of its energysupplies. Despite the severe damage the economy suffered due tocivil strife in the 1990s, Georgia, with the help of the IMF andWorld Bank, has made substantial economic gains since 2000,achieving positive GDP growth and curtailing inflation. Georgia'sGDP growth neared 10% in 2006 and 2007 despite restrictions oncommerce with Russia. Areas of recent improvement include increasedforeign direct investment as well as growth in the construction,banking services, and mining sectors. In addition, the reinvigoratedprivatization process has met with success. However, a wideningtrade deficit and higher inflation are emerging risks to theeconomy. Georgia has suffered from a chronic failure to collect taxrevenues; however, the new government is making progress and hasreformed the tax code, improved tax administration, increased taxenforcement, and cracked down on corruption. Government revenueshave increased nearly four fold since 2003. Due to improvements incustoms and financial (tax) enforcement, smuggling is a decliningproblem. Georgia has overcome the chronic energy shortages of thepast by renovating hydropower plants and by bringing newly availablenatural gas supplies from Azerbaijan. It also has an increasedability to pay for more expensive gas imports from Russia. Thecountry is pinning its hopes for long-term growth on a determinedeffort to reduce regulation, taxes and corruption in order toattract foreign investment. The construction on theBaku-T'bilisi-Ceyhan oil pipeline, the Baku-T'bilisi-Erzerum gaspipeline, and the Kars-Akhalkalaki Railroad are part of a strategyto capitalize on Georgia's strategic location between Europe andAsia and develop its role as a transit point for gas, oil and othergoods.
GermanyGermany's affluent and technologically powerful economy -the fifth largest in the world in PPP terms - showed considerableimprovement in 2007 with 2.6% growth. After a long period ofstagnation with an average growth rate of 0.7% between 2001-05 andchronically high unemployment, stronger growth led to a considerablefall in unemployment to about 8% near the end of 2007. Among themost important reasons for Germany's high unemployment during thepast decade were macroeconomic stagnation, the declining level ofinvestment in plant and equipment, company restructuring, flatdomestic consumption, structural rigidities in the labor market,lack of competition in the service sector, and high interest rates.The modernization and integration of the eastern German economycontinues to be a costly long-term process, with annual transfersfrom west to east amounting to roughly $80 billion. The formergovernment of Chancellor Gerhard SCHROEDER launched a comprehensiveset of reforms of labor market and welfare-related institutions. Thecurrent government of Chancellor Angela MERKEL has initiated otherreform measures, such as a gradual increase in the mandatoryretirement age from 65 to 67 and measures to increase femaleparticipation in the labor market. Germany's aging population,combined with high chronic unemployment, has pushed social securityoutlays to a level exceeding contributions, but higher governmentrevenues from the cyclical upturn in 2006-07 and a 3% rise in thevalue-added tax pushed Germany's budget deficit well below the EU's3% debt limit. Corporate restructuring and growing capital marketsare setting the foundations that could help Germany meet thelong-term challenges of European economic integration andglobalization, although some economists continue to argue the needfor change in inflexible labor and services markets. Growth may fallbelow 2% in 2008 as the strong euro, high oil prices, tighter creditmarkets, and slowing growth abroad take their toll.
GhanaWell endowed with natural resources, Ghana has roughly twicethe per capita output of the poorest countries in West Africa. Evenso, Ghana remains heavily dependent on international financial andtechnical assistance. Gold and cocoa production, and individualremittances, are major sources of foreign exchange. The domesticeconomy continues to revolve around agriculture, which accounts forabout 35% of GDP and employs about 55% of the work force, mainlysmall landholders. Ghana opted for debt relief under the HeavilyIndebted Poor Country (HIPC) program in 2002, and is also benefitingfrom the Multilateral Debt Relief Initiative that took effect in2006. Thematic priorities under its current Growth and PovertyReduction Strategy, which also provides the framework fordevelopment partner assistance, are: macroeconomic stability;private sector competitiveness; human resource development; and goodgovernance and civic responsibility. Sound macro-economic managementalong with high prices for gold and cocoa helped sustain GDP growthin 2007. Ghana signed a Millennium Challenge Corporation (MCC)Compact in 2006, which aims to assist in transforming Ghana'sagricultural sector.
GibraltarSelf-sufficient Gibraltar benefits from an extensiveshipping trade, offshore banking, and its position as aninternational conference center. The British military presence hasbeen sharply reduced and now contributes about 7% to the localeconomy, compared with 60% in 1984. The financial sector, tourism(almost 5 million visitors in 1998), shipping services fees, andduties on consumer goods also generate revenue. The financialsector, the shipping sector, and tourism each contribute 25%-30% ofGDP. Telecommunications accounts for another 10%. In recent years,Gibraltar has seen major structural change from a public to aprivate sector economy, but changes in government spending stillhave a major impact on the level of employment.
GreeceGreece has a capitalist economy with the public sectoraccounting for about 40% of GDP and with per capita GDP at least 75%of the leading euro-zone economies. Tourism provides 15% of GDP.Immigrants make up nearly one-fifth of the work force, mainly inagricultural and unskilled jobs. Greece is a major beneficiary of EUaid, equal to about 3.3% of annual GDP. The Greek economy grew bynearly 4.0% per year between 2003 and 2007, due partly toinfrastructural spending related to the 2004 Athens Olympic Games,and in part to an increased availability of credit, which hassustained record levels of consumer spending. Greece violated theEU's Growth and Stability Pact budget deficit criteria of no morethan 3% of GDP from 2001 to 2006, but finally met that criteria in2007. Public debt, inflation, and unemployment are above theeuro-zone average, but are falling. The Greek Government continuesto grapple with cutting government spending, reducing the size ofthe public sector, and reforming the labor and pension systems, inthe face of often vocal opposition from the country's powerful laborunions and the general public. The economy remains an importantdomestic political issue in Greece and, while the ruling NewDemocracy government has had some success in improving economicgrowth and reducing the budget deficit, Athens faces long-termchallenges in its effort to continue its economic reforms,especially social security reform and privatization.
GreenlandThe economy remains critically dependent on exports offish and a substantial subsidy from the Danish Government, whichsupplies about half of government revenues. The public sector,including publicly owned enterprises and the municipalities, playsthe dominant role in the economy. Several interesting hydrocarbonand mineral exploration activities are ongoing. Press reports inearly 2007 indicated that two international aluminum companies wereconsidering building smelters in Greenland to take advantage oflocal hydropower potential. Tourism is the only sector offering anynear-term potential, and even this is limited due to a short seasonand high costs. Air Greenland began summer-season direct flights tothe US east coast in May 2007, potentially opening a major newtourism market.
GrenadaGrenada relies on tourism as its main source of foreignexchange, especially since the construction of an internationalairport in 1985. Strong performances in construction andmanufacturing, together with the development of an offshorefinancial industry, have also contributed to growth in nationaloutput. Grenada has rebounded from the devastating effects ofHurricanes Ivan (2004) and Emily (2005), but is now saddled with thedebt burden from the rebuilding process. The agricultural sector,particularly nutmeg and cocoa cultivation, has gradually recovered,and the tourism sector has seen substantial increases in foreigndirect investment as the regional share of the tourism marketincreases.
GuamThe economy depends largely on US military spending andtourism. Total US grants, wage payments, and procurement outlaysamounted to $1.3 billion in 2004. Over the past 30 years, thetourist industry has grown to become the largest income sourcefollowing national defense. The Guam economy continues to experienceexpansion in both its tourism and military sectors.
GuatemalaGuatemala is the most populous of the Central Americancountries with a GDP per capita roughly one-half that of Argentina,Brazil, and Chile. The agricultural sector accounts for aboutone-tenth of GDP, two-fifths of exports, and half of the laborforce. Coffee, sugar, and bananas are the main products, with sugarexports benefiting from increased global demand for ethanol. The1996 signing of peace accords, which ended 36 years of civil war,removed a major obstacle to foreign investment, and Guatemala sincethen has pursued important reforms and macroeconomic stabilization.On 1 July 2006, the Central American Free Trade Agreement (CAFTA)entered into force between the US and Guatemala and has sincespurred increased investment in the export sector. The distributionof income remains highly unequal with about 56% of the populationbelow the poverty line. Other ongoing challenges include increasinggovernment revenues, negotiating further assistance frominternational donors, upgrading both government and privatefinancial operations, curtailing drug trafficking and rampant crime,and narrowing the trade deficit. Given Guatemala's large expatriatecommunity in the United States, it is the top remittance recipientin Central America, with inflows serving as a primary source offoreign income equivalent to nearly two-thirds of exports.
GuernseyFinancial services - banking, fund management, insurance -account for about 23% of employment and about 55% of total income inthis tiny, prosperous Channel Island economy. Tourism,manufacturing, and horticulture, mainly tomatoes and cut flowers,have been declining. Financial services, construction, retail, andthe public sector have been growing. Light tax and death duties makeGuernsey a popular tax haven. The evolving economic integration ofthe EU nations is changing the environment under which Guernseyoperates.
GuineaGuinea possesses major mineral, hydropower, and agriculturalresources, yet remains an underdeveloped nation. The country hasalmost half of the world's bauxite reserves and is thesecond-largest bauxite producer. The mining sector accounts for over70% of exports. Long-run improvements in government fiscalarrangements, literacy, and the legal framework are needed if thecountry is to move out of poverty. Investor confidence has beensapped by rampant corruption, a lack of electricity and otherinfrastructure, a lack of skilled workers, and the politicaluncertainty due to the failing health of President Lansana CONTE.Guinea is trying to reengage with the IMF and World Bank, which cutoff most assistance in 2003, and is working closely with technicaladvisors from the U.S. Treasury Department, the World Bank and IMF,seeking to return to a fully funded program. Growth rose slightly in2006-07, primarily due to increases in global demand and commodityprices on world markets, but the standard of living fell. The Guineafranc depreciated sharply as the prices for basic necessities likefood and fuel rose beyond the reach of most Guineans.Dissatisfaction with economic conditions prompted nationwide strikesin February and June 2006.
Guinea-BissauOne of the five poorest countries in the world,Guinea-Bissau depends mainly on farming and fishing. Cashew cropshave increased remarkably in recent years, and the country now rankssixth in cashew production. Guinea-Bissau exports fish and seafoodalong with small amounts of peanuts, palm kernels, and timber. Riceis the major crop and staple food. However, intermittent fightingbetween Senegalese-backed government troops and a military juntadestroyed much of the country's infrastructure and caused widespreaddamage to the economy in 1998; the civil war led to a 28% drop inGDP that year, with partial recovery in 1999-2002. Before the war,trade reform and price liberalization were the most successful partof the country's structural adjustment program under IMFsponsorship. The tightening of monetary policy and the developmentof the private sector had also begun to reinvigorate the economy.Because of high costs, the development of petroleum, phosphate, andother mineral resources is not a near-term prospect. Offshore oilprospecting is underway in several sectors but has not yet led tocommercially viable crude deposits. The inequality of incomedistribution is one of the most extreme in the world. The governmentand international donors continue to work out plans to forwardeconomic development from a lamentably low base. In December 2003,the World Bank, IMF, and UNDP were forced to step in to provideemergency budgetary support in the amount of $107 million for 2004,representing over 80% of the total national budget. Government driftand indecision, however, resulted in continued low growth in2002-06. Higher raw material prices boosted growth to 3.7% in 2007.
GuyanaThe Guyanese economy exhibited moderate economic growth in2001-07, based on expansion in the agricultural and mining sectors,a more favorable atmosphere for business initiatives, a morerealistic exchange rate, fairly low inflation, and the continuedsupport of international organizations. Economic recovery since the2005 flood-related contraction has been buoyed by increases inremittances and foreign direct investment. Chronic problems includea shortage of skilled labor and a deficient infrastructure. Thegovernment is juggling a sizable external debt against the urgentneed for expanded public investment. In March 2007, theInter-American Development Bank, Guyana's principal donor, canceledGuyana's nearly $470 million debt, equivalent to nearly 48% of GDP.The bauxite mining sector should benefit in the near term fromrestructuring and partial privatization, and the state-owned sugarindustry will conduct efficiency increasing modernizations. Exportearnings from agriculture and mining have fallen sharply, while theimport bill has risen, driven by higher energy prices. Guyana'sentrance into the Caricom Single Market and Economy (CSME) inJanuary 2006 will broaden the country's export market, primarily inthe raw materials sector.
HaitiHaiti is the poorest country in the Western Hemisphere, with80% of the population living under the poverty line and 54% inabject poverty. Two-thirds of all Haitians depend on theagricultural sector, mainly small-scale subsistence farming, andremain vulnerable to damage from frequent natural disasters,exacerbated by the country's widespread deforestation. Amacroeconomic program developed in 2005 with the help of theInternational Monetary Fund helped the economy grow 3.5% in 2007,the highest growth rate since 1999. US economic engagement under theHaitian Hemispheric Opportunity through Partnership Encouragement(HOPE) Act, passed in December 2006, has boosted the garment andautomotive parts exports and investment by providing tariff-freeaccess to the US. Haiti suffers from high inflation, a lack ofinvestment because of insecurity and limited infrastructure, and asevere trade deficit. In 2005, Haiti paid its arrears to the WorldBank, paving the way for reengagement with the Bank. The governmentrelies on formal international economic assistance for fiscalsustainability. Remittances are the primary source of foreignexchange, equaling nearly a quarter of GDP and more than twice theearnings from exports.
Heard Island and McDonald IslandsThe islands have no indigenouseconomic activity, but the Australian Government allows limitedfishing in the surrounding waters.
Holy See (Vatican City)This unique, noncommercial economy issupported financially by an annual contribution (known as Peter'sPence) from Roman Catholic dioceses throughout the world; by thesale of postage stamps, coins, medals, and tourist mementos; by feesfor admission to museums; and by the sale of publications.Investments and real estate income also account for a sizableportion of revenue. The incomes and living standards of lay workersare comparable to those of counterparts who work in the city of Rome.
HondurasHonduras, the second poorest country in Central America andone of the poorest countries in the Western Hemisphere, with anextraordinarily unequal distribution of income and massiveunemployment, is banking on expanded trade under the US-CentralAmerica Free Trade Agreement (CAFTA) and on debt relief under theHeavily Indebted Poor Countries (HIPC) initiative. Despiteimprovements in tax collections, the government's fiscal deficit isgrowing due to increases in current expenditures and financiallosses from the state energy and telephone companies. Honduras isthe fastest growing remittance destination in the region withinflows representing over a quarter of GDP, equivalent to nearlythree-quarters of exports. The economy relies heavily on a narrowrange of exports, notably bananas and coffee, making it vulnerableto natural disasters and shifts in commodity prices, however,investments in the maquila and non-traditional export sectors areslowly diversifying the economy. Growth remains dependent on theeconomy of the US, its largest trading partner, and on reduction ofthe high crime rate, as a means of attracting and maintaininginvestment.
Hong KongHong Kong has a free market economy highly dependent oninternational trade. In 2006, the total value of goods and servicestrade, including the sizable share of reexports, was equivalent to400% of GDP. The territory has become increasingly integrated withmainland China over the past few years through trade, tourism, andfinancial links. The mainland has long been Hong Kong's largesttrading partner, accounting for 46% of Hong Kong's total trade byvalue in 2006. As a result of China's easing of travel restrictions,the number of mainland tourists to the territory has surged from 4.5million in 2001 to 13.6 million in 2006, when they outnumberedvisitors from all other countries combined. Hong Kong has alsoestablished itself as the premier stock market for Chinese firmsseeking to list abroad. Bolstered by several successful initialpublic offerings in early 2007, by September 2007 mainland companiesaccounted for one-third of the firms listed on the Hong Kong StockExchange, and more than half of the Exchange's marketcapitalization. During the past decade, as Hong Kong's manufacturingindustry moved to the mainland, its service industry has grownrapidly and now accounts for 91% of the territory's GDP. Hong Kong'snatural resources are limited, and food and raw materials must beimported. GDP growth averaged a strong 5% from 1989 to 2007, despitethe economy suffering two recessions during the Asian financialcrisis in 1997-98 and the global downturn in 2001-02. Hong Kongcontinues to link its currency closely to the US dollar, maintainingan arrangement established in 1983.
HungaryHungary has made the transition from a centrally planned toa market economy, with a per capita income nearly two-thirds that ofthe EU-25 average. The private sector accounts for more than 80% ofGDP. Foreign ownership of and investment in Hungarian firms arewidespread, with cumulative foreign direct investment totaling morethan $60 billion since 1989. Hungary issues investment-gradesovereign debt. International observers, however, have expressedconcerns over Hungary's fiscal and current account deficits. In2007, Hungary eliminated a trade deficit that had persisted forseveral years. Inflation declined from 14% in 1998 to a low of 3.7%in 2006, but jumped to 7.8% in 2007. Unemployment has persistedabove 6%. Hungary's labor force participation rate of 57% is one ofthe lowest in the Organization for Economic Cooperation andDevelopment (OECD). Germany is by far Hungary's largest economicpartner. Policy challenges include cutting the public sector deficitto 4% of GDP by 2008, from about 6% in 2007. The government'sausterity program of tax hikes and subsidy cuts has reducedHungary's large budget deficit, but the reforms have dampeneddomestic consumption, slowing GDP growth to about 2% in 2007. Thegovernment will need to pass additional reforms to ensure thelong-term stability of public finances. The government plans toeventually lower its public sector deficit to below 3% of GDP toadopt the euro.
IcelandIceland's Scandinavian-type economy is basicallycapitalistic, yet with an extensive welfare system (includinggenerous housing subsidies), low unemployment, and remarkably evendistribution of income. In the absence of other natural resources(except for abundant geothermal power), the economy depends heavilyon the fishing industry, which provides 70% of export earnings andemploys 6% of the work force. The economy remains sensitive todeclining fish stocks as well as to fluctuations in world prices forits main exports: fish and fish products, aluminum, andferrosilicon. Substantial foreign investment in the aluminum andhydropower sectors has boosted economic growth which, nevertheless,has been volatile and characterized by recurrent imbalances.Government policies include reducing the current account deficit,limiting foreign borrowing, containing inflation, revisingagricultural and fishing policies, and diversifying the economy. Thegovernment remains opposed to EU membership, primarily because ofIcelanders' concern about losing control over their fishingresources. Iceland's economy has been diversifying intomanufacturing and service industries in the last decade, and newdevelopments in software production, biotechnology, and financialservices are taking place. The tourism sector is also expanding,with the recent trends in ecotourism and whale watching. The 2006closure of the US military base at Keflavik had very little impacton the national economy; Iceland's low unemployment rate aidedformer base employees in finding alternate employment.
IndiaIndia's diverse economy encompasses traditional villagefarming, modern agriculture, handicrafts, a wide range of modernindustries, and a multitude of services. Services are the majorsource of economic growth, accounting for more than half of India'soutput with less than one third of its labor force. Aboutthree-fifths of the work force is in agriculture, leading the UnitedProgressive Alliance (UPA) government to articulate an economicreform program that includes developing basic infrastructure toimprove the lives of the rural poor and boost economic performance.The government has reduced controls on foreign trade and investment.Higher limits on foreign direct investment were permitted in a fewkey sectors, such as telecommunications. However, tariff spikes insensitive categories, including agriculture, and incrementalprogress on economic reforms still hinder foreign access to India'svast and growing market. Privatization of government-ownedindustries remains stalled and continues to generate politicaldebate; populist pressure from within the UPA government and fromits Left Front allies continues to restrain needed initiatives. Theeconomy has posted an average growth rate of more than 7% in thedecade since 1997, reducing poverty by about 10 percentage points.India achieved 8.5% GDP growth in 2006, and again in 2007,significantly expanding production of manufactures. India iscapitalizing on its large numbers of well-educated people skilled inthe English language to become a major exporter of software servicesand software workers. Economic expansion has helped New Delhicontinue to make progress in reducing its federal fiscal deficit.However, strong growth combined with easy consumer credit and a realestate boom fueled inflation concerns in 2006 and 2007, leading to aseries of central bank interest rate hikes that have slowed creditgrowth and eased inflation concerns. The huge and growing populationis the fundamental social, economic, and environmental problem.
Indian OceanThe Indian Ocean provides major sea routes connectingthe Middle East, Africa, and East Asia with Europe and the Americas.It carries a particularly heavy traffic of petroleum and petroleumproducts from the oilfields of the Persian Gulf and Indonesia. Itsfish are of great and growing importance to the bordering countriesfor domestic consumption and export. Fishing fleets from Russia,Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainlyfor shrimp and tuna. Large reserves of hydrocarbons are being tappedin the offshore areas of Saudi Arabia, Iran, India, and westernAustralia. An estimated 40% of the world's offshore oil productioncomes from the Indian Ocean. Beach sands rich in heavy minerals andoffshore placer deposits are actively exploited by borderingcountries, particularly India, South Africa, Indonesia, Sri Lanka,and Thailand.
IndonesiaIndonesia, a vast polyglot nation, has been undergoingsignificant economic reforms under President YUDHOYONO. Indonesia'sdebt-to-GDP ratio has been declining steadily, its foreign exchangereserves are at an all-time high of over $50 billion, and its stockmarket has been one of the three best performers in the world in2006 and 2007, as global investors sought out higher returns inemerging markets. The government has introduced significant reformsin the financial sector, including tax and customs reforms, theintroduction of Treasury bills, and improved capital marketsupervision. Indonesia's new investment law, passed in March 2007,seeks to address some of the concerns of foreign and domesticinvestors. Indonesia still struggles with poverty and unemployment,inadequate infrastructure, corruption, a complex regulatoryenvironment, and unequal resource distribution among regions.Indonesia has been slow to privatize over 100 state-ownedenterprises, several of which have monopolies in key sectors. Thenon-bank financial sector, including pension funds and insurance,remains weak. Capital markets are underdeveloped. The high globalprice of oil in 2007 increased the cost of domestic fuel andelectricity subsidies, and are contributing to concerns about higherfood prices. Located on the Pacific "Ring of Fire" Indonesia remainsvulnerable to volcanic and tectonic disasters. Significant progresshas been made in rebuilding Aceh after the devastating December 2004tsunami, and the province now shows more economic activity thanbefore the disaster. Unfortunately, Indonesia suffered new disastersin 2006 and early 2007 including: a major earthquake nearYogyakarta, an industrial accident in Sidoarjo, East Java thatcreated a "mud volcano," a tsunami in South Java, and major floodingin Jakarta, all of which caused additional damages in the billionsof dollars. Donors are assisting Indonesia with its disastermitigation and early warning efforts.
IranIran's economy is marked by an inefficient state sector,reliance on the oil sector (which provides 85% of governmentrevenues), and statist policies that create major distortionsthroughout. Most economic activity is controlled by the state.Private sector activity is typically small-scale workshops, farming,and services. President Mahmud AHMADI-NEJAD failed to make anynotable progress in fulfilling the goals of the nation's latestfive-year plan. A combination of price controls and subsidies,particularly on food and energy, continue to weigh down the economy,and administrative controls, widespread corruption, and otherrigidities undermine the potential for private-sector-led growth. Asa result of these inefficiencies, significant informal marketactivity flourishes and shortages are common. High oil prices inrecent years have enabled Iran to amass nearly $70 billion inforeign exchange reserves. Yet this increased revenue has not easedeconomic hardships, which include double-digit unemployment andinflation - inflation climbed to 26% as of June 2008. The economyhas seen only moderate growth. Iran's educated population, economicinefficiency and insufficient investment - both foreign and domestic- have prompted an increasing number of Iranians to seek employmentoverseas, resulting in significant "brain drain."
IraqIraq's economy is dominated by the oil sector, which hastraditionally provided about 95% of foreign exchange earnings.Although looting, insurgent attacks, and sabotage have underminedeconomy rebuilding efforts, economic activity is beginning to pickup in areas recently secured by the US military surge. Oil exportsare around levels seen before Operation Iraqi Freedom, and totalgovernment revenues have benefited from high oil prices. Despitepolitical uncertainty, Iraq is making some progress in building theinstitutions needed to implement economic policy and has negotiateda debt reduction agreement with the Paris Club and a new Stand-ByArrangement with the IMF. Iraq has received pledges for $13.5billion in foreign aid for 2004-07 from outside of the US, more than$33 billion in total pledges. The International Compact with Iraqwas established in May 2007 to integrate Iraq into the regional andglobal economy, and the Iraqi government is seeking to pass laws tostrengthen its economy. This legislation includes a hydrocarbon lawto establish a modern legal framework to allow Iraq to develop itsresources and a revenue sharing law to equitably divide oil revenueswithin the nation, although both are still bogged down indiscussions. The Central Bank has been successful in controllinginflation through appreciation of the dinar against the US dollar.Reducing corruption and implementing structural reforms, such asbank restructuring and developing the private sector, will be key toIraq's economic success.
IrelandIreland is a small, modern, trade-dependent economy withgrowth averaging 6% in 1995-2007. Agriculture, once the mostimportant sector, is now dwarfed by industry and services. Althoughthe exports sector, dominated by foreign multinationals, remains akey component of Ireland's economy, construction has most recentlyfueled economic growth along with strong consumer spending andbusiness investment. Property prices have risen more rapidly inIreland in the decade up to 2006 than in any other developed worldeconomy. Per capita GDP is 40% above that of the four big Europeaneconomies and the second highest in the EU behind Luxembourg, and in2007 surpassed that of the United States. The Irish Government hasimplemented a series of national economic programs designed to curbprice and wage inflation, invest in infrastructure, increase laborforce skills, and promote foreign investment. A slowdown in theproperty market, more intense global competition, and increasedcosts, however, have compelled government economists to lowerIreland's growth forecast slightly for 2008. Ireland joined incirculating the euro on 1 January 2002 along with 11 other EUnations.
Isle of ManOffshore banking, manufacturing, and tourism are keysectors of the economy. The government offers incentives tohigh-technology companies and financial institutions to locate onthe island; this has paid off in expanding employment opportunitiesin high-income industries. As a result, agriculture and fishing,once the mainstays of the economy, have declined in their shares ofGDP. The Isle of Man also attracts online gambling sites and thefilm industry. Trade is mostly with the UK. The Isle of Man enjoysfree access to EU markets.
IsraelIsrael has a technologically advanced market economy withsubstantial, though diminishing, government participation. Itdepends on imports of crude oil, grains, raw materials, and militaryequipment. Despite limited natural resources, Israel has intensivelydeveloped its agricultural and industrial sectors over the past 20years. Israel imports substantial quantities of grain but is largelyself-sufficient in other agricultural products. Cut diamonds,high-technology equipment, and agricultural products (fruits andvegetables) are the leading exports. Israel usually posts sizabletrade deficits, which are covered by large transfer payments fromabroad and by foreign loans. Roughly half of the government'sexternal debt is owed to the US, its major source of economic andmilitary aid. Israel's GDP, after contracting slightly in 2001 and2002 due to the Palestinian conflict and troubles in thehigh-technology sector, has grown by about 5% per year since 2003.The economy grew an estimated 5.4% in 2007, the fastest pace since2000. The government's prudent fiscal policy and structural reformsover the past few years have helped to induce strong foreigninvestment, tax revenues, and private consumption, setting theeconomy on a solid growth path.
ItalyItaly has a diversified industrial economy with roughly thesame total and per capita output as France and the UK. Thiscapitalistic economy remains divided into a developed industrialnorth, dominated by private companies, and a less-developed,welfare-dependent, agricultural south, with 20% unemployment. Mostraw materials needed by industry and more than 75% of energyrequirements are imported. Over the past decade, Italy has pursued atight fiscal policy in order to meet the requirements of theEconomic and Monetary Unions and has benefited from lower interestand inflation rates. The current government has enacted numerousshort-term reforms aimed at improving competitiveness and long-termgrowth. Italy has moved slowly, however, on implementing neededstructural reforms, such as lightening the high tax burden andoverhauling Italy's rigid labor market and over-generous pensionsystem, because of the current economic slowdown and opposition fromlabor unions. But the leadership faces a severe economic constraint:Italy's official debt remains above 100% of GDP, and the governmenthas found it difficult to bring the budget deficit down to a levelthat would allow a rapid decrease in that debt. The economycontinues to grow by less than the euro-zone average and growth isexpected to decelerate from 1.9% in 2006 and 2007 to under 1.5% in2008 as the euro-zone and world economies slow.
JamaicaThe Jamaican economy is heavily dependent on services, whichnow account for more than 60% of GDP. The country continues toderive most of its foreign exchange from tourism, remittances, andbauxite/alumina. Remittances account for nearly 20% of GDP and areequivalent to tourism revenues. Jamaica's economy, already saddledwith a record of sluggish growth, will suffer an economic setbackfrom damages caused by Hurricane Dean in August 2007. The economyfaces serious long-term problems: high but declining interest rates,increased foreign competition, exchange rate instability, a sizablemerchandise trade deficit, large-scale unemployment andunderemployment, and a debt-to-GDP ratio of 135%. Jamaica's onerousdebt burden - the fourth highest per capita - is the result ofgovernment bailouts to ailing sectors of the economy, most notablythe financial sector in the mid-to-late 1990s. Inflation also hasdeclined, standing at about 7% at the end of 2007. High unemploymentexacerbates the serious crime problem, including gang violence thatis fueled by the drug trade. The GOLDING administration faces thedifficult prospect of having to achieve fiscal discipline in orderto maintain debt payments while simultaneously attacking a seriousand growing crime problem that is hampering economic growth.