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 small, open, export-driven Czecheconomy grew by over 6% annually from 2005-2007 and by 2.5% in 2008.The conservative Czech financial system has remained relativelyhealthy throughout 2009. Nevertheless, the real economy contractedby 4.1% in 2009, mainly due to a significant drop in external demandas the Czech Republic's main export markets fell into recession. GDPis expected to grow by 2.4% in 2010, driven largely by a rebound inexternal demand, particularly from Gremany.
DenmarkThis thoroughly modern market economy features a high-techagricultural sector, state-of-the-art industry with world-leadingfirms in pharmaceuticals, maritime shipping and renewable energy,and a high dependence on foreign trade. The Danish economy is alsocharacterized by extensive government welfare measures, an equitabledistribution of income, and comfortable living standards. Denmark isa net exporter of food and energy and enjoys a comfortable balanceof payments surplus. After a long consumption-driven upswing,Denmark's economy began slowing in 2007 with the end of a housingboom. Housing prices dropped markedly in 2008-09. The globalfinancial crisis has exacerbated this cyclical slowdown throughincreased borrowing costs and lower export demand, consumerconfidence, and investment. The global financial crises cut DanishGDP by 0.9% in 2008 and 4.7% in 2009. Historically low levels ofunemployment rose sharply with the recession but remain below 5%,about half the level of the EU. Denmark made a modest recovery in2010 in part because of increased government spending. An impendingdecline in the ratio of workers to retirees will be a majorlong-term issue. Denmark maintained a healthy budget surplus formany years up to 2008, but the budget balance swung into deficitduring 2009-10. Nonetheless, Denmark's fiscal position remains amongthe strongest in the EU. Despite previously meeting the criteria tojoin the European Economic and Monetary Union (EMU), so far Denmarkhas decided not to join, although the Danish krone remains pegged tothe euro.
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 70% 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). Djibouti hasexperienced relatively minimal impact from the global economicdownturn, but its reliance on diesel-generated electricity andimported food leave average consumers vulnerable to global priceshocks.
DominicaThe Dominican economy has been dependent on agriculture -primarily bananas - in years past, but increasingly has been drivenby tourism as the government seeks to promote Dominica as an"ecotourism" destination. In order to diversify the island'sproduction base, the government also is attempting to develop anoffshore financial sector and has signed an agreement with the EU todevelop geothermal energy resources. In 2003, the government began acomprehensive restructuring of the economy - including eliminationof price controls, privatization of the state banana company, andtax increases - to address an economic and financial crisis and tomeet IMF requirements. This restructuring paved the way for aneconomic recovery - real growth for 2006 reached a two-decade high -and helped to reduce the debt burden, which remains at about 85% ofGDP. Hurricane Dean struck the island in August 2007 causing damagesequivalent to 20% of GDP. In 2009, growth slowed as a result of theglobal recession; it picked up only slightly in 2010.
Dominican RepublicThe Dominican Republic has long been viewedprimarily as an exporter of sugar, coffee, and tobacco, but inrecent years the service sector has overtaken agriculture as theeconomy's largest employer, due to growth in tourism and free tradezones. The economy is highly dependent upon the US, the destinationfor nearly 60% of exports. Remittances from the US amount to about atenth of GDP, equivalent to almost half of exports andthree-quarters of tourism receipts. The country suffers from markedincome inequality; the poorest half of the population receives lessthan one-fifth of GDP, while the richest 10% enjoys nearly 40% ofGDP. High unemployment and underemployment remains an importantlong-term challenge. The Central America-Dominican Republic FreeTrade Agreement (CAFTA-DR) came into force in March 2007, boostinginvestment and exports and reducing losses to the Asian garmentindustry. The growth of the Dominican Republic's economy slowed in2008-09 because of the global recession, but still remained one ofthe fastest growing in the region.
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, the Congress approved a seriesof structural 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. After moderate growth in 2007, the economy reached a growthrate of 7.2% in 2008, in large part due to high global petroleumprices. President Rafael CORREA, who took office in January 2007,defaulted on Ecuador's sovereign debt in December 2008, refusing tomake payment on $3.2 billion in international bonds, representingover 80% of Ecuador's private external debt. Economic policies underthe CORREA administration - including an announcement in late 2009terminating 13 bilateral investment treaties - have generatedeconomic uncertainty and discouraged private investment. TheEcuadorian economy slowed to 0.4% growth in 2009 due to the globalfinancial crisis, and the sharp decline in world oil prices andremittance flows, but picked up to a 2.4% growth rate in 2010.
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 from 2004 to 2008aggressively pursued economic reforms to attract foreign investmentand facilitate GDP growth. The global financial crisis has slowedthe reform efforts. The budget deficit climbed to over 8% of GDP andEgypt's GDP growth slowed to 4.6% in 2009, predominately due toreduced growth in export-oriented sectors, including manufacturingand tourism, and Suez Canal revenues. In 2010, the government spentmore on infrastructure and public projects, and exports drove GDPgrowth to more than 5%, but GDP growth in 2011 is unlikely to bounceback to pre-global financial recession levels, when it stood at 7%.Despite the relatively high levels of economic growth over the pastfew years, living conditions for the average Egyptian remain poor.
El SalvadorDespite being the smallest country geographically inCentral America, El Salvador has the third largest economy in theregion. The economy took a hit from the global recession and realGDP contracted by 3.5% in 2009. The economy began a slow recovery in2010 on the back of improved export and remittances figures.Remittances accounted for 16% of GDP in 2009, and about a third ofall households receive these transfers. In 2006 El Salvador was thefirst country to ratify the Dominican Republic-Central American FreeTrade Agreement (CAFTA-DR), which has bolstered the export ofprocessed foods, sugar, and ethanol, and supported investment in theapparel sector amid increased Asian competition and the expirationof the Multi-Fiber Agreement in 2005. El Salvador has promoted anopen trade and 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, the primary conflict zone during thecivil war, through investments in education, public services,enterprise development, and transportation infrastructure. With theadoption of the US dollar as its currency in 2001, El Salvador lostcontrol over monetary policy. Any counter-cyclical policy responseto the downturn must be through fiscal policy, which is constrainedby legislative requirements for a two-thirds majority to approve anyinternational financing.
Equatorial GuineaThe discovery and exploitation of large oilreserves have contributed to dramatic economic growth butfluctuating oil prices have produced huge swings in GDP growth inrecent years. Forestry, farming, and fishing are also majorcomponents of GDP. Subsistence farming is the dominate form oflivelihood. Although pre-independence Equatorial Guinea counted oncocoa production for hard currency earnings, the neglect of therural economy under successive regimes has diminished potential foragriculture-led growth (the government has stated its intention toreinvest some oil revenue into agriculture). A number of aidprograms sponsored by the World Bank and the IMF have been cut offsince 1993 because of corruption and mismanagement. Governmentofficials and their family members own most businesses, butcorruption is rampant. Undeveloped natural resources includetitanium, iron ore, manganese, uranium, and alluvial gold. Growthremained strong in 2008, led by oil, but dropped in 2009-10, as theprice of oil fell.
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, a large share ofthe population - nearly 80% - is engaged in subsistence agriculture,but they produce only a small share of total output. Since theconclusion of the Ethiopian-Eritrea war in 2000, 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 began mineral extraction in 2010.Eritrea's economic future depends upon its ability to master socialproblems such as illiteracy, unemployment, and low skills, and moreimportantly, on the government's willingness to support a truemarket economy.
EstoniaEstonia, a 2004 European Union entrant, has a modernmarket-based economy and one of the higher per capita income levelsin Central Europe and the Baltic region. Estonia's successivegovernments have pursued a free market, pro-business economic agendaand have wavered little in their commitment to pro-market reforms.The current government has pursued relatively sound fiscal policiesthat have resulted in balanced budgets and very low public debt. Theeconomy benefits from strong electronics and telecommunicationssectors and strong trade ties with Finland, Sweden, and Germany.Tallinn's priority has been to sustain high growth rates - onaverage 8% per year from 2003 to 2007. Estonia's economy slowed downmarkedly and fell sharply into recession in mid-2008, primarily as aresult of an investment and consumption slump following the burstingof the real estate market bubble. GDP dropped nearly 15% in 2009,among the world's highest rates of contraction. A modest recoverybegan in 2010, but unemployment stands above 13%. Estonia adoptedthe euro in January 2011.
EthiopiaEthiopia's poverty-stricken economy is based onagriculture, accounting for almost 45% of GDP, and 85% of totalemployment. The agricultural sector suffers from frequent droughtand poor cultivation practices. Coffee is critical to the Ethiopianeconomy with exports of some $350 million in 2006, but historicallylow prices have seen many farmers switching to qat to supplementincome. Under Ethiopia's constitution, the state owns all land andprovides long-term leases to the tenants; the system continues tohamper growth in the industrial sector as entrepreneurs are unableto use land as collateral for loans. In November 2001, Ethiopiaqualified for debt relief from the Highly Indebted Poor Countries(HIPC) initiative, and in December 2005 the IMF forgave Ethiopia'sdebt. The global economic downturn led to balance of paymentspressures, partially alleviated by recent emergency funding from theIMF. While GDP growth has remained high, per capita inome is amongthe lowest in the world.
European UnionInternally, the EU has abolished trade barriers,adopted a common currency, and is striving 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 $78,000) and in national attitudes toward issues likeinflation, debt, and foreign trade, the EU faces difficulties indevising and enforcing common policies. In the wake of the globaleconomic crisis, the European Commission projected that the EU'seconomy would shrink by 4% in 2009 and 0.1% in 2010. The EU hasrecovered from the crisis faster than expected, however, and theCommission estimates 2010 growth at 1.8%. Significant risks togrowth nevertheless remain, including, high official debts anddeficits, aging populations, over-regulation of non-financialbusinesses, and doubts about the sustainability of European Economicand Monetary Union (EMU). In June 2010, prompted by the Greekfinancial crisis, the EU and the IMF set up a $1 trillion bailoutfund to rescue any EMU member in danger of default, but it has notcalmed market jitters that have diminished the value of the euro.Eleven established EU member states introduced the euro as theircommon currency on 1 January 1999 (Greece did so two years later),but the UK and Denmark have 'opt-outs' that allow them to keep theirnational currencies, and Sweden has not taken the steps needed toparticipate. Between 2004 and 2007, the EU admitted 12 countriesthat are, in general, less advanced economically than the other 15.Of the 12 most recent member states, only Slovenia (1 January 2007),Cyprus and Malta (1 January 2008), Slovakia (1 January 2009), andEstonia (1 January 2011) have adopted the euro; the remaining statesother than the UK and Denmark are legally required to adopt thecurrency upon 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. Foreign exchange earnings come from 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. Political tensions between the UK and Argentina rose in early 2010 after a UK company began oil drilling activities in the waters around the Falkland Islands but abated somewhat when the drilling operation failed to discover commercially exploitable 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 about 95% of exports and nearly half of GDP. In early 2008 theFaroese economy began to slow as a result of smaller catches andhistorically high oil prices that continue to trouble the economy.Though oil prices have come down, reduced catches, especially of codand haddock, have continued to strain the Faroese economy. GDP grew0.5% in 2008-09. The slowdown in the Faroese economy followed astrong performance since the mid-1990s with annual growth ratesaveraging close to 6%, mostly a result of increased fish landingsand salmon farming, and high export prices. Unemployment reached itslowest level in the first half of 2008, but increased to 3.9% in2009 and is rising. The Faroese Home Rule Government producedincreasing budget surpluses that helped to reduce the large publicdebt, most of it to Denmark. However, total dependence on fishingand salmon farming make the Faroese economy very vulnerable tofluctuations in world demand. In addition, budget surpluses turnedto deficits in 2008-09, and the economy at both the country andlocal level is running large deficits. Initial discoveries of oil inthe Faroese area give hope for eventual oil production, which mayprovide a foundation for a more diversified economy and lessdependence on Danish economic assistance. Aided by an annual subsidyfrom Denmark amounting to about 6% of Faroese GDP, the Faroese havea standard of living almost equal to that of Denmark and Greenland.
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. The coup has created adifficult business climate. The EU has suspended all aid until theinterim government takes steps toward new elections. Long-termproblems include low investment, uncertain land ownership rights,and the government's inability to manage its budget. Overseasremittances from Fijians working in Kuwait and Iraq have decreasedsignificantly. Fiji's current account deficit reached 23% of GDP in2006.
FinlandFinland has a highly industrialized, largely free-marketeconomy with per capita output roughly that of Austria, Belgium, theNetherlands, and Sweden. Trade is important with exports accountingfor over one third of GDP in recent years. Finland is stronglycompetitive in manufacturing - principally the wood, metals,engineering, telecommunications, and electronics industries. Finlandexcels in high-tech exports such as mobile phones. Except for timberand several minerals, Finland depends on imports of raw materials,energy, and some components for manufactured goods. Because of theclimate, agricultural development is limited to maintainingself-sufficiency in basic products. Forestry, an important exportearner, provides a secondary occupation for the rural population.Finland had been one of the best performing economies within the EUin recent years and its banks and financial markets avoided theworst of global financial crisis. However, the world slowdown hitexports and domestic demand hard in 2009, with Finland experiencingone of the deepest contractions in the euro zone. A recovery ofexports stimulated economic growth in 2010, and led to a lowering ofunemployment. The recession left a deep mark on general governmentfinances and the debt ratio, turning previously strong budgetsurpluses into deficits. In the next few years, the great challengeof economic policy will be to implement a post-recession exitstrategy in which measures supporting growth will be combined withgeneral government adjustment measures. Longer-term, Finland mustaddress a rapidly aging population and decreasing productivity thatthreaten competitiveness, fiscal sustainability, and economic growth.
FranceFrance is in the midst of transition from a well-to-do moderneconomy that has featured extensive government ownership andintervention to one that relies more on market mechanisms. Thegovernment has partially or fully privatized many large companies,banks, and insurers, and has ceded stakes in such leading firms asAir France, France Telecom, Renault, and Thales. It maintains astrong presence in some sectors, particularly power, publictransport, and defense industries. With at least 75 million foreigntourists per year, France is the most visited country in the worldand maintains the third largest income in the world from tourism.France's leaders remain committed to a capitalism in which theymaintain social equity by means of laws, tax policies, and socialspending that reduce income disparity and the impact of free marketson public health and welfare. France has weathered the globaleconomic crisis better than most other big EU economies because ofthe relative resilience of domestic consumer spending, a largepublic sector, and less exposure to the downturn in global demandthan in some other countries. Nonetheless, France's real GDPcontracted 2.5% in 2009, but recovered somewhat in 2010, while theunemployment rate increased from 7.4% in 2008 to 9.5% in 2010. Thegovernment pursuit of aggressive stimulus and investment measures inresponse to the economic crisis, however, are contributing to adeterioration of France's public finances. The government budgetdeficit rose sharply from 3.4% of GDP in 2008 to 7.8% of GDP in2010, while France's public debt rose from 68% of GDP to 84% overthe same period. Paris is terminating stimulus measures, eliminatingtax credits, and freezing most government spending to bring thebudget deficit under the 3% euro-zone ceiling by 2013, and tohighlight France's commitment to fiscal discipline at a time ofintense financial market scrutiny of euro zone debt levels.President SARKOZY - who secured passage of pension reform in 2010 -is expected to seek passage of some tax reforms in 2011, but he maydelay additional, more costly, reforms until after the 2012 election.
French PolynesiaSince 1962, when France stationed militarypersonnel in the region, French Polynesia has changed from asubsistence agricultural economy to one in which a high proportionof the work force is either employed by the military or supports thetourist industry. With the halt of French nuclear testing in 1996,the military contribution to the economy fell sharply. Tourismaccounts for about one-fourth of GDP and is a primary source of hardcurrency earnings. Other sources of income are pearl farming anddeep-sea commercial fishing. The small manufacturing sectorprimarily processes agricultural products. The territory benefitssubstantially from development agreements with France aimedprincipally at creating new businesses and strengthening socialservices.
French Southern and Antarctic LandsEconomic activity is limited toservicing meteorological and geophysical research stations, militarybases, and French and other fishing fleets. The fish catches landedon Iles Kerguelen by foreign ships are exported to France andReunion.
GabonGabon enjoys a per capita income four times that of mostsub-Saharan African nations, but because of high income inequality,a large proportion of the population remains poor. Gabon depended ontimber and manganese until oil was discovered offshore in the early1970s. The oil sector now accounts for more than 50% of GDP althoughthe industry is in decline as fields pass their peak production.Gabon continues to face fluctuating prices for its oil, timber, andmanganese exports and the global recession led to a GDP contractionof 1.4% in 2009. Despite the abundance of natural wealth, poorfiscal management hobbles the economy. In 1997, an IMF mission toGabon criticized the government for overspending on off-budgetitems, overborrowing from the central bank, and slipping on itsschedule for privatization and administrative reform. The rebound ofoil prices from 1999 to 2008 helped growth, but drops in productionhave hampered Gabon from fully realizing potential gains. Gabonsigned a 14-month Stand-By Arrangement with the IMF in May 2007, andlater that year issued a $1 billion sovereign bond to buy back asizable portion of its Paris Club debt.
Gambia, TheThe Gambia has sparse natural resource deposits and alimited agricultural base, and relies in part on remittances fromworkers overseas and tourist receipts. About three-quarters of thepopulation depends on the agricultural sector for its livelihood.Small-scale manufacturing activity features the processing ofpeanuts, fish, and hides. The Gambia's natural beauty and proximityto Europe has made it one of the larger markets for tourism in WestAfrica, boosted by government and private sector investments ineco-tourism and upscale facilities. In the past few years, TheGambia's re-export trade - traditionally a major segment of economicactivity - has declined, but its banking sector has grown rapidly.Unemployment and underemployment rates remain high; economicprogress depends on sustained bilateral and multilateral aid, onresponsible government economic management, and on continuedtechnical assistance from multilateral and bilateral donors. Thequality of fiscal management, however, is weak. The government haspromised to raise civil service wages over the next two years andthe deficit is projected to worsen.
Gaza StripHigh population density, limited land and sea access,continuing isolation, and strict internal and external securitycontrols have degraded economic conditions in the Gaza Strip - thesmaller of the two areas in the Palestinian Territories.Israeli-imposed crossings closures, which became more restrictiveafter HAMAS violently took over the territory in June 2007, andfighting between HAMAS and Israel during December 2008-January 2009,resulted in the near collapse of most of the private sector,extremely high unemployment, and high poverty rates. Shortages ofgoods are met through large-scale humanitarian assistance - led byUNRWA - and the HAMAS-regulated black market tunnel trade thatflourishes under the Gaza Strip's border with Egypt. However,chnages to the blockade in 2010 included moving from a white list -in which only approved items were allowed into Gaza through thecrossings - to a black list, where all but non-approved items wereallowed into Gaza through the crossings. Israeli authorities haverecently signaled that exports from the territory might be possiblein the future, but currently regular exports from Gaza are notpermitted.
GeorgiaGeorgia's economy sustained GDP growth of more than 10% in2006-07, based on strong inflows of foreign investment and robustgovernment spending. However, GDP growth slowed in 2008 followingthe August 2008 conflict with Russia, and turned negative in 2009 asforeign direct investment and workers' remittances declined in thewake of the global financial crisis, but rebounded in 2010.Georgia's main economic activities include the cultivation ofagricultural products such as grapes, citrus fruits, and hazelnuts;mining of manganese and copper; and output of a small industrialsector producing alcoholic and nonalcoholic beverages, metals,machinery, aircraft and chemicals. Areas of recent improvementinclude growth in the construction, banking services, and miningsectors, but reduced availability of external investment and theslowing regional economy are emerging risks. The country importsnearly all its needed supplies of natural gas and oil products. Ithas sizeable hydropower capacity, a growing component of its energysupplies. Georgia has overcome the chronic energy shortages and gassupply interruptions of the past by renovating hydropower plants andby increasingly relying on natural gas imports from Azerbaijaninstead of from Russia. The construction on the Baku-T'bilisi-Ceyhanoil pipeline, the Baku-T'bilisi-Erzerum gas pipeline, and theKars-Akhalkalaki Railroad are part of a strategy to capitalize onGeorgia's strategic location between Europe and Asia and develop itsrole as a transit point for gas, oil and other goods. Georgia hashistorically suffered from a chronic failure to collect taxrevenues; however, the government, since coming to power in 2004,has simplified the tax code, improved tax administration, increasedtax enforcement, and cracked down on petty corruption. However, theeconomic downturn of 2008-09 eroded the tax base and led to adecline in the budget surplus and an increase in public borrowingneeds. The country is pinning its hopes for renewed growth on adetermined effort to continue to liberalize the economy by reducingregulation, taxes, and corruption in order to attract foreigninvestment, but the economy faces a more difficult investmentclimate both domestically and internationally.
GermanyThe German economy - the fifth largest economy in the worldin PPP terms and Europe's largest - is a leading exporter ofmachinery, vehicles, chemicals, and household equipment and benefitsfrom a highly skilled labor force. Like its western Europeanneighbors, Germany faces significant demographic challenges tosustained long-term growth. Low fertility rates and declining netimmigration are increasing pressure on the country's social welfaresystem and necessitate structural reforms. The modernization andintegration of the eastern German economy - where unemployment canexceed 20% in some municipalities - continues to be a costlylong-term process, with annual transfers from west to east amountingin 2008 alone to roughly $12 billion. Reforms launched by thegovernment of Chancellor Gerhard SCHROEDER (1998-2005), deemednecessary to address chronically high unemployment and low averagegrowth, contributed to strong growth in 2006 and 2007 and fallingunemployment, which in 2008 reached a new post-reunification low of7.8%. These advances, as well as a government subsidized, reducedworking hour scheme, help explain the relatively modest increase inunemployment during the 2008-09 recession - the deepest since WorldWar II - and its healthy decrease in 2010. GDP contracted nearly 5%in 2009 but grew by 3.3% in 2010. Germany crept out of recessionthanks largely to rebounding manufacturing orders and exports -primarily outside the Euro Zone - and relatively steady consumerdemand. Stimulus and stabilization efforts initiated in 2008 and2009 and tax cuts introduced in Chancellor Angela MERKEL's secondterm increased Germany's budget deficit to 3.3% in 2009 and to 3.6%in 2010. The EU has given Germany until 2013 to get its consolidatedbudget deficit below 3% of GDP. A new constitutional amendmentlikewise limits the federal government to structural deficits of nomore than 0.35% of GDP per annum as of 2016.
GhanaGhana is well endowed with natural resources and agricultureaccounts for roughly one-third of GDP and employs more than half ofthe workforce, mainly small landholders. The services sectoraccounts for 50% of GDP. Gold and cocoa production and individualremittances are major sources of foreign exchange. Oil production atGhana's offshore Jubilee field began in mid-December and is expectedto boost economic growth. Ghana signed a Millennium ChallengeCorporation (MCC) Compact in 2006, which aims to assist intransforming Ghana's agricultural sector. Ghana opted for debtrelief under the Heavily Indebted Poor Country (HIPC) program in2002, and is also benefiting from the Multilateral Debt ReliefInitiative that took effect in 2006. In 2009 Ghana signed athree-year Poverty Reduction and Growth Facility with the IMF toimprove macroeconomic stability, private sector competitiveness,human resource development, and good governance and civicresponsibility. Sound macro-economic management along with highprices for gold and cocoa helped sustain GDP growth in 2008-10. Inearly 2010 President John Atta MILLS targeted recovery from highinflation and current account and budget deficits as his priorities.
GibraltarSelf-sufficient Gibraltar benefits from an extensiveshipping trade, offshore banking, and its position as aninternational conference center. Tax rates are low to attractforeign investment. The British military presence has been sharplyreduced and now contributes about 7% to the local economy, comparedwith 60% in 1984. The financial sector, tourism (almost 5 millionvisitors in 1998), gaming revenues, shipping services fees, andduties on consumer goods also generate revenue. The financialsector, tourism, and the shipping sector contribute 30%, 30%, and25%, respectively, of GDP. Telecommunications, e-commerce, ande-gaming account for the remaining 15%. In recent years, Gibraltarhas seen major structural change from a public to a private sectoreconomy, but changes in government spending still have a majorimpact on the level of employment.
Greece Greece has a capitalist economy with the public sector accounting for about 40% of GDP and with per capita GDP about two-thirds that of the leading euro-zone economies. Tourism provides 15% of GDP. Immigrants make up nearly one-fifth of the work force, mainly in agricultural and unskilled jobs. Greece is a major beneficiary of EU aid, equal to about 3.3% of annual GDP. The Greek economy grew by nearly 4.0% per year between 2003 and 2007, due partly to infrastructural spending related to the 2004 Athens Olympic Games, and in part to an increased availability of credit, which has sustained record levels of consumer spending. But the economy went into recession in 2009 as a result of the world financial crisis, tightening credit conditions, and Athens' failure to address a growing budget deficit, which was triggered by falling state revenues, and increased government expenditures. The economy contracted by 2% in 2009, and 4.8% in 2010. Greece violated the EU's Growth and Stability Pact budget deficit criterion of no more than 3% of GDP from 2001 to 2006, but finally met that criterion in 2007-08, before exceeding it again in 2009, with the deficit reaching 15.4% of GDP. Austerity measures reduced the deficit to 9.4% of GDP in 2010. Public debt, inflation, and unemployment are above the euro-zone average while per capita income is below; unemployment rose to 12% in 2010. Eroding public finances, a credibility gap stemming from inaccurate and misreported statistics, and consistent underperformance on following through with reforms prompted major credit rating agencies in late 2009 to downgrade Greece's international debt rating, and has led the country into a financial crisis. Under intense pressure by the EU and international market participants, the government has adopted a medium-term austerity program that includes cutting government spending, reducing the size of the public sector, decreasing tax evasion, reforming the health care and pension systems, and improving competitiveness through structural reforms to the labor and product markets. Athens, however, faces long-term challenges to push through unpopular reforms in the face of often vocal opposition from the country's powerful labor unions and the general public. Greek labor unions are striking over new austerity measures, but the strikes so far have had a limited impact on the government's will to adopt reforms. An uptick in widespread unrest, however, could challenge the government's ability to implement reforms and meet budget targets, and could also lead to rioting or violence. In April 2010 a leading credit agency assigned Greek debt its lowest possible credit rating; in May, the International Monetary Fund and Eurozone governments provided Greece emergency short- and medium-term loans worth $147 billion so that the country could make debt repayments to creditors. In exchange for the largest bailout ever assembled, the government announced combined spending cuts and tax increases totaling $40 billion over three years, on top of the tough austerity measures already taken. Greece, however, struggled to boost revenues and cut spending to meet 2010 targets set by the EU and the IMF, especially after Eurostat - the EU's statistical office - revised upward Greece's deficit and debt numbers for 2009 and 2010. Greece's lenders are calling on Athens to step up efforts in 2011 to increase tax collection, shore up public enterprises, and rein in health spending, and are planning to give Greece more time to repay its EU-IMF loan. Greece responded by introducing major structural reforms, but investors still question whether Greece can sustain fiscal efforts in the face of a bleak economic outlook and public discontent.
GreenlandThe economy remains critically dependent on exports ofshrimp and fish and on a substantial subsidy - about $650 million in2009 - from the Danish Government, which supplies nearly 60% ofgovernment revenues. The public sector, including publicly ownedenterprises and the municipalities, plays the dominant role inGreenland's economy. Greenland's GDP contracted about 2% in 2009 asa result of the global economic slowdown. Budget surpluses turned todeficits beginning in 2007 and unemployment has risen. During thelast decade the Greenland Home Rule Government (GHRG) pursuedconservative fiscal and monetary policies, but public pressure hasincreased for better schools, health care and retirement systems.The Greenlandic economy has benefited from increasing catches andexports of shrimp, Greenland halibut and, more recently, crabs. Dueto Greenland's continued dependence on exports of fish - whichaccount for 82% of exports - the economy remains very sensitive toforeign developments. International consortia are increasinglyactive in exploring for hydrocarbon resources off Greenland'swestern coast, and international studies indicate the potential foroil and gas fields in northern and northeastern Greenland. In May2007 a US aluminum producer concluded a memorandum of understandingwith the Greenland Home Rule Government to build an aluminum smelterand a power generation facility, which takes advantage ofGreenland's abundant hydropower potential. Within the area ofmining, olivine sand continues to be produced and gold productionhas resumed in south Greenland. Tourism also offers another avenueof economic growth for Greenland, with increasing numbers of cruiselines now operating in Greenland's western and southern watersduring the peak summer tourism season.
GrenadaGrenada relies on tourism as its main source of foreignexchange especially since the construction of an internationalairport in 1985. Hurricanes Ivan (2004) and Emily (2005) severelydamaged the agricultural sector - particularly nutmeg and cocoacultivation - which had been a key driver of economic growth.Grenada has rebounded from the devastating effects of the hurricanesbut is now saddled with the debt burden from the rebuilding process.Public debt-to-GDP is nearly 110%, leaving the THOMAS administrationlimited room to engage in public investments and social spending.Strong performances in construction and manufacturing, together withthe development of tourism and an offshore financial industry, havealso contributed to growth in national output; however, economicgrowth was stagnant in 2010 after a sizeable contraction in 2009,because of the global economic slowdown's effects on tourism andremittances.
GuamThe economy depends largely on US military spending andtourism. Total US grants, wage payments, and procurement outlaysamounted to $1.3 billion in 2004. Over the past 30 years, thetourist industry has grown to become the largest income sourcefollowing national defense. The Guam economy continues to experienceexpansion in both its tourism and military sectors.
GuatemalaGuatemala is the most populous of the Central Americancountries with a GDP per capita roughly one-half that of the averagefor Latin America and the Caribbean. The agricultural sectoraccounts for nearly 15% of GDP and half of the labor force; keyagricultural exports include coffee, sugar, and bananas. The 1996peace accords, which ended 36 years of civil war, removed a majorobstacle to foreign investment, and since then Guatemala has pursuedimportant reforms and macroeconomic stabilization. The CentralAmerican Free Trade Agreement (CAFTA) entered into force in July2006 spurring increased investment and diversification of exports,with the largest increases in ethanol and non-traditionalagricultural exports. While CAFTA has helped improve the investmentclimate, concerns over security, the lack of skilled workers andpoor infrastructure continue to hamper foreign direct investment.The distribution of income remains highly unequal with the richestdecile comprising over 40% of Guatemala's overall consumption. Morethan half of the population is below the national poverty line and15% lives in extreme poverty. Poverty among indigenous groups, whichmake up 38% of the population, averages 76% and extreme povertyrises to 28%. 43% of children under five are chronicallymalnourished, one of the highest malnutrition rates in the world.President COLOM entered into office with the promise to increaseeducation, healthcare, and rural development, and in April 2008 heinaugurated a conditional cash transfer program, modeled afterprograms in Brazil and Mexico, that provide financial incentives forpoor families to keep their children in school and get regularhealth check-ups. Given Guatemala's large expatriate community inthe United States, it is the top remittance recipient in CentralAmerica, with inflows serving as a primary source of foreign incomeequivalent to nearly two-thirds of exports. Economic growth fell in2009 as export demand from US and other Central American marketsfell and foreign investment slowed amid the global recession, butthe economy recovered gradually in 2010 and will likely return tomore normal growth rates by 2012. President COLOM, in his last yearin office, will likely face opposition to economic reform,particularly over a long-delayed tax reform and an IMF-recommendedreform to strengthen the banking sector. Larger budget deficits andincreased debt can be expected in 2011.
GuernseyFinancial services - banking, fund management, insurance -account for about 23% of employment and about 55% of total income inthis tiny, prosperous Channel Island economy. Tourism,manufacturing, and horticulture, mainly tomatoes and cut flowers,have been declining. Financial services, construction, retail, andthe public sector have been growing. Light tax and death duties makeGuernsey a popular tax haven. The evolving economic integration ofthe EU nations is changing the environment under which Guernseyoperates.
GuineaGuinea is a poor country that possesses major mineral,hydropower, and agricultural resources. The country has almost halfof the world's bauxite reserves. The mining sector accounts for morethan 70% of exports. Long-run improvements in the management of theeconomy, literacy, and the legal framework are needed if the countryis to move out of poverty. Investor confidence has been sapped byrampant corruption, a lack of electricity and other infrastructure,a lack of skilled workers, and the political uncertainty resultingfrom the death of President Lansana CONTE in December 2008.International donors, including the G-8, the IMF, and the WorldBank, cut their development programming significantly in response tothe coup, and international partners have said that a resumption ofaid will be contingent on a successful democratic transition with ademocratically elected president and a functioning NationalAssembly. Growth rose slightly in 2006-08, primarily due toincreases in global demand and commodity prices on world markets,but bauxite and alumina exports were negatively affected by theglobal economic downturn and the economy in 2009 contracted.International investors expressed renewed interest in Guinea's ironore mines in 2010.
Guinea-BissauOne of the poorest countries in the world,Guinea-Bissau's legal economy depends mainly on farming and fishing,but trafficking narcotics is probably the most lucrative trade.Cashew crops have increased remarkably in recent years.Guinea-Bissau exports fish and seafood along with small amounts ofpeanuts, palm kernels, and timber. Rice is the major crop and staplefood. However, intermittent fighting between Senegalese-backedgovernment troops and a military junta destroyed much of thecountry's infrastructure and caused widespread damage to the economyin 1998; the civil war led to a 28% drop in GDP that year, withpartial recovery in 1999-2002. In December 2003, the World Bank,IMF, and UNDP were forced to step in to provide emergency budgetarysupport in the amount of $107 million for 2004, representing over80% of the total national budget. The combination of limitedeconomic prospects, a weak and faction-ridden government, andfavorable geography have made this West African country a waystation for drugs bound for Europe.
GuyanaThe Guyanese economy exhibited moderate economic growth inrecent years and is based largely on agriculture and extractiveindustries. The economy is heavily dependent upon the export of sixcommodities - sugar, gold, bauxite, shrimp, timber, and rice - whichrepresent nearly 60% of the country's GDP and are highly susceptibleto adverse weather conditions and fluctuations in commodity prices.Guyana's entrance into the Caricom Single Market and Economy (CSME)in January 2006 has broadened the country's export market, primarilyin the raw materials sector. Economic recovery since a 2005flood-related contraction was buoyed by increases in remittances andforeign direct investment in the sugar and rice industries as wellas the mining sector. Chronic problems include a shortage of skilledlabor and a deficient infrastructure. The government is juggling asizable external debt against the urgent need for expanded publicinvestment. In March 2007, the Inter-American Development Bank,Guyana's principal donor, canceled Guyana's nearly $470 milliondebt, equivalent to nearly 48% of GDP, which along with other HighlyIndebted Poor Country (HIPC) debt forgiveness brought thedebt-to-GDP ratio down from 183% in 2006 to 120% in 2007. Guyanabecame heavily indebted as a result of the inward-looking, state-leddevelopment model pursued in the 1970s and 1980s. Growth slowed in2009-10 as a result of the world recession. The slowdown in thedomestic economy and lower import costs helped to narrow thecountry's current account deficit, despite generally lower earningsfrom exports.
HaitiHaiti's economy suffered a severe setback when a 7.1 magnitudeearthquake damaged its capital city, Port-au-Prince, in January2010. Already the poorest country in the Western Hemisphere with 80%of the population living under the poverty line and 54% in abjectpoverty, the damage to Port-au-Prince caused the country's GDP tocontract an estimated 8% in 2010. Two-thirds of all Haitians dependon the agricultural sector, mainly small-scale subsistence farming,and remain vulnerable to damage from frequent natural disasters,exacerbated by the country's widespread deforestation. US economicengagement under the Haitian Hemispheric Opportunity throughPartnership Encouragement (HOPE) Act, passed in December 2006, hasboosted apparel exports and investment by providing tariff-freeaccess to the US. Congress voted in 2010 to extend the legislationuntil 2020 under the Haitian Economic Lift Act (HELP); the apparelsector accounts for three-quarters of Haitian exports and nearlyone-tenth of GDP. Remittances are the primary source of foreignexchange, equaling nearly a quarter of GDP and more than twice theearnings from exports. Haiti suffers from a lack of investmentbecause of insecurity and limited infrastructure, and a severe tradedeficit. In 2005, Haiti paid its arrears to the World Bank, pavingthe way for reengagement with the Bank. Haiti received debtforgiveness for over $1 billion of its debt through theHighly-Indebted Poor Country (HIPC) initiative in 2009. Theremainder of its outstanding external debt was cancelled by donorcountries in early 2010 but has since climbed back to about $500million. The government relies on formal international economicassistance for fiscal sustainability.
Heard Island and McDonald IslandsThe islands have no indigenouseconomic activity, but the Australian Government allows limitedfishing in the surrounding waters.
Holy See (Vatican City)The Holy See is supported financially by avariety of sources, including investments, real estate income, anddonations from Catholic individuals, dioceses, and institutions;these help fund the Roman Curia (Vatican bureaucracy), diplomaticmissions, and media outlets. The separate Vatican City State budgetincludes the Vatican museums and post office and is supportedfinancially by the sale of stamps, coins, medals, and touristmementos; by fees for admission to museums; and by publicationssales. Moreover, an annual collection taken up in dioceses anddirect donations go to a non-budgetary fund known as Peter's Pence,which is used directly by the Pope for charity, disaster relief, andaid to churches in developing nations. The incomes and livingstandards of lay workers are comparable to those of counterparts whowork in the city of Rome.
HondurasHonduras, the second poorest country in Central America,suffers from extraordinarily unequal distribution of income, as wellas high underemployment. While historically dependent on the exportof bananas and coffee, Honduras has diversified its export base toinclude apparel and automobile wire harnessing. Nearly half ofHonduras's economic activity is directly tied to the US, withexports to the US equivalent to 30% of GDP and remittances foranother 20%. The US-Central America Free Trade Agreement (CAFTA)came into force in 2006 and has helped foster foriegn directinvestment, but physical and political insecurity may deterpotential investors; about 70% of FDI is from US firms. The economyregistered marginally positive economic growth in 2010, insufficientto improve living standards for the nearly 60% of the population inpoverty. The LOBO administration inherited a difficult fiscalposition with off-budget debts accrued in previous administrationsand government salaries nearly equivalent to tax collections. Hisgovernment has displayed a commitment to improving tax collectionand cutting expenditures. This enabled Tegucigalpa to secure an IMFPrecautionary Stand-By agreement in October 2010. The IMF agreementhas helped renew multilateral and bilateral donor confidence inHonduras following the ZELAYA administration's economicmismanagement and the political coup.
Hong Kong Hong Kong has a free market economy highly dependent on international trade and finance - the value of goods and services trade, including the sizable share of re-exports, is about four times GDP. Hong Kong's open economy left it exposed to the global economic slowdown, but its increasing integration with China, through trade, tourism, and financial links, helped it recover more quickly than many observers anticipated. The Hong Kong government is promoting the Special Administrative Region (SAR) as the site for Chinese renminbi (RMB) internationalization. Hong Kong residents are allowed to establish RMB-denominated savings accounts; RMB-denominated corporate and Chinese government bonds have been issued in Hong Kong; and RMB trade settlement is allowed. The territory far exceeded the RMB conversion quota set by Beijing for trade settlements in 2010 due to the growth of earnings from exports to the mainland. RMB deposits grew to roughly 3.6% of total system deposits in Hong Kong by October 2010, an increase of over 250% since the beginning of the year. The government is pursuing efforts to introduce additional use of RMB in Hong Kong financial markets and is seeking to expand the RMB quota for 2011. The mainland has long been Hong Kong's largest trading partner, accounting for about half of Hong Kong's exports by value. Hong Kong's natural resources are limited, and food and raw materials must be imported. As a result of China's easing of travel restrictions, the number of mainland tourists to the territory has surged from 4.5 million in 2001 to 17.7 million in 2009, outnumbering visitors from all other countries combined. Hong Kong has also established itself as the premier stock market for Chinese firms seeking to list abroad. In 2009 mainland Chinese companies constituted about 40% of the firms listed on the Hong Kong Stock Exchange and accounted for 60% of the Exchange's market capitalization. During the past decade, as Hong Kong's manufacturing industry moved to the mainland, its service industry has grown rapidly and in 2009 accounted for more than 90% of the territory's GDP. GDP growth averaged a strong 4% from 1989 to 2008. Hong Kong's GDP fell in 2009 as a result of the global financial crisis, but a recovery began in third quarter 2009, and the economy grew nearly 6% in 2010. The Hong Kong government adopted several temporary fiscal policy support measures in response to the crisis that it may discontinue if strong growth is sustained. Credit expansion and tight housing supply conditions caused Hong Kong property prices to rise rapidly in 2010, and some lower income segments of the population are increasingly unable to afford adequate housing. Hong Kong continues to link its currency closely to the US dollar, maintaining an arrangement established in 1983.
HungaryHungary has made the transition from a centrally planned toa market economy, with a per capita income nearly two-thirds that ofthe EU-25 average. The private sector accounts for more than 80% ofGDP. Foreign ownership of and investment in Hungarian firms arewidespread, with cumulative foreign direct investment worth morethan $70 billion. The government's austerity measures, imposed sincelate 2006, have reduced the budget deficit from over 9% of GDP in2006 to 3.8% in 2010. Hungary's impending inability to service itsshort-term debt - brought on by the global financial crisis in late2008 - led Budapest to obtain an IMF-arranged financial assistancepackage worth over $25 billion. The global economic downturn,declining exports, and low domestic consumption and fixed assetaccumulation, dampened by government austerity measures, resulted inan economic contraction of 6.3% in 2009. The economy rebounded in2010 with a big boost from exports, and growth of more than 2.5% isexpected in 2011. Unemployment remained high, at more than 11%.
Iceland Iceland's Scandinavian-type social-market economy combines a capitalist structure and free-market principles with an extensive welfare system. Prior to the 2008 crisis, Iceland had achieved high growth, low unemployment, and a remarkably even distribution of income. The economy depends heavily on the fishing industry, which provides 40% of export earnings, more than 12% of GDP, and employs 7% of the work force. It remains sensitive to declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, particularly within the fields of software production, biotechnology, and tourism. Abundant geothermal and hydropower sources have attracted substantial foreign investment in the aluminum sector and boosted economic growth, although the financial crisis has put several investment projects on hold. Much of Iceland's economic growth in recent years came as the result of a boom in domestic demand following the rapid expansion of the country's financial sector. Domestic banks expanded aggressively in foreign markets, and consumers and businesses borrowed heavily in foreign currencies, following the privatization of the banking sector in the early 2000s. Worsening global financial conditions throughout 2008 resulted in a sharp depreciation of the krona vis-a-vis other major currencies. The foreign exposure of Icelandic banks, whose loans and other assets totaled more than 10 times the country's GDP, became unsustainable. Iceland's three largest banks collapsed in late 2008. The country secured over $10 billion in loans from the IMF and other countries to stabilize its currency and financial sector, and to back government guarantees for foreign deposits in Icelandic banks. GDP fell 6.8% in 2009, and unemployment peaked at 9.4% in February 2009. GDP fell 3.4% in 2010. Since the collapse of Iceland's financial sector, government economic priorities have included: stabilizing the krona, reducing Iceland's high budget deficit, containing inflation, restructuring the financial sector, and diversifying the economy. Three new banks were established to take over the domestic assets of the collapsed banks. Two of them have foreign majority ownership, while the State holds a majority of the shares of the third. British and Dutch authorities have pressed claims totaling over $5 billion against Iceland to compensate their citizens for losses suffered on deposits held in the failed Icelandic bank, Landsbanki Islands. Iceland agreed to new terms with the UK and the Netherlands to compensate British and Dutch depositors, but the agreement must first be approved by the Icelandic President. Iceland began EU accession negotiations with the EU in July 2010, however, public support has dropped substantially because of concern about losing control over fishing resources and in reaction to measures taken by Brussels during the ongoing Eurozone crisis.
IndiaIndia is developing into an open-market economy, yet traces ofits past autarkic policies remain. Economic liberalization,including industrial deregulation, privatization of state-ownedenterprises, and reduced controls on foreign trade and investment,began in the early 1990s and has served to accelerate the country'sgrowth, which has averaged more than 7% per year since 1997. India'sdiverse economy encompasses traditional village farming, modernagriculture, handicrafts, a wide range of modern industries, and amultitude of services. Slightly more than half of the work force isin agriculture, but services are the major source of economicgrowth, accounting for more than half of India's output, with onlyone-third of its labor force. India has capitalized on its largeeducated English-speaking population to become a major exporter ofinformation technology services and software workers. In 2010, theIndian economy rebounded robustly from the global financial crisis -in large part because of strong domestic demand - and growthexceeded 8% year-on-year in real terms. Merchandise exports, whichaccount for about 15% of GDP, returned to pre-financial crisislevels. An industrial expansion and high food prices, resulting fromthe combined effects of the weak 2009 monsoon and inefficiencies inthe government's food distribution system, fueled inflation whichpeaked at about 11% in the first half fo 2010, but has graduallydecreased to single digits following a series of central bankinterest rate hikes. New Delhi in 2010 reduced subsidies in fuel andfertilizers, sold a small percentage of its shares in somestate-owned enterprises and auctioned off rights to radio bandwidthfor 3G telecommunications in part to lower the government's deficit.The Indian Government seeks to reduce its deficit to 5.5% of GDP inFY 2010-11, down from 6.8% in the previous fiscal year. India's longterm challenges include widespread poverty, inadequate physical andsocial infrastructure, limited non-agricultural employmentopportunities, insufficient access to quality basic and highereducation, and accommodiating rual-to-urban migration.
Indian OceanThe Indian Ocean provides major sea routes connectingthe Middle East, Africa, and East Asia with Europe and the Americas.It carries a particularly heavy traffic of petroleum and petroleumproducts from the oilfields of the Persian Gulf and Indonesia. Itsfish are of great and growing importance to the bordering countriesfor domestic consumption and export. Fishing fleets from Russia,Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainlyfor shrimp and tuna. Large reserves of hydrocarbons are being tappedin the offshore areas of Saudi Arabia, Iran, India, and westernAustralia. An estimated 40% of the world's offshore oil productioncomes from the Indian Ocean. Beach sands rich in heavy minerals andoffshore placer deposits are actively exploited by borderingcountries, particularly India, South Africa, Indonesia, Sri Lanka,and Thailand.
IndonesiaIndonesia, a vast polyglot nation, has weathered theglobal financial crisis relatively smoothly because of its heavyreliance on domestic consumption as the driver of economic growth.Although the economy slowed significantly in 2009 from the 6%-plusgrowth rate recorded in 2007 and 2008, by 2010 growth returned to a6% rate. During the recession, Indonesia outperformed its regionalneighbors and joined China and India as the only G20 members postinggrowth. The government made economic advances under the firstadministration of President YUDHOYONO, introducing significantreforms in the financial sector, including tax and customs reforms,the use of Treasury bills, and capital market development andsupervision. Indonesia's debt-to-GDP ratio in recent years hasdeclined steadily because of increasingly robust GDP growth andsound fiscal stewardship. Indonesia still struggles with poverty andunemployment, inadequate infrastructure, corruption, a complexregulatory environment, and unequal resource distribution amongregions. YUDHOYONO's reelection, with respected economist BOEDIONOas his vice president, suggests broad continuity of economic policy,although the start of their term has been marred by corruptionscandals and the departure of an internationally respected financeminister. The government in 2010 faces the ongoing challenge ofimproving Indonesia's insufficient infrastructure to removeimpediments to economic growth, while addressing climate changemitigation and adaptation needs, particularly with regard toconserving Indonesia's forests and peatlands, the focus of apotentially trailblazing $1 billion REDD+ pilot project.
IranIran's economy is marked by an inefficient state sector,reliance on the oil sector, which provides the majority ofgovernment revenues, and statist policies, which create majordistortions throughout the system. Private sector activity istypically limited to small-scale workshops, farming, and services.Price controls, subsidies, and other rigidities weigh down theeconomy, undermining the potential for private-sector-led growth.Significant informal market activity flourishes. The legislature inlate 2009 passed President Mahmud AHMADI-NEJAD's bill to reducesubsidies, particularly on food and energy. The bill would phase outsubsidies - which benefit Iran's upper and middle classes the most -over three to five years and replace them with cash payments toIran's lower classes. However, the start of the program was delayedrepeatedly throughout 2010 over fears of public reaction to higherprices. This is the most extensive economic reform since thegovernment implemented gasoline rationing in 2007. The recovery ofworld oil prices in the last year increased Iran's oil exportrevenue by at least $10 billion over 2009, easing some of thefinancial impact of the newest round of international sanctions.Although inflation has fallen substantially since the mid-2000s,Iran continues to suffer from double-digit unemployment andunderemployment. Underemployment among Iran's educated youth hasconvinced many to seek jobs overseas, resulting in a significant"brain drain."
Iraq An improved security environment and an initial wave of foreign investment are helping to spur economic activity, particularly in the energy, construction, and retail sectors. Broader economic improvement, long-term fiscal health, and sustained increases in the standard of living still depend on the government passing major policy reforms and on continued development of Iraq's massive oil reserves. Although foreign investors viewed Iraq with increasing interest in 2010, most are still hampered by difficulties in acquiring land for projects and by other regulatory impediments. Iraq's economy is dominated by the oil sector, which provides over 90% of government revenue and 80% of foreign exchange earnings. Since mid-2009, oil export earnings have returned to levels seen before Operation Iraqi Freedom and government revenues have rebounded, along with global oil prices. In 2011 Baghdad probably will increase oil exports above the current level of 1.9 million barrels per day (bbl/day) as a result of new contracts with international oil companies, but is likely to fall short of the 2.4 million bbl/day it is forecasting in its budget. Iraq is making modest progress in building the institutions needed to implement economic policy. In 2010, Bagdad signed a new agreement with both the IMF and World Bank for conditional aid programs that will help strengthen Iraq's economic institutions. Some reform-minded leaders within the Iraqi government are seeking to pass laws to strengthen the economy. This legislation includes a package of laws to establish a modern legal framework for the oil sector and a mechanism to equitably divide oil revenues within the nation, although these and other important reforms are still under contentious and sporadic negotiation. Iraq's recent contracts with major oil companies have the potential to greatly expand oil revenues, but Iraq will need to upgrade its oil processing, pipeling, and export infrastructure to enable these deals to reach their potential. The Government of Iraq is pursuing a strategy to gain additional foreign investment in Iraq's economy. This includes an amendment to the National Investment Law, multiple international trade and investment events, as well as potential participation in joint ventures with state-owned enterprises. Provincial Councils also are using their own budgets to promote and facilitate investment at the local level. However, widespread corruption, inadequate infrastructure, insufficient essential services, and antiquated commercial laws and regulations stifle investment and continue to constrain the growth of private, non-energy sectors. The Central Bank has successfully held the exchange rate at approximately 1,170 Iraqi dinar/US dollar since January 2009. Inflation has decreased consistently since 2006 as the security situation has improved. However, Iraqi leaders remain hard pressed to translate macroeconomic gains into improved lives for ordinary Iraqis. Unemployment remains a problem throughout the country. Reducing corruption and implementing reforms - such as bank restructuring and developing the private sector - would be important steps in this direction.