IrelandIreland is a small, modern, trade-dependent economy. Irelandjoined 11 other EU nations in circulating the euro on 1 January2002. GDP growth averaged 6% in 1995-2007, but economic activity hasdropped sharply since 2008 with GDP falling by over 3% in 2008,nearly 8% in 2009, and 1% in 2010, and further contraction isexpectd in 2011. Ireland entered into a recession for the first timein more than a decade with the onset of the world financial crisisand subsequent severe slowdown in its domestic property andconstruction markets. Agriculture, once the most important sector,is now dwarfed by industry and services. Although the export sector,dominated by foreign multinationals, remains a key component ofIreland's economy, construction most recently fueled economic growthalong with strong consumer spending and business investment.Property prices rose more rapidly in Ireland in the decade up to2007 than in any other developed economy. However, average homeprices have fallen 50% from the 2007 peak. In 2008 the COWENgovernment moved to guarantee all bank deposits, recapitalize thebanking system, and establish partly-public venture capital funds inresponse to the country's economic downturn. In 2009, in an effortto stabilize the banking sector, the Irish Government establishedthe National Asset Management Agency (NAMA) to acquire problemcommercial property and development loans from Irish banks. Facedwith sharply reduced revenues and a burgeoning budget deficit, theIrish Government introduced the first in a series of draconianbudgets in 2009. In addition to across-the-board cuts in spending,the 2009 budget included wage reductions for all public servants.These measures were not sufficient. The budget deficit reachednearly 38% of GDP in 2010 because of additional government supportfor the banking sector. In late 2010, the COWEN Government agreed toa $112 billion loan package from the EU and IMF to help Dublinrecapitalize its banking sector and avoid defaulting on itssovereign debt, and initiated a four-year austerity plan to cut anadditional $20 billion from its budget.
Isle of ManOffshore banking, manufacturing, and tourism are keysectors of the economy. The government offers low taxes and otherincentives to high-technology companies and financial institutionsto locate on the island; this has paid off in expanding employmentopportunities in high-income industries. As a result, agricultureand fishing, once the mainstays of the economy, have declined intheir contributions to GDP. The Isle of Man also attracts onlinegambling sites and the film industry. Trade is mostly with the UK.The Isle of Man enjoys free access to EU markets.
IsraelIsrael has a technologically advanced market economy. Itdepends on imports of crude oil, grains, raw materials, and militaryequipment. Despite limited natural resources, Israel has intensivelydeveloped its agricultural and industrial sectors over the past 20years. Cut diamonds, high-technology equipment, and agriculturalproducts (fruits and vegetables) are the leading exports. Israelusually posts sizable trade deficits, which are covered by largetransfer payments from abroad and by foreign loans. Roughly half ofthe government's external debt is owed to the US, its major sourceof economic and military aid. Israel's GDP, after contractingslightly in 2001 and 2002 due to the Palestinian conflict andtroubles in the high-technology sector, grew about 5% per year from2004-07. The global financial crisis of 2008-09 spurred a briefrecession in Israel, but the country entered the crisis with solidfundamentals - following years of prudent fiscal policy and a seriesof liberalizing reforms - and a resilient banking sector, and theeconomy has shown signs of an early recovery. Following GDP growthof 4% in 2008, Israel's GDP slipped to 0.2% in 2009, but reached3.4% in 2010, as exports rebounded. The global economic downturnaffected Israel's economy primarily through reduced demand forIsrael's exports in the United States and EU, Israel's top tradingpartners. Exports account for about 25% of the country's GDP. TheIsraeli Government responded to the recession by implementing amodest fiscal stimulus package and an aggressive expansionarymonetary policy - including cutting interest rates to record lows,purchasing government bonds, and intervening in the foreign currencymarket. The Bank of Israel began raising interest rates in thesummer of 2009 when inflation rose above the upper end of the Bank'starget and the economy began to show signs of recovery.
Italy Italy has a diversified industrial economy, which is divided into a developed industrial north, dominated by private companies, and a less-developed, welfare-dependent, agricultural south, with high unemployment. The Italian economy is driven in large part by the manufacture of high-quality consumer goods produced by small and medium-sized enterprises, many of them family owned. Italy also has a sizable underground economy, which by some estimates accounts for as much as 15% of GDP. These activities are most common within the agriculture, construction, and service sectors. Italy has moved slowly on implementing needed structural reforms, such as reducing graft, overhauling costly entitlement programs, and increasing employment opportunities for young workers, particularly women. The international financial crisis worsened conditions in Italy's labor market, with unemployment rising from 6.2% in 2007 to 8.4% in 2010, but in the longer-term Italy's low fertility rate and quota-driven immigration policies will increasingly strain its economy. A rise in exports and investment driven by the global economic recovery nevertheless helped the economy grow by about 1% in 2010 following a 5% contraction in 2009. The Italian government has struggled to limit government spending, but Italy's exceedingly high public debt remains above 115% of GDP, and its fiscal deficit - just 1.5% of GDP in 2007 - exceeded 5% in 2009 and 2010, as the costs of servicing the country's debt rose.
JamaicaThe Jamaican economy is heavily dependent on services, whichnow account for more than 60% of GDP. The country continues toderive most of its foreign exchange from tourism, remittances, andbauxite/alumina. Remittances account for nearly 15% of GDP andexports of bauxite and alumina make up about 10%. Tourism revenuesaccount for roughly 10% of GDP, and both arrivals and revenues grewin 2010, up 4% and 6% respectively. The Economic growth faces manychallenges: high crime and corruption, large-scale unemployment andunderemployment, and a debt-to-GDP ratio of more than 120%.Jamaica's onerous debt burden - the fourth highest per capita - isthe result of government bailouts to ailing sectors of the economy,most notably to the financial sector in the mid-to-late 1990s. TheGovernment of Jamaica signed a $1.27 billion, 27-month StandbyAgreement with the International Monetary Fund for balance ofpayment support in February 2010. Other multilaterals have alsoprovided millions of dollars in loans and grants. The government'sdifficult fiscal position hinders spending on infrastructure andsocial programs, particularly as job losses rise in a shrinkingeconomy. The GOLDING administration faces the difficult prospect ofhaving to achieve fiscal discipline in order to maintain debtpayments, while simultaneously attacking a serious and growing crimeproblem that is hampering economic growth. High unemploymentexacerbates the crime problem, including gang violence that isfueled by the drug trade.
Jan MayenJan Mayen is a volcanic island with no exploitable naturalresources, although surrounding waters contain substantial fishstocks and potential untapped petroleum resources. Economic activityis limited to providing services for employees of Norway's radio andmeteorological stations on the island.
JapanIn the years following World War II, government-industrycooperation, a strong work ethic, mastery of high technology, and acomparatively small defense allocation (1% of GDP) helped Japandevelop a technologically advanced economy. Two notablecharacteristics of the post-war economy were the close interlockingstructures of manufacturers, suppliers, and distributors, known askeiretsu, and the guarantee of lifetime employment for a substantialportion of the urban labor force. Both features are now erodingunder the dual pressures of global competition and domesticdemographic change. Japan's industrial sector is heavily dependenton imported raw materials and fuels. A tiny agricultural sector ishighly subsidized and protected, with crop yields among the highestin the world. Usually self sufficient in rice, Japan imports about60% of its food on a caloric basis. Japan maintains one of theworld's largest fishing fleets and accounts for nearly 15% of theglobal catch. For three decades, overall real economic growth hadbeen spectacular - a 10% average in the 1960s, a 5% average in the1970s, and a 4% average in the 1980s. Growth slowed markedly in the1990s, averaging just 1.7%, largely because of the after effects ofinefficient investment and an asset price bubble in the late 1980sthat required a protracted period of time for firms to reduce excessdebt, capital, and labor. The Japanese financial sector was notheavily exposed to sub-prime mortgages or their derivativeinstruments and weathered the initial effect of the recent globalcredit crunch, but a sharp downturn in business investment andglobal demand for Japan's exports in late 2008 pushed Japan furtherinto recession. Government stimulus spending helped the economyrecover in late 2009 and 2010, but Tokyo is warning that GDP growthwill slow in 2011. Prime Minister Kan's government has proposedopening the agricultural and services sectors to greater foreigncompetition and boosting exports through free-trade agreements, butdebate continues on restructuring the economy and funding newstimulus programs in the face of a tight fiscal situation. Japan'shuge government debt, which is approaching 200 percent of GDP,persistent deflation, and an aging and shrinking population aremajor complications for the economy.
JerseyJersey's economy is based on international financialservices, agriculture, and tourism. In 2005 the finance sectoraccounted for about 50% of the island's output. Potatoes,cauliflower, tomatoes, and especially flowers are important exportcrops, shipped mostly to the UK. The Jersey breed of dairy cattle isknown worldwide and represents an important export income earner.Milk products go to the UK and other EU countries. Tourism accountsfor one-quarter of GDP. In recent years, the government hasencouraged light industry to locate in Jersey with the result thatan electronics industry has developed, displacing more traditionalindustries. All raw material and energy requirements are imported aswell as a large share of Jersey's food needs. Light taxes and deathduties make the island a popular tax haven. Living standards comeclose to those of the UK.
JordanJordan's economy is among the smallest in the Middle East,with insufficient supplies of water, oil, and other naturalresources, underlying the government's heavy reliance on foreignassistance. Other economic challenges for the government includechronic high rates of poverty, unemployment, inflation, and a largebudget deficit. Since assuming the throne in 1999, King ABDALLAH hasimplemented significant economic reforms, such as opening the traderegime, privatizing state-owned companies, and eliminating most fuelsubsidies, which in the past few years have spurred economic growthby attracting foreign investment and creating some jobs. The globaleconomic slowdown, however, has depressed Jordan's GDP growth.Export-oriented sectors such as manufacturing, mining, and thetransport of re-exports have been hit the hardest. The Governmentapproved two supplementary budgets in 2010, but sweeping tax cutsplanned for 2010 did not materialize because of Amman's need foradditional revenue to cover excess spending. The budget deficit islikely to remain high, at 5-6% of GDP, and Amman likely willcontinue to depend heavily on foreign assistance to finance thedeficit in 2011. Jordan's financial sector has been relativelyisolated from the international financial crisis because of itslimited exposure to overseas capital markets. Jordan is currentlyexploring nuclear power generation to forestall energy shortfalls.
KazakhstanKazakhstan, geographically the largest of the formerSoviet republics, excluding Russia, possesses enormous fossil fuelreserves and plentiful supplies of other minerals and metals, suchas uranium, copper, and zinc. It also has a large agriculturalsector featuring livestock and grain. Kazakhstan's industrial sectoris primarily focused on the extraction and processing of thesenatural resources. Kazakhstan enjoyed double-digit growth in 2000-01and 8% or more per year in 2002-07 - thanks largely to its boomingenergy sector but also to economic reform, good harvests, andincreased foreign investment; GDP growth slowed dramaticallyfollowing the near-collapse of the banking sector in late 2007 andthe declines in oil and metals prices associated with the globaleconomic downturn in 2008-09. Kazakhstan has embarked upon anindustrial policy designed to diversify the economy away fromoverdependence on the oil sector as well expanding export marketsaway from its historical reliance on Russia. Nevertheless, growth isstill driven by oil. The government has engaged in several disputeswith Western oil companies over the terms of production agreements,most recently, with regard to the Kashagan project in 2007-08 andthe Karachaganak project in 2009.
KenyaAlthough the regional hub for trade and finance in EastAfrica, Kenya has been hampered by corruption and by reliance uponseveral primary goods whose prices have remained low. In 1997, theIMF suspended Kenya's Enhanced Structural Adjustment Program due tothe government's failure to maintain reforms and curb corruption.The IMF, which had resumed loans in 2000 to help Kenya through adrought, again halted lending in 2001 when the government failed toinstitute several anticorruption measures. In the key December 2002elections, Daniel Arap MOI's 24-year-old reign ended, and a newopposition government took on the formidable economic problemsfacing the nation. After some early progress in rooting outcorruption and encouraging donor support, the KIBAKI government wasrocked by high-level graft scandals in 2005 and 2006. In 2006, theWorld Bank and IMF delayed loans pending action by the government oncorruption. The international financial institutions and donors havesince resumed lending, despite little action on the government'spart to deal with corruption. Post-election violence in early 2008,coupled with the effects of the global financial crisis onremittance and exports, reduced GDP growth to 1.7 in 2008, but theeconomy rebounded in 2009-10.
KiribatiA remote country of 33 scattered coral atolls, Kiribati hasfew natural resources and is one of the least developed PacificIslands. Commercially viable phosphate deposits were exhausted atthe time of independence from the UK in 1979. Copra and fish nowrepresent the bulk of production and exports. The economy hasfluctuated widely in recent years. Economic development isconstrained by a shortage of skilled workers, weak infrastructure,and remoteness from international markets. Tourism provides morethan one-fifth of GDP. Private sector initiatives and a financialsector are in the early stages of development. Foreign financial aidfrom the EU, UK, US, Japan, Australia, New Zealand, Canada, UNagencies, and Taiwan accounts for 20-25% of GDP. Remittances fromseamen on merchant ships abroad account for more than $5 millioneach year. Kiribati receives around $15 million annually for thegovernment budget from an Australian trust fund.
Korea, NorthNorth Korea, one of the world's most centrally directedand least open economies, faces chronic economic problems.Industrial capital stock is nearly beyond repair as a result ofyears of underinvestment and shortages of spare parts. Large-scalemilitary spending draws off resources needed for investment andcivilian consumption. Industrial and power output have declined inparallel from pre-1990 levels. Severe flooding in the summer of 2007aggravated chronic food shortages caused by on-going systemicproblems, including a lack of arable land, collective farmingpractices, and persistent shortages of tractors and fuel.Large-scale international food aid deliveries have allowed thepeople of North Korea to escape widespread starvation since faminethreatened in 1995, but the population continues to suffer fromprolonged malnutrition and poor living conditions. Since 2002, thegovernment has allowed private "farmers' markets" to begin selling awider range of goods. It also permitted some private farming - on anexperimental basis - in an effort to boost agricultural output. InOctober 2005, the government tried to reverse some of these policiesby forbidding private sales of grains and reinstituting acentralized food rationing system. By December 2005, the governmentterminated most international humanitarian assistance operations inNorth Korea (calling instead for developmental assistance only) andrestricted the activities of remaining international andnon-governmental aid organizations. In mid-2008, North Korea beganreceiving food aid under a US program to deliver 500,000 metric tonsof food via the World Food Program and US nongovernmentalorganizations; but Pyongyang stopped accepting the aid in March2009. In December 2009, North Korea carried out a redenomination ofits currency, capping the amount of North Korean won that could beexchanged for the new notes, and limiting the exchange to a one-weekwindow. A concurrent crackdown on markets and foreign currency useyielded severe shortages and inflation, forcing Pyongyang to easethe restrictions by February 2010. Nevertheless, firm politicalcontrol remains the Communist government's overriding concern, whichlikely will inhibit changes to North Korea's current economic system.
Korea, SouthSince the 1960s, South Korea has achieved an incrediblerecord of growth and global integration to become a high-techindustrialized economy. Four decades ago, GDP per capita wascomparable with levels in the poorer countries of Africa and Asia.In 2004, South Korea joined the trillion dollar club of worldeconomies, and currently is among the world's 20 largest economies.Initially, a system of close government and business ties, includingdirected credit and import restrictions, made this success possible.The government promoted the import of raw materials and technologyat the expense of consumer goods, and encouraged savings andinvestment over consumption. The Asian financial crisis of 1997-98exposed longstanding weaknesses in South Korea's development modelincluding high debt/equity ratios and massive short-term foreignborrowing. GDP plunged by 6.9% in 1998, and then recovered by 9% in1999-2000. Korea adopted numerous economic reforms following thecrisis, including greater openness to foreign investment andimports. Growth moderated to about 4-5% annually between 2003 and2007. With the global economic downturn in late 2008, South KoreanGDP growth slowed to 0.2% in 2009. In the third quarter of 2009, theeconomy began to recover, in large part due to export growth, lowinterest rates, and an expansionary fiscal policy, and growthexceeded 6% in 2010. The South Korean economy's long term challengesinclude a rapidly aging population, inflexible labor market, andoverdependence on manufacturing exports to drive economic growth.
KosovoOver the past few years Kosovo's economy has shownsignificant progress in transitioning to a market-based system andmaintaining macroeconomic stability, but it is still highlydependent on the international community and the diaspora forfinancial and technical assistance. Remittances from the diaspora -located mainly in Germany and Switzerland - are estimated to accountfor about 14% of GDP, and donor-financed activities and aid foranother 7.5%. Kosovo's citizens are the poorest in Europe with anaverage annual per capita income of only $2,500. Unemployment,around 40% of the population, is a significant problem thatencourages outward migration and black market activity. Most ofKosovo's population lives in rural towns outside of the capital,Pristina. Inefficient, near-subsistence farming is common - theresult of small plots, limited mechanization, and lack of technicalexpertise. With international assistance, Kosovo has been able toprivatize 50% of its state-owned enterprises (SOEs) by number, andover 90% of SOEs by value. Minerals and metals - including lignite,lead, zinc, nickel, chrome, aluminum, magnesium, and a wide varietyof construction materials - once formed the backbone of industry,but output has declined because of ageing equipment and insufficientinvestment. A limited and unreliable electricity supply due totechnical and financial problems is a major impediment to economicdevelopment. Kosovo's Ministry of Energy and Mining has solicitedexpressions of interest from private investors to develop a newpower plant in order to address Kosovo and the region's unmet andgrowing demands for power. The official currency of Kosovo is theeuro, but the Serbian dinar is also used in Serb enclaves. Kosovo'stie to the euro has helped keep core inflation low. Kosovo has oneof the most open economies in the region, and continues to work withthe international community on measures to improve the businessenvironment and attract foreign investment. Kosovo has kept thegovernment budget in balance as a result of efficient value addedtax (VAT) collection at the borders and inefficient budgetexecution. In order to help integrate Kosovo into regional economicstructures, UNMIK signed (on behalf of Kosovo) its accession to theCentral Europe Free Trade Area (CEFTA) in 2006. However, Serbia andBosnia have refused to recognize Kosovo's customs stamp or extendreduced tariff privileges for Kosovo products under CEFTA. In July2008, Kosovo received pledges of $1.9 billion from 37 countries insupport of its reform priorities. In June 2009, Kosovo joined theWorld Bank and International Monetary Fund, and Kosovo beganservicing its share of the former Yugoslavia's debt.
KuwaitKuwait has a geographically small, but wealthy, relativelyopen economy with self-reported crude oil reserves of about 102billion barrels - about 9% of world reserves. Petroleum accounts fornearly half of GDP, 95% of export revenues, and 95% of governmentincome. Kuwaiti officials have committed to increasing oilproduction to 4 million barrels per day by 2020. The rise in globaloil prices throughout 2010 is reviving government consumption andeconomic growth as Kuwait experiences a 20% increase in governmentbudget revenue. Kuwait has done little to diversify its economy, inpart, because of this positive fiscal situation, and, in part, dueto the poor business climate and the acrimonious relationshipbetween the National Assembly and the executive branch, which hasstymied most movement on economic reforms. Nonetheless, thegovernment in May 2010 passed a privatization bill that allows thegovernment to sell assets to private investors, and in Januarypassed an economic development plan that pledges to spend up to $130billion in five years to diversify the economy away from oil,attract more investment, and boost private sector participation inthe economy. Increasing government expenditures by so large anamount during the planned time frame may be difficult to accomplish.
KyrgyzstanKyrgyzstan is a poor, mountainous country with a dominantagricultural sector. Cotton, tobacco, wool, and meat are the mainagricultural products, although only tobacco and cotton are exportedin any quantity. Industrial exports include gold, mercury, uranium,natural gas, and electricity. The economy depends heavily on goldexports - mainly from output at the Kumtor gold mine. Followingindependence, Kyrgyzstan was progressive in carrying out marketreforms, such as an improved regulatory system and land reform.Kyrgyzstan was the first Commonwealth of Independent States (CIS)country to be accepted into the World Trade Organization. Much ofthe government's stock in enterprises has been sold. Drops inproduction had been severe after the breakup of the Soviet Union inDecember 1991, but by mid-1995, production began to recover andexports began to increase. In 2005, the BAKIEV government andinternational financial institutions initiated a comprehensivemedium-term poverty reduction and economic growth strategy. Bishkekagreed to pursue much needed tax reform and, in 2006, becameeligible for the heavily indebted poor countries (HIPC) initiative.The government made steady strides in controlling its substantialfiscal deficit, nearly closing the gap between revenues andexpenditures in 2006, before boosting expenditures more than 20% in2007-08. GDP grew about 8% annually in 2007-08, partly due to highergold prices internationally, but slowed to 2.3% in 2009. Theoverthrow of President BAKIEV in April, 2010 and subsequent ethnicclashes left hundreds dead and damaged infrastructure. Shrinkingtrade and agricultural production, as well as political instability,caused GDP to contract about 3.5% in 2010. The fiscal deficitwidened to 12% of GDP, reflecting significant increases incrisis-related spending, including both rehabilitation of damagedinfrastructure and bank recapitalization. Progress inreconstruction, fighting corruption, restructuring domesticindustry, and attracting foreign aid and investment are key tofuture growth.
LaosThe government of Laos, one of the few remaining one-partyCommunist states, began decentralizing control and encouragingprivate enterprise in 1986. The results, starting from an extremelylow base, were striking - growth averaged 6% per year from 1988-2008except during the short-lived drop caused by the Asian financialcrisis that began in 1997. Despite this high growth rate, Laosremains a country with an underdeveloped infrastructure,particularly in rural areas. It has a rudimentary, but improving,road system, and limited external and internal telecommunications.Electricity is available in urban areas and in many rural districts.Subsistence agriculture, dominated by rice cultivation in lowlandareas, accounts for about 30% of GDP and provides 80% of totalemployment. The government in FY08/09 received $560 million frominternational donors. Economic growth has reduced official povertyrates from 46% in 1992 to 26% in 2009. The economy has benefitedfrom high foreign investment in hydropower, mining, andconstruction. Laos gained Normal Trade Relations status with the USin 2004, and is taking steps required to join the World TradeOrganization, such as reforming import licensing. Related tradepolicy reforms will improve the business environment. On the fiscalside, Laos launched an effort to ensure the collection of taxes in2009 as the global economic slowdown reduced revenues from miningprojects. Simplified investment procedures and expanded bank creditsfor small farmers and small entrepreneurs will improve Lao'seconomic prospects. The government appears committed to raising thecountry's profile among investors. The World Bank has declared thatLaos's goal of graduating from the UN Development Program's list ofleast-developed countries by 2020 is achievable. According Laotianofficials, the 7th Socio-Economic Development Plan for 2011-15 willoutline efforts to achieve Millennium Development Goals.
LatviaLatvia's economy experienced GDP growth of more than 10% peryear during 2006-07 but entered a severe recession in 2008 as aresult of an unsustainable current account deficit and large debtexposure amid the softening world economy. GDP plunged 18% in 2009 -the three former Soviet Baltic republics had the world's worstdeclines that year - and another 1.8% in 2010. The IMF, EU, andother donors provided assistance to Latvia as part of an agreementto defend the currency's peg to the euro and reduce the fiscaldeficit to about 5% of GDP over time. DOMBROVSKIS' governmentenacted major speding cuts to reduce the fiscal deficit to 7.8% ofGDP in 2010, and plans to cut the deficit further in 2011. Themajority of companies, banks, and real estate have been privatized,although the state still holds sizable stakes in a few largeenterprises. Latvia officially joined the World Trade Organizationin February 1999. EU membership, a top foreign policy goal, came inMay 2004.
LebanonLebanon has a free-market economy and a strong laissez-fairecommercial tradition. The government does not restrict foreigninvestment; however, the investment climate suffers from red tape,corruption, arbitrary licensing decisions, high taxes, tariffs, andfees, archaic legislation, and weak intellectual property rights.The Lebanese economy is service-oriented; main growth sectorsinclude banking and tourism. The 1975-90 civil war seriously damagedLebanon's economic infrastructure, cut national output by half, andall but ended Lebanon's position as a Middle Eastern entrepot andbanking hub. In the years since, Lebanon has rebuilt much of itswar-torn physical and financial infrastructure by borrowing heavily- mostly from domestic banks. In an attempt to reduce the ballooningnational debt, the Rafiq HARIRI government in 2000 began anausterity program, reining in government expenditures, increasingrevenue collection, and passing legislation to privatize stateenterprises, but economic and financial reform initiatives stalledand public debt continued to grow despite receipt of more than $2billion in bilateral assistance at the 2002 Paris II DonorsConference. The Israeli-Hizballah conflict in July-August 2006caused an estimated $3.6 billion in infrastructure damage, andprompted international donors to pledge nearly $1 billion inrecovery and reconstruction assistance. Donors met again in January2007 at the Paris III Donor Conference and pledged more than $7.5billion to Lebanon for development projects and budget support,conditioned on progress on Beirut's fiscal reform and privatizationprogram. An 18-month political stalemate and sporadic sectarian andpolitical violence hampered economic activity, particularly tourism,retail sales, and investment, until the new government was formed inJuly 2008. Political stability following the Doha Accord of May 2008helped boost tourism and, together with a strong banking sector,enabled real GDP growth of 7% per year in 2009-10 despite a slowdownin the region.
LesothoSmall, landlocked, and mountainous, Lesotho relies onremittances from miners employed in South Africa, customs dutiesfrom the Southern Africa Customs Union (SACU), and export revenuefor the majority of government revenue. However, the government hasrecently strengthened its tax system to reduce dependency on customsduties. Completion of a major hydropower facility in January 1998permitted the sale of water to South Africa and generated royaltiesfor Lesotho. 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 an apparel-assembly sector. DespiteLesotho's market-based economy being heavily tied to its neighborSouth Africa, the US is an important trade partner because of theexport sector's heavy dependence on apparel exports. Exports havegrown significantly because of the trade benefits contained in theAfrica Growth and Opportunity Act. The economy is still primarilybased on subsistence agriculture, especially livestock, althoughdrought has decreased agricultural activity. The extreme inequalityin the distribution of income remains a major drawback. Lesotho hassigned an Interim Poverty Reduction and Growth Facility with theIMF. In July 2007, Lesotho signed a Millennium Challenge AccountCompact with the US worth $362.5 million. Economic growth dropped in2009, due mainly to the effects of the global economic crisis asdemand for the country's exports declined and SACU revenue fellprecipitously when South Africa - the primary contributor to theSACU revenue pool - went into recession, but growth returned to 3.5%in 2010.
LiberiaLiberia is a low income country heavily reliant on foreignassistance for revenue. Civil war and government mismanagementdestroyed much of Liberia's economy, especially the infrastructurein and around the capital, Monrovia. Many businesses fled thecountry, taking capital and expertise with them, but with theconclusion of fighting and the installation of ademocratically-elected government in 2006, several have returned.Liberia has the distinction of having the highest ratio of directforeign investment to GDP in the world. Richly endowed with water,mineral resources, forests, and a climate favorable to agriculture,Liberia had been a producer and exporter of basic products,primarily raw timber and rubber and is reviving those sectors. Localmanufacturing, mainly foreign owned, had been small in scope.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 and Liberia shipped its firstmajor timber exports to Europe in 2010. The country reached itsHeavily Indebted Poor Countries initiative completion point in 2010and nearly $5 billion of international debt was permanentlyeliminated. This new status will enable Liberia to estabilish asovereign credit rating and issue bonds. Liberia's Paris Clubcreditors agreed to cancel Liberia's debt as well. Rebuildinginfrastructure and raising incomes will depend on generous financialand technical assistance from donor countries and foreign investmentin key sectors, such as infrastructure and power generation.
LibyaThe Libyan economy depends primarily upon revenues from theoil sector, which contribute about 95% of export earnings, 25% ofGDP, and 80% of government revenue. The weakness in worldhydrocarbon prices in 2009 reduced Libyan government tax income andconstrained economic growth. Substantial revenues from the energysector coupled with a small population give Libya one of the highestper capita GDPs in Africa, but little of this income flows down tothe lower orders of society. Libyan officials in the past five yearshave made progress on economic reforms as part of a broader campaignto reintegrate the country into the international fold. This effortpicked up steam after UN sanctions were lifted in September 2003 andas Libya announced in December 2003 that it would abandon programsto build weapons of mass destruction. The process of lifting USunilateral sanctions began in the spring of 2004; all sanctions wereremoved by June 2006, helping Libya attract greater foreign directinvestment, especially in the energy sector. Libyan oil and gaslicensing rounds continue to draw high international interest; theNational Oil Corporation (NOC) set a goal of nearly doubling oilproduction to 3 million bbl/day by 2012. In November 2009, the NOCannounced that that target may slip to as late as 2017. Libya facesa long road ahead in liberalizing the socialist-oriented economy,but initial steps - including applying for WTO membership, reducingsome subsidies, and announcing plans for privatization - are layingthe groundwork for a transition to a more market-based economy. Thenon-oil manufacturing and construction sectors, which account formore than 20% of GDP, have expanded from processing mostlyagricultural products to include the production of petrochemicals,iron, steel, and aluminum. Climatic conditions and poor soilsseverely limit agricultural output, and Libya imports about 75% ofits food. Libya's primary agricultural water source remains theGreat Manmade River Project, but significant resources are beinginvested in desalinization research to meet growing water demands.
LiechtensteinDespite its small size and limited natural resources,Liechtenstein has developed into a prosperous, highlyindustrialized, free-enterprise economy with a vital financialservice sector and 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 2008,Liechtenstein came under renewed international pressure -particularly from Germany - to improve transparency in its bankingand tax systems. In December 2008, Liechtenstein signed a TaxInformation Exchange Agreement with the US. Upon Liechtenstein'sconclusion of 12 bilateral information-sharing agreements, the OECDin October 2009 removed the principality from its "grey list" ofcountries that had yet to implement the organization's Model TaxConvention.
LithuaniaLithuania gained membership in the World TradeOrganization and joined the EU in May 2004. Despite Lithuania's EUaccession, Lithuania's trade with its Central and Eastern Europeanneighbors, and Russia in particular, accounts for a growingpercentage of total trade. Privatization of the large, state-ownedutilities is nearly complete. Foreign government and businesssupport have helped in the transition from the old command economyto a market economy. Lithuania's economy grew on average 8% per yearfor the four years prior to 2008 driven by exports and domesticdemand. However, GDP plunged nearly 15% in 2009 - during the 2008-09crisis the three former Soviet Baltic republics had the world'sworst economic declines. In 2009, the government launched ahigh-profile campaign, led by Prime Minister KUBILIUS, to attractforeign investment and to develop export markets. The currentaccount deficit, which had risen to roughly 15% of GDP in 2007-08,recovered to a surplus of 4% 2009 and 3.5% in 2010 in the wake of acutback in imports to almost half the 2008 level. Nevertheless,economic growth was flat and unemployment continued upward to 16% in2010.
LuxembourgThis small, stable, high-income economy - benefiting fromits proximity 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, but Luxembourg has lost some of its advantages as a taxhaven because of OECD and EU pressure. The economy depends onforeign and cross-border workers for about 60% of its labor force.Luxembourg, like all EU members, suffered from the global economiccrisis that began in late 2008, but unemployment has trended belowthe EU average. Following strong expansion from 2004 to 2007,Luxembourg's economy contracted and 3.4% in 2009, but rebounded 2.6%in 2010. The country continues to enjoy an extraordinarily highstandard of living - GDP per capita ranks third in the world, afterLiechtenstein and Qatar, and is the highest in the EU. Turmoil inthe world financial markets and lower global demand during 2008-09prompted the government to inject capital into the banking sectorand implement stimulus measures to boost the economy. Governmentstimulus measures and support for the banking sector, however, ledto a 5% government budget deficit in 2009, however, the deficit wascut below 3% in 2010.
MacauMacau's economy slowed dramatically in 2009 as a result of theglobal economic slowdown, but strong growth resumed in 2010, largelyon the back of strong tourism and gaming sectors. After opening upits locally-controlled casino industry to foreign competition in2001, the territory attracted tens of billions of dollars in foreigninvestment, transforming Macau into one of the world's largestgaming center. Macau's gaming and tourism businesses were fueled byChina's decision to relax travel restrictions on Chinese citizenswishing to visit Macau. By 2006, Macau's gaming revenue surpassedthat of the Las Vegas strip, and gaming-related taxes accounted formore than 70% of total government revenue. In 2008, Macau introducedmeasures to cool the rapidly developing sector. This city of nearly570,000 hosted more than 21 million visitors in 2009. Almost 51%came from mainland China. Macau's traditional manufacturing industryhas virtually disappeared since the termination of the Multi-FiberAgreement in 2005. In 2009, total exports were less than US$1billion, while gaming receipts were almost US$15 billion. By October2010, gross gaming revenue had already reached US$19 billion for theyear. The Macau government plans to tighten control over the openingof new casinos and strengthen supervision of local casino operationsin 2011 and has introduced measures to diversify the economy. TheCloser Economic Partnership Agreement (CEPA) between Macau andmainland China that came into effect on 1 January 2004 offersMacau-made products tariff-free access to the mainland;nevertheless, China remains Macau's third largest goods exportmarket, behind Hong Kong and the United States. Macau's currency,the Pataca, 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. Since then, Macedonia has maintained macroeconomicstability with low inflation, but it has so far lagged the region inattracting foreign investment and creating jobs, despite makingextensive fiscal and business sector reforms. Official unemploymentremains high at 33%, but may be overstated based on the existence ofan extensive gray market, estimated to be more than 20% of GDP, thatis not captured by official statistics. In the wake of the globaleconomic downturn, Macedonia has experienced decreased foreigndirect investment, lowered credit, and a large trade deficit, butthe financial system remained sound. Macroeconomic stability wasmaintained by a prudent monetary policy, which kept the domesticcurrency at the pegged level against the euro, at the expense ofraising interest rates. As a result, GDP fell in 2009. but returnedto positive in 2010.
MadagascarAfter discarding socialist economic policies in themid-1990s, Madagascar followed a World Bank- and IMF-led policy ofprivatization and liberalization that has been undermined since thestart of the political crisis. This strategy placed the country on aslow and steady growth path from an extremely low level.Agriculture, including fishing and forestry, is a mainstay of theeconomy, accounting for more than one-fourth of GDP and employing80% of the population. Exports of apparel have boomed in recentyears primarily due to duty-free access to the US. However,Madagascar's failure to comply with the requirements of the AfricanGrowth and Opportunity Act (AGOA) led to the termination of thecountry's duty-free access in January 2010. Deforestation anderosion, aggravated by the use of firewood as the primary source offuel, are serious concerns. Former President RAVALOMANANA workedaggressively to revive the economy following the 2002 politicalcrisis, which triggered a 12% drop in GDP that year. The currentpolitical crisis which began in early 2009 has dealt additionalblows to the economy. Tourism dropped more than 50% in 2009,compared with the previous year, and many investors are wary ofentering the uncertain investment environment.
MalawiLandlocked Malawi ranks among the world's most denselypopulated and least developed countries. The economy ispredominately agricultural with about 80% of the population livingin rural areas. Agriculture, which has benefited from fertilizersubsidies since 2006, accounts for more than one-third of GDP and90% of export revenues. The performance of the tobacco sector is keyto 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 2006, Malawi was approved for relief under the HeavilyIndebted Poor Countries (HIPC) program. In December 2007, the USgranted Malawi eligibility status to receive financial supportwithin the Millennium Challenge Corporation (MCC) initiative. Thegovernment faces many challenges including developing a marketeconomy, improving educational facilities, facing up toenvironmental problems, dealing with the rapidly growing problem ofHIV/AIDS, and satisfying foreign donors that fiscal discipline isbeing tightened. Since 2005 President MUTHARIKA'S government hasexhibited improved financial discipline under the guidance ofFinance Minister Goodall GONDWE and signed a three year PovertyReduction and Growth Facility worth $56 million with the IMF.Improved relations with the IMF lead other international donors toresume aid as well. The government has announced infrastructureprojects that could yield improvements, such as a new oil pipeline,for better fuel access, and the potential for a waterway linkthrough Mozambican rivers to the ocean, for better transportationoptions. Since 2009, however, Malawi experienced some setbacks,including a general shortage of foreign exchange, which has damagedits ability to pay for imports, and fuel shortages that hindertransportation and productivity. Investment fell 23% in 2009. Thegovernment has failed to address barriers to investment such asunreliable power, water shortages, poor telecommunicationsinfrastructure, and the high costs of services.
MalaysiaMalaysia, a middle-income country, has transformed itselfsince the 1970s from a producer of raw materials into an emergingmulti-sector economy. Under current Prime Minister NAJIB, Malaysiais attempting to achieve high-income status by 2020 and to movefarther up the value-added production chain by attractinginvestments in Islamic finance, high technology industries, medicaltechnology, and pharmaceuticals. The NAJIB administration also iscontinuing efforts to boost domestic demand and to wean the economyoff of its dependence on exports. Nevertheless, exports -particularly of electronics - remain a significant driver of theeconomy. As an oil and gas exporter, Malaysia has profited fromhigher world energy prices, although the rising cost of domesticgasoline and diesel fuel, combined with strained governmentfinances, has forced Kuala Lumpur to reduce government subsidies.The government is also trying to lessen its dependence on state oilproducer Petronas, which supplies at least 40% of governmentrevenue. The central bank maintains healthy foreign exchangereserves and its well-developed regulatory regime has limitedMalaysia's exposure to riskier financial instruments and the globalfinancial crisis. Nevertheless, decreasing worldwide demand forconsumer goods hurt Malaysia's exports and economic growth in 2009,although both showed signs of recovery in 2010. In order to attractincreased investment, NAJIB has also sought to revise the specialeconomic and social preferences accorded to ethnic Malays under theNew Economic Policy of 1970, but he has encountered significantopposition, especially from Malay nationalists.
MaldivesTourism, Maldives' largest economic activity, accounts for28% of GDP and more than 60% of foreign exchange receipts. Over 90%of government tax revenue comes from import duties andtourism-related taxes. Fishing is the second leading sector.Agriculture and manufacturing continue to play a lesser role in theeconomy, constrained by the limited availability of cultivable landand the shortage of domestic labor. Most staple foods must beimported. The Maldivian Government implemented economic reforms,beginning in 1989 that initially lifted import quotas, opened someexports to the private sector, and liberalized regulations to allowmore foreign investment. Real GDP growth averaged over 7.5% per yearfor more than a decade, and registered 18% in 2006, due to a reboundin tourism and reconstruction following the tsunami of December2004. GDP slowed in 2007-08, then contracted in 2009 due to theglobal recession. Falling tourist arrivals and fish exports,combined with high government spending on social needs, subsidies,and civil servant salaries contributed to a balance of paymentscrisis, which was eased with a December 2009, $79.3 million dollarIMF standby agreement. Diversifying the economy beyond tourism andfishing, reforming public finance, and increasing employmentopportunities are 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.
MaliAmong the 25 poorest countries in the world, Mali is alandlocked country highly dependent on gold mining and agriculturalexports for revenue. The country's fiscal status fluctuates withgold and agricultural commodity prices and the harvest. Mali remainsdependent on foreign aid. Economic activity is largely confined tothe riverine area irrigated by the Niger River and about 65% of itsland area is desert or semidesert. 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. The government has continued an IMF-recommendedstructural adjustment program that has helped the economy grow,diversify, and attract foreign investment. Mali is developing itscotton and iron ore extraction industries to diversify its revenuesources because gold production has started to fall. Mali hasinvested in tourism but security issues are hurting the industry.Mali's adherence to economic reform and the 50% devaluation of theCFA franc in January 1994 have pushed up economic growth to a 5%average in 1996-2010. Worker remittances and external trade routesfor the landlocked country have been jeopardized by continued unrestin neighboring Cote d'Ivoire, however, Mali is building a roadnetwork that will connect it to all adjacent countries and it has arailway line to Senegal. In 2010, Mali experienced a regionaldrought that hurt livestock and livelihoods.
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 target forillegal immigration, which has strained Malta's political andeconomic resources. Malta adopted the euro on 1 January 2008.Malta's financial services industry has grown in recent years and in2008-09 it escaped significant damage from the internationalfinancial crisis, largely because the sector is centered on theindigenous real estate market and is not highly leveraged. Locally,the restricted damage from the financial crisis has been attributedto the stability of the Maltese banking system and to its prudentrisk-management practices. The global economic downturn and highelectricity and water prices hurt Malta's real economy, which isdependent on foreign trade, manufacturing - especially electronicsand pharmaceuticals - and tourism, but growth bounced back as theglobal economy recovered in 2010. Following a 1.2% contraction in2009, GDP grew 2% in 2010.
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. A new investment code approved in December 2001 improvedthe opportunities for direct foreign investment. Mauritania and theIMF agreed to a three-year Poverty Reduction and Growth Facility(PRGF) arrangement in 2006. Mauritania made satisfactory progress,but the IMF, World Bank, and other international actors suspendedassistance and investment in Mauritania after the August 2008 coup.Since the presidential election in July 2009, donors have resumedassistance. Oil prospects, while initially promising, have largelyfailed to materialize, and the government has placed a priority onattracting private investment to spur economic growth. TheGovernment also emphasizes reduction of poverty, improvement ofhealth and education, and privatization 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). Mauritius' sound economic policies andprudent banking practices helped to mitigate negative effects fromthe global financial crisis in 2008-09. GDP grew 3.6% in 2010 andthe country continues to expand its trade and investment outreacharound the globe.
MayotteEconomic activity is based primarily on the agriculturalsector, including fishing and livestock raising. Mayotte is not selfsufficient and must import a large portion of its food requirements,mainly from France. The economy and future development of the islandare heavily dependent on French financial assistance, an importantsupplement to GDP. Mayotte's remote location is an obstacle to thedevelopment 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. Sincethe implementation of the North American Free Trade Agreement(NAFTA) in 1994, Mexico's share of US imports has increased from 7%to 12%, and its share of Canadian imports has doubled to 5%. Mexicohas free trade agreements with over 50 countries including,Guatemala, Honduras, El Salvador, the European Free Trade Area, andJapan, putting more than 90% of trade under free trade agreements.In 2007, during its first year in office, the Felipe CALDERONadministration was able to garner support from the opposition tosuccessfully pass pension and fiscal reforms. The administrationpassed an energy reform measure in 2008, and another fiscal reformin 2009. Mexico's GDP plunged 6.5% in 2009 as world demand forexports dropped and asset prices tumbled, but GDP posted positivegrowth of 5% in 2010, with export growth leading the way. Theadministration continues to face many economic challenges, includingimproving the public education system, upgrading infrastructure,modernizing labor laws, and fostering private investment in theenergy sector. CALDERON has stated that his top economic prioritiesremain reducing poverty and creating jobs.
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. In January 2009, gas supplies were cut duringa dispute between Russia and Ukraine. Russia's decision to banMoldovan wine and agricultural products, coupled with its decisionto double the price Moldova paid for Russian natural gas, have hurtgrowth. The onset of the global financial crisis and poor economicconditions in Moldova's main foreign markets, caused GDP to fall6.5% in 2009. Unemployment almost doubled and inflation disappeared- at -0.1%, a record low. Moldova's IMF agreement expired in May2009. In fall 2009, the IMF allocated $186 million to Moldova tocover its immediate budgetary needs, and the government signed annew agreement with the IMF in January 2010 for a program worth $574million. In 2010, an upturn in the world economy boosted GDP growthto 3.1% and inflation to 7.3%. Economic reforms have been slowbecause of corruption and strong political forces backing governmentcontrols. Nevertheless, the government's primary goal of EUintegration has resulted in some market-oriented progress. Thegranting of EU trade preferences and increased exports to Russiawill encourage higher growth rates, but the agreements are unlikelyto serve as a panacea, given the extent to which export successdepends on higher quality standards and other factors. The economyhas made a modest recovery, but remains vulnerable to politicaluncertainty, weak administrative capacity, vested bureaucraticinterests, higher fuel prices, poor agricultural weather, and theskepticism of foreign investors as well as the presence of anillegal separatist regime in Moldova's Transnistria region.
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. Monaco, however, is not atax-free shelter; it charges nearly 20% value-added tax, collectsstamp duties, and companies face a 33% tax on profits unless theycan show that three-quarters of profits are generated within theprincipality. Monaco was formally removed from the OECD's "greylist" of uncooperative tax jurisdictions in late 2009, but continuesto face international pressure to abandon its banking secrecy lawsand help combat tax evasion. The state retains monopolies in anumber of sectors, including tobacco, the telephone network, and thepostal service. Living standards are high, roughly comparable tothose in prosperous French metropolitan areas.
MongoliaEconomic activity in Mongolia has traditionally been basedon herding and agriculture - Mongolia's extensive mineral deposits,however, have attracted foreign investors. The country holds copper,gold, coal, molybdenum, fluorspar, uranium, tin, and tungstendeposits, which account for a large part of foreign directinvestment and government revenues. 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. In 2008Mongolia experienced a soaring inflation rate with year-to-yearinflation reaching nearly 30% - the highest inflation rate in over adecade. By late 2008, as the country began to feel the effects ofthe global financial crisis, falling commodity prices helped lowerinflation, but also reduced government revenues and forced cuts inspending. In early 2009, the International Monetary Fund reached a$236 million Stand-by Arrangement with Mongolia, and the country hasstarted to move out of the crisis. Although the banking sectorremains unstable, the government is now enforcing strictersupervision regulations. In October 2009, the government passedlong-awaited legislation on an investment agreement to developMongolia's Oyu Tolgoi mine, considered to be one of the world'slargest untapped copper deposits. The economy grew an estimated 7%in 2010, largely on the strength of exports to nearby countries, andinternational reserves reached $1.6 billion in September, an alltime high for Mongolia. Mongolia's economy continues to be heavilyinfluenced by its neighbors. Mongolia purchases 95% of its petroleumproducts and a substantial amount of electric power from Russia,leaving it vulnerable to price increases. Trade with Chinarepresents more than half of Mongolia's total external trade - Chinareceives about two-thirds of Mongolia's exports. Remittances fromMongolians working abroad are sizable, but have fallen due to theeconomic crisis; money laundering is a growing concern. Mongoliajoined the World Trade Organization in 1997 and seeks to expand itsparticipation in 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. In 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. The European Council granted candidatecountry status to Montenegro at the December 2010 session.Unemployment and regional disparities in development are keypolitical and economic problems. Montenegro has privatized its largealuminum complex - the dominant industry - as well as most of itsfinancial sector, and has begun to attract foreign direct investmentin the tourism sector. The global financial crisis has had asignificant negative impact on the economy, due to the ongoingcredit crunch, a decline in the real estate sector, and a fall inaluminum exports.
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.