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. The expectedweakness in world hydrocarbon prices throughout 2009 will reduceLibyan government tax income and constrain Libyan economic growth in2009. Substantial revenues from the energy sector coupled with asmall population give Libya one of the highest per capita GDPs inAfrica, but little of this income flows down to the lower orders ofsociety. Libyan officials in the past five years have made progresson economic reforms as part of a broader campaign to reintegrate thecountry into the international fold. This effort picked up steamafter UN sanctions were lifted in September 2003 and as Libyaannounced in December 2003 that it would abandon programs to buildweapons of mass destruction. UN Sanctions against Libya were liftedin September 2003. The process of lifting US unilateral sanctionsbegan in the spring of 2004; all sanctions were removed by June2006, helping Libya attract greater foreign direct investment,especially in the energy sector. Libyan oil and gas licensing roundscontinue to draw high international interest; the National OilCompany set a goal of nearly doubling oil production to 3 millionbbl/day by 2012. Libya faces a long road ahead in liberalizing thesocialist-oriented economy, but initial steps - including applyingfor WTO membership, reducing some subsidies, and announcing plansfor privatization - are laying the groundwork for a transition to amore market-based economy. The non-oil manufacturing andconstruction sectors, which account for more than 20% of GDP, haveexpanded from processing mostly agricultural products to include theproduction of petrochemicals, iron, steel, and aluminum. Climaticconditions and poor soils severely limit agricultural output, andLibya imports about 75% of its food. Libya's primary agriculturalwater source remains the Great Manmade River Project, butsignificant resources are being invested in desalinization researchto 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 the highest per capita income in the world. TheLiechtenstein economy is widely diversified with a large number ofsmall businesses. Low business taxes - the maximum tax rate is 20% -and easy incorporation rules have induced many holding companies toestablish nominal offices in Liechtenstein, providing 30% of staterevenues. The country participates in a customs union withSwitzerland and uses the Swiss franc as its national currency. Itimports more than 90% of its energy requirements. Liechtenstein hasbeen a member of the European Economic Area (an organization servingas a bridge between the European Free Trade Association (EFTA) andthe EU) since May 1995. The government is working to harmonize itseconomic policies with those of an integrated Europe. In 2008Liechtenstein came under renewed international pressure -particularly from Germany - to improve transparency in its bankingand tax systems.
LithuaniaLithuania's economy grew on average 8% per year for thefour years prior to 2008, driven by exports and domestic consumerdemand. Unemployment stood at 4.8% in 2008, while wages grew atdouble digit rates. The current account deficit rose to roughly 15%of GDP in 2007-08. Lithuania has gained membership in the WorldTrade Organization and joined the EU in May 2004. DespiteLithuania's EU accession, Lithuania's trade with its Central andEastern European neighbors, and Russia in particular, accounts for agrowing percentage of total trade. Privatization of the large,state-owned utilities is nearly complete. Foreign government andbusiness support have helped in the transition from the old commandeconomy to a market economy.
LuxembourgThis stable, high-income economy - benefiting from itsproximity to France, Belgium, and Germany - has historicallyfeatured solid growth, low inflation, and low unemployment. Theindustrial sector, initially dominated by steel, has becomeincreasingly diversified to include chemicals, rubber, and otherproducts. Growth in the financial sector, which now accounts forabout 28% of GDP, has more than compensated for the decline insteel. Most banks are foreign owned and have extensive foreigndealings. Agriculture is based on small family-owned farms. Theeconomy depends on foreign and cross-border workers for about 60% ofits labor force. Although Luxembourg, like all EU members, sufferedfrom the global economic slump in the early part of this decade, thecountry continues to enjoy an extraordinarily high standard ofliving - GDP per capita ranks third in the world, afterLiechtenstein and Qatar. After two years of strong economic growthin 2006-07, turmoil in the world financial markets trimmedLuxembourg's economy in 2008.
MacauMacau's economy has enjoyed strong growth in recent years onthe back of its expanding tourism and gaming sectors. After openingup its locally-controlled casino industry to foreign competition in2001, the territory attracted tens of billions of dollars in foreigninvestment, transforming Macao into the world's largest gamingcenter. By 2006, Macau's gaming revenue surpassed that of the LasVegas strip, and gaming-related taxes accounted for 75% of totalgovernment revenue. In 2008, government revenue from gaming was setto double 2006 collections. The expanding casino sector, and China'sdecision beginning in 2002 to relax travel restrictions, reenergizedMacau's tourism industry. This city of just over 500,000 hosted morethan 30 million visitors in 2008. Almost 60% came from mainlandChina despite increasing restrictions on travel to the SAR. Macau'straditional manufacturing industry has been in a slow decline sincethe termination of the Multi-Fiber Agreement in 2005. In 2008,exports of textiles and garments generated only $1.1 billion,compared to $13.7 billion in gross gaming receipts. The CloserEconomic Partnership Agreement (CEPA) between Macau and mainlandChina that came into effect on 1 January 2004 offers many Macau-madeproducts tariff-free access to the mainland. Macau's currency, thePataca, is closely tied to the Hong Kong dollar, which is alsofreely accepted in the territory.
MacedoniaHaving a small, open economy makes Macedonia vulnerable toeconomic developments in Europe and dependent on regionalintegration and progress toward EU membership for continued economicgrowth. At 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. Growthaveraged 4% per year during 2003-06 and more than 5% per year during2007-08. Macedonia has maintained macroeconomic stability with lowinflation, but it has so far lagged the region in attracting foreigninvestment and creating jobs, despite making extensive fiscal andbusiness sector reforms. Official unemployment remains high atnearly 35%, but may be overstated based on the existence of anextensive gray market, estimated to be more than 20% of GDP, that isnot captured by official statistics. In the wake of the globaleconomic downturn, Macedonia has experienced decreased foreigndirect investment, lowered credit, and a slowdown of export growth.The Government of Macedonia now predicts growth in 2009 to be nomore than 3%.
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. After coming to office in 2003, former PrimeMinister ABDULLAH tried to move the economy farther up thevalue-added production chain by attracting investments in hightechnology industries, medical technology, and pharmaceuticals. TheGovernment of Malaysia is continuing efforts to boost domesticdemand to wean the economy off of its dependence on exports.Nevertheless, exports - particularly of electronics - remain asignificant driver of the economy. As an oil and gas exporter,Malaysia has profited from higher world energy prices, although therising cost of domestic gasoline and diesel fuel forced Kuala Lumpurto reduce government subsidies. Malaysia "unpegged" the ringgit fromthe US dollar in 2005 and the currency appreciated 6% per yearagainst the dollar in 2006-08. Although this has helped to hold downthe price of imports, inflationary pressures began to build in 2007- in 2008 inflation stood at nearly 6%, year-over-year. Thegovernment presented its five-year national development agenda inApril 2006 through the Ninth Malaysia Plan, a comprehensiveblueprint for the allocation of the national budget from 2006-10.ABDULLAH unveiled a series of ambitious development schemes forseveral regions that have had trouble attracting businessinvestment. Real GDP growth averaged about 6% per year underABDULLAH, but regions outside of Kuala Lumpur and the manufacturinghub Penang did not fare as well. The central bank maintains healthyforeign exchange reserves and the regulatory regime has limitedMalaysia's exposure to riskier financial instruments and the globalfinancial crisis. Decreasing worldwide demand for consumer goods isexpected to hurt economic growth in 2009 and beyond, however.
MaldivesTourism, Maldives' largest industry, accounts for 28% ofGDP and more than 60% of foreign exchange receipts. Over 90% ofgovernment tax revenue comes from import duties and tourism-relatedtaxes. Fishing is the second leading sector. Agriculture andmanufacturing continue to play a lesser role in the economy,constrained by the limited availability of cultivable land and theshortage of domestic labor. Most staple foods must be imported.Industry, which consists mainly of garment production, boatbuilding, 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 4.6% in 2005. A rebound in tourism, post-tsunamireconstruction, and development of new resorts helped the economyrecover quickly, with GDP growth registering 18% in 2006. Growthslowed in 2007-08, but remained above 5% per year. The trade deficitexpanded sharply as a result of high oil prices and imports ofconstruction material. Government spending on social needs,subsidies, and civil servant salaries have created a large budgetdeficit and inflation has picked up sharply, reaching nearly 13% inOctober 2008 due to high oil and food prices. Diversifying beyondtourism and fishing, reforming public finance, and increasingemployment are the major challenges facing the government. Over thelonger term Maldivian authorities worry about the impact of erosionand possible global warming on their low-lying country; 80% of thearea is 1 meter or less above sea level.
MaliMali is among the 25 poorest countries in the world, with 65%of its 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 gold and cotton, its mainexports. The government has continued its successful implementationof an IMF-recommended structural adjustment program that is helpingthe economy grow, diversify, and attract foreign investment. Malihas invested in tourism and a tractor assembly factory. Mali'sadherence to economic reform and the 50% devaluation of the CFAfranc in January 1994 have pushed up economic growth to a 5% averagein 1996-2008. Worker remittances and external trade routes for thelandlocked country have been jeopardized by continued unrest inneighboring Cote d'Ivoire, however, Mali is building a road networkthat will connect it to all adjacent countries and it has a railwayline to Senegal.
MaltaMalta produces only about 20% of its food needs, has limitedfresh water supplies, and has few domestic energy sources. Malta'sgeographic position between the EU and Africa makes it a recipientof illegal immigration, which has strained Malta's political andeconomic resources. The financial services industry has grown inrecent years, but is not fully modernized. Malta's economy isdependent on foreign trade, manufacturing - especially electronicsand pharmaceuticals - and tourism all of which have been negativelyaffected by the global economic downturn. Malta adopted the euro on1 January 2008. The Maltese government in 2009 will be challenged tocontain the budget deficit, which ballooned in 2008 to about 4.1% ofGDP, placing it above the euro zone's 3% maximum.
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. Before 2000, drought and economic mismanagementresulted in a buildup of foreign debt. In February 2000, Mauritaniaqualified for debt relief under the Heavily Indebted Poor Countries(HIPC) initiative and nearly all of its foreign debt has since beenforgiven. In December 2007 donors pledged $2.1 billion at atriennial Consultative Group review. A new investment code approvedin December 2001 improved the opportunities for direct foreigninvestment. Mauritania and the IMF agreed to a three-year PovertyReduction and Growth Facility (PRGF) arrangement in 2006 andMauritania made satisfactory progress, but IMF and World Banksuspended their programs in Mauritania following the August 2008coup; following the July 2009 Presidential elections, the IMF andWorld Bank agreed to meet with the Goverment to discuss aresumption. Oil prospects, while initially promising, have largelyfailed to materialize. The Government continues to emphasizereduction of poverty, improvement of health and education, andprivatization 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 roughly one-thirdthat of the US; income distribution remains highly unequal. Tradewith the US and Canada has nearly tripled since the implementationof NAFTA in 1994. Mexico has 12 free trade agreements with over 40countries including, Guatemala, Honduras, El Salvador, the EuropeanFree Trade Area, and Japan, putting more than 90% of trade underfree trade agreements. In 2007, during its first year in office, theFelipe CALDERON 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, and again in January 2009, during a similardispute. Russia's decision to ban Moldovan wine and agriculturalproducts, coupled with its decision to double the price Moldova paidfor Russian natural gas, slowed GDP growth in 2006-07. However, in2008 growth exceeded the 6% level Moldova had achieved in 2000-05,boosted by Russia's partial removal of the bans, solid fixed capitalinvestment, and strong domestic demand driven by remittances fromabroad. Economic reforms have been slow because of corruption andstrong political forces backing government controls. Nevertheless,the government's primary goal of EU integration has resulted in somemarket-oriented progress. The granting of EU trade preferences andincreased exports to Russia will encourage higher growth rates, butthe agreements are unlikely to serve as a panacea, given the extentto which export success depends on higher quality standards andother factors. The economy remains vulnerable to higher fuel prices,poor agricultural weather, and the skepticism of foreign investors.Also, the presence of an illegal separatist regime in Moldova'sTransnistria region continues to be a drag on the Moldovan economy.The deteriorating global economic crisis did not seriously effectthe Moldovan economy in 2008 due to its low exposure to theinternational financial system, but a global economic slowdown,particularly in the EU and Russia, could hurt the economy in 2009 asMoldova relies heavily on remittances from Moldovans abroad.
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 averaged nearly 9% per year in 2004-08 largelybecause of high copper prices and new gold production. Until late2008 Mongolia experienced a soaring inflation rate with year-to-yearinflation reaching nearly 40% - the highest inflation rate in over adecade. In late 2008 falling commodity prices in this import-reliantcountry helped lower inflation but by that time, the country hadbegun to feel the effects of the global financial crisis. Fallingprices for copper and other mineral exports have reduced governmentrevenues and are forcing cuts in spending. The global credit crisishas stalled growth in key sectors, especially those that had beenfueled by foreign investment. Mongolia's economy continues to beheavily influenced by its neighbors. Mongolia purchases 95% of itspetroleum products and a substantial amount of electric power fromRussia, leaving it vulnerable to price increases. Trade with Chinarepresents more than half of Mongolia's total external trade - Chinareceives about 70% of Mongolia's exports. Remittances fromMongolians working abroad both legally and illegally are sizable buthave fallen due to the economic crisis; money laundering is agrowing concern. Mongolia settled its $11 billion debt with Russiaat the end of 2003 on favorable terms. Mongolia, which joined theWorld Trade Organization in 1997, seeks to expand its participationand integration into Asian regional economic and trade regimes.
MontenegroMontenegro severed its economy from federal control andfrom Serbia during the MILOSEVIC era and maintained its own centralbank, adopted the Deutchmark, then the euro - rather than theYugoslav dinar - as official currency, collected customs tariffs,and managed its own budget. The dissolution of the loose politicalunion between Serbia and Montenegro in 2006 led to separatemembership in several international financial institutions, such asthe European Bank for Reconstruction and Development. On 18 January2007, Montenegro joined the World Bank and IMF. Montenegro ispursuing its own membership in the World Trade Organization andsigned a Stabilization and Association agreement with the EuropeanUnion in October 2007. On December 15, 2008, Montenegro submitted anEU membership application. Unemployment and regional disparities indevelopment are key political and economic problems. Montenegro hasprivatized its large aluminum complex - the dominant industry - aswell as most of its financial sector, and has begun to attractforeign direct investment in the tourism sector. The globalfinancial crisis is likely to have a significant negative impact onthe economy.
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 housing limitedthe number. The agriculture sector continued to be affected by thelack of suitable land for farming and the destruction of crops.Prospects for the economy depend largely on developments in relationto the volcanic activity and on public sector construction activity.The UK has launched a three-year $122.8 million aid program to helpreconstruct the economy. Half of the island is expected to remainuninhabitable 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 rose to 5.9% in 2008, with the economyrecovering from a drought in 2007 that severely reduced agriculturaloutput and necessitated wheat imports at rising world prices.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 Compact entered intoforce in September 2008 and will continue for five years. Compactprojects will focus on improving sanitation, roads, agriculture, andthe business regulation environment in an effort to spur economicgrowth in the four northern provinces of the country.
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. Reserves of phosphates may only last until 2010 at currentmining rates. 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.Nauru lost further revenue in 2008 with the closure of Australia'srefugee processing center, making it almost totally dependent onfood imports and foreign aid. Housing, hospitals, and other capitalplant is deteriorating. The cost to Australia of keeping thegovernment and economy afloat continues to climb. Few comprehensivestatistics on the Nauru economy exist with estimates of Nauru's GDPvarying widely.
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 forabout one-third of GDP. Industrial activity mainly involves theprocessing of agricultural products, including pulses, jute,sugarcane, tobacco, and grain. Bumper crops, better security,improved transportation, and increased tourism pushed growth past 5%in 2008, after growth had hovered around 3% - barely above the rateof population growth - for the previous three years. Thedeteriorating world economy in 2009 will challenge tourism andremittance growth, 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 and landlocked geographic location, itscivil strife and labor unrest, and its susceptibility to naturaldisaster.
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 has been one of the leading European nations for attractingforeign direct investment and is one of the four largest investorsin the US. The pace of job growth reached 10-year highs in 2007, buteconomic growth fell sharply in 2008 as fallout from the worldfinancial crisis constricted demand and raised the specter of arecession in 2009.
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 some at the bottom of the ladder - andbroadened and deepened the technological capabilities of theindustrial sector. Per capita income has risen for nine consecutiveyears and reached $27,900 in 2008 in purchasing power parity terms.Debt-driven consumer spending drove robust growth in the first halfof the decade, helping fuel a large balance of payments deficit thatposed a challenge for economic managers. Inflationary pressurescaused the central bank to raise its key rate steadily from January2004 until it was among the highest in the OECD in 2007-08;international capital inflows attracted to the high rates furtherstrengthened the currency and housing market, however, aggravatingthe current account deficit. The economy fell into recession in2008. In line with global peers, the central bank has cut interestrates aggressively; the new government is responding with plans toraise productivity growth and develop infrastructure.
NicaraguaNicaragua has widespread underemployment and the secondlowest per capita income in the Western Hemisphere. The US-CentralAmerica Free Trade Agreement (CAFTA) has been in effect since April2006 and has expanded export opportunities for many agricultural andmanufactured goods. Textiles and apparel account for nearly 60% ofNicaragua's exports, but recent increases in the minimum wage willlikely erode its comparative advantage in this industry. Nicaraguarelies on international economic assistance to meet internal- andexternal-debt financing obligations. In early 2004, Nicaraguasecured some $4.5 billion in foreign debt reduction under theHeavily Indebted Poor Countries (HIPC) initiative, and in October2007, the IMF approved a new poverty reduction and growth facility(PRGF) program. However, severe budget shortfalls resulting from thesuspension of large amounts of direct budget support from foreigndonors concerned with recent political developments has caused aslowdown in PRGF disbursements. Similarly, private sector concernssurrounding ORTEGA's handling of economic issues have dampenedinvestment. Economic growth has slowed in 2009, due to decreasedexport demand from the US and Central American markets, lowercommodity prices for key agricultural exports, and low remittancegrowth - remittances are equivalent to almost 15% of GDP.
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, andstrong population growth have undercut the economy. Niger shares acommon 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, has undertaken several reforms over the past decade.Nigeria's former military rulers failed to diversify the economyaway from its overdependence on the capital-intensive oil sector,which provides 95% of foreign exchange earnings and about 80% ofbudgetary revenues. Following the signing of an IMF stand-byagreement in August 2000, Nigeria received a debt-restructuring dealfrom the Paris Club and a $1 billion credit from the IMF, bothcontingent on economic reforms. Nigeria pulled out of its IMFprogram in April 2002, after failing to meet spending and exchangerate targets, making it ineligible for additional debt forgivenessfrom the Paris Club. Since 2008 the government has begun showing thepolitical will to implement the market-oriented reforms urged by theIMF, such as to modernize the banking system, to curb inflation byblocking excessive wage demands, and to resolve regional disputesover the distribution of earnings from the oil industry. In 2003,the government 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. Based largely on increased oil exports andhigh global crude prices, GDP rose strongly in 2007 and 2008.President YAR'ADUA has pledged to continue the economic reforms ofhis predecessor with 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.
Norfolk IslandTourism, the primary economic activity, has steadilyincreased over the years and has brought a level of prosperityunusual among inhabitants of the Pacific islands. The agriculturalsector has become self sufficient in the production of beef,poultry, and eggs.
Northern Mariana IslandsThe economy benefits substantially fromfinancial assistance from the US. The rate of funding has declinedas locally generated government revenues have grown. The key touristindustry employs about 50% of the work force and accounts forroughly one-fourth of GDP. Japanese tourists predominate. Annualtourist entries have exceeded one-half million in recent years, butfinancial difficulties in Japan have caused a temporary slowdown.The agricultural sector is made up of cattle ranches and small farmsproducing coconuts, breadfruit, tomatoes, and melons. Garmentproduction is by far the most important industry with the employmentof 17,500 mostly Chinese workers and sizable shipments to the USunder duty and quota exemptions.
NorwayThe Norwegian economy is a prosperous bastion of welfarecapitalism, featuring a combination of free market activity andgovernment intervention. The government controls key areas, such asthe vital petroleum sector, through large-scale state enterprises.The country is richly endowed with natural resources - petroleum,hydropower, fish, forests, and minerals - and is highly dependent onthe petroleum sector, which accounts for nearly half of exports andover 30% of state revenue. Norway is the world's third-largest gasexporter; its position as an oil exporter has slipped toseventh-largest as production has begun to decline. Norway opted tostay out of the EU during a referendum in November 1994;nonetheless, as a member of the European Economic Area, itcontributes sizably to the EU budget. In anticipation of eventualdeclines in oil and gas production, Norway saves almost all staterevenue from the petroleum sector in a sovereign wealth fund. Afterlackluster growth of less than 1.5% in 2002-03, GDP growth picked upto 2.5-6.2% in 2004-07, partly due to higher oil prices. Growth fellto 2.6% in 2008 as a result of the slowing world economy and thedrop in oil prices.
OmanOman is a middle-income economy that is heavily dependent ondwindling oil resources, but sustained high oil prices in recentyears have helped build Oman's budget and trade surpluses andforeign reserves. As a result of its dwindling oil resources, Omanis actively pursuing a development plan that focuses ondiversification, industrialization, and privatization, with theobjective of reducing the oil sector's contribution to GDP to 9% by2020. Some of these projects may be in jeopardy, however, becauseMuscat overestimated its ability to produce or secure the naturalgas needed to power them. Oman actively seeks private foreigninvestors, especially in the industrial, information technology,tourism, and higher education fields. Industrial development plansfocus on gas resources, metal manufacturing, petrochemicals, andinternational transshipment ports. The drop in oil prices and theglobal financial crisis in 2008 will affect Oman's fiscal positionand it may post a deficit in 2009 if oil prices stay low. Inaddition, the global credit crisis is slowing the pace of investmentand development projects - a trend that probably will continue into2009.
Pacific OceanThe Pacific Ocean is a major contributor to the worldeconomy and particularly to those nations its waters directly touch.It provides low-cost sea transportation between East and West,extensive fishing grounds, offshore oil and gas fields, minerals,and sand and gravel for the construction industry. In 1996, over 60%of the world's fish catch came from the Pacific Ocean. Exploitationof offshore oil and gas reserves is playing an ever-increasing rolein the energy supplies of the US, Australia, NZ, China, and Peru.The high cost of recovering offshore oil and gas, combined with thewide swings in world prices for oil since 1985, has led tofluctuations in new drillings.
PakistanPakistan, an impoverished and underdeveloped country, hassuffered from decades of internal political disputes, low levels offoreign investment, and declining exports of manufactures. Facedwith untenable budgetary deficits, high inflation, and hemorrhagingforeign exchange reserves, the government agreed to an InternationalMonetary Fund Standby Arrangement in November 2008. Between 2004-07,GDP growth in the 6-8% range was spurred by gains in the industrialand service sectors, despite severe electricity shortfalls. Povertylevels decreased by 10% since 2001, and Islamabad steadily raiseddevelopment spending in recent years. In 2008 the fiscal deficit - aresult of chronically low tax collection and increased spending -exceeded Islamabad's target of 4% of GDP. Inflation remains the topconcern among the public, jumping from 7.7% in 2007 to 20.8% in2008, primarily because of rising world fuel and commodity prices.In addition, the Pakistani rupee has depreciated significantly as aresult of political and economic instability.
PalauThe economy consists primarily of tourism, subsistenceagriculture, and fishing. The government is the major employer ofthe work force relying heavily on financial assistance from the US.The Compact of Free Association with the US, entered into after theend of the UN trusteeship on 1 October 1994, provided Palau with upto $700 million in US aid for the following 15 years in return forfurnishing military facilities. Business and tourist arrivalsnumbered 85,000 in 2007. The population enjoys a per capita incomeroughly 50% higher than that of the Philippines and much ofMicronesia. Long-run prospects for the key tourist sector have beengreatly bolstered by the expansion of air travel in the Pacific, therising prosperity of leading East Asian countries, and thewillingness of foreigners to finance infrastructure development.
PanamaPanama's dollarized economy rests primarily on awell-developed services sector that accounts for 80% of GDP.Services include operating the Panama Canal, banking, the Colon FreeZone, insurance, container ports, flagship registry, and tourism.Economic growth will be bolstered by the Panama Canal expansionproject that began in 2007 and is scheduled to be completed by 2014at a cost of $5.3 billion - about 25% of current GDP. The expansionproject will more than double the Canal's capacity, enabling it toaccommodate ships that are now too large to transverse thetransoceanic crossway, and should help to reduce the highunemployment rate. Strong economic performance has reduced thenational poverty level to 29% in 2008; however, Panama has thesecond most unequal income distribution in Latin America. Thegovernment has implemented tax reforms, as well as social securityreforms, and backs regional trade agreements and development oftourism. Not a CAFTA signatory, Panama in December 2006independently negotiated a free trade agreement with the US, which,when implemented, will help promote the country's economic growth.
Papua New GuineaPapua New Guinea is richly endowed with naturalresources, but exploitation has been hampered by rugged terrain andthe high cost of developing infrastructure. Agriculture provides asubsistence livelihood for 75% of the population. Mineral deposits,including copper, gold, and oil, account for nearly two-thirds ofexport earnings. The government of Prime Minister SOMARE hasexpended much of its energy remaining in power. He was the firstprime minister ever to serve a full five-year term. The governmentalso brought stability to the national budget, largely throughexpenditure control; however, it relaxed spending constraints in2006 and 2007 as elections approached. Numerous challenges stillface the government including regaining investor confidence,restoring integrity to state institutions, promoting economicefficiency by privatizing moribund state institutions, and balancingrelations with Australia, its former colonial ruler. Othersocio-cultural challenges could upend the economy including aworsening HIV/AIDS epidemic, currently the highest rate in all ofEast Asia and the Pacific, and chronic law and order and land tenureissues. Australia supplied more than $300 million in aid in FY07/08,which accounts for nearly 20% of the national budget. A consortiumled by a major American oil company hopes to begin thecommercialization of the country's estimated 227 billion cubicmeters of natural gas reserves through the construction of aliquefied natural gas (LNG) production facility by 2010. The projecthas the potential to double the GDP of Papua New Guinea.
Paracel IslandsThe islands have the potential for oil and gasdevelopment. Waters around the islands support commercial fishing,but the islands themselves are not populated on a permanent basis.China announced plans in 1997 to open the islands for tourism.
ParaguayLandlocked Paraguay has a market economy marked by a largeinformal sector, featuring reexport of imported consumer goods toneighboring countries, as well as the activities of thousands ofmicroenterprises and urban street vendors. A large percentage of thepopulation, especially in rural areas, derives its living fromagricultural activity, often on a subsistence basis. Because of theimportance of the informal sector, accurate economic measures aredifficult to obtain. On a per capita basis, real income hasstagnated at 1980 levels. Most observers attribute Paraguay's pooreconomic performance to political uncertainty, corruption, limitedprogress on structural reform, and deficient infrastructure. Theeconomy rebounded between 2003 and 2008, however, as growing worlddemand for commodities combined with high prices and favorableweather to support Paraguay's commodity-based export expansion.Paraguay is the sixth largest soy producer in the world.
PeruPeru's economy reflects its varied geography - an arid coastalregion, the Andes further inland, and tropical lands borderingColombia and Brazil. Abundant mineral resources are found in themountainous areas, and Peru's coastal waters provide excellentfishing grounds. The Peruvian economy grew by more than 4% per yearduring the period 2002-06, with a stable exchange rate and lowinflation. Growth jumped to 9% per year in 2007 and 2008, driven byhigher world prices for minerals and metals and the government'saggressive trade liberalization strategies. Peru's rapid expansionhas helped to reduce the national poverty rate by about 15% since2002, though underemployment and inflation remain high. DespitePeru's strong macroeconomic performance, overdependence on mineralsand metals subjects the economy to fluctuations in world prices, andpoor infrastructure precludes the spread of growth to Peru'snon-coastal areas. Not all Peruvians therefore have shared in thebenefits of growth. President GARCIA's pursuit of sound trade andmacroeconomic policies has cost him political support since hiselection. Nevertheless, he remains committed to Peru's free-tradepath. The United States and Peru completed negotiations on theimplementation of the US-Peru Trade Promotion Agreement (PTPA), andthe agreement entered into force February 1, 2009, opening the wayto greater trade and investment between the two economies.
PhilippinesEconomic growth has averaged 5% since PresidentMACAPAGAL-ARROYO took office in 2001. MACAPAGAL-ARROYO averted afiscal crisis by pushing for new revenue measures and, untilrecently, tightening expenditures. Declining fiscal deficits,tapering debt and debt service ratios, and increased spending oninfrastructure and social services bolstered optimism overPhilippine economic prospects. Although the general macroeconomicoutlook improved significantly in recent years, the economy stillfaces several long term challenges. The Philippines must maintainthe reform momentum in order to catch up with regional competitors,improve employment opportunities, and alleviate poverty. ThePhilippines will need still higher, sustained growth to makeprogress in alleviating poverty, given its high population growthand unequal distribution of income. The Philippine economy grew atits fastest pace in three decades in 2007 with real GDP growthexceeding 7%, but growth slowed to 3.8% in 2008 as a result of theworld financial crisis. High government spending, a relatively smalltrade sector, a resilient service sector, and large remittances fromthe four- to five-million Filipinos who work abroad have helpedcushion the economy from the current financial crisis.
Pitcairn IslandsThe inhabitants of this tiny isolated economy existon fishing, subsistence farming, handicrafts, and postage stamps.The fertile soil of the valleys produces a wide variety of fruitsand vegetables, including citrus, sugarcane, watermelons, bananas,yams, and beans. Bartering is an important part of the economy. Themajor sources of revenue are the sale of postage stamps tocollectors and the sale of handicrafts to passing ships. In October2004, more than one-quarter of Pitcairn's small labor force wasarrested, putting the economy in a bind, since their services wererequired as lighter crew to load or unload passing ships.
PolandPoland has pursued a policy of economic liberalization since1990 and today stands out as a success story among transitioneconomies. In 2008, GDP grew an estimated 4.8%, based on risingprivate consumption, a jump in corporate investment, and EU fundsinflows. GDP per capita is still much below the EU average, but issimilar to that of the three Baltic states. Since 2004, EUmembership and access to EU structural funds have provided a majorboost to the economy. Unemployment is falling rapidly, though atroughly 9.7% in 2008, it remains above the EU average. In 2008inflation reached 4.3%, more than the upper limit of the NationalBank of Poland's target range, but has been falling due to globaleconomic slowdown. Poland's economic performance could improvefurther if the country addresses some of the remaining deficienciesin its business environment. An inefficient commercial court system,a rigid labor code, bureaucratic red tape, and persistent low-levelcorruption keep the private sector from performing up to its fullpotential. Rising demands to fund health care, education, and thestate pension system present a challenge to the Polish Government'seffort to hold the consolidated public sector budget deficit under3.0% of GDP, a target which was achieved in 2007-08. The PO/PSLcoalition government which came to power in November 2007 plans tofurther reduce the budget deficit with the aim of eventuallyadopting the euro by 2012. The new government has also announced itsintention to enact business-friendly reforms, reduce public sectorspending growth, lower taxes, and accelerate privatization. Thegovernment, however, has moved slowly on major reforms. Pension andhealth-care bills passed through the legislature, but thelegislature failed to overturn a presidential veto.
PortugalPortugal has become a diversified and increasinglyservice-based economy since joining the European Community in 1986.Over the past two decades, successive governments have privatizedmany state-controlled firms and liberalized key areas of theeconomy, including the financial and telecommunications sectors. Thecountry qualified for the European Monetary Union (EMU) in 1998 andbegan circulating the euro on 1 January 2002 along with 11 other EUmember economies. Economic growth had been above the EU average formuch of the 1990s, but fell back in 2001-08. GDP per capita standsat roughly two-thirds of the EU-27 average. A poor educationalsystem, in particular, has been an obstacle to greater productivityand growth. Portugal has been increasingly overshadowed bylower-cost producers in Central Europe and Asia as a target forforeign direct investment. The budget deficit surged to an all-timehigh of 6% of GDP in 2005, but the government reduced the deficit to2.6% in 2007 - a year ahead of Portugal's targeted schedule.Nonetheless, the government faces tough choices in its attempts toboost the economy, which declined 0.1% in 2008, while keeping thebudget deficit within the euro-zone 3%-of-GDP ceiling.
Puerto RicoPuerto Rico has one of the most dynamic economies in theCaribbean region. A diverse industrial sector has far surpassedagriculture as the primary locus of economic activity and income.Encouraged by duty-free access to the US and by tax incentives, USfirms have invested heavily in Puerto Rico since the 1950s. USminimum wage laws apply. Sugar production has lost out to dairyproduction and other livestock products as the main source of incomein the agricultural sector. Tourism has traditionally been animportant source of income with estimated arrivals of nearly 5million tourists in 2004. Growth fell off in 2001-03, largely due tothe slowdown in the US economy, recovered in 2004-05, but declinedagain in 2006-07.
QatarQatar has experienced rapid economic growth over the lastseveral years on the back of high oil prices, and in 2008 posted itseighth consecutive budget surplus. Economic policy is focused ondeveloping Qatar's nonassociated natural gas reserves and increasingprivate and foreign investment in non-energy sectors, but oil andgas still account for more than 50% of GDP, roughly 85% of exportearnings, and 70% of government revenues. Oil and gas have madeQatar the second highest per-capita income country - followingLiechtenstein - and one of the world's fastest growing. Proved oilreserves of 15 billion barrels should enable continued output atcurrent levels for 37 years. Qatar's proved reserves of natural gasare nearly 26 trillion cubic meters, about 14% of the world totaland third largest in the world. The drop in oil prices in late 2008and the global financial crisis will reduce Qatar's budget surplusand may slow the pace of investment and development projects in 2009.