Jan MayenJan Mayen is a volcanic island with no exploitable naturalresources. Economic activity is limited to providing services foremployees of Norway's radio and meteorological stations on theisland.
JapanGovernment-industry cooperation, a strong work ethic, masteryof high technology, and a comparatively small defense allocation (1%of GDP) helped Japan advance with extraordinary rapidity to the rankof second most technologically powerful economy in the world afterthe US and the third-largest economy in the world after the US andChina, measured on a purchasing power parity (PPP) basis. Onenotable characteristic of the economy has been how manufacturers,suppliers, and distributors have worked together in closely-knitgroups called keiretsu. A second basic feature has been theguarantee of lifetime employment for a substantial portion of theurban labor force. Both features have now eroded. Japan's industrialsector is heavily dependent on imported raw materials and fuels. Thetiny agricultural sector is highly subsidized and protected, withcrop yields among the highest in the world. Usually self sufficientin rice, Japan must import about 55% of its food on a caloric basis.Japan maintains one of the world's largest fishing fleets andaccounts for nearly 15% of the global catch. For three decades,overall real economic growth had been spectacular - a 10% average inthe 1960s, a 5% average in the 1970s, and a 4% average in the 1980s.Growth slowed markedly in the 1990s, averaging just 1.7%, largelybecause of the after effects of overinvestment and an asset pricebubble during the late 1980s that required a protracted period oftime for firms to reduce excess debt, capital, and labor. From 2000to 2001, government efforts to revive economic growth proved shortlived and were hampered by the slowing of the US, European, andAsian economies. In 2002-07, growth improved and the lingering fearsof deflation in prices and economic activity lessened, leading thecentral bank to raise interest rates to 0.25% in July 2006, up fromthe near 0% rate of the six years prior, and to 0.50% in February2007. In addition, the 10-year privatization of Japan Post, whichhas functioned not only as the national postal delivery system butalso, through its banking and insurance facilities as Japan'slargest financial institution, was completed in October 2007,marking a major milestone in the process of structural reform.Nevertheless, Japan's huge government debt, which totals 182% ofGDP, and the aging of the population are two major long-runproblems. Some fear that a rise in taxes could endanger the currenteconomic recovery. Debate also continues on the role of and effectsof reform in restructuring the economy, particularly with respect toincreasing income disparities.
JerseyJersey's economy is based on international financialservices, agriculture, and tourism. In 2005 the finance sectoraccounted for about 50% of the island's output. Potatoes,cauliflower, tomatoes, and especially flowers are important exportcrops, shipped mostly to the UK. The Jersey breed of dairy cattle isknown worldwide and represents an important export income earner.Milk products go to the UK and other EU countries. Tourism accountsfor one-quarter of GDP. In recent years, the government hasencouraged light industry to locate in Jersey, with the result thatan electronics industry has developed alongside the traditionalmanufacturing of knitwear. All raw material and energy requirementsare imported, as well as a large share of Jersey's food needs. Lighttaxes and death duties make the island a popular tax haven. Livingstandards come close to those of the UK.
JordanJordan is a small Arab country with insufficient supplies ofwater, oil, and other natural resources. Poverty, unemployment, andinflation are fundamental problems, but King ABDALLAH II, sinceassuming the throne in 1999, has undertaken some broad economicreforms in a long-term effort to improve living standards. SinceJordan's graduation from its most recent IMF program in 2002, Ammanhas continued to follow IMF guidelines, practicing careful monetarypolicy, making substantial headway with privatization, and openingthe trade regime. Jordan's exports have significantly increasedunder the free trade accord with the US and Jordanian QualifyingIndustrial Zones (QIZ), which allow Jordan to export goods duty freeto the US. In 2006, Jordan reduced its debt-to-GDP ratiosignificantly. These measures have helped improve productivity andhave made Jordan more attractive for foreign investment. Before theUS-led war in Iraq, Jordan imported most of its oil from Iraq. Since2003, however, Jordan has been more dependent on oil from other Gulfnations. The government ended subsidies for petroleum and otherconsumer goods in 2008 in an effort to control the budget. The mainchallenges facing Jordan are reducing dependence on foreign grants,reducing the budget deficit, attracting investments, and creatingjobs.
KazakhstanKazakhstan, the largest of the former Soviet republics interritory, excluding Russia, possesses enormous fossil fuel reservesand plentiful supplies of other minerals and metals. It also has alarge agricultural sector featuring livestock and grain.Kazakhstan's industrial sector rests on the extraction andprocessing of these natural resources. The breakup of the USSR inDecember 1991 and the collapse in demand for Kazakhstan'straditional heavy industry products resulted in a short-termcontraction of the economy, with the steepest annual declineoccurring in 1994. In 1995-97, the pace of the government program ofeconomic reform and privatization quickened, resulting in asubstantial shifting of assets into the private sector. Kazakhstanenjoyed double-digit growth in 2000-01 - 8% or more per year in2002-07 - thanks largely to its booming energy sector, but also toeconomic reform, good harvests, and foreign investment. Inflation,however, jumped to more than 10% in 2007. In the energy sector, theopening of the Caspian Consortium pipeline in 2001, from westernKazakhstan's Tengiz oilfield to the Black Sea, substantially raisedexport capacity. In 2006 Kazakhstan completed the Atasu-Alashankouportion of an oil pipeline to China that is planned in futureconstruction to extend from the country's Caspian coast eastward tothe Chinese border. The country has embarked upon an industrialpolicy designed to diversify the economy away from overdependence onthe oil sector by developing its manufacturing potential. The policyaims to reduce the influence of foreign investment and foreignpersonnel. The government has engaged in several disputes withforeign oil companies over the terms of production agreements;tensions continue. Upward pressure on the local currency continuedin 2007 due to massive oil-related foreign-exchange inflows. Aidedby strong growth and foreign exchange earnings, Kazakhstan aspiresto become a regional financial center and has created a bankingsystem comparable to those in Central Europe.
KenyaThe regional hub for trade and finance in East Africa, Kenyahas been hampered by corruption and by reliance upon several primarygoods whose prices have remained low. In 1997, the IMF suspendedKenya's Enhanced Structural Adjustment Program due to thegovernment's failure to maintain reforms and curb corruption. Asevere drought from 1999 to 2000 compounded Kenya's problems,causing water and energy rationing and reducing agricultural output.As a result, GDP contracted by 0.2% in 2000. The IMF, which hadresumed loans in 2000 to help Kenya through the drought, againhalted lending in 2001 when the government failed to instituteseveral anticorruption measures. Despite the return of strong rainsin 2001, weak commodity prices, endemic corruption, and lowinvestment limited Kenya's economic growth to 1.2%. Growth lagged at1.1% in 2002 because of erratic rains, low investor confidence,meager donor support, and political infighting up to the elections.In the key December 2002 elections, Daniel Arap MOI's 24-year-oldreign ended, and a new opposition government took on the formidableeconomic problems facing the nation. After some early progress inrooting out corruption and encouraging donor support, the KIBAKIgovernment was rocked by high-level graft scandals in 2005 and 2006.In 2006 the World Bank and IMF delayed loans pending action by thegovernment on corruption. The international financial institutionsand donors have since resumed lending, despite little action on thegovernment's part to deal with corruption. The scandals have notweighed down growth, with estimated real GDP growth at more than 6percent in 2007.
KiribatiA remote country of 33 scattered coral atolls, Kiribati hasfew natural resources. Commercially viable phosphate deposits wereexhausted at the time of independence from the UK in 1979. Copra andfish now represent the bulk of production and exports. The economyhas fluctuated widely in recent years. Economic development isconstrained by a shortage of skilled workers, weak infrastructure,and remoteness from international markets. Tourism provides morethan one-fifth of GDP. Private sector initiatives and a financialsector are in the early stages of development. Foreign financial aidfrom UK, Japan, Australia, New Zealand, and China equals more than10% of GDP. Remittances from seamen on merchant ships abroad accountfor more than $5 million each year. Kiribati receives around $15million annually for the government budget from an Australian trustfund.
Korea, NorthNorth Korea, one of the world's most centrally directedand least open economies, faces chronic economic problems.Industrial capital stock is nearly beyond repair as a result ofyears of underinvestment and shortages of spare parts. Industrialand power output have declined in parallel from pre-1990 levels. Duein part to severe summer flooding followed by dry weather conditionsin the fall of 2006, the nation suffered its 13th year of foodshortages because of on-going systemic problems including a lack ofarable land, collective farming practices, and persistent shortagesof tractors and fuel. During the summer of 2007, severe floodingagain occurred. Large-scale international food aid deliveries haveallowed the people of North Korea to escape widespread starvationsince famine threatened in 1995, but the population continues tosuffer from prolonged malnutrition and poor living conditions.Large-scale military spending draws off resources needed forinvestment and civilian consumption. Since 2002, the government hasformalized an arrangement whereby private "farmers' markets" wereallowed to begin selling a wider range of goods. It also permittedsome private farming on an experimental basis in an effort to boostagricultural output. In October 2005, the government tried toreverse some of these policies by forbidding private sales of grainsand reinstituting a centralized food rationing system. By December2005, the government terminated most international humanitarianassistance operations in North Korea (calling instead fordevelopmental assistance only) and restricted the activities ofremaining international and non-governmental aid organizations suchas the World Food Program. External food aid now comes primarilyfrom China and South Korea in the form of grants and long-termconcessional loans. During the October 2007 summit, South Korea alsoagreed to develop some of North Korea's infrastructure and naturalresources and light industry. Firm political control remains theCommunist government's overriding concern, which will likely inhibitthe loosening of economic regulations.
Korea, SouthSince the 1960s, South Korea has achieved an incrediblerecord of growth and integration into the high-tech modern worldeconomy. Four decades ago, GDP per capita was comparable with levelsin the poorer countries of Africa and Asia. In 2004, South Koreajoined the trillion dollar club of world economies. Today its GDPper capita is roughly the same as that of Greece and Spain. Thissuccess was achieved by a system of close government/business tiesincluding directed credit, import restrictions, sponsorship ofspecific industries, and a strong labor effort. The governmentpromoted the import of raw materials and technology at the expenseof consumer goods and encouraged savings and investment overconsumption. The Asian financial crisis of 1997-98 exposedlongstanding weaknesses in South Korea's development model includinghigh debt/equity ratios, massive foreign borrowing, and anundisciplined financial sector. GDP plunged by 6.9% in 1998, thenrecovered by 9.5% in 1999 and 8.5% in 2000. Growth fell back to 3.3%in 2001 because of the slowing global economy, falling exports, andthe perception that much-needed corporate and financial reforms hadstalled. Led by consumer spending and exports, growth in 2002 was animpressive 7%, despite anemic global growth. Between 2003 and 2007,growth moderated to about 4-5% annually. A downturn in consumerspending was offset by rapid export growth. Moderate inflation, lowunemployment, and an export surplus in 2007 characterize this solideconomy, but inflation and unemployment are increasing in the faceof rising oil prices.
KosovoOver the past few years Kosovo's economy has shownsignificant progress in transitioning to a market-based system, butit is still highly dependent on the international community and thediaspora for financial and technical assistance. Remittances fromthe diaspora - located mainly in Germany and Switzerland - accountfor about 30% of GDP. Kosovo's citizens are the poorest in Europewith an average annual per capita income of only $1800 - aboutone-third the level of neighboring Albania. Unemployment - at morethan 40% of the population - is a severe problem that encouragesoutward migration. Most of Kosovo's population lives in rural townsoutside of the capital, Pristina. Inefficient, near-subsistencefarming is common - the result of small plots, limitedmechanization, and lack of technical expertise. Economic growth islargely driven by the private sector - mostly small-scale retailbusinesses. With international assistance, Kosovo has been able toprivatize 50% of its state-owned enterprises (SOEs) by number, andover 90% of SOEs by value. Minerals and metals - including lignite,lead, zinc, nickel, chrome, aluminum, magnesium, and a wide varietyof construction materials - once formed the backbone of industry,but output has declined because investment has been insufficient toreplace ageing Eastern Bloc equipment. Technical and financialproblems in the power sector also impedes industrial development.The US has worked with the World Bank to prepare a commercial tenderfor the development of new power generating and mining capacity. Theofficial currency of Kosovo is the euro, but the Serbian dinar isalso used in the Serb enclaves. Kosovo's tie to the euro has helpedkeep inflation low. Kosovo has maintained a budget surplus as aresult of efficient tax collection and inefficient budget execution.While maintaining ultimate oversight, UNMIK continues to work withthe EU and with Kosovo's government to accelerate economic growth,lower unemployment, and attract foreign investment. In order to helpintegrate Kosovo into regional economic structures, UNMIK signed (onbehalf of Kosovo) its accession to the Central Europe Free TradeArea (CEFTA) in 2006. In February 2008, UNMIK also representedKosovo at the newly established Regional Cooperation Council (RCC).
KuwaitKuwait is a small, rich, relatively open economy withself-reported crude oil reserves of about 104 billion barrels - 10%of world reserves. Petroleum accounts for nearly half of GDP, 95% ofexport revenues, and 80% of government income. High oil prices inrecent years have helped build Kuwait's budget and trade surplusesand foreign reserves. As a result of this positive fiscal situation,the need for economic reforms is less urgent and the government hasnot earnestly pushed through new initiatives. Despite its vast oilreserves, Kuwait experienced power outages during the summer monthsin 2006 and 2007 because demand exceeded power generating capacity.Power outages are likely to worsen, given its high population growthrates, unless the government can increase generating capacity. InMay 2007 Kuwait changed its currency peg from the US dollar to abasket of currencies in order to curb inflation and to reduce itsvulnerability to external shocks.
KyrgyzstanKyrgyzstan is a poor, mountainous country with apredominantly agricultural economy. Cotton, tobacco, wool, and meatare the main agricultural products, although only tobacco and cottonare exported in any quantity. Industrial exports include gold,mercury, uranium, natural gas, and electricity. Followingindependence, Kyrgyzstan was progressive in carrying out marketreforms such as an improved regulatory system and land reform.Kyrgyzstan was the first Commonwealth of Independent States (CIS)country to be accepted into the World Trade Organization. Much ofthe government's stock in enterprises has been sold. Drops inproduction had been severe after the breakup of the Soviet Union inDecember 1991, but by mid-1995, production began to recover andexports began to increase. The economy is heavily weighted towardgold export and a drop in output at the main Kumtor gold minesparked a 0.5% decline in GDP in 2002 and a 0.6% decline in 2005.GDP grew more than 6% in 2007, partly due to higher gold pricesinternationally. The government made steady strides in controllingits substantial fiscal deficit, nearly closing the gap betweenrevenues and expenditures in 2006, before boosting expenditures morethan 20% in 2007. The government and international financialinstitutions have been engaged in a comprehensive medium-termpoverty reduction and economic growth strategy. In 2005, Bishkekagreed to pursue much-needed tax reform and, in 2006, becameeligible for the heavily indebted poor countries (HIPC) initiative.Progress fighting corruption, further restructuring of domesticindustry, and success in attracting foreign investment are keys tofuture growth.
LaosThe government of Laos, one of the few remaining one-partyCommunist states, began decentralizing control and encouragingprivate enterprise in 1986. The results, starting from an extremelylow base, were striking - growth averaged 6% per year in 1988-2007except during the short-lived drop caused by the Asian financialcrisis beginning in 1997. Despite this high growth rate, Laosremains a country with a underdeveloped infrastructure, particularlyin rural areas. It has no railroads, a rudimentary road system, andlimited external and internal telecommunications, though thegovernment is sponsoring major improvements in the road system withsupport from Japan and China. Electricity is available in urbanareas and in most rural districts. Subsistence agriculture,dominated by rice, accounts for about 40% of GDP and provides 80% oftotal employment. The economy will continue to benefit from aid frominternational donors and from foreign investment in hydropower andmining. Construction will be another strong economic driver,especially as hydroelectric dam and road projects gain steam.Several policy changes since 2004 may help spur growth. In late2004, Laos gained Normal Trade Relations status with the US,allowing Laos-based producers to benefit from lower tariffs onexports. Laos is taking steps to join the World Trade Organizationin the next few years; the resulting trade policy reforms willimprove the business environment. On the fiscal side, a value-addedtax (VAT) regime, slated to begin in 2008, should help streamlinethe government's inefficient tax system.
LatviaLatvia's economy experienced GDP growth of more than 10% peryear during 2006-07. The majority of companies, banks, and realestate have been privatized, although the state still holds sizablestakes in a few large enterprises. Latvia officially joined theWorld Trade Organization in February 1999. EU membership, a topforeign policy goal, came in May 2004. The current account deficit -more than 22% of GDP in 2007 - and inflation - at nearly 10% peryear - remain major concerns.
LebanonThe 1975-90 civil war seriously damaged Lebanon's economicinfrastructure, cut national output by half, and all but endedLebanon's position as a Middle Eastern entrepot and banking hub. Inthe years since, Lebanon has rebuilt much of its war-torn physicaland financial infrastructure by borrowing heavily - mostly fromdomestic banks. In an attempt to reduce the ballooning nationaldebt, the Rafiq HARIRI government in the 1990s began an austerityprogram, reining in government expenditures, increasing revenuecollection, and privatizing state enterprises, but economic andfinancial reform initiatives stalled and public debt continued togrow despite receipt of more than $2 billion in bilateral assistanceat the 2002 Paris II Donors Conference. The Israeli-Hizballahconflict in July-August 2006 caused an estimated $3.6 billion ininfrastructure damage, and prompted international donors to pledgenearly $1 billion in recovery and reconstruction assistance. Donorsmet again in January 2007 at the Paris III Donor Conference andpledged more than $7.5 billion to Lebanon for development projectsand budget support, conditioned on progress on Beirut's fiscalreform and privatization program. An 18-month political stalemateand sporadic sectarian and political violence hampered economicactivity, particularly tourism, retail sales, and investment, untila new government was formed in July 2008.
LesothoSmall, landlocked, and mountainous, Lesotho relies onremittances from miners employed in South Africa and customs dutiesfrom the Southern Africa Customs Union for the majority ofgovernment revenue. However, the government has recentlystrengthened its tax system to reduce dependency on customs duties.Completion of a major hydropower facility in January 1998 permittedthe sale of water to South Africa and generated royalties forLesotho. Lesotho produces about 90% of its own electrical powerneeds. As the number of mineworkers has declined steadily over thepast several years, a small manufacturing base has developed basedon farm products that support the milling, canning, leather, andjute industries, as well as a rapidly expanding apparel-assemblysector. The latter has grown significantly mainly due to Lesothoqualifying for the trade benefits contained in the Africa Growth andOpportunity Act. The economy is still primarily based on subsistenceagriculture, especially livestock, although drought has decreasedagricultural activity. The extreme inequality in the distribution ofincome remains a major drawback. Lesotho has signed an InterimPoverty Reduction and Growth Facility with the IMF. In July 2007,Lesotho signed a Millennium Challenge Account Compact with the USworth $362.5 million.
LiberiaCivil war and government mismanagement destroyed much ofLiberia's economy, especially the infrastructure in and around thecapital, Monrovia. Many businesses fled the country, taking capitaland expertise with them, but with the conclusion of fighting and theinstallation of a democratically-elected government in 2006, somehave returned. Richly endowed with water, mineral resources,forests, and a climate favorable to agriculture, Liberia had been aproducer and exporter of basic products - primarily raw timber andrubber. Local manufacturing, mainly foreign owned, had been small inscope. President JOHNSON SIRLEAF, a Harvard-trained banker andadministrator, has taken steps to reduce corruption, build supportfrom international donors, and encourage private investment.Embargos on timber and diamond exports have been lifted, opening newsources of revenue for the government. The reconstruction ofinfrastructure and the raising of incomes in this ravaged economywill largely depend on generous financial and technical assistancefrom donor countries and foreign investment in key sectors, such asinfrastructure and power generation.
LibyaThe Libyan economy depends primarily upon revenues from theoil sector, which contribute about 95% of export earnings, aboutone-quarter of GDP, and 60% of public sector wages. Substantialrevenues from the energy sector coupled with a small population giveLibya one of the highest per capita GDPs in Africa, but little ofthis income flows down to the lower orders of society. Libyanofficials in the past five years have made progress on economicreforms as part of a broader campaign to reintegrate the countryinto the international fold. This effort picked up steam after UNsanctions were lifted in September 2003 and as Libya announced inDecember 2003 that it would abandon programs to build weapons ofmass destruction. Almost all US unilateral sanctions against Libyawere removed in April 2004, helping Libya attract more foreigndirect investment, mostly in the energy sector. Libyan oil and gaslicensing rounds continue to draw high international interest; theNational Oil Company set a goal of nearly doubling oil production to3 million bbl/day by 2015. Libya faces a long road ahead inliberalizing the socialist-oriented economy, but initial steps -including applying for WTO membership, reducing some subsidies, andannouncing plans for privatization - are laying the groundwork for atransition to a more market-based economy. The non-oil manufacturingand construction sectors, which account for more than 20% of GDP,have expanded from processing mostly agricultural products toinclude the production of petrochemicals, iron, steel, and aluminum.Climatic conditions and poor soils severely limit agriculturaloutput, and Libya imports about 75% of its food. Libya's primaryagricultural water source remains the Great Manmade River Project,but significant resources are being invested in desalinizationresearch to meet growing water demands.
LiechtensteinDespite its small size and limited natural resources,Liechtenstein has developed into a prosperous, highlyindustrialized, free-enterprise economy with a vital financialservice sector and living standards on a par with its large Europeanneighbors. The Liechtenstein economy is widely diversified with alarge number of small businesses. Low business taxes - the maximumtax rate is 20% - and easy incorporation rules have induced manyholding or so-called letter box companies to establish nominaloffices in Liechtenstein, providing 30% of state revenues. Thecountry participates in a customs union with Switzerland and usesthe Swiss franc as its national currency. It imports more than 90%of its energy requirements. Liechtenstein has been a member of theEuropean Economic Area (an organization serving as a bridge betweenthe European Free Trade Association (EFTA) and the EU) since May1995. The government is working to harmonize its economic policieswith those of an integrated Europe.
LithuaniaLithuania, the Baltic state that has conducted the mosttrade with Russia, has grown rapidly since rebounding from the 1998Russian financial crisis. Unemployment fell to 3.2% in 2007 whilewages continued to grow at double digit rates, contributing torising inflation. Exports and imports also grew strongly, and thecurrent account deficit rose to nearly 15% of GDP in 2007. Trade hasbeen increasingly oriented toward the West. Lithuania has gainedmembership in the World Trade Organization and joined the EU in May2004. Privatization of the large, state-owned utilities is nearlycomplete. Foreign government and business support have helped in thetransition from the old command economy to a market economy.
LuxembourgThis stable, high-income economy - benefiting from itsproximity to France, Belgium, and Germany - features solid growth,low inflation, and low unemployment. The industrial sector,initially dominated by steel, has become increasingly diversified toinclude chemicals, rubber, and other products. Growth in thefinancial sector, which now accounts for about 28% of GDP, has morethan compensated for the decline in steel. Most banks are foreignowned and have extensive foreign dealings. Agriculture is based onsmall family-owned farms. The economy depends on foreign andcross-border workers for about 60% of its labor force. AlthoughLuxembourg, like all EU members, suffered from the global economicslump in the early part of this decade, the country continues toenjoy an extraordinarily high standard of living - GDP per capitaranks second in the world, after Qatar. After two years of strongeconomic growth in 2006-07, turmoil in the world financial marketswill slow Luxembourg's economy in 2008, but growth will remain abovethe European average.
MacauMacau's economy has enjoyed strong growth in recent years onthe back of its expanding tourism and gaming sectors. Since openingup its locally-controlled casino industry to foreign competition in2001, the territory has attracted tens of billions of dollars inforeign investment that have helped transform it into the world'slargest gaming center. In 2006, Macau's gaming revenue surpassedthat of the Las Vegas strip, and gaming-related taxes accounted for75% of total government revenue. The expanding casino sector, andChina's decision beginning in 2002 to relax travel restrictions,have reenergized Macau's tourism industry, which saw total visitorsgrow to 27 million in 2007, up 62% in three years. Macau's strongeconomic growth has put pressure its labor market promptingbusinesses to look abroad to meet their staffing needs. Theresulting influx of non-resident workers, who totaled one-fifth ofthe workforce in 2006, has fueled tensions among some segments ofthe population. Macau's traditional manufacturing industry has beenin a slow decline. In 2006, exports of textiles and garmentsgenerated only $1.8 billion compared to $6.9 billion in gross gamingreceipts. Macau's textile industry will continue to move to themainland because of the termination in 2005 of the Multi-FiberAgreement, which provided a near guarantee of export markets,leaving the territory more dependent on gambling and trade-relatedservices to generate growth. However, the Closer EconomicPartnership Agreement (CEPA) between Macau and mainland China thatcame into effect on 1 January 2004 offers many Macau-made productstariff-free access to the mainland. Macau's currency, the Pataca, isclosely tied to the Hong Kong dollar, which is also freely acceptedin the territory.
MacedoniaAt independence in September 1991, Macedonia was the leastdeveloped of the Yugoslav republics, producing a mere 5% of thetotal federal output of goods and services. The collapse ofYugoslavia ended transfer payments from the central government andeliminated advantages from inclusion in a de facto free trade area.An absence of infrastructure, UN sanctions on the downsizedYugoslavia, and a Greek economic embargo over a dispute about thecountry's constitutional name and flag hindered economic growthuntil 1996. GDP subsequently rose each year through 2000. In 2001,during a civil conflict, the economy shrank 4.5% because ofdecreased trade, intermittent border closures, increased deficitspending on security needs, and investor uncertainty. Growth barelyrecovered in 2002 to 0.9%, then averaged 4% per year during 2003-07,expanding to 5.1% in 2007. Macedonia has maintained macroeconomicstability with low inflation, but it has so far lagged the region inattracting foreign investment and creating jobs, despite makingextensive fiscal and business sector reforms. Official unemploymentremains high at nearly 35%, but may be overstated based on theexistence of an extensive gray market, estimated to be more than 20percent of GDP, that is not captured by official statistics.
MadagascarHaving discarded past socialist economic policies,Madagascar has since the mid 1990s followed a World Bank- andIMF-led policy of privatization and liberalization. This strategyplaced the country on a slow and steady growth path from anextremely low level. Agriculture, including fishing and forestry, isa mainstay of the economy, accounting for more than one-fourth ofGDP and employing 80% of the population. Exports of apparel haveboomed in recent years primarily due to duty-free access to the US.Deforestation and erosion, aggravated by the use of firewood as theprimary source of fuel, are serious concerns. President RAVALOMANANAhas worked aggressively to revive the economy following the 2002political crisis, which triggered a 12% drop in GDP that year.Poverty reduction and combating corruption will be the centerpiecesof economic policy for the next few years.
MalawiLandlocked Malawi ranks among the world's most denselypopulated and least developed countries. The economy ispredominately agricultural with about 85% of the population livingin rural areas. Agriculture accounts for more than one-third of GDPand 90% of export revenues. The performance of the tobacco sector iskey to short-term growth as tobacco accounts for more than half ofexports. The economy depends on substantial inflows of economicassistance from the IMF, the World Bank, and individual donornations. In December 2007, the US granted Malawi eligibility statusto receive financial support within the Millennium ChallengeCorporation (MCC) initiative. Malawi will now begin a consultativeprocess to develop a five-year program before funding can begin. In2006, Malawi was approved for relief under the Heavily Indebted PoorCountries (HIPC) program. The government faces many challengesincluding developing a market economy, improving educationalfacilities, facing up to environmental problems, dealing with therapidly growing problem of HIV/AIDS, and satisfying foreign donorsthat fiscal discipline is being tightened. In 2005, PresidentMUTHARIKA championed an anticorruption campaign. Since 2005President MUTHARIKA'S government has exhibited improved financialdiscipline under the guidance of Finance Minister Goodall GONDWE andsigned a three year Poverty Reduction and Growth Facility worth $56million with the IMF. Improved relations with the IMF lead otherinternational donors to resume aid as well.
MalaysiaMalaysia, a middle-income country, has transformed itselfsince the 1970s from a producer of raw materials into an emergingmulti-sector economy. Since coming to office in 2003, Prime MinisterABDULLAH has tried to move the economy farther up the value-addedproduction chain by attracting investments in high technologyindustries, medical technology, and pharmaceuticals. The Governmentof Malaysia is continuing efforts to boost domestic demand to weanthe economy off of its dependence on exports. Nevertheless, exports- particularly of electronics - remain a significant driver of theeconomy. As an oil and gas exporter, Malaysia has profited fromhigher world energy prices, although the rising cost of domesticgasoline and diesel fuel forced Kuala Lumpur to reduce governmentsubsidies. Malaysia "unpegged" the ringgit from the US dollar in2005 and the currency appreciated 6% per year against the dollar in2006-07. Although this has helped to hold down the price of imports,inflationary pressures began to build in 2007. Healthy foreignexchange reserves and a small external debt greatly reduce the riskthat Malaysia will experience a financial crisis over the near termsimilar to the one in 1997. The government presented its five-yearnational development agenda in April 2006 through the Ninth MalaysiaPlan, a comprehensive blueprint for the allocation of the nationalbudget from 2006-10. With national elections expected within theyear, ABDULLAH has unveiled a series of ambitious developmentschemes for several regions that have had trouble attractingbusiness investment. Real GDP growth has averaged about 6% per yearunder ABDULLAH, but regions outside of Kuala Lumpur and themanufacturing hub Penang have not fared as well.
MaldivesTourism, Maldives' largest industry, accounts for 28% ofGDP and more than 60% of the Maldives' foreign exchange receipts.Over 90% of government tax revenue comes from import duties andtourism-related taxes. Fishing is the second leading sector.Agriculture and manufacturing continue to play a lesser role in theeconomy, constrained by the limited availability of cultivable landand the shortage of domestic labor. Most staple foods must beimported. Industry, which consists mainly of garment production,boat building, and handicrafts, accounts for about 7% of GDP. TheMaldivian Government began an economic reform program in 1989initially by lifting import quotas and opening some exports to theprivate sector. Subsequently, it has liberalized regulations toallow more foreign investment. Real GDP growth averaged over 7.5%per year for more than a decade. In late December 2004, a majortsunami left more than 100 dead, 12,000 displaced, and propertydamage exceeding $300 million. As a result of the tsunami, the GDPcontracted by about 3.6% in 2005. A rebound in tourism, post-tsunamireconstruction, and development of new resorts helped the economyrecover quickly. The trade deficit has expanded sharply as a resultof high oil prices and imports of construction material.Diversifying beyond tourism and fishing and increasing employmentare the major challenges facing the government. Over the longer termMaldivian authorities worry about the impact of erosion and possibleglobal warming on their low-lying country; 80% of the area is 1meter or less above sea level.
MaliMali is among the poorest countries in the world, with 65% ofits land area desert or semidesert and with a highly unequaldistribution of income. Economic activity is largely confined to theriverine area irrigated by the Niger. About 10% of the population isnomadic and some 80% of the labor force is engaged in farming andfishing. Industrial activity is concentrated on processing farmcommodities. Mali is heavily dependent on foreign aid and vulnerableto fluctuations in world prices for cotton, its main export, alongwith gold. The government has continued its successfulimplementation of an IMF-recommended structural adjustment programthat is helping the economy grow, diversify, and attract foreigninvestment. Mali's adherence to economic reform and the 50%devaluation of the CFA franc in January 1994 have pushed up economicgrowth to a 5% average in 1996-2007. Worker remittances and externaltrade routes for the landlocked country have been jeopardized bycontinued unrest in neighboring Cote d'Ivoire.
MaltaMajor resources are limestone, a favorable geographiclocation, and a productive labor force. Malta produces only about20% of its food needs, has limited fresh water supplies, and has fewdomestic energy sources. The economy is dependent on foreign trade,manufacturing (especially electronics and pharmaceuticals), andtourism. Economic recovery of the European economy has liftedexports, tourism, and overall growth. Malta adopted the euro on 1January 2008.
Marshall IslandsUS Government assistance is the mainstay of thistiny island economy. The Marshall Islands received more than $1billion in aid from the US from 1986-2002. Agricultural production,primarily subsistence, is concentrated on small farms; the mostimportant commercial crops are coconuts and breadfruit. Small-scaleindustry is limited to handicrafts, tuna processing, and copra. Thetourist industry, now a small source of foreign exchange employingless than 10% of the labor force, remains the best hope for futureadded income. The islands have few natural resources, and importsfar exceed exports. Under the terms of the Amended Compact of FreeAssociation, the US will provide millions of dollars per year to theMarshall Islands (RMI) through 2023, at which time a Trust Fund madeup of US and RMI contributions will begin perpetual annual payouts.Government downsizing, drought, a drop in construction, the declinein tourism, and less income from the renewal of fishing vessellicenses have held GDP growth to an average of 1% over the pastdecade.
MauritaniaHalf the population still depends on agriculture andlivestock for a livelihood, even though many of the nomads andsubsistence farmers were forced into the cities by recurrentdroughts in the 1970s and 1980s. Mauritania has extensive depositsof iron ore, which account for nearly 40% of total exports. Thenation's coastal waters are among the richest fishing areas in theworld, but overexploitation by foreigners threatens this key sourceof revenue. The country's first deepwater port opened nearNouakchott in 1986. In the past, drought and economic mismanagementresulted in a buildup of foreign debt, which now stands at more thanthree times the level of annual exports. In February 2000,Mauritania qualified for debt relief under the Heavily Indebted PoorCountries (HIPC) initiative and in December 2001 received strongsupport from donor and lending countries at a triennial ConsultativeGroup review. A new investment code approved in December 2001improved the opportunities for direct foreign investment. Ongoingnegotiations with the IMF involve problems of economic reforms andfiscal discipline. In 2001, exploratory oil wells in tracts 80 kmoffshore indicated potential extraction at current world oil prices.Oil prospects, while initially promising, have failed tomaterialize. Meantime the government emphasizes reduction ofpoverty, improvement of health and education, and promotingprivatization of the economy.
MauritiusSince independence in 1968, Mauritius has developed from alow-income, agriculturally based economy to a middle-incomediversified economy with growing industrial, financial, and touristsectors. For most of the period, annual growth has been in the orderof 5% to 6%. This remarkable achievement has been reflected in moreequitable income distribution, increased life expectancy, loweredinfant mortality, and a much-improved infrastructure. The economyrests on sugar, tourism, textiles and apparel, and financialservices, and is expanding into fish processing, information andcommunications technology, and hospitality and property development.Sugarcane is grown on about 90% of the cultivated land area andaccounts for 15% of export earnings. The government's developmentstrategy centers on creating vertical and horizontal clusters ofdevelopment in these sectors. Mauritius has attracted more than32,000 offshore entities, many aimed at commerce in India, SouthAfrica, and China. Investment in the banking sector alone hasreached over $1 billion. Mauritius, with its strong textile sector,has been well poised to take advantage of the Africa Growth andOpportunity Act (AGOA).
MayotteEconomic activity is based primarily on the agriculturalsector, including fishing and livestock raising. Mayotte is notself-sufficient and must import a large portion of its foodrequirements, mainly from France. The economy and future developmentof the island are heavily dependent on French financial assistance,an important supplement to GDP. Mayotte's remote location is anobstacle to the development of tourism.
MexicoMexico has a free market economy in the trillion dollarclass. It contains a mixture of modern and outmoded industry andagriculture, increasingly dominated by the private sector. Recentadministrations have expanded competition in seaports, railroads,telecommunications, electricity generation, natural gasdistribution, and airports. Per capita income is one-fourth that ofthe US; income distribution remains highly unequal. Trade with theUS and Canada has tripled since the implementation of NAFTA in 1994.Mexico has 12 free trade agreements with over 40 countriesincluding, Guatemala, Honduras, El Salvador, the European Free TradeArea, and Japan, putting more than 90% of trade under free tradeagreements. In 2007, during his first year in office, the FelipeCALDERON administration was able to garner support from theopposition to successfully pass a pension and a fiscal reform. Theadministration continues to face many economic challenges includingthe need to upgrade infrastructure, modernize labor laws, and allowprivate investment in the energy sector. CALDERON has stated thathis top economic priorities remain reducing poverty and creatingjobs.
Micronesia, Federated States ofEconomic activity consists primarilyof subsistence farming and fishing. The islands have few mineraldeposits worth exploiting, except for high-grade phosphate. Thepotential for a tourist industry exists, but the remote location, alack of adequate facilities, and limited air connections hinderdevelopment. Under the original terms of the Compact of FreeAssociation, the US provided $1.3 billion in grant aid during theperiod 1986-2001; the level of aid has been subsequently reduced.The Amended Compact of Free Association with the US guarantees theFederated States of Micronesia (FSM) millions of dollars in annualaid through 2023, and establishes a Trust Fund into which the US andthe FSM make annual contributions in order to provide annual payoutsto the FSM in perpetuity after 2023. The country's medium-termeconomic outlook appears fragile due not only to the reduction in USassistance but also to the current slow growth of the private sector.
MoldovaMoldova remains one of the poorest countries in Europedespite recent progress from its small economic base. It enjoys afavorable climate and good farmland but has no major mineraldeposits. As a result, the economy depends heavily on agriculture,featuring fruits, vegetables, wine, and tobacco. Moldova must importalmost all of its energy supplies. Moldova's dependence on Russianenergy was underscored at the end of 2005, when a Russian-ownedelectrical station in Moldova's separatist Transnistria region cutoff power to Moldova and Russia's Gazprom cut off natural gas indisputes over pricing. Russia's decision to ban Moldovan wine andagricultural products, coupled with its decision to double the priceMoldova paid for Russian natural gas, slowed GDP growth in 2006.However, in 2007 growth returned to the 6% level Moldova hadachieved in 2000-05, boosted by Russia's partial removal of thebans, solid fixed capital investment, and strong domestic demanddriven by remittances from abroad. Economic reforms have been slowbecause of corruption and strong political forces backing governmentcontrols. Nevertheless, the government's primary goal of EUintegration has resulted in some market-oriented progress. Thegranting of EU trade preferences and increased exports to Russiawill encourage higher growth rates in 2008, but the agreements areunlikely to serve as a panacea, given the extent to which exportsuccess depends on higher quality standards and other factors. Theeconomy remains vulnerable to higher fuel prices, poor agriculturalweather, and the skepticism of foreign investors. Also, the presenceof an illegal separatist regime in Moldova's Transnistria regioncontinues to be a drag on the Moldovan economy.
MonacoMonaco, bordering France on the Mediterranean coast, is apopular resort, attracting tourists to its casino and pleasantclimate. The principality also is a major banking center and hassuccessfully sought to diversify into services and small,high-value-added, nonpolluting industries. The state has no incometax and low business taxes and thrives as a tax haven both forindividuals who have established residence and for foreign companiesthat have set up businesses and offices. The state retainsmonopolies in a number of sectors, including tobacco, the telephonenetwork, and the postal service. Living standards are high, roughlycomparable to those in prosperous French metropolitan areas.
MongoliaEconomic activity in Mongolia has traditionally been basedon herding and agriculture. Mongolia has extensive mineral deposits.Copper, coal, gold, molybdenum, fluorspar, uranium, tin, andtungsten account for a large part of industrial production andforeign direct investment. 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 because of political inactionand natural 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 2000-02 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, 7.5% in 2006,and 9.9% in 2007 largely because of high copper prices and new goldproduction. Mongolia is experiencing its highest inflation rate inover a decade as consumer prices in 2007 rose 15%, largely becauseof increased fuel and food costs. Mongolia's economy continues to beheavily influenced by its neighbors. For example, Mongolia purchases95% of its petroleum products and a substantial amount of electricpower from Russia, leaving it vulnerable to price increases. Tradewith China represents more than half of Mongolia's total externaltrade - China receives about 70% of Mongolia's exports. Remittancesfrom Mongolians working abroad both legally and illegally aresizable, and money laundering is a growing concern. Mongolia settledits $11 billion debt with Russia at the end of 2003 on favorableterms. Mongolia, which joined the World Trade Organization in 1997,seeks to expand its participation and integration into Asianregional economic and trade regimes.
MontenegroMontenegro severed its economy from federal control andfrom Serbia during the MILOSEVIC era and maintained its own centralbank, used the euro instead of the Yugoslav dinar as officialcurrency, collected customs tariffs, and managed its own budget. Thedissolution of the loose political union between Serbia andMontenegro in 2006 led to separate membership in severalinternational financial institutions, such as the European Bank forReconstruction and Development. On 18 January 2007, Montenegrojoined the World Bank and IMF. Montenegro is pursuing its ownmembership in the World Trade Organization as well as negotiating aStabilization and Association agreement with the European Union inanticipation of eventual membership. Severe unemployment remains akey political and economic problem for this entire region.Montenegro has privatized its large aluminum complex - the dominantindustry - as well as most of its financial sector, and has begun toattract foreign direct investment in the tourism sector.
MontserratSevere volcanic activity, which began in July 1995, hasput a damper on this small, open economy. A catastrophic eruption inJune 1997 closed the airports and seaports, causing further economicand social dislocation. Two-thirds of the 12,000 inhabitants fledthe island. Some began to return in 1998, but lack of housinglimited the number. The agriculture sector continued to be affectedby the lack of suitable land for farming and the destruction ofcrops. Prospects for the economy depend largely on developments inrelation to the volcanic activity and on public sector constructionactivity. The UK has launched a three-year $122.8 million aidprogram to help reconstruct the economy. Half of the island isexpected to remain uninhabitable for another decade.
MoroccoMoroccan economic policies brought macroeconomic stabilityto the country in the early 1990s but have not spurred growthsufficient to reduce unemployment - nearing 20% in urban areas -despite the Moroccan Government's ongoing efforts to diversify theeconomy. Morocco's GDP growth rate slowed to 2.1% in 2007 as aresult of a draught that severely reduced agricultural output andnecessitated wheat imports at rising world prices. Continueddependence on foreign energy and Morocco's inability to developsmall and medium size enterprises also contributed to the slowdown.Moroccan authorities understand that reducing poverty and providingjobs are key to domestic security and development. In 2005, Moroccolaunched the National Initiative for Human Development (INDH), a $2billion social development plan to address poverty and unemploymentand to improve the living conditions of the country's urban slums.Moroccan authorities are implementing reform efforts to open theeconomy to international investors. Despite structural adjustmentprograms supported by the IMF, the World Bank, and the Paris Club,the dirham is only fully convertible for current accounttransactions. In 2000, Morocco entered an Association Agreement withthe EU and, in 2006, entered a Free Trade Agreement (FTA) with theUS. Long-term challenges include improving education and jobprospects for Morocco's youth, and closing the income gap betweenthe rich and the poor, which the government hopes to achieve byincreasing tourist arrivals and boosting 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 1990s,and although it returned to double digits in 2000-06, in 2007inflation had slowed to 8%, while GDP growth reached 7.5%. Fiscalreforms, including the introduction of a value-added tax and reformof the customs service, have improved the government's revenuecollection abilities. In spite of these gains, Mozambique remainsdependent upon foreign assistance for much of its annual budget, andthe majority 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. At the end of 2007, and after years of negotiations, thegovernment took over Portugal's majority share of the Cahora BassaHydroelectricity (HCB) company, a dam that was not transferred toMozambique at independence because of the ensuing civil war andunpaid debts. More power is needed for additional investmentprojects in titanium extraction and processing and garmentmanufacturing that could further close the import/export gap.Mozambique's once substantial foreign debt has been reduced throughforgiveness and rescheduling under the IMF's Heavily Indebted PoorCountries (HIPC) and Enhanced HIPC initiatives, and is now at amanageable level. In July 2007 the Millennium Challenge Corporation(MCC) signed a Compact with Mozambique; the Mozambican governmentmoved rapidly to ratify the Compact and propose a plan for funding.
NamibiaThe economy is heavily dependent on the extraction andprocessing of minerals for export. Mining accounts for 8% of GDP,but provides more than 50% of foreign exchange earnings. Richalluvial 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 one of the world's most unequal income distributions.The Namibian economy is closely linked to South Africa with theNamibian dollar pegged one-to-one to the South African rand.Increased payments from the Southern African Customs Union (SACU)put Namibia's budget into surplus in 2007 for the first time sinceindependence, but SACU payments will decline after 2008 as part of anew revenue sharing formula. Increased fish production and mining ofzinc, copper, uranium, and silver spurred growth in 2003-07, butgrowth in recent years was undercut by poor fish catches and highcosts for metal inputs.
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 3% 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 and is one of the five largestinvestors in the US. The economy experienced a slowdown in 2005 butin 2006 recovered to the fastest pace in six years on the back ofincreased exports and strong investment. The pace of job growthreached 10-year highs in 2007.
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. Most of the oil Netherlands Antillesimports for its refineries come from Venezuela. Almost all consumerand capital goods are imported, the US, Italy, and Mexico being themajor suppliers. Poor soils and inadequate water supplies hamper thedevelopment of agriculture. Budgetary problems hamper reform of thehealth and pension systems of an aging population. The Netherlandsprovides financial aid to support the economy.
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 - andbroadened and deepened the technological capabilities of theindustrial sector. Per capita income has risen for eight consecutiveyears and reached $27,300 in 2007 in purchasing power parity terms.Consumer and government spending have driven growth in recent years,and exports picked up in 2006 after struggling for several years.Exports were equal to about 22% of GDP in 2007, down from 33% of GDPin 2001. Thus far the economy has been resilient, and the LaborGovernment promises that expenditures on health, education, andpensions will increase proportionately to output. Inflationarypressures have built in recent years and the central bank raised itskey rate 13 times since January 2004 to finish 2007 at 8.25%. Alarge balance of payments deficit poses another challenge inmanaging the economy.
NicaraguaNicaragua has widespread underemployment, one of thehighest degrees of income inequality in the world, and the thirdlowest per capita income in the Western Hemisphere. While thecountry has progressed toward macroeconomic stability in the pastfew years, annual GDP growth has been far too low to meet thecountry's needs, forcing the country to rely on internationaleconomic assistance to meet fiscal and debt financing obligations.In early 2004, Nicaragua secured some $4.5 billion in foreign debtreduction under the Heavily Indebted Poor Countries (HIPC)initiative, and in October 2007, the IMF approved a new povertyreduction and growth facility (PRGF) program that should createfiscal space for social spending and investment. The continuity of arelationship with the IMF reinforces donor confidence, despiteprivate sector concerns surrounding ORTEGA, which has dampenedinvestment. The US-Central America Free Trade Agreement (CAFTA) hasbeen in effect since April 2006 and has expanded exportopportunities for many agricultural and manufactured goods. Energyshortages fueled by high oil prices, however, are a seriousbottleneck to growth.
NigerNiger is one of the poorest countries in the world, rankingnear last 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 US $86 million 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 80% 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 2007, based largely onincreased oil exports and high global crude prices. Newly-electedPresident YAR'ADUA has pledged to continue the economic reforms ofhis predecessor and the proposed budget for 2008 reflects theadministrations emphasis on infrastructure improvements.Infrastructure is the main impediment to growth. The government isworking toward developing stronger public-private partnerships forelectricity and roads.
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 US$2.6 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.