BermudaBermuda enjoys the third highest per capita income in theworld more than 50% higher than that of the US. Its economy isprimarily based on providing financial services for internationalbusiness and luxury facilities for tourists. A number of reinsurancecompanies relocated to the island following the 11 September 2001attacks and again after Hurricane Katrina in August 2005contributing to the expansion of an already robust internationalbusiness sector. Bermuda's tourism industry - which derives over 80%of its visitors from the US - continues to struggle but remains theisland's number two industry. Most capital equipment and food mustbe imported. Bermuda's industrial sector is small, althoughconstruction continues to be important; the average cost of a housein June 2003 had risen to $976,000. Agriculture is limited with only20% of the land being arable.
BhutanThe economy, one of the world's smallest and least developed,is based on agriculture and forestry, which provide the mainlivelihood for more than 60% of the population. Agriculture consistslargely of subsistence farming and animal husbandry. Ruggedmountains dominate the terrain and make the building of roads andother infrastructure difficult and expensive. The economy is closelyaligned with India's through strong trade and monetary links anddependence on India's financial assistance. The industrial sector istechnologically backward, with most production of the cottageindustry type. Most development projects, such as road construction,rely on Indian migrant labor. Model education, social, andenvironment programs are underway with support from multilateraldevelopment organizations. Each economic program takes into accountthe government's desire to protect the country's environment andcultural traditions. For example, the government, in its cautiousexpansion of the tourist sector, encourages visits by upscale,environmentally conscientious tourists. Detailed controls anduncertain policies in areas such as industrial licensing, trade,labor, and finance continue to hamper foreign investment. Hydropowerexports to India have boosted Bhutan's overall growth, even thoughGDP fell in 2008 as a result of a slowdown in India, its predominantexport market. New hydropower projects will be the driving forcebehind Bhutan's ability to create employment and sustain growth inthe coming years.
BoliviaBolivia is one of the poorest and least developed countriesin Latin America. Following a disastrous economic crisis during theearly 1980s, reforms spurred private investment, stimulated economicgrowth, and cut poverty rates in the 1990s. The period 2003-05 wascharacterized by political instability, racial tensions, and violentprotests against plans - subsequently abandoned - to exportBolivia's newly discovered natural gas reserves to large northernhemisphere markets. In 2005, the government passed a controversialhydrocarbons law that imposed significantly higher royalties andrequired foreign firms then operating under risk-sharing contractsto surrender all production to the state energy company. In early2008, higher earnings for mining and hydrocarbons exports pushed thecurrent account surplus to 9.4% of GDP and the government's highertax take produced a fiscal surplus after years of large deficits.Private investment as a share of GDP, however, remains among thelowest in Latin America, and inflation remained at double-digitlevels in 2008. The decline in commodity prices in late 2008, thelack of foreign investment in the mining and hydrocarbon sectors,and the suspension of trade benefits with the United States willpose challenges for the Bolivian economy in 2009.
Bosnia and HerzegovinaThe interethnic warfare in Bosnia andHerzegovina caused production to plummet by 80% from 1992 to 1995and unemployment to soar. With an uneasy peace in place, outputrecovered in 1996-99 at high percentage rates from a low base; butoutput growth slowed in 2000-02. Part of the lag in output was madeup in 2003-08 when GDP growth exceeded 5% per year. Banking reformaccelerated in 2001 as all the Communist-era payments bureaus wereshut down; foreign banks, primarily from Western Europe, now controlmost of the banking sector. The konvertibilna marka (convertiblemark or BAM)- the national currency introduced in 1998 - is peggedto the euro, and confidence in the currency and the banking sectorhas increased. Bosnia's private sector is growing and foreigninvestment is slowly increasing, but government spending, at nearly40% of adjusted GDP, remains high because of redundant governmentoffices at the state, entity and municipal level. Implementingprivatization, however, has been slow, particularly in theFederation where political division between ethnically-basedpolitical parties makes agreement on economic policy more difficult.A sizeable current account deficit and high unemployment rate remainthe two most serious macroeconomic problems. Successfulimplementation of a value-added tax in 2006 provided a predictablesource of revenue for the government and helped rein in gray marketactivity. National-level statistics have also improved over time buta large share of economic activity remains unofficial andunrecorded. Bosnia and Herzegovina became a full member of theCentral European Free Trade Agreement in September 2007. Bosnia'seconomy has been largely sheltered from the global financialdowntown although key economic indicators have worsened. Keyexporters in the metal, automobile and wood processing industrieshave reported a worsening performance and have announced layoffs andoutput reductions.
BotswanaBotswana has maintained one of the world's highest economicgrowth rates since independence in 1966, though growth fell below 5%in 2007-08. Through fiscal discipline and sound management, Botswanahas transformed itself from one of the poorest countries in theworld to a middle-income country with a per capita GDP of $13,300 in2008. Two major investment services rank Botswana as the best creditrisk in Africa. Diamond mining has fueled much of the expansion andcurrently accounts for more than one-third of GDP and for 70-80% ofexport earnings. Tourism, financial services, subsistence farming,and cattle raising are other key sectors. On the downside, thegovernment must deal with high rates of unemployment and poverty.Unemployment officially was 23.8% in 2004, but unofficial estimatesplace it closer to 40%. HIV/AIDS infection rates are the secondhighest in the world and threaten Botswana's impressive economicgains. An expected leveling off in diamond mining productionovershadows long-term prospects.
Bouvet Islandno economic activity; declared a nature reserve
BrazilCharacterized by large and well-developed agricultural,mining, manufacturing, and service sectors, Brazil's economyoutweighs that of all other South American countries and Brazil isexpanding its presence in world markets. From 2003 to 2007, Brazilran record trade surpluses and recorded its first current accountsurpluses since 1992. Productivity gains coupled with high commodityprices contributed to the surge in exports. Brazil improved its debtprofile in 2006 by shifting its debt burden toward real denominatedand domestically held instruments. LULA da Silva restated hiscommitment to fiscal responsibility by maintaining the country'sprimary surplus during the 2006 election. Following his secondinauguration in October of that year, LULA da Silva announced apackage of further economic reforms to reduce taxes and increaseinvestment in infrastructure. Brazil's debt achieved investmentgrade status early in 2008, but the government's attempt to achievestrong growth while reducing the debt burden created inflationarypressures. For most of 2008, the Central Bank embarked on arestrictive monetary policy to stem these pressures. Since the onsetof the global financial crisis in September, Brazil's currency andits stock market - Bovespa - have significantly lost value, -41% forBovespa for the year ending 30 December 2008. Brazil incurredanother current account deficit in 2008, as world demand and pricesfor commodities dropped in the second-half of the year.
British Indian Ocean Territory All economic activity is concentrated on the largest island of Diego Garcia, where a joint UK-US military facility is located. Construction projects and various services needed to support the military installation are performed by military and contract employees from the UK, Mauritius, the Philippines, and the US. There are no industrial or agricultural activities on the islands. The territory earns foreign exchange by selling fishing licenses and postage stamps.
British Virgin IslandsThe economy, one of the most stable andprosperous in the Caribbean, is highly dependent on tourismgenerating an estimated 45% of the national income. An estimated820,000 tourists, mainly from the US, visited the islands in 2005.In the mid-1980s, the government began offering offshoreregistration to companies wishing to incorporate in the islands, andincorporation fees now generate substantial revenues. Roughly400,000 companies were on the offshore registry by yearend 2000. Theadoption of a comprehensive insurance law in late 1994, whichprovides a blanket of confidentiality with regulated statutorygateways for investigation of criminal offenses, made the BritishVirgin Islands even more attractive to international business.Livestock raising is the most important agricultural activity; poorsoils limit the islands' ability to meet domestic food requirements.Because of traditionally close links with the US Virgin Islands, theBritish Virgin Islands has used the US dollar as its currency since1959.
BruneiBrunei has a small well-to-do economy that encompasses amixture of foreign and domestic entrepreneurship, governmentregulation, welfare measures, and village tradition. Crude oil andnatural gas production account for just over half of GDP and morethan 90% of exports. Per capita GDP is among the highest in Asia,and substantial income from overseas investment supplements incomefrom domestic production. The government provides for all medicalservices and free education through the university level andsubsidizes rice and housing. Brunei's leaders are concerned thatsteadily increased integration into the world economy will undermineinternal social cohesion. Plans for the future include upgrading thelabor force, reducing unemployment, strengthening the banking andtourist sectors, increasing agricultural production, and, ingeneral, further widening the economic base beyond oil and gas.
BulgariaBulgaria, a former Communist country that entered the EU on1 January 2007, has experienced strong growth since a major economicdownturn in 1996. Successive governments have demonstrated acommitment to economic reforms and responsible fiscal planning, buthave failed so far to rein in rising inflation and large currentaccount deficits. Bulgaria has averaged more than 6% growth since2004, attracting significant amounts of foreign direct investment,but corruption in the public administration, a weak judiciary, andthe presence of organized crime remain significant challenges.
Burkina FasoOne of the poorest countries in the world, landlockedBurkina Faso has few natural resources and a weak industrial base.About 90% of the population is engaged in subsistence agriculture,which is vulnerable to periodic drought. Cotton is the main cashcrop and the government has joined with three other cotton producingcountries in the region - Mali, Niger, and Chad - to lobby in theWorld Trade Organization for fewer subsidies to producers in othercompeting countries. Since 1998, Burkina Faso has embarked upon agradual but successful privatization of state-owned enterprises.Having revised its investment code in 2004, Burkina Faso hopes toattract foreign investors. Thanks to this new code and otherlegislation favoring the mining sector, the country has seen anupswing in gold exploration and production. While the bitterinternal crisis in neighboring Cote d'Ivoire is beginning to beresolved, it is still having a negative effect on Burkina Faso'strade and employment. Burkina Faso received a Millennium ChallengeCorporation (MCC) threshold grant to improve girls' education at theprimary school level, and signed an MCC compact that focuses on theareas of infrastructure, agriculture, and land reform in July 2008.
Burma Burma, a resource-rich country, suffers from pervasive government controls, inefficient economic policies, and rural poverty. Despite Burma's increasing oil and gas revenue, socio-economic conditions have deteriorated because of the regime's mismanagement of the economy. The economy suffers from serious macroeconomic imbalances - including rising inflation, fiscal deficits, multiple official exchange rates that overvalue the Burmese kyat, a distorted interest rate regime, unreliable statistics, and an inability to reconcile national accounts to determine a realistic GDP figure. Most overseas development assistance ceased after the junta began to suppress the democracy movement in 1988 and subsequently refused to honor the results of the 1990 legislative elections. In response to the government of Burma's attack in May 2003 on AUNG SAN SUU KYI and her convoy, the US imposed new economic sanctions in August 2003 including a ban on imports of Burmese products and a ban on provision of financial services by US persons. Further, a poor investment climate hampers the inflow of foreign investment. Foreign investors have shied away from nearly every sector except for natural gas and power generation. The business climate is widely perceived as opaque, corrupt, and highly inefficient. The most productive sectors will continue to be in extractive industries - especially oil and gas, mining, and timber - with the latter causing significant environmental degradation. Other areas, such as manufacturing and services, are struggling with inadequate infrastructure, unpredictable import/export policies, deteriorating health and education systems, and endemic corruption. A major banking crisis in 2003 shuttered 20 private banks and disrupted the economy. As of 2008, the largest private banks operated under tight restrictions, limiting the private sector's access to formal credit. The September 2007 crackdown on prodemocracy demonstrators, including thousands of monks, strained the economy as the tourism industry, which directly employs about 500,000 people, suffered dramatic declines in foreign visitor levels. In November 2007, the European Union announced new sanctions banning investment and trade in Burmese gems, timber, and precious stones, while the United States expanded its sanctions list to include more Burmese government and military officials and their family members, as well as prominent regime business cronies, their family members, and associated companies. Official statistics are inaccurate. In July 2008 the President signed into law the Tom LANTOS JADE (Junta's Anti-Democratic Efforts) Act of 2008, imposing new targeted sanctions on the regime. Published statistics on foreign trade are greatly understated because of the size of the black market and unofficial border trade - often estimated to be as large as the official economy. Though the Burmese government has good economic relations with its neighbors, better investment and business climates and an improved political situation are needed to promote serious foreign investment, exports, and tourism.
BurundiBurundi is a landlocked, resource-poor country with anunderdeveloped manufacturing sector. The economy is predominantlyagricultural with more than 90% of the population dependent onsubsistence agriculture. Economic growth depends on coffee and teaexports, which account for 90% of foreign exchange earnings. Theability to pay for imports rests primarily on weather conditions andinternational coffee and tea prices. The Tutsi minority, 14% of thepopulation, dominates the coffee trade. An ethnic-based war thatlasted for over a decade resulted in more than 200,000 deaths,forced more than 48,000 refugees into Tanzania, and displaced140,000 others internally. Only one in two children go to school,and approximately one in 15 adults has HIV/AIDS. Food, medicine, andelectricity remain in short supply. Burundi's GDP grew around 4%annually in 2006-08. Political stability and the end of the civilwar have improved aid flows and economic activity has increased, butunderlying weaknesses - a high poverty rate, poor education rates, aweak legal system, and low administrative capacity - riskundermining planned economic reforms. Burundi will continue toremain heavily dependent on aid from bilateral and multilateraldonors; the delay of funds after a corruption scandal cut offbilateral aid in 2007 reduced government's revenues and its abilityto pay salaries.
CambodiaFrom 2004 to 2007, the economy grew about 10% per year,driven largely by an expansion in the garment sector, construction,agriculture, and tourism. Growth dropped to below 7% in 2008 as aresult of the global economic slowdown. With the January 2005expiration of a WTO Agreement on Textiles and Clothing, Cambodiantextile producers were forced to compete directly with lower-pricedcountries such as China, India, Vietnam, and Bangladesh. The garmentindustry currently employs more than 320,000 people and contributesmore than 85% of Cambodia's exports. In 2005, exploitable oildeposits were found beneath Cambodia's territorial waters,representing a new revenue stream for the government if commercialextraction begins. Mining also is attracting significant investorinterest, particularly in the northern parts of the country. Thegovernment has said opportunities exist for mining bauxite, gold,iron and gems. In 2006, a US-Cambodia bilateral Trade and InvestmentFramework Agreement (TIFA) was signed, and several rounds ofdiscussions have been held since 2007. The tourism industry hascontinued to grow rapidly, with foreign arrivals exceeding 2 millionper year in 2007-08, however, economic troubles abroad will dampengrowth in 2009. Rubber exports declined more than 15% in 2008 due tofalling world market prices. The global financial crisis isweakening demand for Cambodian exports, and construction isdeclining due to a shortage of credit. The long-term development ofthe economy remains a daunting challenge. The Cambodian governmentis working with bilateral and multilateral donors, including theWorld Bank and IMF, to address the country's many pressing needs.The major economic challenge for Cambodia over the next decade willbe fashioning an economic environment in which the private sectorcan create enough jobs to handle Cambodia's demographic imbalance.More than 50% of the population is less than 21 years old. Thepopulation lacks education and productive skills, particularly inthe poverty-ridden countryside, which suffers from an almost totallack of basic infrastructure.
CameroonBecause of its modest oil resources and favorableagricultural conditions, Cameroon has one of the best-endowedprimary commodity economies in sub-Saharan Africa. Still, it facesmany of the serious problems facing other underdeveloped countries,such as stagnating per capita income, a relatively inequitabledistribution of income, a top-heavy civil service, and a generallyunfavorable climate for business enterprise. International oil andcocoa prices have a significant impact on the economy. Since 1990,the government has embarked on various IMF and World Bank programsdesigned to spur business investment, increase efficiency inagriculture, improve trade, and recapitalize the nation's banks. TheIMF is pressing for more reforms, including increased budgettransparency, privatization, and poverty reduction programs.
CanadaAs an affluent, high-tech industrial society in thetrillion-dollar class, Canada resembles the US in itsmarket-oriented economic system, pattern of production, and affluentliving standards. Since World War II, the impressive growth of themanufacturing, mining, and service sectors has transformed thenation from a largely rural economy into one primarily industrialand urban. The 1989 US-Canada Free Trade Agreement (FTA) and the1994 North American Free Trade Agreement (NAFTA) (which includesMexico) touched off a dramatic increase in trade and economicintegration with the US, its principle trading partner. Canadaenjoys a substantial trade surplus with the US, which absorbs nearly80% of Canadian exports each year. Canada is the US's largestforeign supplier of energy, including oil, gas, uranium, andelectric power. Given its great natural resources, skilled laborforce, and modern capital plant, Canada has enjoyed solid economicgrowth, and prudent fiscal management has produced consecutivebalanced budgets from 1997 to 2007. In 2008, growth slowed sharplyas a result of the global economic downturn, US housing slump,plunging auto sector demand, and a drop in world commodity prices.Public finances, too, are set to deteriorate for the first time in adecade. Tight global credit conditions have further restrainedbusiness and housing investment, despite the conservative lendingpractices and strong capitalization that made Canada's major banksamong the most stable in the world.
Cape VerdeThis island economy suffers from a poor natural resourcebase, including serious water shortages exacerbated by cycles oflong-term drought. The economy is service-oriented, with commerce,transport, tourism, and public services accounting for aboutthree-fourths of GDP. Although nearly 70% of the population lives inrural areas, the share of food production in GDP is low. About 82%of food must be imported. The fishing potential, mostly lobster andtuna, is not fully exploited. Cape Verde annually runs a high tradedeficit, financed by foreign aid and remittances from emigrants;remittances supplement GDP by more than 20%. Economic reforms areaimed at developing the private sector and attracting foreigninvestment to diversify the economy. Future prospects depend heavilyon the maintenance of aid flows, the encouragement of tourism,remittances, and the momentum of the government's developmentprogram. Cape Verde became a member of the WTO in July 2008.
Cayman IslandsWith no direct taxation, the islands are a thrivingoffshore financial center. More than 68,000 companies wereregistered in the Cayman Islands as of 2003, including almost 500banks, 800 insurers, and 5,000 mutual funds. A stock exchange wasopened in 1997. Tourism is also a mainstay, accounting for about 70%of GDP and 75% of foreign currency earnings. The tourist industry isaimed at the luxury market and caters mainly to visitors from NorthAmerica. Total tourist arrivals exceeded 2.1 million in 2003, withabout half from the US. About 90% of the islands' food and consumergoods must be imported. The Caymanians enjoy one of the highestoutputs per capita and one of the highest standards of living in theworld.
Central African RepublicSubsistence agriculture, together withforestry, remains the backbone of the economy of the Central AfricanRepublic (CAR), with more than 70% of the population living inoutlying areas. The agricultural sector generates more than half ofGDP. Timber has accounted for about 16% of export earnings and thediamond industry, for 40%. Important constraints to economicdevelopment include the CAR's landlocked position, a poortransportation system, a largely unskilled work force, and a legacyof misdirected macroeconomic policies. Factional fighting betweenthe government and its opponents remains a drag on economicrevitalization. Distribution of income is extraordinarily unequal.Grants from France and the international community can onlypartially meet humanitarian needs.
ChadChad's primarily agricultural economy will continue to beboosted by major foreign direct investment projects in the oilsector that began in 2000. At least 80% of Chad's population relieson subsistence farming and livestock raising for its livelihood.Chad's economy has long been handicapped by its landlocked position,high energy costs, and a history of instability. Chad relies onforeign assistance and foreign capital for most public and privatesector investment projects. A consortium led by two US companies hasbeen investing $3.7 billion to develop oil reserves - estimated at 1billion barrels - in southern Chad. Chinese companies are alsoexpanding exploration efforts and plan to build a refinery. Thenation's total oil reserves are estimated at 1.5 billion barrels.Oil production came on stream in late 2003. Chad began to export oilin 2004. Cotton, cattle, and gum arabic provide the bulk of Chad'snon-oil export earnings.
ChileChile has a market-oriented economy characterized by a highlevel of foreign trade and a reputation for strong financialinstitutions and sound policy that have given it the strongestsovereign bond rating in South America. Exports account for 40% ofGDP, with commodities making up some three-quarters of totalexports. Copper alone provides one-third of government revenue.During the early 1990s, Chile's reputation as a role model foreconomic reform was strengthened when the democratic government ofPatricio AYLWIN - which took over from the military in 1990 -deepened the economic reform initiated by the military government.Growth in real GDP averaged 8% during 1991-97, but fell to half thatlevel in 1998 because of tight monetary policies implemented to keepthe current account deficit in check and because of lower exportearnings - the latter a product of the global financial crisis. Asevere drought exacerbated the situation in 1999, reducing cropyields and causing hydroelectric shortfalls and electricityrationing, and Chile experienced negative economic growth for thefirst time in more than 15 years. In the years since then, growthhas averaged 4% per year. Chile deepened its longstanding commitmentto trade liberalization with the signing of a free trade agreementwith the US, which took effect on 1 January 2004. Chile claims tohave more bilateral or regional trade agreements than any othercountry. It has 57 such agreements (not all of them full free tradeagreements), including with the European Union, Mercosur, China,India, South Korea, and Mexico. Over the past five years, foreigndirect investment inflows have quadrupled to some $17 billion in2008. The Chilean government conducts a rule-based countercyclicalfiscal policy, accumulating surpluses in sovereign wealth fundsduring periods of high copper prices and economic growth, andallowing deficit spending only during periods of low copper pricesand growth. As of September 2008, those sovereign wealth funds -kept mostly outside the country and separate from Central Bankreserves - amounted to more than $20 billion.
China China's economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy. Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment. Annual inflows of foreign direct investment rose to nearly $84 billion in 2007. China has generally implemented reforms in a gradualist or piecemeal fashion. In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. After keeping its currency tightly linked to the US dollar for years, China in July 2005 revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. Cumulative appreciation of the renminbi against the US dollar since the end of the dollar peg was more than 20% by late 2008, but the exchange rate has changed little since the onset of the global financial crisis. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2008 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income. The Chinese government faces numerous economic development challenges, including: (a) strengthening its social safety net, including pension and health system reform, to counteract a high domestic savings rate and correspondingly low domestic demand; (b) sustaining adequate job growth for tens of millions of migrants, new entrants to the work force, and workers laid off from state-owned enterprises deemed not worth saving; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy's rapid transformation. Economic development has been more rapid in coastal provinces than in the interior, and approximately 200 million rural laborers and their dependents have relocated to urban areas to find work - in recent years many have returned to their villages. One demographic consequence of the "one child" policy is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the north - is another long-term problem. China continues to lose arable land because of erosion and economic development. In 2007 China intensified government efforts to improve environmental conditions, tying the evaluation of local officials to environmental targets, publishing a national climate change policy, and establishing a high level leading group on climate change, headed by Premier WEN Jiabao. The Chinese government seeks to add energy production capacity from sources other than coal and oil. In late 2008, as China commemorated the 30th anniversary of its historic economic reforms, the global economic downturn began to slow foreign demand for Chinese exports for the first time in many years. The government vowed to continue reforming the economy and emphasized the need to increase domestic consumption in order to make China less dependent on foreign exports for GDP growth in the future.
Christmas IslandPhosphate mining had been the only significanteconomic activity, but in December 1987 the Australian governmentclosed the mine. In 1991, the mine was reopened. With the support ofthe government, a $34 million casino opened in 1993, but closed in1998. The Australian government in 2001 agreed to support thecreation of a commercial space-launching site on the island expectedto begin operations in the near future.
Clipperton IslandAlthough 115 species of fish have been identifiedin the territorial waters of Clipperton Island, the only economicactivity is tuna fishing.
Cocos (Keeling) IslandsGrown throughout the islands, coconuts arethe sole cash crop. Small local gardens and fishing contribute tothe food supply, but additional food and most other necessities mustbe imported from Australia. There is a small tourist industry.
ColombiaColombia has experienced accelerating growth between 2002and 2007, with expansion above 7% in 2007, chiefly due toadvancements in domestic security, to rising commodity prices, andto President URIBE's promarket economic policies. Colombia'ssustained growth helped reduce poverty by 20% and cut unemploymentby 25% since 2002. Additionally, investor friendly reforms toColombia's hydrocarbon sector and the US-Colombia Trade PromotionAgreement (CTPA) negotiations have attracted record levels offoreign investment. Inequality, underemployment,and narcotraffickingremain significant challenges, and Colombia's infrastructurerequires significant updating in order to sustain expansion.Economic growth slipped in 2008 as a result of the global financialcrisis and weakening demand for Colombia's exports. In response,URIBE's administration has cut capital controls, arranged foremergency credit lines from multilateral institutions, and promotedinvestment incentives such as Colombia's modernized free trade zonemechanism, legal stability contracts, and new bilateral investmenttreaties and trade agreements. The government has also encouragedexporters to diversify their customer base away from the UnitedStates and Venezuela, Colombia's largest trading partners.Nevertheless, the business sector continues to be concerned aboutthe impact of a global recession on Colombia's exports, as well asthe approval of the CTPA, which is stalled in the US Congress.
ComorosOne of the world's poorest countries, Comoros is made up ofthree islands that have inadequate transportation links, a young andrapidly increasing population, and few natural resources. The loweducational level of the labor force contributes to a subsistencelevel of economic activity, high unemployment, and a heavydependence on foreign grants and technical assistance. Agriculture,including fishing, hunting, and forestry, contributes 40% to GDP,employs 80% of the labor force, and provides most of the exports.The country is not self-sufficient in food production; rice, themain staple, accounts for the bulk of imports. The government -which is hampered by internal political disputes - is struggling toupgrade education and technical training, privatize commercial andindustrial enterprises, improve health services, diversify exports,promote tourism, and reduce the high population growth rate. Thepolitical problems have inhibited growth, which has averaged onlyabout 1% in 2006-08. Remittances from 150,000 Comorans abroad helpsupplement GDP.
Congo, Democratic Republic of theThe economy of the DemocraticRepublic of the Congo - a nation endowed with vast potential wealth- is slowly recovering from two decades of decline. Conflict thatbegan in August 1998 has dramatically reduced national output andgovernment revenue, increased external debt, and resulted in thedeaths of more than 5 million people from violence, famine, anddisease. Foreign businesses curtailed operations due to uncertaintyabout the outcome of the conflict, lack of infrastructure, and thedifficult operating environment. Conditions began to improve in late2002 with the withdrawal of a large portion of the invading foreigntroops. The transitional government reopened relations withinternational financial institutions and international donors, andPresident KABILA began implementing reforms, although progress hasbeen slow and the International Monetary Fund curtailed theirprogram for the DRC at the end of March 2006 because of fiscaloverruns. Much economic activity still occurs in the informalsector, and is not reflected in GDP data. Renewed activity in themining sector, the source of most export income, boosted Kinshasa'sfiscal position and GDP growth from 2006-2008, however, renewedstrife in the second half of 2008, combined with a fall in worldmarket prices for the DRC's key mineral exports inflicted majordamage on the economy and halted growth. Government reforms may leadto increased government revenues, outside budget assistance, andforeign direct investment, although an uncertain legal framework,corruption, a lack of transparency in government policy arelong-term problems. The DRC government has applied to the IMF for anExogenous Shock Facility in the amount of $200 million to help itdeal with its deteriorating financial situation, and the World Bankwill consider a separate $100 million in emergency funding. Theglobal recession probably will cut economic growth in 2009 to halfits 2008 level.
Congo, Republic of theThe economy is a mixture of subsistenceagriculture, an industrial sector based largely on oil, and supportservices, and a government characterized by budget problems andoverstaffing. Oil has supplanted forestry as the mainstay of theeconomy, providing a major share of government revenues and exports.In the early 1980s, rapidly rising oil revenues enabled thegovernment to finance large-scale development projects with GDPgrowth averaging 5% annually, one of the highest rates in Africa.The government has mortgaged a substantial portion of its oilearnings through oil-backed loans that have contributed to a growingdebt burden and chronic revenue shortfalls. Economic reform effortshave been undertaken with the support of internationalorganizations, notably the World Bank and the IMF. However, thereform program came to a halt in June 1997 when civil war erupted.Denis SASSOU-NGUESSO, who returned to power when the war ended inOctober 1997, publicly expressed interest in moving forward oneconomic reforms and privatization and in renewing cooperation withinternational financial institutions. Economic progress was badlyhurt by slumping oil prices and the resumption of armed conflict inDecember 1998, which worsened the republic's budget deficit. Thecurrent administration presides over an uneasy internal peace andfaces difficult economic challenges of stimulating recovery andreducing poverty. Recovery of oil prices has boosted the economy'sGDP and near-term prospects. In March 2006, the World Bank and theInternational Monetary Fund (IMF) approved Heavily Indebted PoorCountries (HIPC) treatment for Congo.
Cook IslandsLike many other South Pacific island nations, the CookIslands' economic development is hindered by the isolation of thecountry from foreign markets, the limited size of domestic markets,lack of natural resources, periodic devastation from naturaldisasters, and inadequate infrastructure. Agriculture, employingmore than one-quarter of the working population, provides theeconomic base with major exports made up of copra and citrus fruit.Black pearls are the Cook Islands' leading export. Manufacturingactivities are limited to fruit processing, clothing, andhandicrafts. Trade deficits are offset by remittances from emigrantsand by foreign aid overwhelmingly from New Zealand. In the 1980s and1990s, the country lived beyond its means, maintaining a bloatedpublic service and accumulating a large foreign debt. Subsequentreforms, including the sale of state assets, the strengthening ofeconomic management, the encouragement of tourism, and a debtrestructuring agreement, have rekindled investment and growth.
Coral Sea Islandsno economic activity
Costa RicaCosta Rica's basically stable economy depends on tourism,agriculture, and electronics exports. Exports have become morediversified in the past 10 years due to the growth of the high-techmanufacturing sector, which is dominated by the microprocessorindustry and the production of medical devices. Tourism continues tobring in foreign exchange, as Costa Rica's impressive biodiversitymakes it a key destination for ecotourism. Foreign investors remainattracted by the country's political stability and relatively higheducation levels, as well as the fiscal incentives offered in thefree-trade zones. Costa Rica has attracted one of the highest levelsof foreign direct investment per capita in Latin America. Povertyhas remained around 20% for nearly 20 years, and the strong socialsafety net that had been put into place by the government has erodeddue to increased financial constraints on government expenditures.Immigration from Nicaragua has increasingly become a concern for thegovernment. The estimated 300,000-500,000 Nicaraguans in Costa Ricalegally and illegally are an important source of - mostly unskilled- labor, but also place heavy demands on the social welfare system.Under the ARIAS administration, the government has made strides inreducing internal and external debt - in 2007, Costa Rica had itsfirst budget surplus in 50 years. Reducing inflation remains adifficult problem because of rising commodity import prices andlabor market rigidities, though lower oil prices will decreaseupward pressures. The Central Bank is moving towards a more flexibleexchange rate system to focus on inflation targeting by 2010. TheUS-Central American Free Trade Agreement (CAFTA) entered into forceon 1 January 2009, after significant delays within the Costa Ricanlegislature. Nevertheless, economic growth has slowed in 2009 as theglobal downturn reduced export demand and invesment inflows.
Cote d'IvoireCote d'Ivoire is the world's largest producer andexporter of cocoa beans and a significant producer and exporter ofcoffee and palm oil. Consequently, the economy is highly sensitiveto fluctuations in international prices for these products, and, toa lesser extent, in climatic conditions. Despite government attemptsto diversify the economy, it is still heavily dependent onagriculture and related activities, engaging roughly 68% of thepopulation. Since 2006, oil and gas production have become moreimportant engines of economic activity than cocoa. According to IMFstatistics, earnings from oil and refined products were $1.3 billionin 2006, while cocoa-related revenues were $1 billion during thesame period. Cote d'Ivoire's offshore oil and gas production hasresulted in substantial crude oil exports and provides sufficientnatural gas to fuel electricity exports to Ghana, Togo, Benin, Maliand Burkina Faso. Oil exploration by a number of consortiums ofprivate companies continues offshore, and President GBAGBO hasexpressed hope that daily crude output could reach 200,000 barrelsper day (b/d) by the end of the decade. Since the end of the civilwar in 2003, political turmoil has continued to damage the economy,resulting in the loss of foreign investment and slow economicgrowth. GDP grew by nearly 2% in 2007 and 3% in 2008. Per capitaincome has declined by 15% since 1999.
CroatiaOnce one of the wealthiest of the Yugoslav republics,Croatia's economy suffered badly during the 1991-95 war as outputcollapsed and the country missed the early waves of investment inCentral and Eastern Europe that followed the fall of the BerlinWall. Between 2000 and 2007, however, Croatia's economic fortunesbegan to improve slowly, with moderate but steady GDP growth between4% and 6% led by a rebound in tourism and credit-driven consumerspending. Inflation over the same period has remained tame and thecurrency, the kuna, stable. Nevertheless, difficult problems stillremain, including a stubbornly high unemployment rate, a growingtrade deficit and uneven regional development. The state retains alarge role in the economy, as privatization efforts often meet stiffpublic and political resistance. While macroeconomic stabilizationhas largely been achieved, structural reforms lag because of deepresistance on the part of the public and lack of strong support frompoliticians. The EU accession process should accelerate fiscal andstructural reform. While long term growth prospects for the economyremain strong, Croatia will face significant pressure as a result ofthe global financial crisis. Croatia's high foreign debt, anemicexport sector, strained state budget, and over-reliance on tourismrevenue will result in higher risk to economic stability over themedium term.
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 30,000medical professionals.
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 has grown at a rate well above the EU averagesince 2000. Cyprus joined the European Exchange Rate Mechanism(ERM2) in May 2005 and adopted the euro as its national currency on1 January 2008. An aggressive austerity program in the precedingyears, aimed at paving the way for the euro, helped turn a soaringfiscal deficit (6.3% in 2003) into a surplus of 1.2% in 2008, andreduced inflation to 5.1%. This prosperity will come under pressurein 2009, as construction and tourism slow in the face of reducedforeign demand triggered by the ongoing global financial crisis.Growth is expected to slow to less than 2%, which would be itslowest level since 2003. As in the area administered by TurkishCypriots, water shortages are a perennial problem; a fewdesalination plants have been added to existing plants over the lastyear and are now on line. After 10 years of drought, the countryreceived substantial rainfall from 2001-04. Since then, rainfall hasbeen well below average, making water rationing a necessity.
Czech RepublicThe Czech Republic is one of the most stable andprosperous of the post-Communist states of Central and EasternEurope. Maintaining an open investment climate has been a keyelement of the Czech Republic's transition from a communist,centrally planned economy to a functioning market economy. As amember of the European Union, with an advantageous location in thecenter of Europe, a relatively low cost structure, and awell-qualified labor force, the Czech Republic is an attractivedestination for foreign investment. Prior to its EU accession in2004, the Czech government harmonized its laws and regulations withthose of the European Union. The government plans to meet thecriteria for joining the euro area around 2012. The small, open,export-driven Czech economy grew by over 6% annually from 2005-2007and strong growth continued throughout the first three quarters of2008. Despite the global financial crisis, the conservative Czechfinancial system has remained relatively healthy. The rate of Czecheconomic growth, however, fell in the fourth quarter of 2008, mainlydue to a significant drop in demand for Czech exports in WesternEurope. This trend is expected to continue, with many analystspredicting the Czech economy to contract slightly in 2009.
DenmarkThis thoroughly modern market economy features high-techagriculture, up-to-date small-scale and corporate industry,extensive government welfare measures, an equitable distribution ofincome, comfortable living standards, a stable currency, a stablepolitical system, and high dependence on foreign trade. Unemploymentis low and capacity constraints limit growth potential. Denmark is anet exporter of food and energy and enjoys a comfortable balance ofpayments surplus. The government has been successful in meeting, andeven exceeding, the economic convergence criteria for participatingin the third phase (a common European currency) of the EuropeanEconomic and Monetary Union (EMU), but so far Denmark has decidednot to join 16 other EU members in the euro. Nonetheless, the Danishkrone remains pegged to the euro. Denmark's fiscal position is amongthe strongest in the EU. Economic growth gained momentum in 2004 andthe upturn continued through 2006. After a long consumption-drivenupswing, Denmark's economy began slowing in early 2007 with the endof a housing boom. This cyclical slowdown has been exacerbated bythe global financial crisis through increased borrowing costs andlower export demand, consumer confidence, and investment. Theslowing global economy cut GDP by 1.2% in 2008. A major long-termissue will be the sharp decline in the ratio of workers to retirees.
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% in urban areas continues to be amajor problem. While inflation is not a concern, due to the fixedtie of the Djiboutian franc to the US dollar, the artificially highvalue of the Djiboutian franc adversely affects Djibouti's balanceof payments. 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" destinationand has developed a new tourism development plan with assistancefrom the EU. Hurricane Dean struck the island in August 2007 causingdamages equivalent to 20% of GDP. In 2003, the government began acomprehensive restructuring of the economy - including eliminationof price controls, privatization of the state banana company, andtax increases - to address Dominica's economic and financial crisisof 2001-02 and to meet IMF targets. This restructuring paved the wayfor the current economic recovery - real growth for 2006 reached atwo-decade high - and will help to reduce the debt burden, whichremains at about 100% of GDP. In order to diversify the island'sproduction base, the government is attempting to develop an offshorefinancial sector and has signed an agreement with the EU to developgeothermal energy resources.
Dominican RepublicThe Dominican Republic has enjoyed strong GDPgrowth since 2005 and continued to post sound gains throughmid-2008. The global recession, however, had a significant impact onGDP growth in the latter half of the year as tourism andremittances, two of the Dominican Republic's most important economiccontributors, showed signs of slowing. The economy is highlydependent upon the US, the destination for about two-thirds ofexports. Remittances from the US amount to about a tenth of GDP,equivalent to almost half of exports and three-quarters of tourismreceipts. The country has long been viewed primarily as an exporterof sugar, coffee, and tobacco but in recent years the service sectorhas overtaken agriculture as the economy's largest employer due togrowth in tourism and free trade zones. Although 2007 saw inflationaround 6%, the rate grew to over 12% in 2008. High food prices,driven by the effects of consecutive tropical storms on agriculturalproducts, and education prices were significant contributors to thejump. The effects of the global financial crisis and the USrecession are projected to negatively affect GDP growth in 2009 witha rebound expected in 2010. 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 contracting by more than 6%. Poverty increased significantly,the banking system collapsed, and Ecuador defaulted on its externaldebt later that year. In March 2000, Congress approved a series ofstructural reforms that also provided for the adoption of the USdollar as legal tender. Dollarization stabilized the economy, andpositive growth returned in the years that followed, helped by highoil prices, remittances, and increased non-traditional exports. From2002-06 the economy grew 5.5%, the highest five-year average in 25years. The poverty rate declined but remained high at 38% in 2006.In 2006 the government imposed a windfall revenue tax on foreign oilcompanies, leading to the suspension of free trade negotiations withthe US. These measures led to a drop in petroleum production in2007. President Rafael CORREA raised the specter of debt default andfollowed through on those threats in December 2008 by defaulting onsome commercial bond obligations. He also decreed a higher windfallrevenue tax on private oil companies, then renegotiated theircontracts to overcome the debilitating effect of the tax. Thisgenerated economic uncertainty; private investment has dropped andeconomic growth has slowed.
EgyptOccupying the northeast corner of the African continent, Egyptis bisected by the highly fertile Nile valley, where most economicactivity takes place. Egypt's economy was highly centralized duringthe rule of former President Gamal Abdel NASSER but has opened upconsiderably under former President Anwar EL-SADAT and currentPresident Mohamed Hosni MUBARAK. Cairo has aggressively pursuedeconomic reforms to encourage inflows of foreign investment andfacilitate GDP growth. In 2005, Prime Minister Ahmed NAZIF'sgovernment reduced personal and corporate tax rates, reduced energysubsidies, and privatized several enterprises. The stock marketboomed, and GDP grew about 7% each year since 2006. Despite theseachievements, the government has failed to raise living standardsfor the average Egyptian, and has had to continue providingsubsidies for basic necessities. The subsidies have contributed to asizeable budget deficit - roughly 7% of GDP in 2007-08 - andrepresent a significant drain on the economy. Foreign directinvestment has increased significantly in the past two years, butthe NAZIF government will need to continue its aggressive pursuit ofreforms in order to sustain the spike in investment and growth andbegin to improve economic conditions for the broader population.Egypt's export sectors - particularly natural gas - have brightprospects.
El SalvadorThe smallest country in Central America, El Salvador hasthe third largest economy, but growth has been modest in recentyears. Economic growth will decelerate in 2009 due to the globalslowdown and to El Salvador's dependence on exports to the US andremittances from the US. El Salvador leads the region in remittancesper capita with inflows equivalent to nearly all export income. In2006 El Salvador was the first country to ratify the CentralAmerica-Dominican Republic Free Trade Agreement (CAFTA). CAFTA hasbolstered the export of processed foods, sugar, and ethanol, andsupported investment in the maquila sector. The SACA administrationhas sought to diversify the economy, focusing on regionaltransportation and tourism. El Salvador has promoted an open tradeand investment environment, and has embarked on a wave ofprivatizations extending to telecom, electricity distribution,banking, and pension funds. In late 2006, the government and theMillennium Challenge Corporation signed a five-year, $461 millioncompact to stimulate economic growth and reduce poverty in thecountry's northern region through investments in education, publicservices, enterprise development, and transportation infrastructure.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.
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 2008, 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%. Despitethe fighting, Eritrea developed its transportation infrastructure,asphalting new roads, improving its ports, and repairing war-damagedroads and bridges. Since the war's conclusion, 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 by limiting access and availability. Few privateenterprises remain in Eritrea. Eritrea's economy depends heavily ontaxes paid by members of the diaspora. Erratic rainfall and thedelayed demobilization of agriculturalists from the militarycontinue to interfere with agricultural production, and Eritrea'srecent harvests have been unable 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 Government in 2007 and plans to begin mineral extraction in2010. Eritrea also opened a free trade zone at the port of Massawain 2008. Eritrea's economic future depends upon its ability tomaster 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. Estonia's successive governments have pursued afree market, pro-business economic agenda and have wavered little intheir commitment to pro-market reforms. Tallinn's priority has beento sustain high growth rates - on average 8% per year from 2003 to2007. 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. Rapid growth, however, has made it difficult to keep inflationand large current-account deficits from soaring, putting downwardpressure on the country's currency. The government has not given upon adopting the euro, but has repeatedly postponed its target date.Estonia's economy slowed down markedly and fell sharply intorecession in mid-2008, primarily as a result of an investment andconsumption slump following the bursting of the real estate marketbubble.
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 forgave Ethiopia's debt. Under Ethiopia'sconstitution, the state owns all land and provides long-term leasesto the tenants; the system continues to hamper growth in theindustrial sector as entrepreneurs are unable to use land ascollateral for loans. Drought struck again late in 2002, leading toa 3.3% decline in GDP in 2003. Normal weather patterns helpedagricultural and GDP growth recover during 2004-08.
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. Between 2004 and 2007, the EU admitted 12 countriesthat are, in general, less advanced technologically and economicallythan the other 15. Eleven established EU member states introducedthe euro as their common currency on 1 January 1999 (Greece did sotwo years later), but the UK, Sweden, and Denmark chose not toparticipate. Of the 12 most recent member states, only Slovenia (1January 2007) and Cyprus and Malta (1 January 2008) have adopted theeuro; the remaining nine are legally required to adopt the currencyupon meeting EU's fiscal and monetary 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. The sector accountsfor 95% of exports and nearly half of GDP. 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.In 2007 tourist arrivals were down almost 6%, with substantial joblosses in the service sector, and GDP dipped nearly 7%. The coup hascreated a difficult business climate. The EU has suspended all aiduntil the interim government takes steps toward new elections.Long-term problems include low investment, uncertain land ownershiprights, and the government's inability to manage its budget.Overseas remittances from Fijians working in Kuwait and Iraq havedecreased significantly. Fiji's current account deficit reached 23%of GDP in 2006.
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; Finland's ratio ofexports to GDP has risen from a quarter to 37% over the past 15years. Finland excels in high-tech exports such as mobile phones.Except for timber and several minerals, Finland depends on importsof raw materials, energy, and some components for manufacturedgoods. Because of the climate, agricultural development is limitedto maintaining self-sufficiency in basic products. Forestry, animportant export earner, provides a secondary occupation for therural population. Although Finland has been one of the bestperforming economies within the EU in recent years and its banks andfinancial markets have avoided the worst of global financial crisis,the world slowdown has hit export growth and domestic demand andwill serve as a brake on economic growth in 2009 and 2010. Theslowdown of construction, other investment, and exports will causeunemployment to rise. During 2009, unemployment will climb to over8% of the labor force. Long-term challenges include the need toaddress a rapidly aging population and decreasing productivity thatthreaten competitiveness, fiscal sustainability, and economic growth.