Field Listing :: Economy - overview
This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.
Country
 Economy - overview
Afghanistan Afghanistan's economy is recovering from decades of conflict. The economy has improved significantly since the fall of the Taliban regime in 2001 largely because of the infusion of international assistance, the recovery of the agricultural sector, and service sector growth. Despite the progress of the past few years, Afghanistan is extremely poor, landlocked, and highly dependent on foreign aid. Much of the population continues to suffer from shortages of housing, clean water, electricity, medical care, and jobs. Criminality, insecurity, weak governance, lack of infrastructure, and the Afghan Government's difficulty in extending rule of law to all parts of the country pose challenges to future economic growth. Afghanistan's living standards are among the lowest in the world. The international community remains committed to Afghanistan's development, pledging over $67 billion at nine donors' conferences between 2003-10. In July 2012, the donors at the Tokyo conference pledged an additional $16 billion in civilian aid through 2015. Despite this help, the Government of Afghanistan will need to overcome a number of challenges, including low revenue collection, anemic job creation, high levels of corruption, weak government capacity, and poor public infrastructure.
Akrotiri Economic activity is limited to providing services to the military and their families located in Akrotiri. All food and manufactured goods must be imported.
Albania Albania, a formerly closed, centrally-planned state, is making the difficult transition to a more modern open-market economy. Macroeconomic growth averaged around 6% between 2004-08, but declined to about 3% in 2009-11, and 0.5% in 2012. Inflation is low and stable. The government has taken measures to curb violent crime, and recently adopted a fiscal reform package aimed at reducing the large gray economy and attracting foreign investment. Remittances, a significant catalyst for economic growth declined from 12-15% of GDP before the 2008 financial crisis to 8% of GDP in 2010, mostly from Albanians residing in Greece and Italy. The agricultural sector, which accounts for almost half of employment but only about one-fifth of GDP, is limited primarily to small family operations and subsistence farming because of lack of modern equipment, unclear property rights, and the prevalence of small, inefficient plots of land. Energy shortages because of a reliance on hydropower - 98% of the electrical power produced in Albania - and antiquated and inadequate infrastructure contribute to Albania's poor business environment and lack of success in attracting new foreign investment needed to expand the country's export base. FDI is among the lowest in the region, but the government has embarked on an ambitious program to improve the business climate through fiscal and legislative reforms. The completion of a new thermal power plant near Vlore has helped diversify generation capacity, and plans to upgrade transmission lines between Albania and Montenegro and Kosovo would help relieve the energy shortages. Also, with help from EU funds, the government is taking steps to improve the poor national road and rail network, a long-standing barrier to sustained economic growth. The country will continue to face challenges from increasing public debt, having slightly exceeded its former statutory limit of 60% of GDP in 2012. Strong trade, remittance, and banking sector ties with Greece and Italy make Albania vulnerable to spillover effects of the global financial crisis.
Algeria Algeria's economy remains dominated by the state, a legacy of the country's socialist post-independence development model. In recent years the Algerian Government has halted the privatization of state-owned industries and imposed restrictions on imports and foreign involvement in its economy. Hydrocarbons have long been the backbone of the economy, accounting for roughly 60% of budget revenues, 30% of GDP, and over 95% of export earnings. Algeria has the 10th-largest reserves of natural gas in the world and is the sixth-largest gas exporter. It ranks 16th in oil reserves. Strong revenues from hydrocarbon exports have brought Algeria relative macroeconomic stability, with foreign currency reserves approaching $200 billion and a large budget stabilization fund available for tapping. In addition, Algeria's external debt is extremely low at about 2% of GDP. However, Algeria has struggled to develop non-hydrocarbon industries because of heavy regulation and an emphasis on state-driven growth. The government's efforts have done little to reduce high youth unemployment rates or to address housing shortages. A wave of economic protests in February and March 2011 prompted the Algerian Government to offer more than $23 billion in public grants and retroactive salary and benefit increases, moves which continue to weigh on public finances. Long-term economic challenges include diversifying the economy away from its reliance on hydrocarbon exports, bolstering the private sector, attracting foreign investment, and providing adequate jobs for younger Algerians.
American Samoa American Samoa has a traditional Polynesian economy in which more than 90% of the land is communally owned. Economic activity is strongly linked to the US with which American Samoa conducts most of its commerce. Tuna fishing and tuna processing plants are the backbone of the private sector with canned tuna the primary export. The two tuna canneries account for 80% of employment. In late September 2009, an earthquake and the resulting tsunami devastated American Samoa and nearby Samoa, disrupting transportation and power generation, and resulting in about 200 deaths. The US Federal Emergency Management Agency is overseeing a relief program of nearly $25 million. Transfers from the US Government add substantially to American Samoa's economic well being. Attempts by the government to develop a larger and broader economy are restrained by Samoa's remote location, its limited transportation, and its devastating hurricanes. Tourism is a promising developing sector.
Andorra Tourism, retail sales, and finance are the mainstays of Andorra's tiny, well-to-do economy, accounting for more than three-quarters of GDP. Andorra's duty-free status for some products and its summer and winter resorts attract millions of visitors annually, although the economic downturn in neighboring countries has curtailed tourism activity. The banking sector also contributes substantially to the economy. Andorra's comparative advantage as a tax haven eroded when the borders of neighboring France and Spain opened; its bank secrecy laws have been relaxed under pressure from the EU and OECD. Agricultural production is limited - only 2% of the land is arable - and most food has to be imported, making the economy vulnerable to changes in fuel and food prices. The principal livestock activity is sheep raising. Manufacturing output and exports consist mainly of perfumes and cosmetic products, products of the printing industry, electrical machinery and equipment, clothing, tobacco products, and furniture. Andorra is a member of the EU Customs Union and is treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products. Andorra uses the euro and is effectively subject to the monetary policy of the European Central Bank. Slower growth in Spain and France has dimmed Andorra's economic prospects. Since 2010, a drop in tourism contributed to a contraction in GDP and a sharp deterioration of public finances, prompting the government to begin implementing several austerity measures to reduce the budget deficit, including levying a special corporate tax. To bring in new revenue and diversify future sources of economic growth, the government approved in July 2012 a new foreign investment law opening investment to foreign capital.
Angola Angola's high growth rate in recent years was driven by high international prices for its oil. Angola became a member of OPEC in late 2006 and its current assigned a production quota of 1.65 million barrels a day (bbl/day). Oil production and its supporting activities contribute about 85% of GDP. Diamond exports contribute an additional 5%. Subsistence agriculture provides the main livelihood for most of the people, but half of the country's food is still imported. Increased oil production supported growth averaging more than 17% per year from 2004 to 2008. A postwar reconstruction boom and resettlement of displaced persons has led to high rates of growth in construction and agriculture as well. Much of the country's infrastructure is still damaged or undeveloped from the 27-year-long civil war. Land mines left from the war still mar the countryside, even though peace was established after the death of rebel leader Jonas SAVIMBI in February 2002. Since 2005, the government has used billions of dollars in credit lines from China, Brazil, Portugal, Germany, Spain, and the EU to rebuild Angola's public infrastructure. The global recession that started in 2008 temporarily stalled economic growth. Lower prices for oil and diamonds during the global recession slowed GDP growth to 2.4% in 2009, and many construction projects stopped because Luanda accrued $9 billion in arrears to foreign construction companies when government revenue fell in 2008 and 2009. Angola abandoned its currency peg in 2009, and in November 2009 signed onto an IMF Stand-By Arrangement loan of $1.4 billion to rebuild international reserves. Consumer inflation declined from 325% in 2000 to about 10% in 2012. Higher oil prices have helped Angola turn a budget deficit of 8.6% of GDP in 2009 into an surplus of 12% of GDP in 2012. Corruption, especially in the extractive sectors, also is a major challenge.
Anguilla Anguilla has few natural resources, and the economy depends heavily on luxury tourism, offshore banking, lobster fishing, and remittances from emigrants. Increased activity in the tourism industry has spurred the growth of the construction sector contributing to economic growth. Anguillan officials have put substantial effort into developing the offshore financial sector, which is small but growing. In the medium term, prospects for the economy will depend largely on the tourism sector and, therefore, on revived income growth in the industrialized nations as well as on favorable weather conditions.
Antarctica Scientific undertakings rather than commercial pursuits are the predominate human activity in Antarctica. Fishing off the coast and tourism, both based abroad, account for Antarctica's limited economic activity. Antarctic fisheries, targeting three main species - Patagonian and Antarctic toothfish (Dissostichus eleginoides and D. mawsoni), mackerel icefish (Champsocephalus gunnari), and krill (Euphausia superba) - reported landing 141,147 metric tons in 2008-09 (1 July - 30 June). (Estimated fishing is from the area covered by the Convention on the Conservation of Antarctic Marine Living Resources (CCAMLR), which extends slightly beyond the Antarctic Treaty area.) Unregulated fishing, particularly of Patagonian toothfish (also known as Chilean sea bass), is a serious problem. The CCAMLR determines the recommended catch limits for marine species. A total of 37,858 tourists visited the Antarctic Treaty area in the 2008-09 Antarctic summer, down from the 46,265 visitors in 2007-08 (estimates provided to the Antarctic Treaty by the International Association of Antarctica Tour Operators (IAATO); this does not include passengers on overflights). Nearly all of them were passengers on commercial (nongovernmental) ships and several yachts that make trips during the summer.
Antigua and Barbuda Tourism continues to dominate Antigua and Barbuda's economy, accounting for nearly 60% of GDP and 40% of investment. The dual-island nation's agricultural production is focused on the domestic market and constrained by a limited water supply and a labor shortage stemming from the lure of higher wages in tourism and construction. Manufacturing comprises enclave-type assembly for export with major products being bedding, handicrafts, and electronic components. Prospects for economic growth in the medium term will continue to depend on tourist arrivals from the US, Canada, and Europe and potential damages from natural disasters. After taking office in 2004, the SPENCER government adopted an ambitious fiscal reform program and was successful in reducing its public debt-to-GDP ratio from approximately 130% in 2010 to 89% in 2012. In 2009, Antigua's economy was severely hit by the global economic crisis and suffered from the collapse of its largest private sector employer, a steep decline in tourism, a rise in debt, and a sharp economic contraction between 2009-11. Antigua has not yet returned to its pre-crisis growth levels.
Arctic Ocean Economic activity is limited to the exploitation of natural resources, including petroleum, natural gas, fish, and seals.
Argentina Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Although one of the world's wealthiest countries 100 years ago, Argentina suffered during most of the 20th century from recurring economic crises, persistent fiscal and current account deficits, high inflation, mounting external debt, and capital flight. A severe depression, growing public and external indebtedness, and an unprecedented bank run culminated in 2001 in the most serious economic, social, and political crisis in the country's turbulent history. Interim President Adolfo RODRIGUEZ SAA declared a default - at the time the largest ever - on the government's foreign debt in December of that year, and abruptly resigned only a few days after taking office. His successor, Eduardo DUHALDE, announced an end to the peso's decade-long 1-to-1 peg to the US dollar in early 2002. The economy bottomed out that year, with real GDP 18% smaller than in 1998 and almost 60% of Argentines under the poverty line. Real GDP rebounded to grow by an average 8.5% annually over the subsequent six years, taking advantage of previously idled industrial capacity and labor, an audacious debt restructuring and reduced debt burden, excellent international financial conditions, and expansionary monetary and fiscal policies. Inflation also increased, however, during the administration of President Nestor KIRCHNER, which responded with price restraints on businesses, as well as export taxes and restraints, and beginning in 2007, with understating inflation data. Cristina FERNANDEZ DE KIRCHNER succeeded her husband as President in late 2007, and the rapid economic growth of previous years began to slow sharply the following year as government policies held back exports and the world economy fell into recession. The economy in 2010 rebounded strongly from the 2009 recession, but has slowed since late 2011 even as the government continued to rely on expansionary fiscal and monetary policies, which have kept inflation in the double digits. The government expanded state intervention in the economy throughout 2012. In May the Congress approved the nationalization of the oil company YPF from Spain's Repsol. The government expanded formal and informal measures to restrict imports during the year, including a requirement for pre-registration and pre-approval of all imports. In July the government also further tightened currency controls in an effort to bolster foreign reserves and stem capital flight.
Armenia After several years of double-digit economic growth, Armenia faced a severe economic recession with GDP declining more than 14% in 2009, despite large loans from multilateral institutions. Sharp declines in the construction sector and workers' remittances, particularly from Russia, led the downturn. The economy began to recover in 2010 with 2.1% growth, and picked up to 4.6% growth in 2011, before slowing to 3.8% in 2012. Under the old Soviet central planning system, Armenia developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics, in exchange for raw materials and energy. Armenia has since switched to small-scale agriculture and away from the large agroindustrial complexes of the Soviet era. Since August 2011, Armenia experienced a sharp 15 percent currency depreciation and an increase in the unemployment rate. Armenia's geographic isolation, a narrow export base, and pervasive monopolies in important business sectors have made it particularly vulnerable to the sharp deterioration in the global economy and the economic downturn in Russia. Armenia has only two open trade borders - Iran and Georgia - because its borders with Azerbaijan and Turkey have been closed since 1991 and 1993, respectively, as a result of Armenia's ongoing conflict with Azerbaijan over the separatist Nagorno-Karabakh region. Armenia is particularly dependent on Russian commercial and governmental support and most key Armenian infrastructure is Russian-owned and/or managed, especially in the energy sector. The electricity distribution system was privatized in 2002 and bought by Russia's RAO-UES in 2005. Natural gas is primarily imported from Russia but construction of a pipeline to deliver natural gas from Iran to Armenia was completed in December 2008, and gas deliveries expanded after the April 2010 completion of the Yerevan Thermal Power Plant. Armenia's severe trade imbalance has been offset somewhat by international aid, remittances from Armenians working abroad, and foreign direct investment. Armenia joined the WTO in January 2003. The government made some improvements in tax and customs administration in recent years, but anti-corruption measures have been ineffective and the economic downturn has led to a sharp drop in tax revenue and forced the government to accept large loan packages from Russia, the IMF, and other international financial institutions. Amendments to tax legislation, including the introduction of the first ever "luxury tax" in 2011, aim to increase the ratio of budget revenues to GDP, which still remains at low levels. Armenia will need to pursue additional economic reforms and to strengthen the rule of law in order to regain economic growth and improve economic competitiveness and employment opportunities, especially given its economic isolation from two of its nearest neighbors, Turkey and Azerbaijan.
Aruba Tourism and offshore banking are the mainstays of the small open Aruban economy. Oil refining and storage ended in 2009. The rapid growth of the tourism sector over the last decade has resulted in a substantial expansion of other activities. Over 1.5 million tourists per year visit Aruba with 75% of those from the US. Construction continues to boom with hotel capacity five times the 1985 level. Tourist arrivals rebounded strongly following a dip after the 11 September 2001 attacks. Aruba is heavily dependent on imports and is making efforts to expand exports to achieve a more desirable trade balance. The government has also made cutting the budget and international development high priorities.
Ashmore and Cartier Islands no economic activity
Atlantic Ocean The Atlantic Ocean provides some of the world's most heavily trafficked sea routes, between and within the Eastern and Western Hemispheres. Other economic activity includes the exploitation of natural resources, e.g., fishing, dredging of aragonite sands (The Bahamas), and production of crude oil and natural gas (Caribbean Sea, Gulf of Mexico, and North Sea).
Australia The Australian economy has experienced continuous growth and features low unemployment, contained inflation, very low public debt, and a strong and stable financial system. By 2012, Australia had experienced more than 20 years of continued economic growth, averaging 3.5% a year. Demand for resources and energy from Asia and especially China has grown rapidly, creating a channel for resources investments and growth in commodity exports. The high Australian dollar has hurt the manufacturing sector, while the services sector is the largest part of the Australian economy, accounting for about 70% of GDP and 75% of jobs. Australia was comparatively unaffected by the global financial crisis as the banking system has remained strong and inflation is under control. Australia has benefited from a dramatic surge in its terms of trade in recent years, stemming from rising global commodity prices. Australia is a significant exporter of natural resources, energy, and food. Australia's abundant and diverse natural resources attract high levels of foreign investment and include extensive reserves of coal, iron, copper, gold, natural gas, uranium, and renewable energy sources. A series of major investments, such as the US$40 billion Gorgon Liquid Natural Gas project, will significantly expand the resources sector. Australia is an open market with minimal restrictions on imports of goods and services. The process of opening up has increased productivity, stimulated growth, and made the economy more flexible and dynamic. Australia plays an active role in the World Trade Organization, APEC, the G20, and other trade forums. Australia has bilateral free trade agreements (FTAs) with Chile, Malaysia, New Zealand, Singapore, Thailand, and the US, has a regional FTA with ASEAN and New Zealand, is negotiating agreements with China, India, Indonesia, Japan, and the Republic of Korea, as well as with its Pacific neighbors and the Gulf Cooperation Council countries, and is also working on the Trans-Pacific Partnership Agreement with Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam.
Austria Austria, with its well-developed market economy, skilled labor force, and high standard of living, is closely tied to other EU economies, especially Germany's. Its economy features a large service sector, a sound industrial sector, and a small, but highly developed agricultural sector. Following several years of solid foreign demand for Austrian exports and record employment growth, the international financial crisis of 2008 and subsequent global economic downturn led to a sharp but brief recession. Austrian GDP contracted 3.8% in 2009 but saw positive growth of about 2% in 2010 and 2.7% in 2011. Growth fell to 0.6% in 2012. Unemployment did not rise as steeply in Austria as elsewhere in Europe, partly because the government subsidized reduced working hour schemes to allow companies to retain employees. The 2012 unemployment rate of 4.3% was the lowest within the EU. Stabilization measures, stimulus spending, and an income tax reform pushed the budget deficit to 4.5% in 2010 and 2.6% in 2011, from only about 0.9% in 2008. The international financial crisis of 2008 caused difficulties for Austria's largest banks whose extensive operations in central, eastern, and southeastern Europe faced large losses. The government provided bank support - including in some instances, nationalization - to support aggregate demand and stabilize the banking system. Austria's fiscal position compares favorably with other euro-zone countries, but it faces external risks, such as Austrian banks' continued exposure to Central and Eastern Europe as well as political and economic uncertainties caused by the European sovereign debt crisis. In 2011 the government attempted to pass a constitutional amendment limiting public debt to 60% of GDP by 2020, but it was unable to obtain sufficient support in parliament and instead passed the measure as a simple law. In March 2012, the Austrian parliament approved an austerity package consisting of a mix of expenditure cuts and new revenues that will bring public finances into balance by 2016. In 2012, the budget deficit rose to 3.1% of GDP.
Azerbaijan Azerbaijan's high economic growth during 2006-10 was attributable to large and growing oil and gas exports, but some non-export sectors also featured double-digit growth, including construction, banking, and real estate. In 2012, economic growth picked up to 3.8%. Continued production declines in the oil sector were offset by strong growth in the non-oil sector. However, the non-oil sector growth may be driven primarily by government investment, which may not be sustainable if oil production continues to decline. Oil exports through the Baku-Tbilisi-Ceyhan Pipeline, the Baku-Novorossiysk, and the Baku-Supsa pipelines remain the main economic driver, but efforts to boost Azerbaijan's gas production are underway. The eventual completion of the geopolitically important Southern Gas Corridor between Azerbaijan and Europe will open up another, albeit, smaller source of revenue from gas exports. Azerbaijan has made only limited progress on instituting market-based economic reforms. Pervasive public and private sector corruption and structural economic inefficiencies remain a drag on long-term growth, particularly in non-energy sectors. Several other obstacles impede Azerbaijan's economic progress, including the need for stepped up foreign investment in the non-energy sector and the continuing conflict with Armenia over the Nagorno-Karabakh region. Trade with Russia and the other former Soviet republics is declining in importance, while trade is building with Turkey and the nations of Europe. Long-term prospects depend on world oil prices, Azerbaijan's ability to negotiate export routes for its growing gas production, and its ability to use its energy wealth to promote growth and spur employment in non-energy sectors of the economy.
Bahamas, The The Bahamas is one of the wealthiest Caribbean countries with an economy heavily dependent on tourism and offshore banking. Tourism together with tourism-driven construction and manufacturing accounts for approximately 60% of GDP and directly or indirectly employs half of the archipelago's labor force. Financial services constitute the second-most important sector of the Bahamian economy and, when combined with business services, account for about 36% of GDP. Manufacturing and agriculture combined contribute less than a 10th of GDP and show little growth, despite government incentives aimed at those sectors. The economy of The Bahamas shrank at an average pace of 0.8% annually between 2007-11, and tourism, financial services, and construction - pillars of the national economy - remained weak. These challenges, coupled with a growing public debt, increases in government expenditures, a narrow revenue base, and heavy dependence on customs and property taxes have led to prospects of limited growth for The Bahamas.
Bahrain Bahrain has taken great strides in diversifying its economy and its highly developed communication and transport facilities make Bahrain home to numerous multinational firms with business in the Gulf. As part of its diversification plans, Bahrain implemented a Free Trade Agreement (FTA) with the US in August 2006, the first FTA between the US and a Gulf state. Bahrain's economy, however, continues to depend heavily on oil. Petroleum production and refining account for more than 60% of Bahrain's export receipts, 70% of government revenues, and 11% of GDP. Other major economic activities are production of aluminum - Bahrain's second biggest export after oil - finance, and construction. Bahrain competes with Malaysia as a worldwide center for Islamic banking and continues to seek new natural gas supplies as feedstock to support its expanding petrochemical and aluminum industries. In 2011 and 2012, Bahrain experienced economic setbacks as a result of domestic unrest, however, several factors indicate that the economy is beginning to recover, such as the return of the formula one race and tourist cruise ships to Bahrain. Economic policies aimed at restoring confidence in Bahrain's economy, such as the suspension of an expatriate labor tax and frequent bailouts of Gulf Air, will make Bahrain's foremost long-term economic challenges - youth unemployment and the growth of government debt - more difficult to address.
Bangladesh In real terms Bangladesh's economy has grown 5.8% per year since 1996 despite political instability, poor infrastructure, corruption, insufficient power supplies, and slow implementation of economic reforms. Bangladesh remains a poor, overpopulated, and inefficiently-governed nation. Although more than half of GDP is generated through the service sector, 45% of Bangladeshis are employed in the agriculture sector with rice as the single-most-important product. Bangladesh's growth was resilient during the 2008-09 global financial crisis and recession. Garment exports, totaling $12.3 billion in FY09 and remittances from overseas Bangladeshis, totaling $11 billion in FY10, accounted for almost 12% of GDP.
Barbados Barbados is the wealthiest and most developed country in the Eastern Caribbean and enjoys one of the highest per capita incomes in Latin America. Historically, the Barbadian economy was dependent on sugarcane cultivation and related activities. However, in recent years the economy has diversified into light industry and tourism with about four-fifths of GDP and of exports being attributed to services. Offshore finance and information services are important foreign exchange earners and thrive from having the same time zone as eastern US financial centers and a relatively highly educated workforce. Barbados' tourism, financial services, and construction industries have been hard hit since the onset of the global economic crisis in 2008, which caused the economy to contract 4% in 2009 and grow below 1% annually since 2010. Barbados' public debt-to-GDP ratio rose from 56% in 2008 to 83% in 2012.
Belarus As part of the former Soviet Union, Belarus had a relatively well-developed industrial base; it retained this industrial base - which is now outdated, energy inefficient, and dependent on subsidized Russian energy and preferential access to Russian markets - following the breakup of the USSR. The country also has a broad agricultural base which is inefficient and dependent on government subsidies. After an initial burst of capitalist reform from 1991-94, including privatization of state enterprises, creation of institutions of private property, and development of entrepreneurship, Belarus' economic development greatly slowed. About 80% of all industry remains in state hands, and foreign investment has been hindered by a climate hostile to business. A few banks, which had been privatized after independence, were renationalized. State banks account for 75% of the banking sector. Economic output, which had declined for several years following the collapse of the Soviet Union, revived in the mid-2000s thanks to the boom in oil prices. Belarus has only small reserves of crude oil, though it imports most of its crude oil and natural gas from Russia at prices substantially below the world market. Belarus exported refined oil products at market prices produced from Russian crude oil purchased at a steep discount. In late 2006, Russia began a process of rolling back its subsidies on oil and gas to Belarus. Tensions over Russian energy reached a peak in 2010, when Russia stopped the export of all subsidized oil to Belarus save for domestic needs. In December 2010, Russia and Belarus reached a deal to restart the export of discounted oil to Belarus. Little new foreign investment has occurred in recent years. In 2011, a financial crisis began, triggered by government directed salary hikes unsupported by commensurate productivity increases. The crisis was compounded by an increased cost in Russian energy inputs and an overvalued Belarusian ruble, and eventually led to a near three-fold devaluation of the Belarusian ruble in 2011. In November 2011, Belarus agreed to sell to Russia its remaining shares in Beltransgaz, the Belarusian natural gas pipeline operator, in exchange for reduced prices for Russian natural gas. Receiving more than half of a $3 billion loan from the Russian-dominated Eurasian Economic Community Bail-out Fund, a $1 billion loan from the Russian state-owned bank Sberbank, and the $2.5 billion sale of Beltranzgas to Russian state-owned Gazprom helped stabilize the situation in 2012; nevertheless, the Belarusian currency lost more than 60% of its value, as the rate of inflation reached 53% in 2011 and 59% in 2012.
Belgium This modern, open, and private-enterprise-based economy has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base. Industry is concentrated mainly in the more heavily-populated region of Flanders in the north. With few natural resources, Belgium imports substantial quantities of raw materials and exports a large volume of manufactures, making its economy vulnerable to volatility in world markets. Roughly three-quarters of Belgium's trade is with other EU countries, and Belgium has benefited most from its proximity to Germany. In 2011 Belgian GDP grew by 1.8%, the unemployment rate decreased slightly to 7.2% from 8.3% the previous year, and the government reduced the budget deficit from a peak of 6% of GDP in 2009 to 4.2% in 2011 and 3.3% in 2012. Fourth quarter GDP growth in 2012 was at -0.1%, the third consecutive quarter of negative growth. This brought economic growth for the whole of 2012 to negative 0.2%. It also left Belgium on the brink of a possible recession at the end of 2012. However, at year's end, the government appeared close to meeting its 2012 budget deficit goal of 3% of GDP. Despite the relative improvement in Belgium's budget deficit, public debt hovers around 100% of GDP, a factor that has contributed to investor perceptions that the country is increasingly vulnerable to spillover from the euro-zone crisis. Belgian banks were severely affected by the international financial crisis in 2008 with three major banks receiving capital injections from the government, and the nationalization of the Belgian retail arm of a Franco-Belgian bank.
Belize Tourism is the number one foreign exchange earner in this small economy, followed by exports of marine products, citrus, cane sugar, bananas, and garments. The government's expansionary monetary and fiscal policies, initiated in September 1998, led to GDP growth averaging nearly 4% in 1999-2007. Oil discoveries in 2006 bolstered this growth. Exploration efforts have continued and production has increased a small amount. Growth slipped to 0% in 2009, and has remained at just over 2% per year during 2010-2012, as a result of the global slowdown, natural disasters, and a temporary drop in the price of oil. With weak economic growth and a large public debt burden, fiscal spending is likely to be tight. In September 2012, the government paid half of a $23 million interest payment that had been due in August 2012. In January 2013, the government announced that it had reached a deal with creditors to restructure its $544 million commercial external debt, commonly referred to as the "superbond." The superbond represents one half of the country's public debt. A key government objective remains the reduction of poverty and inequality with the help of international donors. Although Belize has the second highest per capita income in Central America, the average income figure masks a huge income disparity between rich and poor. The 2010 Poverty Assessment shows that more than 4 out of 10 people live in poverty. The sizable trade deficit and heavy foreign debt burden continue to be major concerns.
Benin The economy of Benin remains underdeveloped and dependent on subsistence agriculture, cotton production, and regional trade. Growth in real output had averaged almost 4% before the global recession and it has returned to roughly that level in 2011-12. Inflation has subsided over the past several years. In order to raise growth, Benin plans to attract more foreign investment, place more emphasis on tourism, facilitate the development of new food processing systems and agricultural products, and encourage new information and communication technology. Specific projects to improve the business climate by reforms to the land tenure system, the commercial justice system, and the financial sector were included in Benin's $307 million Millennium Challenge Account grant signed in February 2006. The 2001 privatization policy continues in telecommunications, water, electricity, and agriculture. The Paris Club and bilateral creditors have eased the external debt situation with Benin benefiting from a G-8 debt reduction announced in July 2005, while pressing for more rapid structural reforms. An insufficient electrical supply continues to adversely affect Benin's economic growth though the government recently has taken steps to increase domestic power production. Private foreign direct investment is small, and foreign aid accounts for the majority of investment in infrastructure projects. Cotton, a key export, suffered from flooding in 2010-11, but high prices supported export earnings. The government agreed to a 25% increase in civil servant salaries in 2011, following a series of strikes, increasing pressure on the national budget. Benin has appealed for international assistance to mitigate piracy against commercial shipping in its territory.
Bermuda Despite four years of recession and a public debt of $1.4 billion, Bermuda enjoys the fourth highest per capita income in the world, about 70% higher than that of the US. The average cost of a single-family home in 2012 was $1.1 million. Its economy is primarily based on international business and the provision of financial services to that sector, and to a lesser extent tourism. A number of reinsurance companies relocated to the island following the 11 September 2001 attacks on the US and again after Hurricanes Katrina, Rita, and Wilma in 2005, contributing to the expansion of an already robust international business sector. Bermuda's tourism industry - which derives over 80% of its visitors from the US - continues to struggle and has dropped in its relevant importance to the economy, although it is still important as a job creator. Bermuda must import almost everything. Agriculture is limited due to the small size of the island and Bermuda's industrial sector is small.
Bhutan Bhutan's economy, small and less developed, is based on agriculture and forestry, which provide the main livelihood for more than 40% of the population. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links and is dependent on India's financial assistance. The industrial sector is technologically backward with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Model education, social, and environment programs are underway with support from multilateral development organizations. Each economic program takes into account the government''s desire to protect the country's environment and cultural traditions. For example, the government, in its cautious expansion of the tourist sector, encourages visits by upscale, environmentally conscientious tourists. Complicated controls and uncertain policies in areas such as industrial licensing, trade, labor, and finance continue to hamper foreign investment. The import of equipment and fuel to build hydropower plants is leading to large trade and current account deficits, though new hydropower projects and electricity exports to India are creating employment and will probably sustain growth in the coming years. GDP has rebounded strongly since the global recession began in 2008.
Bolivia Bolivia is one of the poorest and least developed countries in Latin America. Following a disastrous economic crisis during the early 1980s, reforms spurred private investment, stimulated economic growth, and cut poverty rates in the 1990s. The period 2003-05 was characterized by political instability, racial tensions, and violent protests against plans - subsequently abandoned - to export Bolivia's newly discovered natural gas reserves to large Northern Hemisphere markets. In 2005, the government passed a controversial hydrocarbons law that imposed significantly higher royalties and required foreign firms then operating under risk-sharing contracts to surrender all production to the state energy company in exchange for a predetermined service fee. The global recession slowed growth, but Bolivia recorded the highest growth rate in South America during 2009. During 2010-12 high world commodity prices sustained rapid growth and large trade surpluses. However, a lack of foreign investment in the key sectors of mining and hydrocarbons, along with growing conflict among social groups pose challenges for the Bolivian economy.
Bosnia and Herzegovina Bosnia has a transitional economy with limited market reforms. The economy relies heavily on the export of metals as well as on remittances and foreign aid. A highly decentralized government hampers economic policy coordination and reform, while excessive bureaucracy and a segmented market discourage foreign investment. The interethnic warfare in Bosnia and Herzegovina caused production to plummet by 80% from 1992 to 1995 and unemployment to soar. With an uneasy peace in place, output recovered in 1996-99 but slowed in 2000-02 and picked up again during 2003-08, when GDP growth exceeded 5% per year. However, the country experienced a decline in GDP of nearly 3% in 2009 reflecting local effects of the global economic crisis. GDP has stagnated since then. Foreign banks, primarily from Austria and Italy, now control most of the banking sector. The konvertibilna marka (convertible mark or BAM) - the national currency introduced in 1998 - is pegged to the euro, and confidence in the currency and the banking sector has increased. Bosnia's private sector is growing, but foreign investment has dropped off sharply since 2007. Government spending, at roughly 50% of GDP, remains high because of redundant government offices at the state, entity and municipal level. Privatization of state enterprises has been slow, particularly in the Federation, where political division between ethnically-based political parties makes agreement on economic policy more difficult. High unemployment remains the most serious macroeconomic problem. Successful implementation of a value-added tax in 2006 provided a predictable source of revenue for the government and helped rein in gray-market activity. National-level statistics have also improved over time but a large share of economic activity remains unofficial and unrecorded. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007. Bosnia and Herzegovina's top economic priorities are: acceleration of integration into the EU; strengthening the fiscal system; public administration reform; World Trade Organization (WTO) membership; and securing economic growth by fostering a dynamic, competitive private sector. In 2009, Bosnia and Herzegovina was granted an International Monetary Fund (IMF) stand-by arrangement, necessitated by sharply increased social spending and a fiscal crisis exacerbated by the global economic downturn. Disbursement of IMF aid was suspended in 2011 after a parliamentary deadlock left Bosnia without a state-level government for over a year. The IMF concluded a new stand-by arrangement with Bosnia in October 2012, with the first tranches paid in November and December 2012.
Botswana Botswana has maintained one of the world's highest economic growth rates since independence in 1966. However, economic growth was negative in 2009, with the industrial sector shrinking by 30%, after the global crisis reduced demand for Botswana's diamonds. Although the economy recovered in 2010, GDP growth has again slowed. Through fiscal discipline and sound management, Botswana transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of $16,800 in 2012. Two major investment services rank Botswana as the best credit risk in Africa. Diamond mining has fueled much of the expansion and currently accounts for more than one-third of GDP, 70-80% of export earnings, and about one-third of the government's revenues. Botswana's heavy reliance on a single luxury export was a critical factor in the sharp economic contraction of 2009. Tourism, financial services, subsistence farming, and cattle raising are other key sectors. According to official government statistics, unemployment reached 17.8% in 2009, but unofficial estimates run much higher. The prevalence of HIV/AIDS is second highest in the world and threatens Botswana's impressive economic gains. An expected leveling off in diamond production within the next two decades overshadows long-term prospects. A major international diamond company signed a 10-year deal with Botswana in 2012 to move its rough stone sorting and trading division from London to Gaborone by the end of 2013. The move may support Botswana's downstream diamond industry.
Bouvet Island no economic activity; declared a nature reserve
Brazil Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries, and Brazil is expanding its presence in world markets. Since 2003, Brazil has steadily improved its macroeconomic stability, building up foreign reserves, and reducing its debt profile by shifting its debt burden toward real denominated and domestically held instruments. In 2008, Brazil became a net external creditor and two ratings agencies awarded investment grade status to its debt. After strong growth in 2007 and 2008, the onset of the global financial crisis hit Brazil in 2008. Brazil experienced two quarters of recession, as global demand for Brazil's commodity-based exports dwindled and external credit dried up. However, Brazil was one of the first emerging markets to begin a recovery. In 2010, consumer and investor confidence revived and GDP growth reached 7.5%, the highest growth rate in the past 25 years. Rising inflation led the authorities to take measures to cool the economy; these actions and the deteriorating international economic situation slowed growth to 2.7% in 2011, and 1.3% in 2012. Unemployment is at historic lows and Brazil's traditionally high level of income inequality has declined for each of the last 14 years. Brazil's historically high interest rates have made it an attractive destination for foreign investors. Large capital inflows over the past several years have contributed to the appreciation of the currency, hurting the competitiveness of Brazilian manufacturing and leading the government to intervene in foreign exchange markets and raise taxes on some foreign capital inflows. President Dilma ROUSSEFF has retained the previous administration's commitment to inflation targeting by the central bank, a floating exchange rate, and fiscal restraint. In an effort to boost growth, in 2012 the administration implemented a somewhat more expansionary monetary policy that has failed to stimulate much growth.
British Indian Ocean Territory All economic activity is concentrated on the largest island of Diego Garcia, where a joint UK-US military facility is located. Construction projects and various services needed to support the military installation are performed by military and contract employees from the UK, Mauritius, the Philippines, and the US. Some of the natural resources found in this territory include coconuts, fish, and sugarcane. Sugarcane is still a major export for this territory. There are no industrial or agricultural activities on the islands. The territory earns foreign exchange by selling fishing licenses and postage stamps.
British Virgin Islands The economy, one of the most stable and prosperous in the Caribbean, is highly dependent on tourism generating an estimated 45% of the national income. More than 934,000 tourists, mainly from the US, visited the islands in 2008. In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate in the islands, and incorporation fees now generate substantial revenues. Roughly 400,000 companies were on the offshore registry by yearend 2000. The adoption of a comprehensive insurance law in late 1994, which provides a blanket of confidentiality with regulated statutory gateways for investigation of criminal offenses, made the British Virgin Islands even more attractive to international business. Livestock raising is the most important agricultural activity; poor soils limit the islands' ability to meet domestic food requirements. Because of traditionally close links with the US Virgin Islands, the British Virgin Islands has used the US dollar as its currency since 1959.
Brunei Brunei has a small well-to-do economy that depends on revenue from natural resource extraction but encompasses a mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village tradition. Crude oil and natural gas production account for 60% of GDP and more than 90% of exports. Per capita GDP is among the highest in Asia, and substantial income from overseas investment supplements income from domestic production. For Bruneian citizens the government provides for all medical services and free education through the university level. The government of Brunei has been emphasizing through policy and resource investments it strong desire to diversity its economy both within the oil and gas sector and to new sectors.
Bulgaria Bulgaria, a former Communist country that entered the EU on 1 January 2007, averaged more than 6% annual growth from 2004 to 2008, driven by significant amounts of bank lending, consumption, and foreign direct investment. Successive governments have demonstrated a commitment to economic reforms and responsible fiscal planning, but the global downturn sharply reduced domestic demand, exports, capital inflows, and industrial production. GDP contracted by 5.5% in 2009, stagnated in 2010, despite a significant recovery in exports, grew 1.7% in 2011, and 1% in 2012. Despite having a favorable investment regime, including low, flat corporate income taxes, significant challenges remain. Corruption in public administration, a weak judiciary, and the presence of organized crime continue to hamper the country's investment climate and economic prospects.
Burkina Faso Burkina Faso is a poor, landlocked country that relies heavily on cotton and gold exports for revenue. The country has few natural resources and a weak industrial base. About 90% of the population is engaged in subsistence agriculture, which is vulnerable to periodic drought. Cotton is the main cash crop. Since 1998, Burkina Faso has embarked upon a gradual privatization of state-owned enterprises and in 2004 revised its investment code to attract foreign investment. As a result of this new code and other legislation favoring the mining sector, the country has seen an upswing in gold exploration and production. By 2010, gold had become the main source of export revenue. Gold mining production doubled between 2009 and 2010. Two new mining projects were launched in the third quarter of 2011. Local community conflict persists in the mining and cotton sectors, but the Prime Minister has made efforts to defuse some of the economic cause of public discontent, including announcing income tax reductions, reparations for looting victims, and subsidies for basic food items and fertilizer. An IMF mission to Burkina Faso in October 2011 expressed general satisfaction with the measures. The risk of a mass exodus of the 3 to 4 million Burinabe who live and work in Cote d'Ivoire has dissipated, and trade, power, and transport links are being restored. Burkina Faso experienced a severe drought in 2011, which decimated grazing land and decreased harvests, creating food insecurity and damaging the country's agricultural base.
Burma Burma is a resource-rich country but still suffers from pervasive government controls, inefficient economic policies, corruption, and rural poverty. Burma is the poorest country in Southeast Asia; approximately 32% of the population lives in poverty. Corruption is prevalent and significant resources in the extractive industries are concentrated in a few hands. The Burmese government has initiated notable economic reforms. In October 2011, 11 private banks were allowed to trade foreign currency. On April 2, 2012, Burma's multiple exchange rates were abolished and the Central Bank of Myanmar established a managed float of the Burmese kyat. In November 2012, President THEIN SEIN signed a new Foreign Investment Law. Despite these reforms, the Burmese government has not yet embarked on broad-based macro-economic reforms or addressed key impediments to economic development such as Burma's opaque revenue collection system. Key benchmarks of economic progress would include steps to ensure the independence of the Central Bank, provide budget allocation for social services, and enact laws to protect intellectual and real property. In recent years, foreign investors have shied away from nearly every sector except for natural gas, power generation, timber, and mining. The exploitation of natural resources does not benefit the population at large. The most productive sectors will continue to be in extractive industries - especially oil and gas, mining, and timber - with the latter two causing significant environmental degradation. Other areas, such as manufacturing, tourism, and services, struggle in the face of poor infrastructure, unpredictable trade policies, undeveloped human resources (the result of neglected health and education systems), endemic corruption, and inadequate access to capital for investment. The US initially imposed sanctions on Burma in response to the 1988 military crackdown and the regime's refusal to honor the democratic opposition National League for Democracy's 1990 landslide election victory under the leadership of AUNG SAN SUU KYI. In 2003, the US moved from broad-based to more targeted sanctions. In July 2012, as a result of reforms undertaken by President THEIN SEIN and his nominally civilian government, the US broadly eased restrictions on new investment in and the export of financial services to Burma. In November 2012, the US eased the import ban on Burmese products to the US with the exception of jadeite and rubies. Although the Burmese government has good economic relations with its neighbors, significant improvements in economic governance, the business climate, and the political situation are needed to promote serious foreign investment.
Burundi Burundi is a landlocked, resource-poor country with an underdeveloped manufacturing sector. The economy is predominantly agricultural; agriculture accounts for just over 30% of GDP and employs more than 90% of the population. Burundi's primary exports are coffee and tea, which account for 90% of foreign exchange earnings, though exports are a relatively small share of GDP. Burundi's export earnings - and its ability to pay for imports - rests primarily on weather conditions and international coffee and tea prices. An ethnic-based war that lasted for over a decade resulted in more than 200,000 deaths, forced more than 48,000 refugees into Tanzania, and displaced 140,000 others internally. Only one in two children go to school, and approximately one in 15 adults has HIV/AIDS. Food, medicine, and electricity remain in short supply. Less than 2% of the population has electricity in its homes. Burundi's GDP grew around 4% annually in 2006-12. Political stability and the end of the civil war have improved aid flows and economic activity has increased, but underlying weaknesses - a high poverty rate, poor education rates, a weak legal system, a poor transportation network, overburdened utilities, and low administrative capacity - risk undermining planned economic reforms. The purchasing power of most Burundians has decreased as wage increases have not kept up with inflation. Burundi will remain heavily dependent on aid from bilateral and multilateral donors - foreign aid represents 42% of Burundi''s national income, the second highest rate in Sub-Saharan Africa. Burundi joined the East African Community in 2009, which should boost Burundi's regional trade ties, and also in 2009 received $700 million in debt relief. Government corruption is hindering the development of a healthy private sector as companies seek to navigate an environment with ever changing rules.
Cabo Verde The economy is service-oriented with commerce, transport, tourism, and public services accounting for about three-fourths of GDP. This island economy suffers from a poor natural resource base, including serious water shortages exacerbated by cycles of long-term drought and poor soil for agriculture on several of the islands. Although about 40% of the population lives in rural areas, the share of food production in GDP is low. About 82% of food must be imported. The fishing potential, mostly lobster and tuna, is not fully exploited. Cabo Verde annually runs a high trade deficit financed by foreign aid and remittances from its large pool of emigrants; remittances supplement GDP by more than 20%. Despite the lack of resources, sound economic management has produced steadily improving incomes. Continued economic reforms are aimed at developing the private sector and attracting foreign investment to diversify the economy and mitigate high unemployment. Future prospects depend heavily on the maintenance of aid flows, the encouragement of tourism, remittances, and the momentum of the government's development program. Cabo Verde became a member of the WTO in July 2008.
Cambodia Since 2004, garments, construction, agriculture, and tourism have driven Cambodia's growth. GDP climbed more than 6% per year between 2010 and 2012. The garment industry currently employs more about 400,000 people and accounts for about 70% of Cambodia's total exports. In 2005, exploitable oil deposits were found beneath Cambodia's territorial waters, representing a potential revenue stream for the government, if commercial extraction becomes feasible. Mining also is attracting some investor interest and the government has touted opportunities for mining bauxite, gold, iron and gems. The tourism industry has continued to grow rapidly with foreign arrivals exceeding 2 million per year since 2007 and reaching over 3 million visitors in 2012. Cambodia, nevertheless, remains one of the poorest countries in Asia and long-term economic development remains a daunting challenge, inhibited by endemic corruption, limited educational opportunities, high income inequality, and poor job prospects. Approximately 4 million people live on less than $1.25 per day, and 37% of Cambodian children under the age of 5 suffer from chronic malnutrition. More than 50% of the population is less than 25 years old. The population lacks education and productive skills, particularly in the impoverished countryside, which also lacks basic infrastructure. The Cambodian Government is working with bilateral and multilateral donors, including the Asian Development Bank, the World Bank and IMF, to address the country's many pressing needs; more than 50% of the government budget comes from donor assistance. The major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia's demographic imbalance.
Cameroon Because of its modest oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa. Still, it faces many of the serious problems confronting other underdeveloped countries, such as stagnant per capita income, a relatively inequitable distribution of income, a top-heavy civil service, endemic corruption, and a generally unfavorable climate for business enterprise. Since 1990, the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalize the nation's banks. The IMF is pressing for more reforms, including increased budget transparency, privatization, and poverty reduction programs. Subsidies for electricity, food, and fuel have strained the budget. Cameroon recently began several large infrastructure projects, including a deep sea port in Kribi, a natural gas powered electricity generating plant, and several hydroelectric dams. Cameroon must attract more investment to improve its inadequate infrastructure, but its business environment is a deterrent to foreign investment.
Canada As a high-tech industrial society in the trillion-dollar class, Canada resembles the US in its market-oriented economic system, pattern of production, and affluent living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban. The 1989 US-Canada Free Trade Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA) (which includes Mexico) touched off a dramatic increase in trade and economic integration with the US its principal trading partner. Canada enjoys a substantial trade surplus with the US, which absorbs about three-fourths of Canadian exports each year. Canada is the US's largest foreign supplier of energy, including oil, gas, uranium, and electric power. Given its great natural resources, highly skilled labor force, and modern capital plant, Canada enjoyed solid economic growth from 1993 through 2007. Buffeted by the global economic crisis, the economy dropped into a sharp recession in the final months of 2008, and Ottawa posted its first fiscal deficit in 2009 after 12 years of surplus. Canada's major banks, however, emerged from the financial crisis of 2008-09 among the strongest in the world, owing to the financial sector's tradition of conservative lending practices and strong capitalization. Canada achieved marginal growth in 2010-12 and plans to balance the budget by 2015. In addition, the country's petroleum sector is rapidly becoming an even larger economic driver with Alberta's oil sands significantly boosting Canada's proven oil reserves, ranking the country third in the world behind Saudi Arabia and Venezuela.
Cayman Islands With no direct taxation, the islands are a thriving offshore financial center. More than 93,000 companies were registered in the Cayman Islands as of 2008, including almost 300 banks, 800 insurers, and 10,000 mutual funds. A stock exchange was opened in 1997. Tourism is also a mainstay, accounting for about 70% of GDP and 75% of foreign currency earnings. The tourist industry is aimed at the luxury market and caters mainly to visitors from North America. Total tourist arrivals exceeded 1.9 million in 2008, with about half from the US. Nearly 90% of the islands' food and consumer goods must be imported. The Caymanians enjoy a standard of living comparable to that of Switzerland.
Central African Republic Subsistence agriculture, together with forestry and mining, remains the backbone of the economy of the Central African Republic (CAR), with about 60% of the population living in outlying areas. The agricultural sector generates more than half of GDP. Timber and diamonds account for most export earnings, followed by cotton. Important constraints to economic development include the CAR's landlocked position, a poor transportation system, a largely unskilled work force, and a legacy of misdirected macroeconomic policies. Factional fighting between the government and its opponents remains a drag on economic revitalization. Since 2009 the IMF has worked closely with the government to institute reforms that have resulted in some improvement in budget transparency, but other problems remain. The government's additional spending in the run-up to the election in 2011 worsened CAR's fiscal situation. Distribution of income is extraordinarily unequal. Grants from France and the international community can only partially meet humanitarian needs. In 2012 the World Bank approved $125 million in funding for transport infrastructure and regional trade, focused on the route between CAR's capital and the port of Douala in Cameroon. After a two year lag in donor support, the IMF's first review of CAR's extended credit facility for 2012-15 praised improvements in revenue collection but warned of weak management of spending.
Chad Chad's primarily agricultural economy will continue to be boosted by major foreign direct investment projects in the oil sector that began in 2000. Economic conditions have been positive in recent years, with real GDP growth reaching 13% in 2010 because of high international prices for oil and a strong local harvest. GDP growth for 2012 was 5%. However, Chad's investment climate remains challenging due to limited infrastructure, a lack of trained workers, extensive government bureaucracy, and corruption. At least 80% of Chad's population relies on subsistence farming and livestock raising for its livelihood. The government of Chad is determined to improve agricultural production through modernization and mechanization over the next three years, and hosted a national Rural Development Forum in 2012 to promote investment in agriculture. Chad's economy has long been handicapped by its landlocked position, high energy costs, and a history of instability. Chad relies on foreign assistance and foreign capital for most public and private sector investment projects. Remittances are also an important source of income. The Libyan conflict disrupted inflows of remittances to Chad's impoverished western region that relies on income from Chadians living in Libya. A consortium led by two US companies has been investing $3.7 billion to develop oil reserves - estimated at 1.5 billion barrels - in southern Chad. Chinese companies are also expanding exploration efforts and have completed a 311-km pipeline and the country's first refinery. The nation's total oil reserves are estimated at 1.5 billion barrels. Oil production came on stream in late 2003. Chad began to export oil in 2004. Cotton, cattle, and gum arabic provide the bulk of Chad's non-oil export earnings.
Chile Chile has a market-oriented economy characterized by a high level of foreign trade and a reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. Exports account for approximately one-third of GDP, with commodities making up some three-quarters of total exports. Copper alone provides 19% of government revenue. From 2003 through 2012, real growth averaged almost 5% per year, despite the slight contraction in 2009 that resulted from the global financial crisis. Chile deepened its longstanding commitment to trade liberalization with the signing of a free trade agreement with the US, which took effect on 1 January 2004. Chile has 22 trade agreements covering 60 countries including agreements with the European Union, Mercosur, China, India, South Korea, and Mexico. Chile has joined the United States and nine other countries in negotiating the Trans-Pacific-Partnership trade agreement. In 2012, foreign direct investment inflows reached $28.2 billion, an increase of 63% over the previous record set in 2011. The Chilean Government has generally followed a countercyclical fiscal policy, accumulating surpluses in sovereign wealth funds during periods of high copper prices and economic growth, and generally allowing deficit spending only during periods of low copper prices and growth. As of 31 December 2012, those sovereign wealth funds - kept mostly outside the country and separate from Central Bank reserves - amounted to more than $20.9 billion. Chile used these funds to finance fiscal stimulus packages during the 2009 economic downturn. In May 2010 Chile signed the OECD Convention, becoming the first South American country to join the OECD.
China Since the late 1970s China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role - in 2010 China became the world's largest exporter. Reforms began with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, creation of a diversified banking system, development of stock markets, rapid growth of the private sector, and opening to foreign trade and investment. China has implemented reforms in a gradualist fashion. In recent years, China has renewed its support for state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. After keeping its currency tightly linked to the US dollar for years, in July 2005 China revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. From mid 2005 to late 2008 cumulative appreciation of the renminbi against the US dollar was more than 20%, but the exchange rate remained virtually pegged to the dollar from the onset of the global financial crisis until June 2010, when Beijing allowed resumption of a gradual appreciation. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2012 stood as the second-largest economy in the world after the US, having surpassed Japan in 2001. The dollar values of China's agricultural and industrial output each exceed those of the US; China is second to the US in the value of services it produces. Still, per capita income is below the world average. The Chinese government faces numerous economic challenges, including: (a) reducing its high domestic savings rate and correspondingly low domestic demand; (b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy's rapid transformation. Economic development has progressed further in coastal provinces than in the interior, and by 2011 more than 250 million migrant workers and their dependents had relocated to urban areas to find work. One consequence of population control policy is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the North - is another long-term problem. China continues to lose arable land because of erosion and economic development. The Chinese government is seeking to add energy production capacity from sources other than coal and oil, focusing on nuclear and alternative energy development. In 2010-11, China faced high inflation resulting largely from its credit-fueled stimulus program. Some tightening measures appear to have controlled inflation, but GDP growth consequently slowed to under 8% for 2012. An economic slowdown in Europe contributed to China's, and is expected to further drag Chinese growth in 2013. Debt overhang from the stimulus program, particularly among local governments, and a property price bubble challenge policy makers currently. The government's 12th Five-Year Plan, adopted in March 2011, emphasizes continued economic reforms and the need to increase domestic consumption in order to make the economy less dependent on exports in the future. However, China has made only marginal progress toward these rebalancing goals.
Christmas Island The main economic activities on Christmas Island are the mining of low grade phosphate, limited tourism, the provision of government services and more recently the construction and operation of the Immigration Detention Center. The government sector includes administration, health, education, policing, customs, quarantine and defense.
Clipperton Island Although 115 species of fish have been identified in the territorial waters of Clipperton Island, the only economic activity is tuna fishing.
Cocos (Keeling) Islands Coconuts, grown throughout the islands, are the sole cash crop. Small local gardens and fishing contribute to the food supply, but additional food and most other necessities must be imported from Australia. There is a small tourist industry.
Colombia Colombia's consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to face external shocks. Real GDP has grown more than 4% per year for the past three years, continuing almost a decade of strong economic performance. All three major ratings agencies have upgraded Colombia's government debt to investment grade. Nevertheless, Colombia depends heavily on oil exports, making it vulnerable to a drop in oil prices. Economic development is stymied by inadequate infrastructure, weakened further by recent flooding. Moreover, the unemployment rate of 10.3% in 2012 is still one of Latin America's highest. The SANTOS Administration's foreign policy has focused on bolstering Colombia's commercial ties and boosting investment at home. The US-Colombia Free Trade Agreement (FTA) was ratified by the US Congress in October 2011 and implemented in 2012. Colombia has signed or is negotiating FTAs with a number of other countries, including Canada, Chile, Mexico, Switzerland, the EU, Venezuela, South Korea, Turkey, Japan, China, Costa Rica, Panama, and Israel. Foreign direct investment - notably in the oil and gas sectors - reached a record $10 billion in 2008 but dropped to $7.2 billion in 2009, before beginning to recover in 2010, and reached a record high of nearly $16 billion in 2012. Colombia is the third largest Latin American exporter of oil to the United States, and the United States' largest source of imported coal. Inequality, underemployment, and narcotrafficking remain significant challenges, and Colombia's infrastructure requires major improvements to sustain economic expansion.
Comoros One of the world's poorest countries, Comoros is made up of three islands that have inadequate transportation links, a young and rapidly increasing population, and few natural resources. The low educational level of the labor force contributes to a subsistence level of economic activity, high unemployment, and a heavy dependence on foreign grants and technical assistance. Agriculture, including fishing, hunting, and forestry, contributes 50% to GDP, employs 80% of the labor force, and provides most of the exports. Export income is heavily reliant on the three main crops of vanilla, cloves, and ylang-ylang; and Comoros' export earnings are easily disrupted by disasters such as fires. The country is not self-sufficient in food production; rice, the main staple, accounts for the bulk of imports. The government - which is hampered by internal political disputes - lacks a comprehensive strategy to attract foreign investment and is struggling to upgrade education and technical training, privatize commercial and industrial enterprises, improve health services, diversify exports, promote tourism, and reduce the high population growth rate. Political problems have inhibited growth, which averaged only about 1% in 2006-09 but more than 2% per year in 2010-12. Remittances from 150,000 Comorans abroad help supplement GDP. In September 2009 the IMF approved Comoros for a three-year $21 million loan, but the government has struggled to meet program targets, such as restricting spending on wages, strengthening domestic revenue collection, and moving forward on structural reforms. In December 2012, IMF and the World Bank's International Development Association supported $176 million in debt relief for Comoros, resulting in a 59% reduction of its future external debt service over a period of 40 years.
Congo, Democratic Republic of the The economy of the Democratic Republic of the Congo - a nation endowed with vast natural resource wealth - is slowly recovering after decades of decline. Systemic corruption since independence in 1960, combined with country-wide instability and conflict that began in the mid-90s has dramatically reduced national output and government revenue and increased external debt. With the installation of a transitional government in 2003 after peace accords, economic conditions slowly began to improve as the transitional government reopened relations with international financial institutions and international donors, and President KABILA began implementing reforms. Progress has been slow to reach the interior of the country although clear changes are evident in Kinshasa and Lubumbashi. An uncertain legal framework, corruption, and a lack of transparency in government policy are long-term problems for the mining sector and for the economy as a whole. Much economic activity still occurs in the informal sector and is not reflected in GDP data. Renewed activity in the mining sector, the source of most export income, has boosted Kinshasa's fiscal position and GDP growth in recent years. The global recession cut economic growth in 2009 to less than half its 2008 level, but growth returned to around 7% per year in 2010-12. The DRC signed a Poverty Reduction and Growth Facility with the IMF in 2009 and received $12 billion in multilateral and bilateral debt relief in 2010, but the IMF at the end of 2012 suspended the last three payments under the loan facility - worth $240 million - because of concerns about the lack of transparency in mining contracts. In 2012, the DRC updated its business laws by adhering to OHADA, the Organization for the Harmonization of Business Law in Africa. The country marked its tenth consecutive year of positive economic expansion in 2012.
Congo, Republic of the The economy is a mixture of subsistence hunting and agriculture, an industrial sector based largely on oil and support services, and government spending. Oil has supplanted forestry as the mainstay of the economy, providing a major share of government revenues and exports. Natural gas is increasingly being converted to electricity rather than being flared, greatly improving energy prospects. New mining projects, particularly iron ore, that may enter production as early as late 2013 may add as much as $1 billion to annual government revenue. Economic reform efforts have been undertaken with the support of international organizations, notably the World Bank and the IMF, including recently concluded Article IV consultations. Denis SASSOU-Nguesso, who returned to power when the war ended in October 1997, publicly expressed interest in moving forward on economic reforms and privatization and in renewing cooperation with international financial institutions. Economic progress was badly hurt by slumping oil prices and the resumption of armed conflict in December 1998, which worsened the republic's budget deficit. The current administration faces difficult economic challenges of stimulating recovery and reducing poverty. The drop in oil prices during the global crisis reduced oil revenue by about 30%, but the subsequent recovery of oil prices boosted the economy's GDP from 2009-12. In March 2006, the World Bank and the International Monetary Fund (IMF) approved Heavily Indebted Poor Countries (HIPC) treatment for Congo, which received $1.9 billion in debt relief under the program in 2010. Congo also restructured old defaulted London Club debt in 2007, which effectively cancelled 80% of its private debt. Contracts with China have increased Congo's publicly held debt. Officially the country became a net external creditor as of 2011, with external debt representing less than 22% of GDP and debt servicing less than 3% of government revenue.
Cook Islands Like many other South Pacific island nations, the Cook Islands' economic development is hindered by the isolation of the country from foreign markets, the limited size of domestic markets, lack of natural resources, periodic devastation from natural disasters, and inadequate infrastructure. Agriculture, employing more than one-quarter of the working population, provides the economic base with major exports of copra and citrus fruit. Black pearls are the Cook Islands' leading export. Manufacturing activities are limited to fruit processing, clothing, and handicrafts. Trade deficits are offset by remittances from emigrants and by foreign aid overwhelmingly from New Zealand. In the 1980s and 1990s, the country lived beyond its means, maintaining a bloated public service and accumulating a large foreign debt. Subsequent reforms, including the sale of state assets, the strengthening of economic management, the encouragement of tourism, and a debt restructuring agreement, have rekindled investment and growth.
Coral Sea Islands no economic activity
Costa Rica Prior to the global economic crisis, Costa Rica enjoyed stable economic growth. The economy contracted 1.3% in 2009 but resumed growth at about 4.5% per year in 2010-12. While the traditional agricultural exports of bananas, coffee, sugar, and beef are still the backbone of commodity export trade, a variety of industrial and specialized agricultural products have broadened export trade in recent years. High value-added goods and services, including microchips, have further bolstered exports. Tourism continues to bring in foreign exchange, as Costa Rica's impressive biodiversity makes it a key destination for ecotourism. Foreign investors remain attracted by the country's political stability and relatively high education levels, as well as the incentives offered in the free-trade zones; and Costa Rica has attracted one of the highest levels of foreign direct investment per capita in Latin America. However, many business impediments remain, such as high levels of bureaucracy, legal uncertainty due to overlapping and at times conflicting responsibilities between agencies, difficulty of enforcing contracts, and weak investor protection. Poverty has remained around 20-25% for nearly 20 years, and the strong social safety net that had been put into place by the government has eroded due to increased financial constraints on government expenditures. Unlike the rest of Central America, Costa Rica is not highly dependent on remittances as they only represent about 2% of GDP. Immigration from Nicaragua has increasingly become a concern for the government. The estimated 300,000-500,000 Nicaraguans in Costa Rica legally and illegally are an important source of mostly unskilled labor but also place heavy demands on the social welfare system. The US-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR) entered into force on 1 January 2009 after significant delays within the Costa Rican legislature. CAFTA-DR has increased foreign direct investment in key sectors of the economy, including the insurance and telecommunications sectors recently opened to private investors. President CHINCHILLA was not able to gain legislative approval for fiscal reform, her top priority, though she continued to pursue fiscal reform in 2012. President CHINCHILLA and the PLN were successful in passing a tax on corporations to fund an increase for security services.
Cote d'Ivoire Cote d'Ivoire is heavily dependent on agriculture and related activities, which engage roughly 68% of the population. Cote d'Ivoire is the world's largest producer and exporter of cocoa beans and a significant producer and exporter of coffee and palm oil. Consequently, the economy is highly sensitive to fluctuations in international prices for these products, and, to a lesser extent, in climatic conditions. Cocoa, oil, and coffee are the country's top export revenue earners, but the country is also producing gold. Since the end of the civil war in 2003, political turmoil has continued to damage the economy, resulting in the loss of foreign investment and slow economic growth. In late 2011, Cote d'Ivoire's economy began to recover from a severe downturn of the first quarter of the year that was caused by widespread post-election fighting. In June 2012, the IMF and the World Bank announced $4.4 billion in debt relief for Cote d'Ivoire under the Highly Indebted Poor Countries Initiative. Cote d'Ivoire's long-term challenges include political instability and degrading infrastructure.
Croatia Though still one of the wealthiest of the former Yugoslav republics, Croatia's economy suffered badly during the 1991-95 war. The country's output during that time collapsed and Croatia missed the early waves of investment in Central and Eastern Europe that followed the fall of the Berlin Wall. Between 2000 and 2007, however, Croatia's economic fortunes began to improve slowly with moderate but steady GDP growth between 4% and 6% led by a rebound in tourism and credit-driven consumer spending. Inflation over the same period remained tame and the currency, the kuna, stable. Croatia experienced an abrupt slowdown in the economy in 2008 and has yet to recover. Difficult problems still remain, including a stubbornly high unemployment rate, uneven regional development, and a challenging investment climate. The new government has announced a more flexible approach to privatization, including the sale in the coming years of state-owned businesses that are not of strategic importance. While macroeconomic stabilization has largely been achieved, structural reforms lag. Croatia will face significant pressure as a result of the global financial crisis, due to reduced exports and capital inflows. Croatia reentered a recession in 2012, and Zagreb cut spending. The government also raised additional revenues through more stringent tax collection and by raising the Value Added Tax in February 2012. On 1 July 2013 Croatia joined the EU, following a decade long application process. Croatia will be a member of the European Exchange Rate Mechanism until it meets the criteria for joining the Economic and Monetary Union and adopts the euro as its currency. Croatia's high foreign debt, strained state budget, and over-reliance on tourism revenue could hinder economic progress over the medium-term.
Cuba The government continues to balance the need for loosening its socialist economic system against a desire for firm political control. The government in April 2011 held the first Cuban Communist Party Congress in almost 13 years, during which leaders approved a plan for wide-ranging economic changes. President Raul CASTRO said such changes were needed to update the economic model to ensure the survival of socialism. The government has expanded opportunities for self-employment and has introduced limited reforms, some initially implemented in the 1990s, to increase enterprise efficiency and alleviate serious shortages of food, consumer goods, services, and housing. The average Cuban's standard of living remains at a lower level than before the downturn of the 1990s, which was caused by the loss of Soviet aid and domestic inefficiencies. Since late 2000, Venezuela has been providing oil on preferential terms, and it currently supplies over 100,000 barrels per day of petroleum products. Cuba has been paying for the oil, in part, with the services of Cuban personnel in Venezuela including some 30,000 medical professionals.
Curacao Tourism, petroleum refining, and offshore finance are the mainstays of this small economy, which is closely tied to the outside world. Although GDP grew slightly during the past decade, the island enjoys a high per capita income and a well-developed infrastructure compared with other countries in the region. Curacao has an excellent natural harbor that can accommodate large oil tankers. Venezuelan state oil company PdVSA leases the single refinery on the island from the government; most of the oil for the refinery is imported from Venezuela; most of the refined products are exported to the US. Almost all consumer and capital goods are imported, with the US, Brazil, Italy, and Mexico being the major suppliers. The government is attempting to diversify its industry and trade and has signed an Association Agreement with the EU to expand business there. Poor soils and inadequate water supplies hamper the development of agriculture. Budgetary problems complicate reform of the health and education systems. Pension system reforms are pending. A new basic health package was implemented in 2013.
Cyprus The area of the Republic of Cyprus under government control has a market economy dominated by the service sector, which accounts for four-fifths of GDP. Tourism, financial services, and real estate are the most important sectors. Erratic growth rates over the past decade reflect the economy's reliance on tourism, the profitability of which can fluctuate with political instability in the region and economic conditions in Western Europe. Nevertheless, the economy in the area under government control has grown at a rate well above the EU average since 2000. Cyprus joined the European Exchange Rate Mechanism (ERM2) in May 2005 and adopted the euro as its national currency on 1 January 2008. An aggressive austerity program in the preceding years, aimed at paving the way for the euro, helped turn a soaring fiscal deficit (6.3% in 2003) into a surplus of 1.2% in 2008, and reduced inflation to 4.7%. This prosperity came under pressure in 2009, as construction and tourism slowed in the face of reduced foreign demand triggered by the ongoing global financial crisis. Although Cyprus lagged behind its EU peers in showing signs of stress from the global crisis, the economy tipped into recession in 2009, contracting by 1.7%, and has been slow to bounce back since, posting anemic growth in 2010-11 before contracting again by 2.3% in 2012. Serious problems surfaced in the Cypriot financial sector in early 2011 as the Greek fiscal crisis and euro zone debt crisis deepened. Cyprus's borrowing costs have risen steadily because of its exposure to Greek debt. Two of Cyprus's biggest banks are among the largest holders of Greek bonds in Europe and have a substantial presence in Greece through bank branches and subsidiaries. Cyprus experienced numerous downgrades of its credit rating in 2012 and has been cut off from international money markets. The Cypriot economy contracted in 2012 following the writedown of Greek bonds. A liquidity squeeze is choking the financial sector and the real economy as many global investors are uncertain the Cypriot economy can weather the EU crisis. The budget deficit rose to 7.4% of GDP in 2011, a violation of the EU's budget deficit criteria - no more than 3% of GDP. In response to the country's deteriorating finances and serious risk of contagion from the Greek debt crisis, Nicosia implemented measures to cut the cost of the state payroll, curb tax evasion, and revamp social benefits, and trimmed the deficit to 4.2% of GDP in 2012. In July, Nicosia became the fifth euro zone government to request an economic bailout program from the European Commission, the European Central Bank, and the International Monetary Fund - known collectively as the "Troika". Negotiations over the final details of the plan are ongoing.
Czech Republic The Czech Republic is a stable and prosperous market economy closely integrated with the EU, especially since the country's EU accession in 2004. While the conservative, inward-looking Czech financial system has remained relatively healthy, the small, open, export-driven Czech economy remains sensitive to changes in the economic performance of its main export markets, especially Germany. When Western Europe and Germany fell into recession in late 2008, demand for Czech goods plunged, leading to double digit drops in industrial production and exports. As a result, real GDP fell 4.7% in 2009, with most of the decline occurring during the first quarter. Real GDP, however, slowly recovered with positive quarter-on-quarter growth starting in the second half of 2009 and continuing throughout 2011. In 2012, however, the economy fell into a recession due to a slump in external demand. The auto industry remains the largest single industry, and, together with its upstream suppliers, accounts for nearly 24% of Czech manufacturing. The Czech Republic produced more than a million cars for the first time in 2010, over 80% of which were exported. Foreign and domestic businesses alike voice concerns about corruption especially in public procurement. Other long term challenges include dealing with a rapidly aging population, funding an unsustainable pension and health care system, and diversifying away from manufacturing and toward a more high-tech, services-based, knowledge economy.
Denmark This thoroughly modern market economy features a high-tech agricultural sector, state-of-the-art industry with world-leading firms in pharmaceuticals, maritime shipping and renewable energy, and a high dependence on foreign trade. Denmark is a member of the European Union (EU); Danish legislation and regulations conform to EU standards on almost all issues. Danes enjoy a high standard of living and the Danish economy is characterized by extensive government welfare measures and an equitable distribution of income. Denmark is a net exporter of food and energy and enjoys a comfortable balance of payments surplus but depends on imports of raw materials for the manufacturing sector. Within the EU, Denmark is among the strongest supporters of trade liberalization. After a long consumption-driven upswing, Denmark's economy began slowing in 2007 with the end of a housing boom. Housing prices dropped markedly in 2008-09 and, following a short respite in 2010, has since continued to decline. The global financial crisis has exacerbated this cyclical slowdown through increased borrowing costs and lower export demand, consumer confidence, and investment. The global financial crisis cut Danish real GDP in 2008-09. Denmark made a modest recovery in 2010 with real GDP growth of 1.3%, in part because of increased government spending; however, the country experienced a technical recession in late 2010-early 2011. Historically low levels of unemployment rose sharply with the recession and have remained at about 6% in 2010-12, based on the national measure, about two-thirds average EU unemployment. An impending decline in the ratio of workers to retirees will be a major long-term issue. Denmark maintained a healthy budget surplus for many years up to 2008, but the budget balance swung into deficit in 2009. In spite of the deficits, the new coalition government delivered a modest stimulus to the economy in 2012. Nonetheless, Denmark's fiscal position remains among the strongest in the EU with public debt at about 45% of GDP in 2012. Despite previously meeting the criteria to join the European Economic and Monetary Union (EMU), so far Denmark has decided not to join, although the Danish krone remains pegged to the euro.
Dhekelia Economic activity is limited to providing services to the military and their families located in Dhekelia. All food and manufactured goods must be imported.
Djibouti Djibouti's economy is based on service activities connected with the country's strategic location and status as a free trade zone in the Horn of Africa. Three-fourths of Djibouti's inhabitants live in the capital city; the remainder are mostly nomadic herders. Scant rainfall limits crop production to small quantities of fruits and vegetables, and most food must be imported. Djibouti provides services as both a transit port for the region and an international transshipment and refueling center. Imports, exports, and re-exports - primarily of coffee from landlocked neighbor Ethiopia - represent 70% of port activity at Djibouti's container terminal. Djibouti has few natural resources and little industry. The nation is, therefore, heavily dependent on foreign assistance to help support its balance of payments and to finance development projects. An unemployment rate of nearly 60% continues to be a major problem. While inflation is not a concern, due to the fixed tie of the Djiboutian franc to the US dollar, the artificially high value of the Djiboutian franc adversely affects Djibouti's balance of payments. Djibouti holds foreign reserves amounting to less than six months of import coverage. Per capita consumption dropped an estimated 35% between 1999 and 2006 because of recession, civil war, and a high population growth rate (including immigrants and refugees). Djibouti has experienced relatively minimal impact from the global economic downturn, but its reliance on diesel-generated electricity and imported food leave average consumers vulnerable to global price shocks. Djibouti in 2012 began construction of a third port to secure its position as a critical transshipment hub in the Horn of Africa and the principal conduit for Ethiopia's trade. Djibouti also received funding in late 2012 for a desalination plant to begin address the severe freshwater shortage affecting Djibouti City, and particularly its poorest residents.
Dominica The Dominican economy has been dependent on agriculture - primarily bananas - in years past, but increasingly has been driven by tourism as the government seeks to promote Dominica as an "ecotourism" destination. Moreover, Dominica has successfully developed an offshore medical education sector. In order to diversify the island's economy, the government is also attempting to develop an offshore financial sector and plans to sign agreements with the private sector to develop geothermal energy resources. In 2003, the government began a comprehensive restructuring of the economy - including elimination of price controls, privatization of the state banana company, and tax increases - to address an economic and financial crisis and to meet IMF requirements. Hurricane Dean struck the island in August 2007 causing damages equivalent to 20% of GDP. In 2009, the economy contracted as a result of the global recession and growth remains anemic. Economic growth in 2010-11 was about 1%. Although debt levels in 2012 continued to exceed pre-recession levels, the debt burden notably declined from 80% to approximately 70% of GDP.
Dominican Republic The Dominican Republic has long been viewed primarily as an exporter of sugar, coffee, and tobacco, but in recent years the service sector has overtaken agriculture as the economy's largest employer, due to growth in telecommunications, tourism, and free trade zones. The economy is highly dependent upon the US, the destination for more than half of exports. Remittances from the US amount to about one-tenth of GDP, equivalent to almost half of exports and three-quarters of tourism receipts. The country suffers from marked income inequality; the poorest half of the population receives less than one-fifth of GDP, while the richest 10% enjoys nearly 40% of GDP. High unemployment and underemployment remains an important long-term challenge. The Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) came into force in March 2007, boosting investment and exports and reducing losses to the Asian garment industry. The growth of the Dominican Republic's economy rebounded from the global recession in 2010-12 and remains one of the fastest growing in the region although its fiscal situation is weak; the fiscal deficit climbed from 2.6% in 2011 to approximately 8% in 2012. A tax reform package passed in November 2012 aims to narrow this deficit.
Ecuador Ecuador is substantially dependent on its petroleum resources, which have accounted for more than half of the country's export earnings and approximately two-fifths of public sector revenues in recent years. In 1999/2000, Ecuador's economy suffered from a banking crisis, with GDP contracting by 5.3% and poverty increasing significantly. In March 2000, the Congress approved a series of structural reforms that also provided for the adoption of the US dollar as legal tender. Dollarization stabilized the economy, and positive growth returned in the years that followed, helped by high oil prices, remittances, and increased non-traditional exports. From 2002-06 the economy grew an average of 4.3% per year, the highest five-year average in 25 years. After moderate growth in 2007, the economy reached a growth rate of 6.4% in 2008, buoyed by high global petroleum prices and increased public sector investment. President Rafael CORREA, who took office in January 2007, defaulted in December 2008 on Ecuador's sovereign debt, which, with a total face value of approximately US$3.2 billion, represented about 30% of Ecuador's public external debt. In May 2009, Ecuador bought back 91% of its "defaulted" bonds via an international reverse auction. Economic policies under the CORREA administration - for example, an announcement in late 2009 of its intention to terminate 13 bilateral investment treaties, including one with the United States - have generated economic uncertainty and discouraged private investment. The Ecuadorian economy slowed to 1% growth in 2009 due to the global financial crisis and to the sharp decline in world oil prices and remittance flows. Growth picked up to a 3.3% rate in 2010 and nearly 8% in 2011, before falling to 5% in 2012. China has become Ecuador's largest foreign lender since Quito defaulted in 2008, allowing the government to maintain a high rate of social spending; Ecuador contracted with the Chinese government for more than $9 billion in oil for cash and project loans as of December 2012.
Egypt Occupying the northeast corner of the African continent, Egypt is bisected by the highly fertile Nile valley, where most economic activity takes place. Egypt's economy was highly centralized during the rule of former President Gamal Abdel NASSER but opened up considerably under former Presidents Anwar EL-SADAT and Mohamed Hosni MUBARAK. Cairo from 2004 to 2008 aggressively pursued economic reforms to attract foreign investment and facilitate GDP growth. Despite the relatively high levels of economic growth in recent years, living conditions for the average Egyptian remained poor and contributed to public discontent. After unrest erupted in January 2011, the Egyptian Government backtracked on economic reforms, drastically increasing social spending to address public dissatisfaction, but political uncertainty at the same time caused economic growth to slow significantly, reducing the government's revenues. Tourism, manufacturing, and construction were among the hardest hit sectors of the Egyptian economy, and economic growth is likely to remain slow during the next several years. The government drew down foreign exchange reserves by more than 50% in 2011 and 2012 to support the Egyptian pound and the dearth of foreign financial assistance - as a result of unsuccessful negotiations with the International Monetary Fund over a multi-billion dollar loan agreement which have dragged on more than 20 months - could precipitate fiscal and balance of payments crises in 2013.
El Salvador The smallest country in Central America geographically, El Salvador has the third largest economy in the region. With the global recession in 2009, real GDP contracted by 3.1%. The economy slowed even further during 2010-12. Remittances accounted for 17% of GDP in 2011 and were received by about a third of all households. In 2006, El Salvador was the first country to ratify the Dominican Republic-Central American Free Trade Agreement (CAFTA-DR), which has bolstered the export of processed foods, sugar, and ethanol, and supported investment in the apparel sector amid increased Asian competition. El Salvador has promoted an open trade and investment environment and has completed a wave of privatizations extending to telecom, electricity distribution, banking, and pension funds. The Salvadoran Government maintained fiscal discipline during post-war reconstruction and reconstruction following earthquakes in 2001 and hurricanes in 1998 and 2005, but El Salvador's external debt has been mounting over the last several years. Taxes levied by the government include a value added tax (VAT) of 13%, income tax of 30%, excise taxes on alcohol and cigarettes, and import duties. The VAT accounted for about 51.7% of total tax revenues in 2011. El Salvador's external debt amounts to about one-fourth of GDP. In 2012, El Salvador successfully completed a $461 million compact with the Millennium Challenge Corporation (MCC) - a United States Government agency aimed at stimulating economic growth and reducing poverty - in the country's northern region, the primary conflict zone during the civil war, through investments in education, public services, enterprise development, and transportation infrastructure. In January 2013, the MCC approved El Salvador as eligible for a possible second MCC compact.
Equatorial Guinea The discovery and exploitation of large oil and gas reserves have contributed to dramatic economic growth, but fluctuating oil prices have produced huge swings in GDP growth in recent years. The economy is still dominated by hydrocarbon production. The government has solicited foreign investment, particularly from the United States, to diversify the economy. Undeveloped natural resources include gold, zinc, diamonds, columbite-tantalite, and other base metals. Forestry and farming are also minor components of GDP. Subsistence farming is the dominant form of livelihood. Although pre-independence Equatorial Guinea counted on cocoa production for hard currency earnings, the neglect of the rural economy under successive regimes has diminished potential for agriculture-led growth. The government has stated its intention to reinvest some oil revenue into agriculture. A number of aid programs sponsored by the World Bank and the IMF have been cut off since 1993 because of corruption and mismanagement. The government has been widely criticized for its lack of transparency and misuse of oil revenues. The government has made efforts to address this issue working towards compliance with the Extractive Industries Transparency Initiative in 2010. The economy recovered from the global recession in 2011-12 stimulated by higher oil prices and large investments in public infrastructure and hotels.
Eritrea Since independence from Ethiopia in 1993, Eritrea has faced the economic problems of a small, poor country, facing chronic drought. These have been exacerbated by restrictive economic policies. Eritrea has a command economy under the control of the sole political party, the People's Front for Democracy and Justice (PFDJ). Like the economies of many African nations, a large share of the population - nearly 80% - is engaged in subsistence agriculture. That sector only produces a small share of the country's total output. Since the conclusion of the Ethiopian-Eritrea war in 2000, the government has expanded use of military and party-owned businesses to complete President ISAIAS's development agenda. The government strictly controls the use of foreign currency by limiting access and availability. Few large private enterprises exist in Eritrea and most operate in conjunction with government partners, although recently a number of large international mining ventures have opened. Eritrea's national income also relies in part on taxes paid by members of the Diaspora. While reliable statistics on food security are difficult to obtain, erratic rainfall and the percentage of the labor force tied up in national service continue to interfere with agricultural production and economic development. Eritrea's harvests generally cannot meet the food needs of the country without supplemental grain purchases. Copper and gold production is likely to drive economic growth over the next few years, but military spending will continue to compete with development and investment plans. Eritrea's economic future will depend on market reform and success at addressing social problems such as illiteracy and low skills.
Estonia Estonia, a member of the European Union and the eurozone since 2004, has a modern market-based economy and one of the higher per capita income levels in Central Europe and the Baltic region. Estonia's successive governments have pursued a free market, pro-business economic agenda and have wavered little in their commitment to pro-market reforms. The current government has followed sound fiscal policies that have resulted in balanced budgets and low public debt. The economy benefits from strong electronics and telecommunications sectors and strong trade ties with Finland, Sweden, Russia, and Germany. Tallinn's priority has been to sustain high growth rates - on average 8% per year from 2003 to 2007. Estonia's economy fell into recession in mid-2008 with GDP contracting 14.3% in 2009, as a result of an investment and consumption slump following the bursting of the real estate market bubble and a decrease in export demand as result of economic slowdown in the rest of Europe. Estonia rebounded nearly 8% in 2011 and the Estonian economy now has one of the higher GDP growth rates in Europe. Estonia adopted the euro on 1 January 2011.
Ethiopia Ethiopia's economy is based on agriculture, which accounts for 46% of GDP and 85% of total employment. Coffee has been a major export crop. The agricultural sector suffers from poor cultivation practices and frequent drought, but recent joint efforts by the Government of Ethiopia and donors have strengthened Ethiopia's agricultural resilience, contributing to a reduction in the number of Ethiopians threatened with starvation. The banking, insurance, and micro-credit industries are restricted to domestic investors, but Ethiopia has attracted significant foreign investment in textiles, leather, commercial agriculture and manufacturing. Under Ethiopia's constitution, the state owns all land and provides long-term leases to the tenants; land use certificates are now being issued in some areas so that tenants have more recognizable rights to continued occupancy and hence make more concerted efforts to improve their leaseholds. While GDP growth has remained high, per capita income is among the lowest in the world. Ethiopia''s economy continues on its state-led Growth and Transformation Plan under its new leadership after Prime Minister MELE's death. The five-year economic plan has achieved high single-digit growth rates through government-led infrastructure expansion and commercial agriculture development. Ethiopia in 2013 plans to continue construction of its Grand Renaissance Dam on the Nile-the controversial multi-billion dollar effort to develop electricity for domestic consumption and export.
European Union Internally, the EU has abolished trade barriers, adopted a common currency, and is striving toward convergence of living standards. Internationally, the EU aims to bolster Europe's trade position and its political and economic weight. Because of the great differences in per capita income among member states (from $13,000 to $82,000) and in national attitudes toward issues like inflation, debt, and foreign trade, the EU faces difficulties in devising and enforcing common policies. Eleven established EU member states, under the auspices of the European Economic and Monetary Union (EMU), introduced the euro as their common currency on 1 January 1999 (Greece did so two years later). Between 2004 and 2007, 12 states acceded to the EU that are, in general, less advanced economically than the other 15 member states. On 1 July 2013 Croatia became the most recent member of the EU, following a decade long application process. Of the 13 most recent entrants, only Slovenia (1 January 2007), Cyprus and Malta (1 January 2008), Slovakia (1 January 2009), and Estonia (1 January 2011) have adopted the euro; 11 non-Euro member states, other than the UK and Denmark which have formal opt-outs, are required by EU treaties to adopt the common currency upon meeting fiscal and monetary convergence criteria. Following the 2008-09 global economic crisis, the EU economy saw moderate GDP growth in 2010 and 2011, but a sovereign debt crisis in the euro zone intensified in 2011 and became the bloc's top economic and political priority. Despite EU/IMF adjustment programs in Greece, Ireland, and Portugal, and consolidation measures in many other EU member states, significant risks to growth remain, including high public debt loads, aging populations, onerous regulations, and fears of debt crisis contagion. In response, euro-zone leaders in 2011 boosted funding levels for the temporary European Financial Stability Facility (EFSF) to almost $600 billion and made loan terms more favorable for crisis-hit countries, and in July 2012 brought the permanent European Stabilization Mechanism (ESM) online, a year earlier than originally planned. In addition, 26 of 28 EU member states (all except the UK and Czech Republic) have indicated their intent to enact a "fiscal compact" treaty to boost long-term budgetary discipline and coordination. In September 2012 the European Central Bank committed to a bond-buying program for troubled euro-zone member states that agree to a formal program of fiscal and structural reforms, aiming to reduce their borrowing costs and restore confidence in the euro zone.
Falkland Islands (Islas Malvinas) The economy was formerly based on agriculture, mainly sheep farming but fishing and tourism currently comprise 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 net more than $40 million per year, which help support the island's health, education, and welfare system. The waters around the Falkland Islands are known for their squid, which account for around 75% of the annual 200,000 ton fish catch. Dairy farming supports domestic consumption; crops furnish winter fodder. Foreign exchange earnings come from shipments of high-grade wool to the UK and from the sale of postage stamps and coins. In 2001, the government purchased 100 reindeer with the intent to increase the number to 10,000 over the following 20 years so that venison could be exported to Scandinavia and Chile. Tourism, especially eco-tourism, is increasing rapidly, with about 69,000 visitors in 2009. The British military presence also provides a sizeable economic boost. The islands are now self-financing except for defense. In 1993 the British Geological Survey announced a 200-mile oil exploration zone around the islands, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day. Political tensions between the UK and Argentina remain high following the start of oil drilling activities in the waters. In September 2011, a British exploration firm announced that it plans to commence oil production in 2016.
Faroe Islands The Faroese economy is dependent on fishing, which makes the economy vulnerable to price fluctuations. The sector normally accounts for about 95% of exports and nearly half of GDP. In early 2008 the Faroese economy began to slow as a result of smaller catches and historically high oil prices. The slowdown in the Faroese economy followed a strong performance since the mid-1990s with annual growth rates averaging close to 6%, mostly a result of increased fish landings and salmon farming, and high export prices. Unemployment reached its lowest level in June 2008 at 1.1%. The Faroese Home Rule Government produced increasing budget surpluses in that period, which helped to reduce the large public debt, most of it to Denmark. However, total dependence on fishing and salmon farming make the Faroese economy vulnerable to fluctuations in world demand. Initial discoveries of oil in the Faroese area give hope for eventual oil production, which may provide a foundation for a more diversified economy and less dependence on Danish economic assistance. Aided by an annual subsidy from Denmark amounting to about 3% of Faroese GDP, the Faroese have a standard of living almost equal to that of Denmark and Greenland. The Faroese Government ran relatively large deficits from 2008 to 2010 and budget deficits are forecast for several years ahead. At year-end 2010 the gross debt had reached approximately US$900 million.
Fiji Fiji, endowed with forest, mineral, and fish resources, is one of the most developed of the Pacific island economies though still with a large subsistence sector. Sugar exports, remittances from Fijians working abroad, and a growing tourist industry - with 400,000 to 500,000 tourists annually - are the major sources of foreign exchange. Fiji's sugar has special access to European Union markets but will be harmed by the EU's decision to cut sugar subsidies. Sugar processing makes up one-third of industrial activity but is not efficient. Fiji's tourism industry was damaged by the December 2006 coup and is facing an uncertain recovery time. In 2007 tourist arrivals were down almost 6%, with substantial job losses in the service sector, and GDP dipped. The coup has created a difficult business climate. The EU has suspended all aid until the interim government takes steps toward new elections. Long-term problems include low investment, uncertain land ownership rights, and the government's inability to manage its budget. Overseas remittances from Fijians working in Kuwait and Iraq have decreased significantly. Fiji's current account deficit peaked at 23% of GDP in 2006, and declined to 12.5% of GDP in 2012.
Finland Finland has a highly industrialized, largely free-market economy with per capita output almost as high as that of Austria, Belgium, the Netherlands, and Sweden. Trade is important with exports accounting for over one third of GDP in recent years. Finland is strongly competitive in manufacturing - principally the wood, metals, engineering, telecommunications, and electronics industries. Finland excels in high-tech exports such as mobile phones. Except for timber and several minerals, Finland depends on imports of raw materials, energy, and some components for manufactured goods. Because of the climate, agricultural development is limited to maintaining self-sufficiency in basic products. Forestry, an important export earner, provides a secondary occupation for the rural population. Finland had been one of the best performing economies within the EU in recent years and its banks and financial markets avoided the worst of global financial crisis. However, the world slowdown hit exports and domestic demand hard in 2009, with Finland experiencing one of the deepest contractions in the euro zone. A recovery of exports, domestic trade, and household consumption stimulated economic growth in 2010-11. The recession affected general government finances and the debt ratio, turning previously strong budget surpluses into deficits, but Finland has taken action to ensure it will meet EU deficit targets by 2013 and retains its triple-A credit rating. Finland's main challenge in 2013 will be to stimulate growth in the face of weak demand in EU export markets and government austerity measures meant to reduce its budget deficit. Longer-term, Finland must address a rapidly aging population and decreasing productivity that threaten competitiveness, fiscal sustainability, and economic growth.
France The French economy is diversified across all sectors. The government has partially or fully privatized many large companies, including Air France, France Telecom, Renault, and Thales. However, the government maintains a strong presence in some sectors, particularly power, public transport, and defense industries. With at least 79 million foreign tourists per year, France is the most visited country in the world and maintains the third largest income in the world from tourism. France's leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that reduce income disparity and the impact of free markets on public health and welfare. France's real GDP contracted 2.6% in 2009, but recovered somewhat in 2010 and 2011, before stagnating in 2012. The unemployment rate increased from 7.4% in 2008 to 10.3% in 2012. Youth unemployment shot up to 24.2% during the third quarter of 2012 in metropolitan France. Lower-than-expected growth and high unemployment costs have strained France's public finances. The budget deficit rose sharply from 3.4% of GDP in 2008 to 7.5% of GDP in 2009 before improving to 4.8% of GDP in 2012, while France's public debt rose from 68% of GDP to 90% over the same period. Under President SARKOZY, Paris implemented some austerity measures to bring the budget deficit under the 3% euro-zone ceiling by 2013 and to highlight France's commitment to fiscal discipline at a time of intense financial market scrutiny of euro-zone debt. Socialist Party candidate Francois HOLLANDE won the May 2012 presidential election, after advocating pro-growth economic policies, the separation of banks' traditional deposit taking and lending activities from more speculative businesses, increasing the top corporate and personal tax rates, and hiring an additional 60,000 teachers during his five-year term. The government's attempt to introduce a 75% wealth tax on income over one million euros for two years was struck down by the French Constitutional Council in December 2012 because it applied to individuals rather than households. France ratified the EU fiscal stability treaty in October 2012 and HOLLANDE's government has maintained France's commitment to meeting the budget deficit target of 3% of GDP during 2013 even amid signs that economic growth will be lower than the government's forecast of 0.8%. Despite stagnant growth and fiscal challenges, France's borrowing costs declined during the second half of 2012 to euro-era lows.
French Polynesia Since 1962, when France stationed military personnel in the region, French Polynesia has changed from a subsistence agricultural economy to one in which a high proportion of the work force is either employed by the military or supports the tourist industry. With the halt of French nuclear testing in 1996, the military contribution to the economy fell sharply. Tourism accounts for about one-fourth of GDP and is a primary source of hard currency earnings. Other sources of income are handicrafts, public works projects, aquaculture, pearl farming and deep-sea commercial fishing. The small manufacturing sector primarily processes agricultural products. The territory benefits substantially from development agreements with France aimed principally at creating new businesses and strengthening social services.
French Southern and Antarctic Lands Economic activity is limited to servicing meteorological and geophysical research stations, military bases, and French and other fishing fleets. The fish catches landed on Iles Kerguelen by foreign ships are exported to France and Reunion.
Gabon Gabon enjoys a per capita income four times that of most sub-Saharan African nations, but because of high income inequality, a large proportion of the population remains poor. Gabon depended on timber and manganese until oil was discovered offshore in the early 1970s. The economy was reliant on oil for about 50% of its GDP, about 70% of revenues, and 87% of goods exports for 2010, although some fields have passed their peak production. A rebound of oil prices from 1999 to 2008 helped growth, but declining production has hampered Gabon from fully realizing potential gains. Gabon signed a 14-month Stand-By Arrangement with the IMF in May 2007, and later that year issued a $1 billion sovereign bond to buy back a sizable portion of its Paris Club debt. Gabon continues to face fluctuating prices for its oil, timber, and manganese exports. Despite the abundance of natural wealth, poor fiscal management has stifled the economy. However, President BONGO ONDIMBA has made efforts to increase transparency and is taking steps to make Gabon a more attractive investment destination to diversify the economy. BONGO ONDIMBA has attempted to boost growth by increasing government investment in human resources and infrastructure. GDP grew more than 6% per year over the 2010-12 period.
Gambia, The The Gambia has sparse natural resource deposits and a limited agricultural base, and relies in part on remittances from workers overseas and tourist receipts. About three-quarters of the population depends on the agricultural sector for its livelihood and the sector provides for about one-quarter of GDP. The agricultural sector has untapped potential - less than half of arable land is cultivated. Small-scale manufacturing activity features the processing of peanuts, fish, and hides. The Gambia's natural beauty and proximity to Europe has made it one of the larger markets for tourism in West Africa, boosted by government and private sector investments in eco-tourism and upscale facilities. In 2012, however, sluggish tourism led to a decline in GDP. Tourism brings in about one-fifth of GDP. Agriculture also took a hit in 2012 due to unfavorable weather patterns. The Gambia's re-export trade accounts for almost 80% of goods exports. Unemployment and underemployment rates remain high. Economic progress depends on sustained bilateral and multilateral aid, on responsible government economic management, and on continued technical assistance from multilateral and bilateral donors. International donors and lenders continue to be concerned about the quality of fiscal management and The Gambia's debt burden.
Gaza Strip Israeli security controls imposed since the end of the second intifada have degraded economic conditions in the Gaza Strip, the smaller of the two areas comprising the Palestinian territories. Israeli-imposed border closures, which became more restrictive after HAMAS seized control of the territory in June 2007, have resulted in high unemployment, elevated poverty rates, and a sharp contraction of the private sector that had relied primarily on export markets. The population depends on government spending - by both the Palestinian Authority and HAMAS's de facto government - and humanitarian assistance. Changes to Israeli restrictions on imports in 2010 resulted in a rebound in some economic activity, but regular exports from Gaza still are not permitted. Standard-of-living measures remain below levels seen in the mid-1990s.
Georgia Georgia's main economic activities include the cultivation of agricultural products such as grapes, citrus fruits, and hazelnuts; mining of manganese, copper, and gold; and output of a small industrial sector producing alcoholic and nonalcoholic beverages, metals, machinery, and chemicals. The country imports nearly all its needed supplies of natural gas and oil products. It has sizeable hydropower capacity that now provides most of its energy needs. Georgia has overcome the chronic energy shortages and gas supply interruptions of the past by renovating hydropower plants and by increasingly relying on natural gas imports from Azerbaijan instead of from Russia. Construction of the Baku-T'bilisi-Ceyhan oil pipeline, the Baku-T'bilisi-Erzerum gas pipeline, and the Kars-Akhalkalaki Railroad are part of a strategy to capitalize on Georgia's strategic location between Europe and Asia and develop its role as a transit point for gas, oil, and other goods. Georgia's economy sustained GDP growth of more than 10% in 2006-07, based on strong inflows of foreign investment and robust government spending. However, GDP growth slowed following the August 2008 conflict with Russia, and sunk to negative 4 percent in 2009 as foreign direct investment and workers' remittances declined in the wake of the global financial crisis. The economy rebounded in 2010-12, with growth rates above 6% per year, but FDI inflows, the engine of Georgian economic growth prior to the 2008 conflict, have not recovered fully. Unemployment has also remained high at above 15%. Georgia has historically suffered from a chronic failure to collect tax revenues; however, the government, since coming to power in 2004, has simplified the tax code, improved tax administration, increased tax enforcement, and cracked down on petty corruption, leading to higher revenues. The country is pinning its hopes for renewed growth on a determined effort to continue to liberalize the economy by reducing regulation, taxes, and corruption in order to attract foreign investment, with a focus on hydropower, agriculture, tourism, and textiles production. Since 2004, the government has taken a series of actions against endemic corruption, including reform of the traffic police and implementation of a fair examination system for entering the university system. The government has received high marks from the World Bank for its anti-corruption efforts.
Germany The German economy - the fifth largest economy in the world in PPP terms and Europe's largest - is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force. Like its Western European neighbors, Germany faces significant demographic challenges to sustained long-term growth. Low fertility rates and declining net immigration are increasing pressure on the country's social welfare system and necessitate structural reforms. Reforms launched by the government of Chancellor Gerhard SCHROEDER (1998-2005), deemed necessary to address chronically high unemployment and low average growth, contributed to strong growth in 2006 and 2007 and falling unemployment. These advances, as well as a government subsidized, reduced working hour scheme, help explain the relatively modest increase in unemployment during the 2008-09 recession - the deepest since World War II - and its decrease to 6.5% in 2012. GDP contracted 5.1% in 2009 but grew by 4.2% in 2010, and 3.0% in 2011, before dipping to 0.7% in 2012 - a reflection of low investment spending due to crisis-induced uncertainty and the decreased demand for German exports from recession-stricken periphery countries. Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts introduced in Chancellor Angela MERKEL's second term increased Germany's total budget deficit - including federal, state, and municipal - to 4.1% in 2010, but slower spending and higher tax revenues reduced the deficit to 0.8% in 2011. In 2012 Germany reached a budget surplus of 0.1%. A constitutional amendment approved in 2009 limits the federal government to structural deficits of no more than 0.35% of GDP per annum as of 2016 though the target was already reached in 2012. By 2014, the federal government wants to balance its budget. Following the March 2011 Fukushima nuclear disaster, Chancellor Angela Merkel announced in May 2011 that eight of the country's 17 nuclear reactors would be shut down immediately and the remaining plants would close by 2022. Germany hopes to replace nuclear power with renewable energy. Before the shutdown of the eight reactors, Germany relied on nuclear power for 23% of its electricity generating capacity and 46% of its base-load electricity production.
Ghana Ghana's economy has been strengthened by a quarter century of relatively sound management, a competitive business environment, and sustained reductions in poverty levels. Ghana is well-endowed with natural resources and agriculture accounts for roughly one-quarter of GDP and employs more than half of the workforce, mainly small landholders. The services sector accounts for 50% of GDP. Gold and cocoa production and individual remittances are major sources of foreign exchange. Oil production at Ghana's offshore Jubilee field began in mid-December, 2010, and is expected to boost economic growth. President MAHAMA faces challenges in managing new oil revenue while maintaining fiscal discipline and resisting debt accumulation. Estimated oil reserves have jumped to almost 700 million barrels. Ghana signed a Millennium Challenge Corporation (MCC) Compact in 2006, which aims to assist in transforming Ghana's agricultural sector. Ghana opted for debt relief under the Heavily Indebted Poor Country (HIPC) program in 2002, and is also benefiting from the Multilateral Debt Relief Initiative that took effect in 2006. In 2009, Ghana signed a three-year Poverty Reduction and Growth Facility with the IMF to improve macroeconomic stability, private sector competitiveness, human resource development, and good governance and civic responsibility. Sound macro-economic management along with higher prices for oil, gold and, cocoa helped sustain high GDP growth in 2008-12, despite the general slowdown in the global economy during that same time period.
Gibraltar Self-sufficient Gibraltar benefits from an extensive shipping trade, offshore banking, and its position as an international conference center. Tax rates are low to attract foreign investment. The British military presence has been sharply reduced and now contributes about 7% to the local economy, compared with 60% in 1984. The financial sector, tourism (almost 5 million visitors in 1998), gaming revenues, shipping services fees, and duties on consumer goods also generate revenue. The financial sector, tourism, and the shipping sector contribute 30%, 30%, and 25%, respectively, of GDP. Telecommunications, e-commerce, and e-gaming account for the remaining 15%. In recent years, Gibraltar has seen major structural change from a public to a private sector economy, but changes in government spending still have a major impact on the level of employment.
Greece Greece has a capitalist economy with a 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% 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. The economy contracted by 2.3% in 2009, 3.5% in 2010, 6.9% in 2011, and 6.0% in 2012. 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% of GDP. Austerity measures reduced the deficit to about 8% in 2012. Deteriorating public finances, inaccurate and misreported statistics, and consistent underperformance on reforms prompted major credit rating agencies to downgrade Greece's international debt rating in late 2009, and has led the country into a financial crisis. Under intense pressure from the EU and international market participants, the government adopted a medium-term austerity program that includes cutting government spending, decreasing tax evasion, overhauling the health-care and pension systems, and reforming the labor and product markets. Athens, however, faces long-term challenges to push through unpopular reforms in the face of widespread unrest from the country's powerful labor unions and the general public. In April 2010 a leading credit agency assigned Greek debt its lowest possible credit rating; in May 2010, the International Monetary Fund and Euro-Zone 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 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. European leaders and the IMF agreed in October 2011 to provide Athens a second bailout package of $169 billion. The second deal however, calls for Greece's creditors to write down a significant portion of their Greek government bond holdings. In exchange for the second loan Greece has promised to introduce an additional $7.8 billion in austerity measures during 2013-15. However, these massive austerity cuts are lengthening Greece's economic recession and depressing tax revenues. Greece's lenders are calling on Athens to step up efforts to increase tax collection, privatize public enterprises, and rein in health spending, and are planning to give Greece more time to shore up its economy and finances. Many investors doubt that Greece can sustain fiscal efforts in the face of a bleak economic outlook, public discontent, and political instability.
Greenland The economy remains critically dependent on exports of shrimp and fish, income from resource exploration and extraction, and on a substantial subsidy from the Danish Government. The subsidy is budgeted to be about $650 million in 2012, approximately 56% of government revenues in 2012 for the year. The public sector, including publicly owned enterprises and the municipalities, plays the dominant role in Greenland's economy. Greenland's real GDP contracted about 1% in 2009 as a result of the global economic slowdown, but is estimated to have grown 2% in 2010 and 3% in 2011. The relative ease with which Greenland has weathered the economic crisis is due to increased hydrocarbon and mineral exploration and extraction activities, a high level of construction activity in the Nuuk area and the increasing price of fish and shrimp. During the last decade the Greenland Home Rule Government (GHRG) pursued conservative fiscal and monetary policies, but public pressure has increased for better schools, health care and retirement systems. The Greenlandic economy has benefited from increasing catches and exports of shrimp, Greenland halibut and, more recently, crabs. Due to Greenland's continued dependence on exports of fish - which accounted for 89% of exports in 2010 - the economy remains very sensitive to foreign developments. International consortia are increasingly active in exploring for hydrocarbon resources off Greenland's western coast, and international studies indicate the potential for oil and gas fields in northern and northeastern Greenland. In May 2007 a US aluminum producer concluded a memorandum of understanding with the Greenland Home Rule Government to build an aluminum smelter and a power generation facility, which takes advantage of Greenland's abundant hydropower potential. Within the area of mining, olivine sand continues to be produced and gold production has resumed in south Greenland, while rare-earth and iron ore mineral projects have been proposed or planned elsewhere on the island. Tourism also offers another avenue of economic growth for Greenland, with increasing numbers of cruise lines now operating in Greenland's western and southern waters during the peak summer tourism season.
Grenada Grenada relies on tourism as its main source of foreign exchange especially since the construction of an international airport in 1985. Hurricanes Ivan (2004) and Emily (2005) severely damaged the agricultural sector - particularly nutmeg and cocoa cultivation - which had been a key driver of economic growth. Grenada has rebounded from the devastating effects of the hurricanes but is now saddled with the debt burden from the rebuilding process. Public debt-to-GDP is nearly 110%, leaving the THOMAS administration limited room to engage in public investments and social spending. Strong performances in construction and manufacturing, together with the development of tourism and an offshore financial industry, have also contributed to growth in national output; however, economic growth remained stagnant in 2010-12 after a sizeable contraction in 2009, because of the global economic slowdown's effects on tourism and remittances.
Guam The economy depends largely on US national defense spending, tourism, other services. Total US grants, wages and salaries, and procurement outlays amounted to approximately $1.6 billion in 2010. Over the past 30 years, tourism has grown to become the largest income source following national defense.
Guatemala Guatemala is the most populous country in Central America with a GDP per capita roughly one-half that of the average for Latin America and the Caribbean. The agricultural sector accounts for 13% of GDP and 38% of the labor force; key agricultural exports include coffee, sugar, bananas, and vegetables. The 1996 peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment, and since then Guatemala has pursued important reforms and macroeconomic stabilization. The Dominican Republic-Central American Free Trade Agreement (CAFTA-DR) entered into force in July 2006 spurring increased investment and diversification of exports, with the largest increases in ethanol and non-traditional agricultural exports. While CAFTA-DR has helped improve the investment climate, concerns over security, the lack of skilled workers and poor infrastructure continue to hamper foreign direct investment. The distribution of income remains highly unequal with the richest 20% of the population accounting for more than 51% of Guatemala's overall consumption. More than half of the population is below the national poverty line and 13% of the population lives in extreme poverty. Poverty among indigenous groups, which make up 38% of the population, averages 73% and extreme poverty rises to 28%. Nearly one-half of Guatemala's children under age five are chronically malnourished, one of the highest malnutrition rates in the world. Given Guatemala''s large expatriate community in the United States, it is the top remittance recipient in Central America, with inflows serving as a primary source of foreign income equivalent to nearly two-fifths of exports or one-tenth of GDP. Economic growth fell in 2009 as export demand from US and other Central American markets dropped and foreign investment slowed amid the global recession. The economy gradually recovered in 2010-12.
Guernsey Financial services - banking, fund management, insurance - account for about 23% of employment and about 55% of total income in this tiny, prosperous Channel Island economy. Tourism, manufacturing, and horticulture, mainly tomatoes and cut flowers, have been declining. Financial services, construction, retail, and the public sector have been growing. Light tax and death duties make Guernsey a popular tax haven. In January 2013, Guernsey signed a tax agreement with Jersey and the Isle of Man, in order to enable the islands' authorities to end tax avoidance and evasion. The evolving economic integration of the EU nations is changing the environment under which Guernsey operates.
Guinea Guinea is a poor country that possesses major mineral, hydropower, and agricultural resources. The country has almost half of the world's bauxite reserves and significant iron ore, gold, and diamond reserves. However, Guinea has been unable to profit from this potential, as rampant corruption, dilapidated infrastructure, and political uncertainty have drained investor confidence. In the time since a 2008 coup following the death of long-term President Lansana CONTE, international donors, including the G-8, the IMF, and the World Bank, have significantly curtailed their development programs. Throughout 2009, policies of the ruling military junta severely weakened the economy. The junta leaders spent and printed money at an accelerating rate, driving inflation and debt to perilously high levels. In early 2010, the junta collapsed and was replaced by a transition government, which ceded power in December 2010 to the country's first-ever democratically elected president, Alpha CONDE. International assistance and investment are expected to return to Guinea, but the levels will depend upon the ability of the new government to combat corruption, reform its banking system, improve its business environment, and build infrastructure. IMF and World Bank programs will be especially critical as Guinea attempts to gain debt relief. International investors have expressed keen interest in Guinea's vast iron ore reserves, which could further propel the country's growth. The government put forward a new mining code in September 2011 that includes provisions to combat corruption, protect the environment, and review all existing mining contracts. Longer range plans to deploy broadband Internet throughout the country could spur economic growth as well.
Guinea-Bissau One of the poorest countries in the world, Guinea-Bissau's legal economy depends mainly on farming and fishing, but trafficking in narcotics is probably the most lucrative trade. The combination of limited economic prospects, a weak and faction-ridden government, and favorable geography have made this West African country a way station for drugs bound for Europe. Cashew crops have increased remarkably in recent years; low rainfall hindered cereals and other crops in 2011. Guinea-Bissau exports fish and seafood along with small amounts of peanuts, palm kernels, and timber. Rice is the major crop and staple food. However, intermittent fighting between Senegalese-backed government troops and a military junta destroyed much of the country's infrastructure and caused widespread damage to the economy in 1998; the civil war led to a 28% drop in GDP that year, with partial recovery in 1999-2002. In December 2003, the World Bank, IMF, and UNDP were forced to step in to provide emergency budgetary support in the amount of $107 million for 2004, representing over 80% of the total national budget. The government is successfully implementing a three-year $33 million extended credit arrangement with the IMF that runs through 2012. In December 2010 the World Bank and IMF announced support for $1.2 billion worth of debt relief. Guinea-Bissau made progress with debt relief in 2011 when members of the Paris Club opted to write-off much of the country's obligations.
Guyana The Guyanese economy exhibited moderate economic growth in recent years and is based largely on agriculture and extractive industries. The economy is heavily dependent upon the export of six commodities - sugar, gold, bauxite, shrimp, timber, and rice - which represent nearly 60% of the country's GDP and are highly susceptible to 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, primarily in the raw materials sector. Guyana has experienced positive growth almost every year over the past decade. Inflation has been kept under control. Recent years have seen the government''s stock of debt reduced significantly - with external debt now less than half of what it was in the early 1990s. Chronic problems include a shortage of skilled labor and a deficient infrastructure. Despite recent improvements, the government is still juggling a sizable external debt against the urgent need for expanded public investment. In March 2007, the Inter-American Development Bank, Guyana''s principal donor, canceled Guyana''s nearly $470 million debt, equivalent to 21% of GDP, which along with other Highly Indebted Poor Country (HIPC) debt forgiveness brought the debt-to-GDP ratio down from 183% in 2006 to 120% in 2007. Guyana became heavily indebted as a result of the inward-looking, state-led development model pursued in the 1970s and 1980s. Growth slowed in 2009 as a result of the world recession, but picked up in 2010-11, before slowing again in 2012, as a result of a second recession, this focused mainly in Europe. The slowdown in the domestic economy and lower import costs has helped to narrow the country''s current account deficit, despite generally lower earnings from exports.
Haiti Haiti is a free market economy that enjoys the advantages of low labor costs and tariff-free access to the US for many of its exports. Poverty, corruption, vulnerability to natural disasters, and low levels of education for much of the population are among Haiti's most serious impediments to economic growth. Haiti's economy suffered a severe setback in January 2010 when a 7.0 magnitude earthquake destroyed much of its capital city, Port-au-Prince, and neighboring areas. Currently the poorest country in the Western Hemisphere with 80% of the population living under the poverty line and 54% in abject poverty, the earthquake further inflicted $7.8 billion in damage and caused the country's GDP to contract 5.4% in 2010. In 2011, the Haitian economy had begun recovering slowly from the effects of the earthquake. However, two hurricanes adversely affected agricultural output and the slow public capital spending negatively affected the economic recovery in 2012. GDP growth for 2012 was 2.8%, down from 5.6% in 2011. Two-fifths of all Haitians depend on 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 economic engagement under the Caribbean Basin Trade Preference Agreement (CBTPA) and the 2008 Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE II) Act helped increase apparel exports and investment by providing duty-free access to the US. Congress voted in 2010 to extend the CBTPA and HOPE II until 2020 under the Haiti Economic Lift Program (HELP) Act; the apparel sector accounts for about 90% of Haitian exports and nearly one-twentieth of GDP. Remittances are the primary source of foreign exchange, equaling 20% of GDP and representing more than five times the earnings from exports in 2012. Haiti suffers from a lack of investment, partly because of weak infrastructure such as access to electricity. In 2005, Haiti paid its arrears to the World Bank, paving the way for reengagement with the Bank. Haiti received debt forgiveness for over $1 billion through the Highly-Indebted Poor Country initiative in mid-2009. The remainder of its outstanding external debt was cancelled by donor countries following the 2010 earthquake, but has since risen to nearly $1 billion. The government relies on formal international economic assistance for fiscal sustainability, with over half of its annual budget coming from outside sources. The MARTELLY administration in 2011 launched a campaign aimed at drawing foreign investment into Haiti as a means for sustainable development. To that end, the MARTELLY government in 2012 created a Commission for Commercial Code Reform, effected reforms to the justice sector, and inaugurated the Caracol industrial park in Haiti's north coast.
Heard Island and McDonald Islands The islands have no indigenous economic activity, but the Australian Government allows limited fishing in the surrounding waters. Visits to Heard Island typically focus on terrestrial and marine research and infrequent private expeditions.
Holy See (Vatican City) The Holy See is supported financially by a variety of sources, including investments, real estate income, and donations from Catholic individuals, dioceses, and institutions; these help fund the Roman Curia (Vatican bureaucracy), diplomatic missions, and media outlets. Moreover, an annual collection taken up in dioceses and from direct donations go to a non-budgetary fund, known as Peter's Pence, which is used directly by the Pope for charity, disaster relief, and aid to churches in developing nations. Donations increased between 2010 and 2011. The separate Vatican City State budget includes the Vatican museums and post office and is supported financially by the sale of stamps, coins, medals, and tourist mementos; by fees for admission to museums; and by publication sales. Its revenues increased between 2010 and 2011 because of expanded opening hours and a growing number of visitors. However, the Holy See has not escaped the financial difficulties engulfing other European countries; in 2012 it started a spending review to determine where to cut costs to reverse its 2011 budget deficit of 15 million euros. Most public expenditures go to wages and other personnel costs; the incomes and living standards of lay workers are comparable to those of counterparts who work in the city of Rome.
Honduras Honduras, the second poorest country in Central America, suffers from extraordinarily unequal distribution of income, as well as high underemployment. While historically dependent on the export of bananas and coffee, Honduras has diversified its export base to include apparel and automobile wire harnessing. Nearly half of Honduras's economic activity is directly tied to the US, with exports to the US accounting for 30% of GDP and remittances for another 20%. The US-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) came into force in 2006 and has helped foster foreign direct investment, but physical and political insecurity, as well as crime and perceptions of corruption, may deter potential investors; about 70% of FDI is from US firms. The economy registered modest economic growth of 3.0%-4.0% from 2010 to 2012, insufficient to improve living standards for the nearly 65% of the population in poverty. An 18-month IMF Standby Arrangement expired in March 2012 and was not renewed, due to the country's growing budget deficit and weak current account performance. Public sector workers complained of not receiving their salaries in November and December 2012, and government suppliers are owed at least several hundred million dollars in unpaid contracts. The government announced in January 2013 that loss-making public enterprises will be forced to submit financial rescue plans before receiving their budget allotments for 2013.
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 levies excise duties on only four commodities, namely: hard alcohol, tobacco, hydrocarbon oil, and methyl alcohol. There are no quotas or dumping laws. Hong Kong's open economy left it exposed to the global economic slowdown that began in 2008. Although increasing integration with China, through trade, tourism, and financial links, helped it to make an initial recovery more quickly than many observers anticipated, it again faces a possible slowdown as exports to the Euro zone and US slump. 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 9.1% of total system deposits in Hong Kong by the end of 2012, an increase of 59% from the previous 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. 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 34.9 million in 2012, 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 2012 mainland Chinese companies constituted about 46.6% of the firms listed on the Hong Kong Stock Exchange and accounted for about 57.4% 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. Growth slowed to 5% in 2011, and less than 2% in 2012. Credit expansion and tight housing supply conditions caused Hong Kong property prices to rise rapidly and inflation to rise 4.1% in 2012. Lower and middle 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.
Hungary Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-27 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment worth more than $70 billion. In late 2008, Hungary's impending inability to service its short-term debt - brought on by the global financial crisis - led Budapest to obtain an IMF/EU/World Bank-arranged financial assistance package worth over $25 billion. The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, resulted in an economic contraction of 6.8% in 2009. In 2010 the new government implemented a number of changes including cutting business and personal income taxes, but imposed "crisis taxes" on financial institutions, energy and telecom companies, and retailers. The IMF/EU bail-out program lapsed at the end of the year and was replaced by Post Program Monitoring and Article IV Consultations on overall economic and fiscal processes. The economy began to recover in 2010 with a big boost from exports, especially to Germany, and achieved growth of approximately 1.7% in 2011. At the end of 2011 the government turned to the IMF and the EU to obtain financial backstop to support its efforts to refinance foreign currency debt and bond obligations in 2012 and beyond, but Budapest's rejection of EU and IMF economic policy recommendations led to a breakdown in talks with the lenders in late 2012. Since joining the EU in 2004, Hungary has been subject to the European Commission's Excessive Deficit Procedure; Brussels has requested that the government outline measures to sustainably reduce the budget deficit to under 3% of GDP. Ongoing economic weakness in Western Europe as well as lack of domestic investment and demand caused a GDP to fall 1.7% in 2012. 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 nearly 5% 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, boosted economic growth, and sparked some interest from high-tech firms looking to establish data centers using cheap green energy, 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 rose 2.7% in 2012 and unemployment declined to 5.6%. Since the collapse of Iceland's financial sector, government economic priorities have included: stabilizing the krona, implementing capital controls, reducing Iceland's high budget deficit, containing inflation, addressing high household debt, 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. Iceland began making payments to the UK, the Netherlands, and other claimants in late 2011 following Iceland's Supreme Court ruling that upheld 2008 emergency legislation that gives priority to depositors for compensation from failed Icelandic banks. Iceland owes British and Dutch authorities approximately $5.5 billion for compensating British and Dutch citizens who lost deposits in Icesave when parent bank Landsbanki failed in 2008. Iceland began 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 worries over the ongoing Eurozone crisis.
India India is developing into an open-market economy, yet traces of its past autarkic policies remain. Economic liberalization measures, including industrial deregulation, privatization of state-owned enterprises, and reduced controls on foreign trade and investment, began in the early 1990s and have served to accelerate the country's growth, which averaged under 7% per year since 1997. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Slightly more than half of the work force is in agriculture, but services are the major source of economic growth, accounting for nearly two-thirds of India's output, with less than one-third of its labor force. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services, business outsourcing services, and software workers. In 2010, the Indian economy rebounded robustly from the global financial crisis - in large part because of strong domestic demand - and growth exceeded 8% year-on-year in real terms. However, India's economic growth began slowing in 2011 because of a slowdown in government spending and a decline in investment, caused by investor pessimism about the government's commitment to further economic reforms and about the global situation. High international crude prices have exacerbated the government's fuel subsidy expenditures, contributing to a higher fiscal deficit and a worsening current account deficit. In late 2012, the Indian Government announced additional reforms and deficit reduction measures to reverse India's slowdown, including allowing higher levels of foreign participation in direct investment in the economy. The outlook for India's medium-term growth is positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. India has many long-term challenges that it has yet to fully address, including poverty, corruption, violence and discrimination against women and girls, an inefficient power generation and distribution system, ineffective enforcement of intellectual property rights, decades-long civil litigation dockets, inadequate transport and agricultural infrastructure, limited non-agricultural employment opportunities, inadequate availability of quality basic and higher education, and accommodating rural-to-urban migration.
Indian Ocean The Indian Ocean provides major sea routes connecting the Middle East, Africa, and East Asia with Europe and the Americas. It carries a particularly heavy traffic of petroleum and petroleum products from the oilfields of the Persian Gulf and Indonesia. Its fish are of great and growing importance to the bordering countries for domestic consumption and export. Fishing fleets from Russia, Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainly for shrimp and tuna. Large reserves of hydrocarbons are being tapped in the offshore areas of Saudi Arabia, Iran, India, and western Australia. An estimated 40% of the world's offshore oil production comes from the Indian Ocean. Beach sands rich in heavy minerals and offshore placer deposits are actively exploited by bordering countries, particularly India, South Africa, Indonesia, Sri Lanka, and Thailand.
Indonesia Indonesia, a vast polyglot nation, grew more than 6% annually in 2010-12. The government made economic advances under the first administration of President YUDHOYONO (2004-09), introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. During the global financial crisis, Indonesia outperformed its regional neighbors and joined China and India as the only G20 members posting growth in 2009. The government has promoted fiscally conservative policies, resulting in a debt-to-GDP ratio of less than 25%, a fiscal deficit below 3%, and historically low rates of inflation. Fitch and Moody's upgraded Indonesia's credit rating to investment grade in December 2011. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. The government in 2013 faces the ongoing challenge of improving Indonesia''s insufficient infrastructure to remove impediments to economic growth, labor unrest over wages, and reducing its fuel subsidy program in the face of high oil prices.
Iran Iran's economy is marked by statist policies and an inefficient state sector, which create major distortions throughout the system, and reliance on oil, which provides a large share of government revenues. Price controls, subsidies, and other rigidities weigh down the economy, undermining the potential for private-sector-led growth. Private sector activity is typically limited to small-scale workshops, farming, some manufacturing, and services. Significant informal market activity flourishes and corruption is widespread. Tehran since the early 1990s has recognized the need to reduce these inefficiencies, and in December 2010 the Majles passed President Mahmud AHMADI-NEJAD's Targeted Subsidies Law (TSL) to reduce state subsidies on food and energy. This was the most extensive economic reform since the government implemented gasoline rationing in 2007. Over a five-year period the legislation sought to phase out subsidies that previously cost Tehran $60-$100 billion annually and mostly benefited Iran''s upper and middle classes. Cash payouts of $45 per person to more than 90% of Iranian households mitigated initial widespread resistance to the TSL program. However, inflation in 2012 reached its highest level in four years, eroding the value of these cash payouts and motivating the Majles to halt planned price increases for the second half of 2012 through at least March 2013. New fiscal and monetary constraints on Tehran, following international sanctions in January against Iran''s Central Bank and oil exports, significantly reduced Iran''s oil revenue, forced government spending cuts, and fueled a 20% currency depreciation. Economic growth turned negative for the first time in two decades. Iran also continues to suffer from double-digit unemployment and underemployment. Underemployment among Iran''s educated youth has convinced many to seek jobs overseas, resulting in a significant "brain drain."
Iraq An improving security environment and foreign investment are helping to spur economic activity, particularly in the energy, construction, and retail sectors. Broader economic development, long-term fiscal health, and sustained improvements in the overall standard of living still depend on the central government passing major policy reforms. Iraq's largely state-run economy is dominated by the oil sector, which provides more than 90% of government revenue and 80% of foreign exchange earnings. Iraq in 2012 boosted oil exports to a 30-year high of 2.6 million barrels per day, a significant increase from Iraq's average of 2.2 million in 2011. Government revenues increased as global oil prices remained persistently high for much of 2012. Iraq's contracts with major oil companies have the potential to further expand oil exports and revenues, but Iraq will need to make significant upgrades to its oil processing, pipeline, and export infrastructure to enable these deals to reach their economic potential. The Iraqi Kurdistan Region's (IKR) autonomous Kurdistan Regional Government (KRG) passed its own oil law in 2007, and has directly signed about 50 contracts to develop IKR energy reserves. The federal government has disputed the legal authority of the KRG to conclude most of these contracts, some of which are also in areas with unresolved administrative boundaries in dispute between the federal and regional government. Iraq is making slow progress enacting laws and developing the institutions needed to implement economic policy, and political reforms are still needed to assuage investors' concerns regarding the uncertain business climate, which may have been harmed by the November 2012 standoff between Baghdad and Erbil and the removal of the Central Bank Governor in October 2012. The government of Iraq is eager to attract additional foreign direct investment, but it faces a number of obstacles including a tenuous political system and concerns about security and societal stability. Rampant corruption, outdated infrastructure, insufficient essential services, skilled labor shortages, and antiquated commercial laws stifle investment and continue to constrain growth of private, nonoil sectors. Iraq is considering 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 reforms are still under contentious and sporadic negotiation. Under the Iraqi Constitution, some competencies relevant to the overall investment climate are either shared by the federal government and the regions or are devolved entirely to the regions. Investment in the IKR operates within the framework of the Kurdistan Region Investment Law (Law 4 of 2006) and the Kurdistan Board of Investment, which is designed to provide incentives to help economic development in areas under the authority of the KRG. Inflation has remained under control since 2006 as security improved. However, Iraqi leaders remain hard pressed to translate macroeconomic gains into an improved standard of living for the Iraqi populace. Unemployment remains a problem throughout the country despite a bloated public sector. Encouraging private enterprise through deregulation would make it easier for Iraqi citizens and foreign investors to start new businesses. Rooting out corruption and implementing reforms - such as restructuring banks and developing the private sector - would be important steps in this direction.
Ireland Ireland is a small, modern, trade-dependent economy. Ireland was among the initial group of 12 EU nations that began circulating the euro on 1 January 2002. GDP growth averaged 6% in 1995-2007, but economic activity has dropped sharply since the onset of the world financial crisis, with GDP falling by over 3% in 2008, nearly 7% in 2009, and less than 1% in 2010. Ireland entered into a recession in 2008 for the first time in more than a decade, with the subsequent collapse of its domestic property and construction markets. Property prices rose more rapidly in Ireland in the decade up to 2007 than in any other developed economy. Since their 2007 peak, average house prices have fallen 47%. In the wake of the collapse of the construction sector and the downturn in consumer spending and business investment, the export sector, dominated by foreign multinationals, has become a key component of Ireland's economy. Agriculture, once the most important sector, is now dwarfed by industry and services. In 2008 the former COWEN government moved to guarantee all bank deposits, recapitalize the banking system, and establish partly-public venture capital funds in response to the country's economic downturn. In 2009, in continued efforts to stabilize the banking sector, the Irish Government established the National Asset Management Agency (NAMA) to acquire problem commercial property and development loans from Irish banks. Faced with sharply reduced revenues and a burgeoning budget deficit, the Irish Government introduced the first in a series of draconian budgets 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. In 2010, the budget deficit reached 32.4% of GDP - the world's largest deficit, as a percentage of GDP - because of additional government support for the banking sector. In late 2010, the former COWEN government agreed to a $112 billion loan package from the EU and IMF to help Dublin further increase the capitalization of its banking sector and avoid defaulting on its sovereign debt. Since entering office in March 2011, the new KENNY government has intensified austerity measures to try to meet the deficit targets under Ireland's EU-IMF program. Ireland achieved moderate growth of 1.4% in 2011 and cut the budget deficit to 9.1% of GDP. Although the recovery slowed in 2012 because of weaker EU demand for Irish exports, Dublin managed to trim the deficit to about 8.5% of GDP.
Isle of Man Offshore banking, manufacturing, and tourism are key sectors of the economy. The government offers low taxes and other incentives to high-technology companies and financial institutions to locate on the island; this has paid off in expanding employment opportunities in high-income industries. As a result, agriculture and fishing, once the mainstays of the economy, have declined in their contributions to GDP. The Isle of Man also attracts online gambling sites and the film industry. Trade is mostly with the UK. In January 2013, the Isle of Man signed a tax agreement with Guernsey and Jersey, in order to enable the islands' authorities to end tax avoidance and evasion. The Isle of Man enjoys free access to EU markets.
Israel Israel has a technologically advanced market economy. Its major imports include crude oil, grains, raw materials, and military equipment. Cut diamonds, high-technology equipment, and pharmaceuticals are among the leading exports. Israel usually posts sizable trade deficits, which are covered by tourism and other service exports, as well as significant foreign investment inflows. The global financial crisis of 2008-09 spurred a brief recession in Israel, but the country entered the crisis with solid fundamentals - following years of prudent fiscal policy and a resilient banking sector. The economy has recovered better than most advanced, comparably sized economies. In 2010, Israel formally acceded to the OECD. Israel's economy also has weathered the Arab Spring because strong trade ties outside the Middle East have insulated the economy from spillover effects. Natural gasfields discovered off Israel's coast during the past two years have brightened Israel''s energy security outlook. The Leviathan field was one of the world''s largest offshore natural gas finds this past decade, and production from the Tama field is expected to meet all of Israel''s natural gas demand beginning mid-2013. In mid-2011, public protests arose around income inequality and rising housing and commodity prices. The government formed committees to address some of the grievances but has maintained that it will not engage in deficit spending to satisfy populist demands.
Italy Italy has a diversified industrial economy, which is divided into a developed industrial north, dominated by private companies, and a less-developed, highly subsidized, agricultural south, where unemployment is high. 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 17% of GDP. These activities are most common within the agriculture, construction, and service sectors. Italy is the third-largest economy in the euro-zone, but its exceptionally high public debt and structural impediments to growth have rendered it vulnerable to scrutiny by financial markets. Public debt has increased steadily since 2007, topping 126% of GDP in 2012, and investor concerns about the broader euro-zone crisis at times have caused borrowing costs on sovereign government debt to rise to euro-era records. During the second half of 2011 the government passed three austerity packages to reduce its budget deficit and help bring down borrowing costs. These measures included a hike in the value-added tax, pension reforms, and cuts to public administration. The government also faces pressure from investors and European partners to sustain its recent efforts to address Italy's long-standing structural impediments to growth, such as labor market inefficiencies and widespread tax evasion. In 2012 economic growth and labor market conditions deteriorated, with growth at -2.3% and unemployment rising to nearly 11%, with youth unemployment around 35%. The government has undertaken several reform initiatives designed to increase long-term economic growth. Italy's GDP is now 7% below its 2007 pre-crisis level.
Jamaica The Jamaican economy is heavily dependent on services, which accounted for more than 60% of GDP at the end of 2011. The country continues to derive most of its foreign exchange from tourism, remittances, and bauxite/alumina. Remittances account for nearly 15% of GDP and exports of bauxite and alumina make up roughly 5%. The bauxite/alumina sector was most affected by the global downturn while the tourism industry was resilient. Tourism revenues account for roughly 5% of GDP in 2011. Jamaica's economy faces many challenges to growth: high crime and corruption, large-scale unemployment and underemployment, and a debt-to-GDP ratio of nearly 130%. Jamaica's onerous public debt burden is the result of government bailouts to ailing sectors of the economy, most notably to the financial sector. In early 2010, the Jamaican Government created the Jamaica Debt Exchange in order to retire high-priced domestic bonds and significantly reduce annual debt servicing. Despite the improvement, debt servicing costs still hinder the government''s ability to spend on infrastructure and social programs, particularly as job losses rise in a shrinking economy. Jamaica was hard hit by the effects of the global economic crisis, experiencing economic contractions from 2008-10 and growth remains low. The SIMPSON-MILLER administration faces the difficult prospect of having to achieve fiscal discipline in order to maintain debt payments, while simultaneously attacking a serious crime problem that is hampering economic growth. High unemployment exacerbates the crime problem, including gang violence that is fueled by the drug trade. As of late 2012, the SIMPSON-MILLER government was working to negotiate a new IMF Stand-by agreement to gain access to additional funds.
Jan Mayen Jan Mayen is a volcanic island with no exploitable natural resources, although surrounding waters contain substantial fish stocks and potential untapped petroleum resources. Economic activity is limited to providing services for employees of Norway's radio and meteorological stations on the island.
Japan In the years following World War II, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan develop a technologically advanced economy. Two notable characteristics of the post-war economy were the close interlocking structures of manufacturers, suppliers, and distributors, known as keiretsu, and the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding under the dual pressures of global competition and domestic demographic change. Japan's industrial sector is heavily dependent on imported raw materials and fuels. A small agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. While self-sufficient in rice production, Japan imports about 60% of its food on a caloric basis. For three decades, overall real economic growth had been spectacular - a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of inefficient investment and an asset price bubble in the late 1980s that required a protracted period of time for firms to reduce excess debt, capital, and labor. Modest economic growth continued after 2000, but the economy has fallen into recession three times since 2008. A sharp downturn in business investment and global demand for Japan's exports in late 2008 pushed Japan into recession. Government stimulus spending helped the economy recover in late 2009 and 2010, but the economy contracted again in 2011 as the massive 9.0 magnitude earthquake and the ensuing tsunami in March disrupted manufacturing. The economy has largely recovered in the two years since the disaster, but reconstruction in the Tohoku region has been uneven. Newly-elected Prime Minister Shinzo ABE has declared the economy his government's top priority; he has pledged to reconsider his predecessor's plan to permanently close nuclear power plants and is pursuing an economic revitalization agenda of fiscal stimulus and regulatory reform and has said he will press the Bank of Japan to loosen monetary policy. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, Japan in 2012 stood as the fourth-largest economy in the world after second-place China, which surpassed Japan in 2001, and third-place India, which edged out Japan in 2012. The new government will continue a longstanding debate on restructuring the economy and reining in Japan's huge government debt, which exceeds 200% of GDP. Persistent deflation, reliance on exports to drive growth, and an aging and shrinking population are other major long-term challenges for the economy.
Jersey Jersey's economy is based on international financial services, agriculture, and tourism. In 2010 the financial services sector accounted for about 50% of the island's output. Potatoes, cauliflower, tomatoes, and especially flowers are important export crops, shipped mostly to the UK. The Jersey breed of dairy cattle is known worldwide and represents an important export income earner. Milk products go to the UK and other EU countries. Tourism accounts for one-quarter of GDP. In recent years, the government has encouraged light industry to locate in Jersey with the result that an electronics industry has developed, displacing more traditional industries. All raw material and energy requirements are imported as well as a large share of Jersey''s food needs. Light taxes and death duties make the island a popular tax haven. In January 2013, Jersey signed a tax agreement with Guernsey and the Isle of Man, in order to enable the islands'' authorities to end tax avoidance and evasion. Living standards come close to those of the UK.
Jordan Jordan's economy is among the smallest in the Middle East, with insufficient supplies of water, oil, and other natural resources, underlying the government's heavy reliance on foreign assistance. Other economic challenges for the government include chronic high rates of poverty, unemployment, inflation, and a large budget deficit. Since assuming the throne in 1999, King ABDALLAH has implemented significant economic reforms, such as opening the trade regime, privatizing state-owned companies, and eliminating some fuel subsidies, which in the last decade spurred economic growth by attracting foreign investment and creating some jobs. The global economic slowdown and regional turmoil, however, have depressed Jordan''s GDP growth, impacting export-oriented sectors, construction, and tourism. In 2011 and 2012, the government approved two economic relief packages and a budgetary supplement, meant to improve the living conditions for the middle and poor classes. Jordan''s finances have also been strained by a series of natural gas pipeline attacks in Egypt, causing Jordan to substitute more expensive diesel imports, primarily from Saudi Arabia, to generate electricity. Jordan is currently exploring nuclear power generation in addition to the exploitation of abundant oil shale reserves and renewable technologies to forestall energy shortfalls. In 2012, to correct budgetary and balance of payments imbalances, Jordan entered into a $2.1 billion, multiple year International Monetary Fund Stand-By Arrangement. Jordan''s financial sector has been relatively isolated from the international financial crisis because of its limited exposure to overseas capital markets. Jordan will continue to depend heavily on foreign assistance to finance the deficit in 2013.
Kazakhstan Kazakhstan, geographically the largest of the former Soviet republics, excluding Russia, possesses enormous fossil fuel reserves and plentiful supplies of other minerals and metals, such as uranium, copper, and zinc. It also has a large agricultural sector featuring livestock and grain. In 2002 Kazakhstan became the first country in the former Soviet Union to receive an investment-grade credit rating. Extractive industries have been and will continue to be the engine of Kazakhstan's growth, although the country is aggressively pursuing diversification strategies. Landlocked, with restricted access to the high seas, Kazakhstan relies on its neighbors to export its products, especially oil and grain. Although its Caspian Sea ports, pipelines, and rail lines carrying oil have been upgraded, civil aviation and roadways continue to need attention. Telecoms are improving, but require considerable investment, as does the information technology base. Supply and distribution of electricity can be erratic because of regional dependencies, but the country is moving forward with plans to improve reliability of electricity and gas supply to its population. At the end of 2007, global financial markets froze up and the loss of capital inflows to Kazakhstani banks caused a credit crunch. The subsequent and sharp fall of oil and commodity prices in 2008 aggravated the economic situation, and Kazakhstan plunged into recession. While the global financial crisis took a significant toll on Kazakhstan's economy, it has rebounded well, helped by prudent government measures. GDP increased 7.5% year-on-year in 2011, and 5.0% in 2012. Rising commodity prices have helped the recovery. Despite solid macroeconomic indicators, the government realizes that its economy suffers from an overreliance on oil and extractive industries, the so-called "Dutch disease." In response, Kazakhstan has embarked on an ambitious diversification program, aimed at developing targeted sectors like transport, pharmaceuticals, telecommunications, petrochemicals and food processing. In 2010 Kazakhstan joined the Belarus-Kazakhstan-Russia Customs Union in an effort to boost foreign investment and improve trade relationships and is planning to accede to the World Trade Organization in 2013.
Kenya Kenya has been hampered by corruption and by reliance upon several primary goods whose prices have remained low. Low infrastructure investment threatens Kenya's long-term position as the largest East African economy. In the key December 2002 elections, Daniel MOI's 24-year-old reign ended, and a new opposition government took on the formidable economic problems facing the nation. After some early progress in rooting out corruption and encouraging donor support, the KIBAKI government was rocked by high-level graft scandals in 2005 and 2006. In 2006, the World Bank and IMF delayed loans pending action by the government on corruption. The international financial institutions and donors have since resumed lending, despite little action on the government''s part to deal with corruption. Unemployment is very high. The country has experienced chronic budget deficits, inflationary pressures, and sharp currency depreciation - as a result of high food and fuel import prices. The discovery of oil in March 2012 provides an opportunity for Kenya to balance its growing trade deficit if the deposits are found to be commercially viable and Kenya is able to develop a port and pipeline to export its oil.
Kiribati A remote country of 33 scattered coral atolls, Kiribati has few natural resources and is one of the least developed Pacific Islands. Commercially viable phosphate deposits were exhausted at the time of independence from the UK in 1979. Copra and fish now represent the bulk of production and exports. The economy has fluctuated widely in recent years. Economic development is constrained by a shortage of skilled workers, weak infrastructure, and remoteness from international markets. Tourism provides more than one-fifth of GDP. Private sector initiatives and a financial sector are in the early stages of development. Foreign financial aid from the EU, UK, US, Japan, Australia, New Zealand, Canada, UN agencies, and Taiwan accounts for 20-25% of GDP. Remittances from seamen on merchant ships abroad account for more than $5 million each year. Kiribati receives around $15 million annually for the government budget from an Australian trust fund.
Korea, North North Korea, one of the world's most centrally directed and least open economies, faces chronic economic problems. Industrial capital stock is nearly beyond repair as a result of years of underinvestment, shortages of spare parts, and poor maintenance. Large-scale military spending draws off resources needed for investment and civilian consumption. Industrial and power output have stagnated for years at a fraction of pre-1990 levels. Frequent weather-related crop failures aggravated chronic food shortages caused by on-going systemic problems, including a lack of arable land, collective farming practices, poor soil quality, insufficient fertilization, and persistent shortages of tractors and fuel. Large-scale international food aid deliveries as well as aid from China has allowed the people of North Korea to escape widespread starvation since famine threatened in 1995, but the population continues to suffer from prolonged malnutrition and poor living conditions. Since 2002, the government has allowed private "farmers' markets" to begin selling a wider range of goods. It also permitted some private farming - on an experimental basis - in an effort to boost agricultural output. In December 2009, North Korea carried out a redenomination of its currency, capping the amount of North Korean won that could be exchanged for the new notes, and limiting the exchange to a one-week window. A concurrent crackdown on markets and foreign currency use yielded severe shortages and inflation, forcing Pyongyang to ease the restrictions by February 2010. In response to the sinking of the South Korean destroyer Cheonan and the shelling of Yeonpyeong Island, South Korea's government cut off most aid, trade, and bilateral cooperation activities, with the exception of operations at the Kaesong Industrial Complex. In 2012, KIM Jong Un's first year of leadership, the North displayed increased focus on the economy by renewing its commitment to special economic zones with China, negotiating a new payment structure to settle its $11 billion Soviet-era debt to Russia, and purportedly proposing new agricultural and industrial policies to boost domestic production. The North Korean government often highlights its goal of becoming a "strong and prosperous" nation and attracting foreign investment, a key factor for improving the overall standard of living. Nevertheless, firm political control remains the government's overriding concern, which likely will inhibit fundamental reforms of North Korea's current economic system.
Korea, South South Korea over the past four decades has demonstrated incredible growth and global integration to become a high-tech industrialized economy. In the 1960s, GDP per capita was comparable with levels in the poorer countries of Africa and Asia. In 2004, South Korea joined the trillion dollar club of world economies, and is currently the world's 12th largest economy. Initially, a system of close government and business ties, including directed credit and import restrictions, made this success possible. The government promoted the import of raw materials and technology at the expense of consumer goods, and encouraged savings and investment over consumption. The Asian financial crisis of 1997-98 exposed longstanding weaknesses in South Korea's development model including high debt/equity ratios and massive short-term foreign borrowing. GDP plunged by 6.9% in 1998, and then recovered by 9% in 1999-2000. Korea adopted numerous economic reforms following the crisis, including greater openness to foreign investment and imports. Growth moderated to about 4% annually between 2003 and 2007. Korea''s export focused economy was hit hard by the 2008 global economic downturn, but quickly rebounded in subsequent years, reaching 6.3% growth in 2010. The US-South Korea Free Trade Agreement was ratified by both governments in 2011 and went into effect in March 2012. Throughout 2012 the economy experienced sluggish growth because of market slowdowns in the United States, China, and the Eurozone. The incoming administration in 2013, following the December 2012 presidential election, is likely to face the challenges of balancing heavy reliance on exports with developing domestic-oriented sectors, such as services. The South Korean economy''s long term challenges include a rapidly aging population, inflexible labor market, and heavy reliance on exports - which comprise half of GDP.
Kosovo Over the past few years Kosovo's economy has shown significant progress in transitioning to a market-based system and maintaining macroeconomic stability, but it is still highly dependent on the international community and the diaspora for financial and technical assistance. Remittances from the diaspora - located mainly in Germany, Switzerland, and the Nordic countries - are estimated to account for about 14% of GDP, and donor-financed activities and aid for approximately 10%. Kosovo's citizens are the poorest in Europe with an average annual per capita income (PPP) of $7,400. Unemployment, around 45%, is a significant problem that encourages outward migration and a significant informal, unreported economy. Most of Kosovo's population lives in rural towns outside of the capital, Pristina. Inefficient, near-subsistence farming is common - the result of small plots, limited mechanization, and lack of technical expertise. With international assistance, Kosovo has been able to privatize a majority of its state-owned-enterprises. Minerals and metals - including lignite, lead, zinc, nickel, chrome, aluminum, magnesium, and a wide variety of construction materials - once formed the backbone of industry, but output has declined because of ageing equipment and insufficient investment. A limited and unreliable electricity supply due to technical and financial problems is a major impediment to economic development, but Kosovo has received technical assistance to help improve accounting and controls and, in 2012, privatized its distribution network. The US Government is cooperating with the Ministry for Energy and Mines and the World Bank to prepare commercial tenders for the construction of a new power plant, rehabilitation of an old plant, and the development of a coal mine that could supply both. In July 2008, Kosovo received pledges of $1.9 billion from 37 countries in support of its reform priorities, but the global financial crisis has limited this assistance and also negatively affected remittance inflows. In June 2009, Kosovo joined the World Bank and International Monetary Fund, and Kosovo began servicing its share of the former Yugoslavia's debt. In order to help integrate Kosovo into regional economic structures, UNMIK signed (on behalf of Kosovo) its accession to the Central Europe Free Trade Area (CEFTA) in 2006. Serbia and Bosnia previously had refused to recognize Kosovo's customs stamp or extend reduced tariff privileges for Kosovo products under CEFTA, but both countries resumed trade with Kosovo in 2011. The official currency of Kosovo is the euro, but the Serbian dinar is also used illegally in Serb enclaves. Kosovo's tie to the euro has helped keep core inflation low. Kosovo maintained a budget surplus until 2011, when government expenditures climbed sharply.
Kuwait Kuwait has a geographically small, but wealthy, relatively open economy with crude oil reserves of about 102 billion barrels - about 7% of world reserves. Petroleum accounts for nearly half of GDP, 95% of export revenues, and 95% of government income. Kuwaiti officials have committed to increasing oil production to 4 million barrels per day by 2020. The rise in global oil prices throughout 2011 and 2012 is reviving government consumption and economic growth. Kuwait has experienced a 20% increase in government budget revenue, which has led to higher budget expenditures, particularly wage hikes for many public sector employees. Kuwait has done little to diversify its economy, in part, because of this positive fiscal situation, and, in part, due to the poor business climate and the historically acrimonious relationship between the National Assembly and the executive branch, which has stymied most movement on economic reforms. In 2010, Kuwait passed an economic development plan that pledges to spend up to $130 billion over five years to diversify the economy away from oil, attract more investment, and boost private sector participation in the economy.
Kyrgyzstan Kyrgyzstan is a poor, mountainous country with a dominant agricultural sector. Cotton, tobacco, wool, and meat are the main agricultural products, although only tobacco and cotton are exported in any quantity. Industrial exports include gold, mercury, uranium, natural gas, and electricity. The economy depends heavily on gold exports - mainly from output at the Kumtor gold mine - and on remittances from Kyrgyzstani migrant workers primarily in Russia. Following independence, Kyrgyzstan was progressive in carrying out market reforms, 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 of the government's stock in enterprises has been sold. Drops in production had been severe after the breakup of the Soviet Union in December 1991, but by mid-1995, production began to recover and exports began to increase. In 2005, the BAKIEV government and international financial institutions initiated a comprehensive medium-term poverty reduction and economic growth strategy. The government made steady strides in controlling its substantial fiscal deficit, nearly closing the gap between revenues and expenditures in 2006, before boosting expenditures more than 20% in 2007-08. GDP grew about 8% annually in 2007-08, partly due to higher gold prices internationally, but slowed to 2.9% in 2009. The overthrow of President BAKIEV in April 2010 and subsequent ethnic clashes left hundreds dead and damaged infrastructure. Shrinking trade and agricultural production, as well as the political instability caused by the change in government, caused GDP to contract 0.5% in 2010. The fiscal deficit widened to 11% of GDP in 2010, reflecting significant increases in crisis-related spending, including both rehabilitation of damaged infrastructure and bank recapitalization. The economy grew 5.7% in 2011, but slowed to around 1% in 2012, primarily due to an 83% decrease in production from Kumtor. As a result, the budget deficit increased at year's end. Progress in fighting corruption, improving transparency in licensing, business permits and taxations, restructuring domestic industry, and attracting foreign aid and investment are key to future growth.
Laos The government of Laos, one of the few remaining one-party communist states, began decentralizing control and encouraging private enterprise in 1986. The results, starting from an extremely low base, were striking - growth averaged 6% per year from 1988-2008 except during the short-lived drop caused by the Asian financial crisis that began in 1997. Laos' growth exceeded 7% per year during 2008-12. Despite this high growth rate, Laos remains a country with an underdeveloped infrastructure, particularly in rural areas. It has a basic, but improving, road system, and limited external and internal land-line telecommunications. Electricity is available 75% of the country. Laos' economy is heavily dependent on capital-intensive natural resource exports. The labor force, however, still relies on agriculture, dominated by rice cultivation in lowland areas, which accounts for about 30% of GDP and 75% of total employment. Economic growth has reduced official poverty rates from 46% in 1992 to 26% in 2010. The economy also has benefited from high-profile foreign direct investment in hydropower, copper and gold mining, logging, and construction though some projects in these industries have drawn criticism for their environmental impacts. Laos gained Normal Trade Relations status with the US in 2004. On the fiscal side, Laos initiated a VAT tax system in 2010. Simplified investment procedures and expanded bank credits for small farmers and small entrepreneurs will improve Laos'' economic prospects. The government appears committed to raising the country''s profile among investors, opening the country''s first stock exchange in 2011 and participating in regional economic cooperation initiatives. Laos was admitted to the WTO in 2012. The World Bank has declared that Laos'' goal of graduating from the UN Development Program''s list of least-developed countries by 2020 is achievable.
Latvia Latvia is a small, open economy with exports contributing nearly a third of GDP. Due to its geographical location, transit services are highly-developed, along with timber and wood-processing, agriculture and food products, and manufacturing of machinery and electronics industries. Corruption continues to be an impediment to attracting foreign direct investment and Latvia's low birth rate and decreasing population are major challenges to its long-term economic vitality. Latvia's economy experienced GDP growth of more than 10% per year during 2006-07, but entered a severe recession in 2008 as a result of an unsustainable current account deficit and large debt exposure amid the softening world economy. Triggered by the collapse of the second largest bank, GDP plunged 18% in 2009. The economy has not returned to pre-crisis levels despite strong growth, especially in the export sector in 2011-12. The IMF, EU, and other international donors provided substantial financial assistance to Latvia as part of an agreement to defend the currency''s peg to the euro in exchange for the government''s commitment to stringent austerity measures. The IMF/EU program successfully concluded in December 2011. The government of Prime Minister Valdis DOMBROVSKIS remained committed to fiscal prudence and reducing the fiscal deficit from 7.7% of GDP in 2010, to 2.7% of GDP in 2012. The majority of companies, banks, and real estate have been privatized, although the state still holds sizable stakes in a few large enterprises, including 99.8% ownership of the Latvian national airline. Latvia officially joined the World Trade Organization in February 1999 and the EU in May 2004. Latvia intends to join the euro zone in 2014.
Lebanon Lebanon has a free-market economy and a strong laissez-faire commercial tradition. The government does not restrict foreign investment; however, the investment climate suffers from red tape, corruption, arbitrary licensing decisions, complex customs procedures, high taxes, tariffs, and fees, archaic legislation, and weak intellectual property rights. The Lebanese economy is service-oriented; main growth sectors include banking and tourism. The 1975-90 civil war seriously damaged Lebanon's economic infrastructure, cut national output by half, and derailed Lebanon's position as a Middle Eastern entrepot and banking hub. Following the civil war, Lebanon rebuilt much of its war-torn physical and financial infrastructure by borrowing heavily - mostly from domestic banks - saddling the government with a huge debt burden. Pledges of economic and financial reforms made at separate international donor conferences during the 2000s have mostly gone unfulfilled, including those made during the Paris III Donor Conference in 2007 following the July 2006 war. The collapse of the government in early 2011 over its backing of the Special Tribunal for Lebanon and unrest in neighboring Syria slowed economic growth to the 1-2% range in 2011-12, after four years of 8% average growth. In September 2011 the Cabinet endorsed a bill that would provide $1.2 billion in funding to improve Lebanon''s downtrodden electricity sector, but fiscal limitations will test the government''s ability to invest in other areas, such as water.
Lesotho Small, mountainous, and completely landlocked by South Africa, Lesotho is a least developed country in which about three-fourths of the people live in rural areas and engage in subsistence agriculture. Lesotho produces less than 20% of the nation's demand for food. Rain-fed agriculture is vulnerable to weather and climate variability; an estimated 725,500 people will require food assistance in 2012/13. The distribution of income in Lesotho remains inequitable. Lesotho relies on South Africa for much of its economic activity. Lesotho imports 90% of the goods it consumes from South Africa, including most agricultural inputs. Households depend heavily on remittances from family members working in South Africa, in mines, on farms and as domestic workers, though mining employment has declined substantially since the 1990s. Government revenue depends heavily on transfers from South Africa. Customs duties from the Southern Africa Customs Union accounted for 44% of government revenue in 2012. The South African Government also pays royalties for water transferred to South Africa from a dam and reservoir system in Lesotho. However, the government continues to strengthen its tax system to reduce dependency on customs duties and other transfers. Access to credit remains a problem for the private sector. The government maintains a large presence in the economy - public expenditures accounted for 55% of GDP in 2010 and the government remains Lesotho's largest employer. Lesotho's largest private employer is the textile and garment industry - approximately 36,000 Basotho, mainly women, work in factories producing garments for export to South Africa and the US. Diamond mining in Lesotho has grown in recent years and may contribute 8.5% to GDP by 2015, according to current forecasts. Lesotho's $362.5 million Millennium Challenge Account Compact, which focused on strengthening the healthcare system, developing the private sector, and providing access to improved water supplies and sanitation facilities, will end in September 2013. Despite the 2008/09 global economic crisis, the economy has recovered strongly with growth averaging nearly 5% per year since 2010.
Liberia Liberia is a low income country heavily reliant on foreign assistance for revenue. Civil war and government mismanagement destroyed much of Liberia's economy, especially the infrastructure in and around the capital, Monrovia. Many businesses fled the country, taking capital and expertise with them, but with the conclusion of fighting and the installation of a democratically elected government in 2006, several have returned. Liberia has the distinction of having the highest ratio of direct foreign 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. Local manufacturing, mainly foreign-owned, had been small in scope. President JOHNSON SIRLEAF, a Harvard-trained banker and administrator, has taken steps to reduce corruption, build support from international donors, and encourage private investment. Embargos on timber and diamond exports have been lifted, opening new sources of revenue for the government and Liberia shipped its first major timber exports to Europe in 2010. The country reached its Heavily Indebted Poor Countries initiative completion point in 2010, and nearly $5 billion of international debt was permanently eliminated. This new status will enable Liberia to establish a sovereign credit rating and issue bonds. Liberia's Paris Club creditors agreed to cancel Liberia's debt as well. The IMF has completed the sixth review of Liberia's extended credit facility, bringing total disbursements to over $379 million. The African Development Bank approved a grant of $48 million in 2011 to support economic governance and competitiveness. Rebuilding infrastructure and raising incomes will depend on generous financial and technical assistance from donor countries and foreign investment in key sectors, such as infrastructure and power generation. The country has achieved high growth during 2010-12 due to favorable world prices for its commodities.
Libya Libya's economy is structured primarily around the nation's energy sector, which generates about 95% of export earnings, 80% of GDP, and 99% of government income. Substantial revenue from the energy sector coupled with a small population give Libya one of the highest per capita GDPs in Africa, but Tripoli largely has not used its significant financial resources to develop national infrastructure or the economy, leaving many citizens poor. In the final five years of QADHAFI''s rule, Libya made some progress on economic reform as part of a broader campaign to reintegrate the country into the international fold. This effort picked up steam after UN sanctions were lifted in September 2003 and after Libya announced in December 2003 that it would abandon programs to build weapons of mass destruction. The process of lifting US unilateral sanctions began in the spring of 2004; all sanctions were removed by June 2006, helping Libya attract greater foreign direct investment, especially in the energy and banking sectors. Libyan oil and gas licensing rounds drew high international interest, but new rounds are unlikely to be successful until Libya establishes a more permanent government and is able to offer more attractive financial terms on contracts and increase security. Libya faces a long road ahead in liberalizing its primarily socialist economy, but the revolution has unleashed previously restrained entrepreneurial activity and increased the potential for the evolution of a more market-based economy. The service and construction sectors, which account for roughly 60% of GDP, expanded over the past five years and could become a larger share of GDP if Tripoli prioritizes capital spending on development projects once political and security uncertainty subside. Climatic conditions and poor soils severely limit agricultural output, and Libya imports about 80% of its food. Libya''s primary agricultural water source is the Great Manmade River Project.
Liechtenstein Despite its small size and limited natural resources, Liechtenstein has developed into a prosperous, highly industrialized, free-enterprise economy with a vital financial service sector and likely the second highest per capita income in the world. The Liechtenstein economy is widely diversified with a large number of small businesses. Low business taxes - the maximum tax rate is 20% - and easy incorporation rules have induced many holding companies to establish nominal offices in Liechtenstein providing 30% of state revenues. The country participates in a customs union with Switzerland and uses the Swiss franc as its national currency. It imports more than 90% of its energy requirements. Liechtenstein has been a member of the European Economic Area (an organization serving as a bridge between the European Free Trade Association (EFTA) and the EU) since May 1995. The government is working to harmonize its economic policies with those of an integrated Europe. Since 2008, Liechtenstein has faced renewed international pressure - particularly from Germany - to improve transparency in its banking and tax systems. In December 2008, Liechtenstein signed a Tax Information Exchange Agreement with the US. Upon Liechtenstein's conclusion of 12 bilateral information-sharing agreements, the OECD in October 2009 removed the principality from its "grey list" of countries that had yet to implement the organization's Model Tax Convention. By the end of 2010, Liechtenstein had signed 25 Tax Information Exchange Agreements or Double Tax Agreements. In 2011 Liechtenstein joined the Schengen area, which allows passport-free travel across 26 European countries.
Lithuania Lithuania gained membership in the World Trade Organization and joined the EU in May 2004. Despite its EU accession, Lithuania's trade with its Central and Eastern European neighbors, and Russia in particular, accounts for a significant share of total trade. Foreign investment and business support have helped in the transition from the old command economy to a market economy. Lithuania's economy grew on average 8% per year for the four years prior to 2008 driven by exports and domestic demand. Lithuania''s GDP plunged nearly 15% in 2009. The three former Soviet Baltic republics were among the hardest hit by the 2008-09 financial crisis. The government''s efforts to attract foreign investment, to develop export markets, and to pursue broad economic reforms has been key to Lithuania''s quick recovery from a deep recession, making Lithuania one of the fastest growing economies in the EU. Lithuania is committed to meeting the Maastricht criteria to join the euro zone, which the government expects to achieve by 2015. Under the Conservative Party''s leadership, Lithuania raised the monthly minimum wage in 2012 nearly 25% over 2011. Despite government efforts, unemployment - at 13.2% in 2012 - remains high.
Luxembourg This small, stable, high-income economy - benefiting from its proximity to France, Belgium, and Germany - has historically featured solid growth, low inflation, and low unemployment. The industrial sector, initially dominated by steel, has become increasingly diversified to include chemicals, rubber, and other products. Growth in the financial sector, which now accounts for about 27% of GDP, has more than compensated for the decline in steel. Most banks are foreign-owned and have extensive foreign dealings, but Luxembourg has lost some of its advantages as a favorable tax location because of OECD and EU pressure. The economy depends on foreign and cross-border workers for about 40% of its labor force. Luxembourg, like all EU members, suffered from the global economic crisis that began in late 2008, but unemployment has trended below the EU average. Following strong expansion from 2004 to 2007, Luxembourg's economy contracted 3.6% in 2009, but rebounded in 2010-11 before slowing again in 2012. The country continues to enjoy an extraordinarily high standard of living - GDP per capita ranks among the highest in the world, and is the highest in the euro zone. Turmoil in the world financial markets and lower global demand during 2008-09 prompted the government to inject capital into the banking sector and implement stimulus measures to boost the economy. Government stimulus measures and support for the banking sector, however, led to a 5% government budget deficit in 2009. Nevertheless, the deficit was cut to 1.1% in 2011 and 0.9% in 2012. Even during the financial crisis and recovery, Luxembourg retained the highest current account surplus as a share of GDP in the euro zone, owing largely to their strength in financial services. Public debt remains among the lowest of the region although it has more than doubled since 2007 as percentage of GDP. Luxembourg's economy, while stabile, grew slowly in 2012 due to ongoing weak growth in the euro area. Authorities have strengthened supervision of domestic banks because of their exposure to the activities of foreign banks.
Macau Since opening up its locally-controlled casino industry to foreign competition in 2001, Macau has attracted tens of billions of dollars in foreign investment, transforming the territory into one of the world's largest gaming centers. Macau's gaming and tourism businesses were fueled by China''s decision to relax travel restrictions on Chinese citizens wishing to visit Macau. By 2006, Macau''s gaming revenue surpassed that of the Las Vegas strip, and gaming-related taxes accounted for more than 70% of total government revenue. Macau''s economy slowed dramatically in 2009 as a result of the global economic slowdown, but strong growth resumed in 2010-11, largely on the back of tourism from mainland China and the gaming sectors. In 2012, this city of 582,000 hosted nearly 28 million visitors. Almost 60% came from mainland China. Macau''s traditional manufacturing industry has slowed greatly since the termination of the Multi-Fiber Agreement in 2005. China is Macau''s second largest goods export market, behind Hong Kong, and followed by the United States. In 2012, exports were less than US$1 billion, while gaming receipts were US$38 billion, a 13.5% increase over 2011. Macau''s economy expanded by 10% in 2012; although impressive, it was a slower growth rate than in previous years. Macau continues to face the challenges of managing its growing casino industry, money-laundering, and the need to diversify the economy away from heavy dependence on gaming revenues. Macau''s currency, the pataca, is closely tied to the Hong Kong dollar, which is also freely accepted in the territory.
Macedonia Macedonia is vulnerable to economic developments in Europe - due to strong trade ties - and dependent on regional integration and progress toward EU membership for continued economic growth. At independence in September 1991, Macedonia was the least developed of the Yugoslav republics, producing a mere 5% of the total federal output of goods and services. The collapse of the Socialist Federal Republic of Yugoslavia ended transfer payments from the central government and eliminated advantages from inclusion in a de facto free trade area. An absence of infrastructure, UN sanctions on the downsized Yugoslavia, and a Greek economic embargo over a dispute about the country's constitutional name and flag hindered economic growth until 1996. Since then, Macedonia has maintained macroeconomic stability with low inflation, but it has so far lagged the region in attracting foreign investment and creating jobs, despite making extensive fiscal and business sector reforms. Official unemployment has remained consistently high at more than 31% since 2008, but may be overstated based on the existence of an extensive gray market, estimated to be between 20% and 45% of GDP, that is not captured by official statistics. In the wake of the global economic downturn, Macedonia has experienced decreased foreign direct investment and a large trade deficit. However, as a result of conservative fiscal policies and a sound financial system, in 2010 the country credit rating improved slightly to BB+ and was kept at that level in 2011-12. However, macroeconomic stability has been maintained by a prudent monetary policy, which keeps the domestic currency pegged against the euro. As a result, GDP growth was modest, but positive at about 3% both in 2010 and 2011, and inflation was under control. The government loosened fiscal policy in 2012 and the budget deficit expanded to 3.5% of GDP.
Madagascar After discarding socialist economic policies in the mid-1990s, Madagascar followed a World Bank- and IMF-led policy of privatization and liberalization that has been undermined since the start of the political crisis. This strategy placed the country on a slow and steady growth path from an extremely low level. Agriculture, including fishing and forestry, is a mainstay of the economy, accounting for more than one-fourth of GDP and employing 80% of the population. Exports of apparel boomed in recent years primarily due to duty-free access to the US, however, Madagascar's failure to comply with the requirements of the African Growth and Opportunity Act (AGOA) led to the termination of the country's duty-free access in January 2010 and a sharp fall in textile production. Deforestation and erosion, aggravated by the use of firewood as the primary source of fuel, are serious concerns. The current political crisis, which began in early 2009, has dealt additional blows to the economy. Tourism dropped more than 50% in 2009 compared with the previous year, and many investors are wary of entering the uncertain investment environment. Growth was anemic during 2010 to 2012 although expansion in mining and agricultural sectors is expected to contribute to more growth in 2013.
Malawi Landlocked Malawi ranks among the world's most densely populated and least developed countries. The economy is predominately agricultural with about 80% of the population living in rural areas. Agriculture, which has benefited from fertilizer subsidies since 2006, accounts for one-third of GDP and 90% of export revenues. The performance of the tobacco sector is key to short-term growth as tobacco accounts for more than half of exports. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. In 2006, Malawi was approved for relief under the Heavily Indebted Poor Countries (HIPC) program. In December 2007, the US granted Malawi eligibility status to receive financial support within the Millennium Challenge Corporation (MCC) initiative. The government faces many challenges including developing a market economy, improving educational facilities, facing up to environmental problems, dealing with the rapidly growing problem of HIV/AIDS, and satisfying foreign donors that fiscal discipline is being tightened. Since 2005 President BANDA'S government has exhibited improved financial discipline under the guidance of Finance Minister Goodall GONDWE and signed a three year Poverty Reduction and Growth Facility worth $56 million with the IMF. The government has announced infrastructure projects that could yield improvements, such as a new oil pipeline for better fuel access, and the potential for a waterway link through Mozambican rivers to the ocean for better transportation options. Since 2009, however, Malawi has experienced some setbacks, including a general shortage of foreign exchange, which has damaged its ability to pay for imports, and fuel shortages that hinder transportation and productivity. Investment fell 23% in 2009, and continued to decline in 2010. The government has failed to address barriers to investment such as unreliable power, water shortages, poor telecommunications infrastructure, and the high costs of services. Donors, who provided an average of 36% of government revenue in the past five years, suspended general budget support for Malawi in 2011 due to a negative IMF review and governance issues.
Malaysia Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. Under current Prime Minister NAJIB, Malaysia is attempting to achieve high-income status by 2020 and to move farther up the value-added production chain by attracting investments in Islamic finance, high technology industries, biotechnology, and services. NAJIB's Economic Transformation Program (ETP) is a series of projects and policy measures intended to accelerate the country's economic growth. The government has also taken steps to liberalize some services sub-sectors. The NAJIB administration also is continuing efforts to boost domestic demand and reduce the economy''s dependence on exports. Nevertheless, exports - particularly of electronics, oil and gas, palm oil and rubber - remain a significant driver of the economy. As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel, combined with strained government finances, has forced Kuala Lumpur to begin to reduce government subsidies. The government is also trying to lessen its dependence on state oil producer Petronas. The oil and gas sector supplies about 35% of government revenue in 2011. Bank Negera Malaysia (central bank) maintains healthy foreign exchange reserves, and a well-developed regulatory regime has limited Malaysia''s exposure to riskier financial instruments and the global financial crisis. Nevertheless, Malaysia could be vulnerable to a fall in commodity prices or a general slowdown in global economic activity because exports are a major component of GDP. In order to attract increased investment, NAJIB has raised possible revisions to the special economic and social preferences accorded to ethnic Malays under the New Economic Policy of 1970, but he has encountered significant opposition, especially from Malay nationalists and other vested interests.
Maldives Tourism, Maldives' largest economic activity, accounts for 28% of GDP and more than 60% of foreign exchange receipts. Fishing is the second leading sector, but the fish catch has dropped sharply in recent years. Agriculture and manufacturing continue to play a lesser role in the economy, constrained by the limited availability of cultivable land and the shortage of domestic labor. Lower than expected tourist arrivals and fish exports, combined with high government spending on social needs, subsidies, and civil servant salaries contributed to a balance of payments crisis, which was temporarily eased with a $79.3 million IMF Stand-By agreement. However, after the first two disbursements, the IMF withheld subsequent disbursements due to concerns over Maldives' growing budget deficit, and the government has been seeking other sources of budgetary support ever since. A new Goods and Services Tax (GST) on tourism introduced in January 2011, on general goods and services in October 2011, and a new Business Profit Tax introduced in July 2011 have provided a boost to revenue. Economic growth slowed to 3.4% of GDP in 2012, compared to 7.0% in 2011 because of slower tourist arrivals and weak global conditions. Diversifying the economy beyond tourism and fishing, reforming public finance, increasing employment opportunities, and combating corruption, cronyism, and a growing drug problem are major near-term challenges facing the government. Gross foreign reserves at the end of November 2012 were approximately $356 million, compared with $326 million in 2011, and were sufficient to finance only 2.6 months of imports. Over the longer term Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80% of the area is 1 meter or less above sea level.
Mali Among the 25 poorest countries in the world, Mali is a landlocked country highly dependent on gold mining and agricultural exports for revenue. The country's fiscal status fluctuates with gold and agricultural commodity prices and the harvest. Mali remains dependent on foreign aid. Economic activity is largely confined to the riverine area irrigated by the Niger River and about 65% of its land area is desert or semidesert. About 10% of the population is nomadic and about 80% of the labor force is engaged in farming and fishing. Industrial activity is concentrated on processing farm commodities. The government in 2011 completed an IMF extended credit facility program that has helped the economy grow, diversify, and attract foreign investment. Mali is developing its cotton and iron ore extraction industries to diversify foreign exchange revenue away from gold. Mali has invested in tourism but security issues are hurting the industry. Mali experienced economic growth of about 5% per year between 1996-2010, but the global recession and a military coup caused a decline in output in 2012. The interim government slashed public spending in the context of a declining state of security and declining international aid.
Malta Malta - the smallest economy in the euro zone - produces only about 20% of its food needs, has limited fresh water supplies, and has few domestic energy sources. Malta's geographic position between Europe and North Africa makes it a target for irregular migration, which has strained Malta's political and economic resources. Malta''s fertility rate is below the EU average, and population growth in recent years has largely been from immigration, putting increasing pressure on the pension system. Malta adopted the euro on 1 January 2008. Malta''s economy is dependent on foreign trade, manufacturing, and tourism, and was hurt by the global economic downturn. Malta has low unemployment relative to other European countries, and growth has recovered since the 2009 recession. Malta''s financial services industry has grown in recent years and it has avoided contagion from the European financial crisis, largely because its debt is mostly held domestically and its banks have low exposure to the sovereign debt of peripheral European countries. Malta reduced its deficit below 3 percent of GDP, leading the EU to dismiss its official excessive deficit procedure against Malta in 2012.
Marshall Islands US assistance and lease payments for the use of Kwajalein Atoll as a US military base are the mainstay of this small island country. The Marshall Islands received roughly $1 billion in aid from the US during 1986-2001 under the original Compact of Free Association (Compact). In 2002 and 2003, the US and the Marshall Islands renegotiated the Compact's financial package for a 20-year period, from 2004 to 2024. Under the amended Compact, the Marshall Islands will receive roughly $1.5 billion in direct US assistance. Agricultural production, primarily subsistence, is concentrated on small farms; the most important commercial crops are coconuts and breadfruit. Industry is limited to handicrafts, tuna processing, and copra. Tourism holds some potential. The islands and atolls have few natural resources, and imports exceed exports. Under the amended Compact, the US is also funding, jointly with the Marshall Islands, a Trust Fund for the people of the Marshall Islands that will provide an income stream beyond 2024 when direct Compact aid is to end.
Mauritania Half the population still depends on agriculture and livestock for a livelihood, even though many of the nomads and subsistence farmers were forced into the cities by recurrent droughts in the 1970s and 1980s. Mauritania has extensive deposits of iron ore, which account for nearly 40% of total exports. The nation's coastal waters are among the richest fishing areas in the world but overexploitation by foreigners threatens this key source of revenue. The country's first deepwater port opened near Nouakchott in 1986. Before 2000, drought and economic mismanagement resulted in a buildup of foreign debt. In February 2000, Mauritania qualified for debt relief under the Heavily Indebted Poor Countries (HIPC) initiative and nearly all of its foreign debt has since been forgiven. A new investment code approved in December 2001 improved the opportunities for direct foreign investment. Mauritania and the IMF 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 suspended assistance and investment in Mauritania after the August 2008 coup. Since the presidential election in July 2009, donors have resumed assistance. Oil prospects, while initially promising, have largely failed to materialize, and the government has placed a priority on attracting private investment to spur economic growth. The government also emphasizes reduction of poverty, improvement of health and education, and privatization of the economy. Economic growth remained around 5% in 2010-12, mostly because of rising prices of gold, copper, iron ore, and oil.
Mauritius Since independence in 1968, Mauritius has developed from a low-income, agriculturally based economy to a middle-income diversified economy with growing industrial, financial, and tourist sectors. For most of this period, annual growth has been on the order of 5% to 6%. This achievement has been reflected in more equitable income distribution, increased life expectancy, lowered infant mortality, and a much-improved infrastructure. The economy rests on sugar, tourism, textiles and apparel, and financial services, and is expanding into fish processing, information and communications technology, and hospitality and property development. Sugarcane is grown on about 90% of the cultivated land area and accounts for 15% of export earnings. The government's development strategy centers on creating vertical and horizontal clusters of development in these sectors. Mauritius has attracted more than 32,000 offshore entities, many aimed at commerce in India, South Africa, and China. Investment in the banking sector alone has reached over $1 billion. Mauritius, with its strong textile sector, has been well poised to take advantage of the Africa Growth and Opportunity Act (AGOA). Mauritius' sound economic policies and prudent banking practices helped to mitigate negative effects of the global financial crisis in 2008-09. GDP grew in the 3-4% per year range in 2010-12, and the country continues to expand its trade and investment outreach around the globe.
Mexico Mexico has a free market economy in the trillion dollar class. It contains a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector. Recent administrations have expanded competition in seaports, railroads, telecommunications, electricity generation, natural gas distribution, and airports. Per capita income is roughly one-third that of the US; income distribution remains highly unequal. Since the 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 5.5%. Mexico has free trade agreements with over 50 countries including Guatemala, Honduras, El Salvador, the European Free Trade Area, and Japan - putting more than 90% of trade under free trade agreements. In 2012 Mexico formally joined the Trans-Pacific Partnership negotiations and in July it formed the Pacific Alliance with Peru, Colombia and Chile. In 2007, during its first year in office, the Felipe CALDERON administration was able to garner support from the opposition to successfully pass pension and fiscal reforms. The administration passed an energy reform measure in 2008 and another fiscal reform in 2009. Mexico's GDP plunged 6.2% in 2009 as world demand for exports dropped, asset prices tumbled, and remittances and investment declined. GDP posted positive growth of 5.6% in 2010 with exports - particularly to the United States - leading the way. Growth slowed to 3.9% in 2011 and slightly recovered to 4% in 2012. In November 2012, Mexico's legislature passed a comprehensive labor reform which was signed into law by former President Felipe CALDERON. Mexico's new PRI government, led by President Enrique PENA NIETO, has said it will prioritize structural economic reforms and competitiveness. The new president signed the Pact for Mexico, an agreement that lists 95 priority commitments, along with the leaders of the country's three main political parties: the Institutional Revolutionary Party (PRI), the National Action Party (PAN) and the Party of the Democratic Revolution (PRD).
Micronesia, Federated States of Economic activity consists of subsistence farming and fishing and government which is funded largely by Compact of Free Association (Compact) assistance provided by the US. The islands have few known mineral deposits worth commercial exploration. The potential for tourism is also limited by isolation, lack of adequate facilities, and limited air and water connections hinder development. Under the terms of the original Compact, the US provided $1.3 billion in grants and aid in 1986-2001. The US and the Federated States of Micronesia (FSM) negotiated a second (amended) Compact agreement in 2002-2003 that took effect in 2004. The amended Compact runs for a 20-year period to 2024; during which the US will provide roughly $2.1 billion to the FSM. The amended Compact also includes a Trust Fund for the people of the FSM which is to provide an income stream beyond 2024 when Compact grants are to end. The country's medium-term economic outlook appears fragile because of reduced US assistance and lackluster performance of its small and stagnant private sector.
Moldova Moldova remains one of the poorest countries in Europe despite recent progress from its small economic base. With its moderate climate and good farmland, Moldova's economy relies heavily on its agriculture sector, featuring fruits, vegetables, wine, and tobacco. With few natural energy resources, Moldova imports almost all of its energy supplies from Russia and Ukraine. Moldova's dependence on Russian energy is underscored by an estimated $4.3 billion debt to Russian natural gas supplier Gazprom due largely to unreimbursed natural gas consumption in the separatist Transnistria region. Previous Russian decisions to ban Moldovan wine and agricultural products, coupled with their decision to double the price Moldova paid for Russian natural gas and the large debt continue to hamper economic growth. Moldova also depends heavily on the annual $1 billion in remittances from the estimated one million Moldovans working in Europe and former Soviet Bloc countries. During the global financial crisis in 2009, Moldova experienced a 6% contraction of its GDP, a shrinkage due to increased unemployment and decrease in remittances. To stabilize the country, the IMF allocated $186 million to Moldova to cover its immediate budgetary needs in the fall of 2009, and the Moldovan Government agreeing with the IMF to a new program worth $574 million. In 2010, an upturn in the world economy boosted GDP growth to about 7% and inflation to more than 7%. Economic reforms have been slow because of corruption and strong political forces backing government controls. Nevertheless, the government's primary goal of EU integration has resulted in some market-oriented progress. The granting of EU trade preferences has encouraged higher growth rates, but the agreements are unlikely to serve as a panacea, given the extent to which export success depends on higher quality standards and other factors. The economy had modest growth in 2011, expanding by 6.8%. However, in 2012, with the Euro crisis and a devastating drought, Moldova's GDP stalled at an estimated 0.3% growth over 2011. Moldova's economic future remains vulnerable to political uncertainty, weak administrative capacity, vested bureaucratic interests, higher fuel prices and the concerns of foreign investors as well as the presence of an illegal separatist regime in Moldova's Transnistria region.
Monaco Monaco, bordering France on the Mediterranean coast, is a popular resort, attracting tourists to its casino and pleasant climate. The principality also is a banking center and has successfully sought to diversify into services and small, high-value-added, nonpolluting industries. The state has no income tax and low business taxes and thrives as a tax haven both for individuals who have established residence and for foreign companies that have set up businesses and offices. Monaco, however, is not a tax-free shelter; it charges nearly 20% value-added tax, collects stamp duties, and companies face a 33% tax on profits unless they can show that three-quarters of profits are generated within the principality. Monaco's reliance on tourism and banking for its economic growth has left it vulnerable to a downturn in France and other European economies which are the principality's main trade partners. In 2009, Monaco''s GDP fell by 11.5% as the euro-zone crisis precipitated a sharp drop in tourism and retail activity and home sales. A modest recovery ensued in 2010 with GDP growth of 2.5%, but Monaco''s economic prospects remain clouded in uncertainty tied to future euro-zone growth. Weak economic growth also has deteriorated public finances as the principality recorded a budget deficit of 1.3% of GDP in 2012. Monaco was formally removed from the OECD''s "grey list" of uncooperative tax jurisdictions in late 2009, but continues to face international pressure to abandon its banking secrecy laws and help combat tax evasion. The state retains monopolies in a number of sectors, including tobacco, the telephone network, and the postal service. Living standards are high, roughly comparable to those in prosperous French metropolitan areas.
Mongolia Mongolia's extensive mineral deposits and attendant growth in mining-sector activities have transformed Mongolia's economy, which traditionally has been dependent on herding and agriculture. Mongolia's copper, gold, coal, molybdenum, fluorspar, uranium, tin, and tungsten deposits, among others, have attracted foreign direct investment. Soviet assistance, at its height one-third of GDP, disappeared almost overnight in 1990 and 1991 at the time of the dismantlement of the USSR. The following decade saw Mongolia endure both deep recession, because of political inaction and natural disasters, as well as economic growth, because of reform-embracing, free-market economics and extensive privatization of the formerly state-run economy. The country opened a fledgling stock exchange in 1991. Mongolia joined the World Trade Organization in 1997 and seeks to expand its participation in regional economic and trade regimes. Growth averaged nearly 9% per year in 2004-08 largely because of high copper prices globally and new gold production. By late 2008, Mongolia was hit hard by the global financial crisis. Slower global economic growth hurt the country's exports, notably copper, and slashed government revenues. As a result, Mongolia's real economy contracted 1.3% in 2009. In early 2009, the International Monetary Fund reached a $236 million Stand-by Arrangement with Mongolia and the country has largely emerged from the crisis with better regulations and closer supervision. The banking sector strengthened but weaknesses remain. In October 2009, Mongolia passed long-awaited legislation on an investment agreement to develop the Oyu Tolgoi mine, considered to be among the world's largest untapped copper deposits. Recent calls by nationalist politicians to renegotiate the investment agreement, however, have called into question the attractiveness of Mongolia as a destination for foreign direct investment. Negotiations to develop the massive Tavan Tolgoi coal field face similar obstacles. The economy grew by 6.4% in 2010, 17.5% in 2011, and by more than 12.3% in 2012, largely on the strength of commodity exports to nearby countries and high government spending domestically. Mongolia's economy, however, faces near-term economic risks from the government's loose fiscal policies, which are contributing to high inflation, and uncertainties in foreign demand for Mongolian exports. Trade with China represents more than half of Mongolia's total external trade - China receives more than 90% of Mongolia's exports. Mongolia purchases 95% of its petroleum products and a substantial amount of electric power from Russia, leaving it vulnerable to price increases. Due to severe winter weather in 2009-10, Mongolia lost 22% of its total livestock, and meat prices doubled. Inflation remained higher than 10% for much of 2010-12, due in part to higher food and fuel prices. The economic slowdown in China during 2011-2012 resulted in fewer Mongolian exports, a widened trade gap, and decreased government revenues, putting pressure on Mongolian fiscal policy. Remittances from Mongolians working abroad, particularly in South Korea, are significant.
Montenegro Montenegro's economy is transitioning to a market system, but the state sector remains large and additional institutional changes are needed. The economy relies heavily on tourism and the export of refined metals. Unprofitable state-owned enterprises weigh on public finances. Montenegro severed its economy from federal control and from Serbia during the MILOSEVIC era and maintained its own central bank, adopted the deutsch mark, then the euro - rather than the Yugoslav dinar - as official currency, collected customs tariffs, and managed its own budget. The dissolution of the loose political union between Serbia and Montenegro in 2006 led to separate membership in several international financial institutions, such as the European Bank for Reconstruction and Development. In January 2007, Montenegro joined the World Bank and IMF. Montenegro became the 156th member of World Trade Organization in December 2011. The European Council (EC) granted candidate country status to Montenegro at the December 2010 session. Montenegro began negotiations to join the EC in June, 2012, having met the conditions set down by the European Council, which called on Montenegro to take steps to fight corruption and organized crime. Unemployment and regional disparities in development are key political and economic problems. Montenegro has privatized its large aluminum complex - the dominant industry - as well as most of its financial sector, and has begun to attract foreign direct investment in the tourism sector. The global financial crisis had a significant negative impact on the economy, due to the ongoing credit crunch, a decline in the real estate sector, and a fall in aluminum exports. In 2012, real GDP growth slipped to 0.5%, reflecting the general downturn in most of Europe.
Montserrat Severe volcanic activity, which began in July 1995, has put a damper on this small, open economy. A catastrophic eruption in June 1997 closed the airport and seaports, causing further economic and social dislocation. Two-thirds of the 12,000 inhabitants fled the island. Some began to return in 1998 but lack of housing limited the number. The agriculture sector continued to be affected by the lack of suitable land for farming and the destruction of crops. Prospects for the economy depend largely on developments in relation to the volcanic activity and on public sector construction activity. Half of the island remains uninhabitable. In January 2013, the EU announced the disbursement of a $55.2 million aid package to Montserrat in order to boost the country's economic recovery, with a specific focus on public finance management, public sector reform, and prudent economic management.
Morocco Morocco has capitalized on its proximity to Europe and relatively low labor costs to build a diverse, open, market-oriented economy. In the 1980s Morocco was a heavily indebted country before pursuing austerity measures and pro-market reforms, overseen by the IMF. Since taking the throne in 1999, King MOHAMMED VI has presided over a stable economy marked by steady growth, low inflation, and gradually falling unemployment, although a poor harvest and economic difficulties in Europe contributed to an economic slowdown in 2012. Industrial development strategies and infrastructure improvements - most visibly illustrated by a new port and free trade zone near Tangier - are improving Morocco's competitiveness. Morocco also seeks to expand its renewable energy capacity with a goal of making renewable 40% of electricity output by 2020. Key sectors of the economy include agriculture, tourism, phosphates, textiles, apparel, and subcomponents. To boost exports, Morocco entered into a bilateral Free Trade Agreement with the United States in 2006 and an Advanced Status agreement with the European Union in 2008. Despite Morocco's economic progress, the country suffers from high unemployment, poverty, and illiteracy, particularly in rural areas. In 2011 and 2012, high prices on fuel - which is subsidized and almost entirely imported - strained the government''s budget and widened the country''s current account deficit. Key economic challenges for Morocco include fighting corruption and reforming the education system, the judiciary, and the government''s costly subsidy program.
Mozambique At independence in 1975, Mozambique was one of the world's poorest countries. Socialist mismanagement and a brutal civil war from 1977-92 exacerbated the situation. In 1987, the government embarked on a series of macroeconomic reforms designed to stabilize the economy. These steps, combined with donor assistance and with political stability since the multi-party elections in 1994, have led to dramatic improvements in the country's growth rate. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities. In spite of these gains, Mozambique remained dependent upon foreign assistance for 40% of its 2012 annual budget and over half the population remained below the poverty line. Subsistence agriculture continues to employ the vast majority of the country's work force and smallholder agricultural productivity and productivity growth is weak. A substantial trade imbalance persists although aluminum production from the Mozal smelter has significantly boosted export earnings in recent years. In 2012, The Mozambican government took over Portugal's last remaining share in the Cahora Bassa Hydroelectricity Company (HCB), a signficant contributor to the Southern African Power Pool. The government has plans to expand the Cahora Bassa Dam and build additional dams to increase its electricity exports and fulfill the needs of its burgeoning domestic industries. Mozambique's once substantial foreign debt has been reduced through forgiveness and rescheduling under the IMF's Heavily Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is now at a manageable level. In July 2007, the US government's Millennium Challenge Corporation (MCC) signed a $506.9 million Compact with Mozambique. Compact projects will end in September 2013 and are focusing on improving sanitation, roads, agriculture, and the business regulation environment in an effort to spur economic growth in the four northern provinces of the country. Citizens rioted in September 2010, after fuel, water, electricity, and bread price increases were announced. In an attempt to lessen the negative impact on people, the government implemented subsidies, decreased taxes and tariffs, and instituted other fiscal measures. Mozambique grew at an average annual rate of 6%-8% in the decade up to 2012, one of Africa's strongest performances. Mozambique's ability to attract large investment projects in natural resources is expected to fuel continued high growth in coming years. Revenues from these vast resources, including natural gas, coal, titanium and hydroelectric capacity, could overtake donor assistance within five years.
Namibia The economy is heavily dependent on the extraction and processing of minerals for export. Mining accounts for 8% of GDP, but provides more than 50% of foreign exchange earnings. Rich alluvial diamond deposits make Namibia a primary source for gem-quality diamonds. Marine diamond mining is becoming increasingly important as the terrestrial diamond supply has dwindled. Namibia is the world's fourth-largest producer of uranium. It also produces large quantities of zinc and is a small producer of gold and other minerals. The mining sector employs only about 3% of the population. Namibia normally imports about 50% of its cereal requirements; in drought years food shortages are a major problem in rural areas. A high per capita GDP, relative to the region, hides one of the world's most unequal income distributions, as shown by Namibia''s 59.7 GINI coefficient. The Namibian economy is closely linked to South Africa with the Namibian dollar pegged one-to-one to the South African rand. Namibia receives 30%-40% of its revenues from the Southern African Customs Union (SACU). Volatility in the size of Namibia''s annual SACU allotment complicates budget planning. Namibia''s economy remains vulnerable to volatility in the price of uranium. The rising cost of mining diamonds, increasingly from the sea, has reduced profit margins. Namibian authorities recognize these issues and have emphasized the need to increase higher value raw materials, manufacturing, and services, especially in the logistics and transportation sectors.
Nauru Revenues of this tiny island traditionally have come from exports of phosphates. Few other resources exist, with most necessities being imported, mainly from Australia, its former occupier and later major source of support. In 2005 an Australian company entered into an agreement to exploit remaining supplies. Primary reserves of phosphates were exhausted and mining ceased in 2006, but mining of a deeper layer of "secondary phosphate" in the interior of the island began the following year. The secondary phosphate deposits may last another 30 years. The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. In anticipation of the exhaustion of Nauru's phosphate deposits, substantial amounts of phosphate income were invested in trust funds to help cushion the transition and provide for Nauru's economic future. As a result of heavy spending from the trust funds, the government faced virtual bankruptcy. To cut costs the government has frozen wages and reduced overstaffed public service departments. Nauru lost further revenue in 2008 with the closure of Australia''s refugee processing center, making it almost totally dependent on food imports and foreign aid. Housing, hospitals, and other capital plant are deteriorating. The cost to Australia of keeping the government and economy afloat continues to climb. Few comprehensive statistics on the Nauru economy exist with estimates of Nauru''s GDP varying widely.
Navassa Island Subsistence fishing and commercial trawling occur within refuge waters.
Nepal Nepal is among the poorest and least developed countries in the world, with about one-quarter of its population living below the poverty line. Agriculture is the mainstay of the economy, providing a livelihood for three-fourths of the population and accounting for a little over one-third of GDP. Industrial activity mainly involves the processing of agricultural products, including pulses, jute, sugarcane, tobacco, and grain. Nepal has considerable scope for exploiting its potential in hydropower, with an estimated 42,000 MW of feasible capacity, but political instability hampers foreign investment. Additional challenges to Nepal's growth include its landlocked geographic location, civil strife and labor unrest, and its susceptibility to natural disaster.
Netherlands The Dutch economy is the sixth-largest economy in the euro-zone and is noted for its stable industrial relations, moderate unemployment and inflation, a sizable trade surplus, and an important role as a European transportation hub. Industrial activity is predominantly in food processing, chemicals, petroleum refining, and electrical machinery. A highly mechanized agricultural sector employs only 2% of the labor force but provides large surpluses for the food-processing industry and for exports. The Netherlands, along with 11 of its EU partners, began circulating the euro currency on 1 January 2002. After 26 years of uninterrupted economic growth, the Dutch economy - highly dependent on an international financial sector and international trade - contracted by 3.5% in 2009 as a result of the global financial crisis. The Dutch financial sector suffered, due in part to the high exposure of some Dutch banks to U.S. mortgage-backed securities. In 2008, the government nationalized two banks and injected billions of dollars of capital into other financial institutions, to prevent further deterioration of a crucial sector. The government also sought to boost the domestic economy by accelerating infrastructure programs, offering corporate tax breaks for employers to retain workers, and expanding export credit facilities. The stimulus programs and bank bailouts, however, resulted in a government budget deficit of 5.3% of GDP in 2010 that contrasted sharply with a surplus of 0.7% in 2008. The government of Prime Minister Mark RUTTE began implementing fiscal consolidation measures in early 2011, mainly reductions in expenditures, which resulted in an improved budget deficit in 2011. In 2012 tax revenues dropped nearly 9%, GDP contracted, and the budget deficit deteriorated. Although jobless claims continued to grow, the unemployment rate remained relatively low at 6.8 percent.
New Caledonia New Caledonia has about 25% of the world's known nickel reserves. Only a small amount of the land is suitable for cultivation, and food accounts for about 20% of imports. In addition to nickel, substantial financial support from France - equal to more than 15% of GDP - and tourism are keys to the health of the economy; during 2009-10, France sent more development assistance to New Caledonia than to any of its other overseas territories. Substantial new investment in the nickel industry, combined with the recovery of global nickel prices, brightens the economic outlook for the next several years.
New Zealand Over the past 20 years the government has transformed New Zealand from an agrarian economy dependent on concessionary British market access to a more industrialized, free market economy that can compete globally. This dynamic growth has boosted real incomes - but left behind some at the bottom of the ladder - and broadened and deepened the technological capabilities of the industrial sector. Per capita income rose for ten consecutive years until 2007 in purchasing power parity terms, but fell in 2008-09. Debt-driven consumer spending drove robust growth in the first half of the decade, helping fuel a large balance of payments deficit that posed a challenge for economic managers. Inflationary pressures caused the central bank to raise its key rate steadily from January 2004 until it was among the highest in the OECD in 2007-08; international capital inflows attracted to the high rates further strengthened the currency and housing market, however, aggravating the current account deficit. The economy fell into recession before the start of the global financial crisis and contracted for five consecutive quarters in 2008-09. In line with global peers, the central bank cut interest rates aggressively and the government developed fiscal stimulus measures. The economy posted a 2% decline in 2009, but pulled out of recession late in the year, and achieved roughly 2% per year growth in 2010-12. Nevertheless, key trade sectors remain vulnerable to weak external demand. The government plans to raise productivity growth and develop infrastructure, while reining in government spending.
Nicaragua Nicaragua, the poorest country in Central America and the second poorest in the Western Hemisphere, has widespread underemployment and poverty. The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) has been in effect since April 2006 and has expanded export opportunities for many agricultural and manufactured goods. Textiles and agriculture combined account for nearly 50% of Nicaragua's exports. The ORTEGA administration's promotion of mixed business initiatives, owned by the Nicaraguan and Venezuelan state oil firms, together with the weak rule of law, could undermine the investment climate for domestic and international private firms in the near-term. Nicaragua relied on an IMF external credit facility to meet internal- and external-debt financing obligations. The most recent IMF program ended in 2011 and Nicaragua is currently in negotiations for a new program. Nicaragua depends heavily on foreign development assistance, however, donors have curtailed this funding in response to November 2008 and subsequent electoral fraud. Nicaragua still struggles with a high public debt burden, however, it succeeded in reducing that burden in 2011. The economy grew at a rate of about 4% in 2012.
Niger Niger is a landlocked, Sub-Saharan nation, whose economy centers on subsistence crops, livestock, and some of the world's largest uranium deposits. Agriculture contributes about 40% of GDP and provides livelihood for about 90% of the population. Niger also has sizable reserves of oil, and oil production, refining, and exports are expected to grow significantly between 2011 and 2016. Drought, desertification, and strong population growth have undercut the economy. Niger shares a common currency, the CFA franc, and a common central bank, the Central Bank of West African States (BCEAO), with seven other members of the West African Monetary Union. In December 2000, Niger qualified for enhanced debt relief under the International Monetary Fund program for Highly Indebted Poor Countries (HIPC) and concluded an agreement with the Fund on a Poverty Reduction and Growth Facility (PRGF). Debt relief provided under the enhanced HIPC initiative significantly reduced Niger's annual debt service obligations, freeing funds for expenditures on basic health care, primary education, HIV/AIDS prevention, rural infrastructure, and other programs geared at poverty reduction. In December 2005, Niger received 100% multilateral debt relief from the IMF, which translated into the forgiveness of approximately US$86 million in debts to the IMF, excluding the remaining assistance under HIPC. The economy was hurt when the international community cut off non-humanitarian aid in response to TANDJA's moves to extend his term as president. Nearly half of the government's budget is derived from foreign donor resources. Future growth may be sustained by exploitation of oil, gold, coal, and other mineral resources. The government, however, has made efforts to secure a new three-year extended credit facility with the IMF following the one that completed in 2011. Oil revenue to the government has fallen well short of its budgeted level. Strikes risk undermining political stability. Food security remains a problem in Niger and is exacerbated by refugees from Mali.
Nigeria Oil-rich Nigeria has been hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management, but in 2008 began pursuing economic reforms. Nigeria's former military rulers failed to diversify the economy away from its overdependence on the capital-intensive oil sector, which provides 95% of foreign exchange earnings and about 80% of budgetary revenues. Following the signing of an IMF stand-by agreement in August 2000, Nigeria received a debt-restructuring deal from the Paris Club and a $1 billion credit from the IMF, both contingent on economic reforms. Nigeria pulled out of its IMF program in April 2002, after failing to meet spending and exchange rate targets, making it ineligible for additional debt forgiveness from the Paris Club. In November 2005, Abuja won Paris Club approval for a debt-relief deal that eliminated $18 billion of debt in exchange for $12 billion in payments - a total package worth $30 billion of Nigeria's total $37 billion external debt. Since 2008 the government has begun to show the political will to implement the market-oriented reforms urged by the IMF, such as modernizing the banking system, removing subsidies, and resolving regional disputes over the distribution of earnings from the oil industry. GDP rose strongly in 2007-12 because of growth in non-oil sectors and robust global crude oil prices. President JONATHAN has established an economic team that includes experienced and reputable members and has announced plans to increase transparency, diversify economic growth, and improve fiscal management. Lack of infrastructure and slow implementation of reforms are key impediments to growth. The government is working toward developing stronger public-private partnerships for roads, agriculture, and power. Nigeria's financial sector was hurt by the global financial and economic crises, but the Central Bank governor has taken measures to restructure and strengthen the sector to include imposing mandatory higher minimum capital requirements.
Niue The economy suffers from the typical Pacific island problems of geographic isolation, few resources, and a small population. Government expenditures regularly exceed revenues, and the shortfall is made up by critically needed grants from New Zealand that are used to pay wages to public employees. Niue has cut government expenditures by reducing the public service by almost half. The agricultural sector consists mainly of subsistence gardening, although some cash crops are grown for export. Industry consists primarily of small factories to process passion fruit, lime oil, honey, and coconut cream. The sale of postage stamps to foreign collectors is an important source of revenue. The island in recent years has suffered a serious loss of population because of emigration to New Zealand. Efforts to increase GDP include the promotion of tourism and financial services, although the International Banking Repeal Act of 2002 resulted in the termination of all offshore banking licenses. Economic aid from New Zealand in FY08/09 was US$5.7 million. Niue suffered a devastating typhoon in January 2004, which decimated nascent economic programs. While in the process of rebuilding, Niue has been dependent on foreign aid.
Norfolk Island Norfolk Island is suffering from a severe economic downturn. Tourism, the primary economic activity, is the main driver of economic growth. The agricultural sector has become self sufficient in the production of beef, poultry, and eggs.
Northern Mariana Islands The Northern Mariana Islands' economy benefits substantially from financial assistance from the US. The tourist industry employs approximately a quarter of the work force and accounts for roughly one-fourth of GDP. As a share of total arrivals, the number of Japanese tourists has dropped recently to less than half, while Korean visitors account for roughly one-third. Annual tourist arrivals have remained below 400,000 since 2007. Other services such as trade are also important to the local economy. The small agriculture sector is made up of cattle ranches and small farms producing coconuts, breadfruit, tomatoes, and melons.
Norway The Norwegian economy is a prosperous mixed economy, with a vibrant private sector, a large state sector, and an extensive social safety net. The government controls key areas, such as the vital petroleum sector, through extensive regulation and large-scale state-majority-owned enterprises. The country is richly endowed with natural resources - petroleum, hydropower, fish, forests, and minerals - and is highly dependent on the petroleum sector, which accounts for the largest portion of export revenue and about 20% of government revenue. Norway is the world's third-largest natural gas exporter; and seventh largest oil exporter, making one of its largest offshore oil finds in 2011. Norway opted to stay out of the EU during a referendum in November 1994; nonetheless, as a member of the European Economic Area, it contributes sizably to the EU budget. In anticipation of eventual declines in oil and gas production, Norway saves state revenue from the petroleum sector in the world's second largest sovereign wealth fund, valued at over $700 billion in January 2013 and uses the fund''s return to help finance public expenses. After solid GDP growth in 2004-07, the economy slowed in 2008, and contracted in 2009, before returning to positive growth in 2010-12, however, the government budget is set to remain in surplus.
Oman Oman is a middle-income economy that is heavily dependent on dwindling oil resources. Because of declining reserves and a rapidly growing labor force, Muscat has actively pursued a development plan that focuses on diversification, industrialization, and privatization, with the objective of reducing the oil sector's contribution to GDP to 9% by 2020 and creating more jobs to employ the rising numbers of Omanis entering the workforce. Tourism and gas-based industries are key components of the government's diversification strategy. However, increases in social welfare benefits, particularly since the Arab Spring, will challenge the government's ability to effectively balance its budget if oil revenues decline. By using enhanced oil recovery techniques, Oman succeeded in increasing oil production, giving the country more time to diversify, and the increase in global oil prices through 2011 provided the government greater financial resources to invest in non-oil sectors. In 2012, continued surpluses resulting from sustained high oil prices and increased enhanced oil recovery allowed the government to maintain growth in social subsidies and public sector job creation. However, the Sultan made widely reported statements indicating this would not be sustainable, and called for expanded efforts to support SME development and entrepreneurship. Government agencies and large oligarchic group companies heeded his call, announcing new initiatives to spin off non-essential functions to entrepreneurs, incubate new businesses, train and mentor up and coming business people, and provide financing for start-ups. In response to fast growth in household indebtedness, the Central Bank reduced the ceiling on personal interest loans from 8 to 7%, lowered mortgage rates, capped the percentage of consumer loans at 50% of borrower's salaries for personal loans and 60% for housing loans, and limited maximum repayment terms to 10 and 25 years respectively. In 2012 the Central Bank also issued final regulations governing Islamic banking and two full-fledged Islamic banks held oversubscribed IPOs while four traditional banks opened sharia-compliant Islamic windows.
Pacific Ocean The Pacific Ocean is a major contributor to the world economy and particularly to those nations its waters directly touch. It provides low-cost sea transportation between East and West, extensive fishing grounds, offshore oil and gas fields, minerals, and sand and gravel for the construction industry. In 1996, over 60% of the world's fish catch came from the Pacific Ocean. Exploitation of offshore oil and gas reserves is playing an ever-increasing role in the energy supplies of the US, Australia, NZ, China, and Peru. The high cost of recovering offshore oil and gas, combined with the wide swings in world prices for oil since 1985, has led to fluctuations in new drillings.
Pakistan Decades of internal political disputes and low levels of foreign investment have led to slow growth and underdevelopment in Pakistan. Agriculture accounts for more than one-fifth of output and two-fifths of employment. Textiles account for most of Pakistan's export earnings, and Pakistan's failure to expand a viable export base for other manufactures has left the country vulnerable to shifts in world demand. Official unemployment is under 6%, but this fails to capture the true picture, because much of the economy is informal and underemployment remains high. Over the past few years, low growth and high inflation, led by a spurt in food prices, have increased the amount of poverty - the UN Human Development Report estimated poverty in 2011 at almost 50% of the population. Inflation has worsened the situation, climbing from 7.7% in 2007 to almost 12% for 2011, before declining to 10% in 2012. As a result of political and economic instability, the Pakistani rupee has depreciated more than 40% since 2007. The government agreed to an International Monetary Fund Standby Arrangement in November 2008 in response to a balance of payments crisis. Although the economy has stabilized since the crisis, it has failed to recover. Foreign investment has not returned, due to investor concerns related to governance, energy, security, and a slow-down in the global economy. Remittances from overseas workers, averaging about $1 billion a month since March 2011, remain a bright spot for Pakistan. However, after a small current account surplus in fiscal year 2011 (July 2010/June 2011), Pakistan's current account turned to deficit in fiscal year 2012, spurred by higher prices for imported oil and lower prices for exported cotton. Pakistan remains stuck in a low-income, low-growth trap, with growth averaging about 3% per year from 2008 to 2012. Pakistan must address long standing issues related to government revenues and energy production in order to spur the amount of economic growth that will be necessary to employ its growing and rapidly urbanizing population, more than half of which is under 22. Other long term challenges include expanding investment in education and healthcare, adapting to the effects of climate change and natural disasters, and reducing dependence on foreign donors.
Palau The economy consists of tourism and other services such as trade, subsistence agriculture, and fishing. Government is a major employer of the work force relying on financial assistance from the US under the Compact of Free Association (Compact) with the US. The Compact took effect, after the end of the UN trusteeship on 1 October 1994. The US provided Palau with roughly $700 million in aid for the first 15 years following commencement of the Compact in 1994 in return for unrestricted access to its land and waterways for strategic purposes. Business and leisure tourist arrivals numbered over 109,000 in 2011, for a 27% increase over 2010. The population enjoys a per capita income roughly double that of the Philippines and much of Micronesia. Long-run prospects for tourism have been bolstered by the expansion of air travel in the Pacific, the rising prosperity of industrial East Asia, and the willingness of foreigners to finance infrastructure development. Proximity to Guam, the region's major destination for tourists from East Asia, and a regionally competitive tourist infrastructure enhance Palau's advantage as a destination.
Panama Panama's dollar-based economy rests primarily on a well-developed services sector that accounts for more than three-quarters of GDP. Services include operating the Panama Canal, logistics, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism. Economic growth will be bolstered by the Panama Canal expansion project that began in 2007 and is estimated to be completed by 2015 at a cost of $5.3 billion - about 10-15% of current GDP. The expansion project will more than double the Canal's capacity, enabling it to accommodate ships that are too large to traverse the existing canal. The United States and China are the top users of the Canal. Panama is also constructing a metro system in Panama City, valued at $1.2 billion and scheduled to be completed by 2014. Panama''s booming transportation and logistics services sectors, along with aggressive infrastructure development projects, have lead the economy to continued high growth in 2012. Foreign investment, at around 10% of GDP in both 2011 and 2012, has continued to be a source of growth. Strong economic performance has not translated into broadly shared prosperity, as Panama has the second worst income distribution in Latin America. About 30% of the population lives in poverty; however, from 2006 to 2012 poverty was reduced by 10 percentage points, while unemployment dropped from 12% to 4.4% of the labor force in 2012. The US-Panama Trade Promotion Agreement was approved by Congress and signed into law in October 2011, and entered into force in October 2012. Panama also achieved removal from the Organization of Economic Development''s gray-list of tax havens by signing various double taxation treaties with other nations.
Papua New Guinea Papua New Guinea (PNG) is richly endowed with natural resources, but exploitation has been hampered by rugged terrain, land tenure issues, and the high cost of developing infrastructure. The economy has a small formal sector, focused mainly on the export of those natural resources, and an informal sector, employing the majority of the population. Agriculture provides a subsistence livelihood for 85% of the people. Mineral deposits, including copper, gold, and oil, account for nearly two-thirds of export earnings. Natural gas reserves amount to an estimated 155 billion cubic meters. A consortium led by a major American oil company is constructing a liquefied natural gas (LNG) production facility that could begin exporting in 2014. As the largest investment project in the country's history, it has the potential to double GDP in the near-term and triple Papua New Guinea's export revenue. An American-owned firm also opened PNG's first oil refinery in 2004 and is building a second LNG production facility. The government faces the challenge of ensuring transparency and accountability for revenues flowing from this and other large LNG projects. In 2011 and 2012, the National Parliament passed legislation that created an offshore Sovereign Wealth Fund (SWF) to manage government surpluses from mineral, oil, and natural gas projects. In recent years, the government has opened up markets in telecommunications and air transport, making both more affordable to the people. Numerous challenges still face the government of Peter O'NEILL, including providing physical security for foreign investors, regaining investor confidence, restoring integrity to state institutions, promoting economic efficiency by privatizing moribund state institutions, and maintaining good relations with Australia, its former colonial ruler. Other socio-cultural challenges could upend the economy including chronic law and order and land tenure issues. The global financial crisis had little impact because of continued foreign demand for PNG's commodities.
Paracel Islands The islands have the potential for oil and gas development. Waters around the islands support commercial fishing, but the islands themselves are not populated on a permanent basis.
Paraguay Landlocked Paraguay has a market economy distinguished by a large informal sector, featuring re-export of imported consumer goods to neighboring countries, as well as the activities of thousands of microenterprises and urban street vendors. A large percentage of the population, especially in rural areas, derives its living from agricultural activity, often on a subsistence basis. Because of the importance of the informal sector, accurate economic measures are difficult to obtain. On a per capita basis, real income has stagnated at 1980 levels. The economy grew rapidly between 2003 and 2008 as growing world demand for commodities combined with high prices and favorable weather to support Paraguay's commodity-based export expansion. Paraguay is the sixth largest soy producer in the world. Drought hit in 2008, reducing agricultural exports and slowing the economy even before the onset of the global recession. The economy fell 3.8% in 2009, as lower world demand and commodity prices caused exports to contract. The government reacted by introducing fiscal and monetary stimulus packages. Growth resumed at a 13% level in 2010, the highest in South America, but slowed to about 4% in 2011 as the stimulus subsided. In 2012, severe drought and outbreaks of foot-and-mouth disease led to a drop in beef and other agricultural exports and the economy contracted about 0.5%. Political uncertainty, corruption, limited progress on structural reform, and deficient infrastructure are the main obstacles to long-term growth.
Peru Peru's economy reflects its varied geography - an arid lowland coastal region, the central high sierra of the Andes, the dense forest of the Amazon, with tropical lands bordering Colombia and Brazil. A wide range of important mineral resources are found in the mountainous and coastal areas, and Peru's coastal waters provide excellent fishing grounds. The Peruvian economy has been growing by an average of 6.4% per year since 2002 with a stable/slightly appreciating exchange rate and low inflation, which in 2013 is expected to be below the upper limit of the Central Bank target range of 1 to 3%. Growth has been in the 6-9% range for the last three years, due partly to a leap in private investment, especially in the extractive sector, which accounts for more than 60% of Peru's total exports. Despite Peru's strong macroeconomic performance, dependence on minerals and metals exports and imported foodstuffs subjects the economy to fluctuations in world prices. Poor infrastructure hinders the spread of growth to Peru's non-coastal areas. Peru's rapid expansion coupled with cash transfers and other programs have helped to reduce the national poverty rate by 23 percentage points since 2002, but inequality persists and continues to pose a challenge for the new Ollanta HUMALA administration, which has championed a policy of social inclusion and a more equitable distribution of income. Peru's free trade policy has continued under the HUMALA administration; since 2006, Peru has signed trade deals with the US, Canada, Singapore, China, Korea, Mexico, Japan, the European Free Trade Association, Chile, and four other countries; concluded negotiations with Venezuela, Costa Rica, and Guatemala; and begun trade talks with two other Central American countries and the Trans-Pacific Partnership. Peru also has signed a trade pact with Chile, Colombia, and Mexico called the Pacific Alliance that rivals Mercosur in combined population, GDP, and trade. The US-Peru Trade Promotion Agreement entered into force 1 February 2009, opening the way to greater trade and investment between the two economies. Although Peru has continued to attract foreign investment, political activism and protests are hampering development of some projects related to natural resource extraction.
Philippines Philippine GDP growth, which cooled from 7.6% in 2010 to 3.9% in 2011, expanded to 6.6% in 2012 - meeting the government's targeted 6%-7% growth range. The 2012 expansion partly reflected a rebound from depressed 2011 export and public sector spending levels. The economy has weathered global economic and financial downturns better than its regional peers due to minimal exposure to troubled international securities, lower dependence on exports, relatively resilient domestic consumption, large remittances from four- to five-million overseas Filipino workers, and a rapidly expanding business process outsourcing industry. The current account balance had recorded consecutive surpluses since 2003; international reserves are at record highs; the banking system is stable; and the stock market was Asia's second best-performer in 2012. Efforts to improve tax administration and expenditure management have helped ease the Philippines' tight fiscal situation and reduce high debt levels. The Philippines received several credit rating upgrades on its sovereign debt in 2012, and has had little difficulty tapping domestic and international markets to finance its deficits. Achieving a higher growth path nevertheless remains a pressing challenge. Economic growth in the Philippines averaged 4.5% during the MACAPAGAL-ARROYO administration but poverty worsened during her term. Growth has accelerated under the AQUINO government, but with limited progress thus far in bringing down unemployment, which hovers around 7%, and improving the quality of jobs. Underemployment is nearly 20% and more than 40% of the employed are estimated to be working in the informal sector. The AQUINO administration has been working to boost the budgets for education, health, cash transfers to the poor, and other social spending programs, and is relying on the private sector to help fund major infrastructure projects under its Public-Private Partnership program. Long term challenges include reforming governance and the judicial system, building infrastructure, improving regulatory predictability, and the ease of doing business, attracting higher levels of local and foreign investments. The Philippine Constitution and the other laws continue to restrict foreign ownership in important activities/sectors (such as land ownership and public utilities).
Pitcairn Islands The inhabitants of this tiny isolated economy exist on fishing, subsistence farming, handicrafts, and postage stamps. The fertile soil of the valleys produces a wide variety of fruits and vegetables, including citrus, sugarcane, watermelons, bananas, yams, and beans. Bartering is an important part of the economy. The major sources of revenue are the sale of postage stamps to collectors and the sale of handicrafts to passing ships.
Poland Poland has pursued a policy of economic liberalization since 1990 and Poland's economy was the only one in the European Union to avoid a recession through the 2008-09 economic downturn. Although EU membership and access to EU structural funds have provided a major boost to the economy since 2004, GDP per capita remains significantly below the EU average while unemployment continues to exceed the EU average. The government of Prime Minister Donald TUSK steered the Polish economy through the economic downturn by skillfully managing public finances without stifling economic growth and adopted controversial pension and tax reforms to further shore up public finances. While the Polish economy has performed well over the past five years, growth slowed in 2012, in part due to the ongoing economic difficulties in the euro zone. The key policy challenge is to provide support to the economy through monetary easing, while maintaining the pace of structural fiscal consolidation. Poland's economic performance could improve over the longer term if the country addresses some of the remaining deficiencies in its road and rail infrastructure and its business environment. An inefficient commercial court system, a rigid labor code, red tape, and a burdensome tax system keep the private sector from realizing its full potential.
Portugal Portugal has become a diversified and increasingly service-based economy since joining the European Community - the EU's predecessor - in 1986. Over the following two decades, successive governments privatized many state-controlled firms and liberalized key areas of the economy, including the financial and telecommunications sectors. The country qualified for the Economic and Monetary Union (EMU) in 1998 and began circulating the euro on 1 January 2002 along with 11 other EU members. The economy grew by more than the EU average for much of the 1990s, but the rate of growth slowed in 2001-08. The economy contracted 2.5% in 2009, before growing 1.4% in 2010, but GDP fell again in 2011 and 2012, as the government began implementing spending cuts and tax increases to comply with conditions of an EU-IMF financial rescue package, agreed to in May 2011. GDP per capita stands at roughly two-thirds of the EU-27 average. Portugal also has been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a destination for foreign direct investment, in part because its rigid labor market hindered greater productivity and growth. However, the government of Pedro PASSOS COELHO has enacted several measures to introduce more flexibility into the labor market, and, this, along with steps to reduce high levels of public debt, could make Portugal more attractive to foreign investors. The government reduced the budget deficit from 10.1% of GDP in 2009 to 4.5% in 2011, an achievement made possible only by the extraordinary revenues obtained from the one-time transfer of bank pension funds to the social security system. The budget deficit worsened in 2012 as a sharp reduction in domestic consumption took a bigger bite out of value-added tax revenues while rising unemployment benefits increased expenditures more than anticipated. Poor growth prospects over the next year have reinforced investors' concerns about the government's ability to achieve its budget deficit targets and regain full access to bond market financing when the EU-IMF financing program expires in 2013.
Puerto Rico Puerto Rico has one of the most dynamic economies in the Caribbean region, however, growth has been negative for the past four years, and unemployment rose to nearly 16% in 2011. The industrial sector has surpassed agriculture as the primary locus of economic activity and income. Mainland US firms have invested heavily in Puerto Rico since the 1950s. US minimum wage laws apply. Sugar production has lost out to dairy production and other livestock products as the main source of income in the agricultural sector. Tourism has traditionally been an important source of income with estimated arrivals of more than 3.6 million tourists in 2008. Closing the budget deficit while restoring economic growth and employment remain the central concerns of the government.
Qatar Qatar has prospered in the last several years with continued high real GDP growth. Throughout the financial crisis Qatari authorities sought to protect the local banking sector with direct investments into domestic banks. GDP grew sharply in 2010 largely due to the increase in oil prices, and 2011's growth was supported by Qatar's investment in expanding its gas sector. GDP slowed to 6.6% in 2012 as Qatar''s gas sector expansion moved toward completion. Economic policy is focused on developing Qatar''s nonassociated natural gas reserves and increasing private and foreign investment in non-energy sectors, but oil and gas still account for more than 50% of GDP, roughly 85% of export earnings, and 70% of government revenues. Oil and gas have made Qatar the world''s highest per-capita income country and the country with the lowest unemployment. Proved oil reserves in excess of 25 billion barrels should enable continued output at current levels for 57 years. Qatar''s proved reserves of natural gas exceed 25 trillion cubic meters, more than 13% of the world total and third largest in the world. Qatar''s successful 2022 World Cup bid will likely accelerate large-scale infrastructure projects such as Qatar''s metro system, light rail system, and the Qatar-Bahrain causeway. The Hamad International Airport is projected to open by the end of 2013 with an annual passenger capacity of 24 million.
Romania Romania, which joined the European Union on 1 January 2007, began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. Domestic consumption and investment fueled strong GDP growth, but led to large current account imbalances. Romania's macroeconomic gains have only recently started to spur creation of a middle class and to address Romania''s widespread poverty. Corruption and red tape continue to permeate the business environment. Inflation rose in 2007-08, driven by strong consumer demand, high wage growth, rising energy costs, a nation-wide drought, and a relaxation of fiscal discipline. As a result of the increase in fiscal and current account deficits and the global financial crisis, Romania signed on to a $26 billion emergency assistance package from the IMF, the EU, and other international lenders. Worsening international financial markets, as well as a series of drastic austerity measures implemented to meet Romania''s obligations under the IMF-led bail-out agreement contributed to a GDP contraction of 6.6% in 2009, followed by a 1.1% GDP contraction in 2010. The economy returned to positive growth in 2011 due to strong exports, a better than expected harvest, and weak domestic demand. In 2012, however, growth slowed to less than 1%, partially due to slackening export demand and an extended drought that resulted in an exceptionally poor harvest. In March 2011, Romania and the IMF/EU/World Bank signed a 24-month precautionary stand-by agreement, worth $6.6 billion, to promote fiscal discipline, encourage progress on structural reforms, and strengthen financial sector stability. The Romanian authorities announced that they do not intend to draw funds under the agreement.
Russia Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference. In 2011, Russia became the world's leading oil producer, surpassing Saudi Arabia; Russia is the second-largest producer of natural gas; Russia holds the world's largest natural gas reserves, the second-largest coal reserves, and the eighth-largest crude oil reserves. Russia is also a top exporter of metals such as steel and primary aluminum. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices. The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few visible results so far. The economy had averaged 7% growth in the decade following the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class. The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. According to the World Bank the government's anti-crisis package in 2008-09 amounted to roughly 6.7% of GDP. The economic decline bottomed out in mid-2009 and the economy began to grow again in the third quarter of 2009. High oil prices buoyed Russian growth in 2011-12 and helped Russia reduce the budget deficit inherited from 2008-09. Russia has reduced unemployment to a record low and has lowered inflation below double digit rates. Russia joined the World Trade Organization in 2012, which will reduce trade barriers in Russia for foreign goods and services and help open foreign markets to Russian goods and services. At the same time, Russia has sought to cement economic ties with countries in the former Soviet space through a Customs Union with Belarus and Kazakhstan, and, in the next several years, through the creation of a new Russia-led economic bloc called the Eurasian Economic Union. Russia has had difficulty attracting foreign direct investment and has experienced large capital outflows in the past several years, leading to official programs to improve Russia's international rankings for its investment climate. Russia's adoption of a new oil-price-based fiscal rule in 2012 and a more flexible exchange rate policy have improved its ability to deal with external shocks, including volatile oil prices. Russia's long-term challenges also include a shrinking workforce, rampant corruption, and underinvestment in infrastructure.
Rwanda Rwanda is a poor rural country with about 90% of the population engaged in (mainly subsistence) agriculture and some mineral and agro-processing. Tourism, minerals, coffee and tea are Rwanda's main sources of foreign exchange. Minerals exports declined 40% in 2009-10 due to the global economic downturn. The 1994 genocide decimated Rwanda's fragile economic base, severely impoverished the population, particularly women, and temporarily stalled the country's ability to attract private and external investment. However, Rwanda has made substantial progress in stabilizing and rehabilitating its economy to pre-1994 levels. GDP has rebounded with an average annual growth of 7%-8% since 2003 and inflation has been reduced to single digits. Nonetheless, a significant percent of the population still live below the official poverty line. Despite Rwanda's fertile ecosystem, food production often does not keep pace with demand, requiring food imports. Rwanda continues to receive substantial aid money and obtained IMF-World Bank Heavily Indebted Poor Country (HIPC) initiative debt relief in 2005-06. In recognition of Rwanda's successful management of its macro economy, in 2010, the IMF graduated Rwanda to a Policy Support Instrument (PSI). Rwanda also received a Millennium Challenge Threshold Program in 2008. Africa's most densely populated country is trying to overcome the limitations of its small, landlocked economy by leveraging regional trade. Rwanda joined the East African Community and is aligning its budget, trade, and immigration policies with its regional partners. The government has embraced an expansionary fiscal policy to reduce poverty by improving education, infrastructure, and foreign and domestic investment and pursuing market-oriented reforms. Energy shortages, instability in neighboring states, and lack of adequate transportation linkages to other countries continue to handicap private sector growth. The Rwandan Government is seeking to become regional leader in information and communication technologies. In 2010, Rwanda neared completion of the first modern Special Economic Zone (SEZ) in Kigali. The SEZ seeks to attract investment in all sectors, but specifically in agribusiness, information and communications technologies, trade and logistics, mining, and construction. The global downturn hurt export demand and tourism, but economic growth has recovered, driven in large part by the services sector, but inflation has grown. On the back of this growth, government is gradually ending its fiscal stimulus policy while protecting aid to the poor.
Saint Barthelemy The economy of Saint Barthelemy is based upon high-end tourism and duty-free luxury commerce, serving visitors primarily from North America. The luxury hotels and villas host 70,000 visitors each year with another 130,000 arriving by boat. The relative isolation and high cost of living inhibits mass tourism. The construction and public sectors also enjoy significant investment in support of tourism. With limited fresh water resources, all food must be imported, as must all energy resources and most manufactured goods. Employment is strong and attracts labor from Brazil and Portugal.
Saint Helena, Ascension, and Tristan da Cunha The economy depends largely on financial assistance from the UK, which amounted to about $27 million in FY06/07 or more than twice the level of annual budgetary revenues. The local population earns income from fishing, raising livestock, and sales of handicrafts. Because there are few jobs, 25% of the work force has left to seek employment on Ascension Island, on the Falklands, and in the UK.
Saint Kitts and Nevis The economy of Saint Kitts and Nevis depends on tourism; since the 1970s tourism has replaced sugar as the traditional mainstay of the economy. Following the 2005 harvest, the government closed the sugar industry, after several decades of losses. To compensate for lost jobs, the government has embarked on a program to diversify the agricultural sector and to stimulate other sectors of the economy, such as export-oriented manufacturing and offshore banking. Roughly 200,000 tourists visited the islands in 2009, but reduced tourism arrivals and foreign investment led to an economic contraction in 2009-2012, and the economy has not yet returned to growth. Like other tourist destinations in the Caribbean, St. Kitts and Nevis is vulnerable to damage from natural disasters and shifts in tourism demand. Furthermore, the government is constrained by one of the world's highest public debt burdens - equivalent to roughly 140% of GDP in 2012 - largely attributable to public enterprise losses.
Saint Lucia The island nation has been able to attract foreign business and investment, especially in its offshore banking and tourism industries. Tourism is Saint Lucia's main source of jobs and income - accounting for 65% of GDP - and the island's main source of foreign exchange earnings. The manufacturing sector is the most diverse in the Eastern Caribbean area. Crops such as bananas, mangos, and avocados continue to be grown for export, but St. Lucia''s once solid banana industry has been devastated by strong competition and by Hurricane Tomas in 2010. Saint Lucia is vulnerable to a variety of external shocks, including volatile tourism receipts, natural disasters, and dependence on foreign oil. Furthermore, high public debt - 77% of GDP in 2012 - and high debt servicing obligations constrain the ANTHONY administration''s ability to respond to adverse external shocks. St. Lucia has experienced anemic growth since the onset of the global financial crisis in 2008, largely because of a slowdown in tourism. As airlines cut back on their routes to St. Lucia in 2012, tourism growth slowed. Also, St. Lucia introduced a value added tax in 2012 of 15%, becoming the last country in the Eastern Caribbean to do so.
Saint Martin The economy of Saint Martin centers around tourism with 85% of the labor force engaged in this sector. Over one million visitors come to the island each year with most arriving through the Princess Juliana International Airport in Sint Maarten. No significant agriculture and limited local fishing means that almost all food must be imported. Energy resources and manufactured goods are also imported, primarily from Mexico and the United States. Saint Martin is reported to have the highest per capita income in the Caribbean.
Saint Pierre and Miquelon The inhabitants have traditionally earned their livelihood by fishing and by servicing fishing fleets operating off the coast of Newfoundland. The economy has been declining, however, because of disputes with Canada over fishing quotas and a steady decline in the number of ships stopping at Saint Pierre. In 1992, an arbitration panel awarded the islands an exclusive economic zone of 12,348 sq km to settle a longstanding territorial dispute with Canada, although it represents only 25% of what France had sought. France heavily subsidizes the islands to the great betterment of living standards. The government hopes an expansion of tourism will boost economic prospects. Fish farming, crab fishing, and agriculture are being developed to diversify the local economy. Recent test drilling for oil may pave the way for development of the energy sector.
Saint Vincent and the Grenadines Success of the economy hinges upon seasonal variations in agriculture, tourism, and construction activity as well as remittance inflows. Much of the workforce is employed in banana production and tourism, but persistent high unemployment has prompted many to leave the islands. This lower-middle-income country is vulnerable to natural disasters - tropical storms wiped out substantial portions of crops in 1994, 1995, and 2002. In 2008, the islands had more than 200,000 tourist arrivals, mostly to the Grenadines, a drop of nearly 20% from 2007. Saint Vincent is home to a small offshore banking sector and has moved to adopt international regulatory standards. The government's ability to invest in social programs and respond to external shocks is constrained by its high public debt burden, which was 68% of GDP at the end of 2011. GDP grew on average 6% annually from 2002-07, but contracted between 2008-10 as a result of the global economic downturn; growth remains slow.
Samoa The economy of Samoa has traditionally been dependent on development aid, family remittances from overseas, agriculture, and fishing. The country is vulnerable to devastating storms. Agriculture employs roughly two-thirds of the labor force and furnishes 90% of exports, featuring coconut cream, coconut oil, and copra. The manufacturing sector mainly processes agricultural products. One factory in the Foreign Trade Zone employs 3,000 people to make automobile electrical harnesses for an assembly plant in Australia. Tourism is an expanding sector accounting for 25% of GDP; 122,000 tourists visited the islands in 2007. In late September 2009, an earthquake and the resulting tsunami severely damaged Samoa, and nearby American Samoa, disrupting transportation and power generation, and resulting in about 200 deaths. In December 2012, extensive flooding and wind damage from Tropical Cyclone Evan killed four people, displaced over 6,000, and damaged or destroyed an estimated 1,500 homes in Samoa's Upolu island. The Samoan Government has called for deregulation of the financial sector, encouragement of investment, and continued fiscal discipline, while at the same time protecting the environment. Observers point to the flexibility of the labor market as a basic strength for future economic advances. Foreign reserves are in a relatively healthy state, the external debt is stable, and inflation is low.
San Marino San Marino's economy relies heavily on tourism, the banking industry and the manufacture and export of ceramics, clothing, fabrics, furniture, paints, spirits, tiles, and wine. The manufacturing and financial sectors account for more than half of San Marino's GDP. The per capita level of output and standard of living are comparable to those of the most prosperous regions of Italy. The economy benefits from foreign investment due to its relatively low corporate taxes and low taxes on interest earnings. The income tax rate is also very low, about one-third the average EU level. San Marino does not issue public debt securities; when necessary, it finances deficits by drawing down central bank deposits. San Marino''s economy has encountered five years of GDP contraction, largely due to weakened demand from Italy - which accounts for 90% of its export market - and financial sector consolidation. Difficulties in the banking sector, the recent global economic downturn, and the sizeable decline in tax revenues have contributed to negative real GDP growth. The government has adopted measures to counter the economic downturn, including subsidized credit to businesses. For the first time since 2009, there were signs of improvements in the financial sector in the third quarter of 2012. San Marino continues to work towards harmonizing its fiscal laws with EU and international standards. In September 2009, the OECD removed San Marino from its list of tax havens that have yet to fully adopt global tax standards, and in 2010 San Marino signed Tax Information Exchange Agreements with most major countries. San Marino's Government continues to work with Italy to ratify a financial information exchange agreement, seen by businesses and investors as crucial to strengthening the economic relationship between the two countries.
Sao Tome and Principe This small, poor island economy has become increasingly dependent on cocoa since independence in 1975. Cocoa production has substantially declined in recent years because of drought and mismanagement. Sao Tome and Principe has to import fuels, most manufactured goods, consumer goods, and a substantial amount of food, making it vulnerable to fluctuations in global commodity prices. Over the years, it has had difficulty servicing its external debt and has relied heavily on concessional aid and debt rescheduling. Sao Tome and Principe benefited from $200 million in debt relief in December 2000 under the Highly Indebted Poor Countries (HIPC) program, which helped bring down the country's $300 million debt burden. In August 2005, the government signed on to a new 3-year IMF Poverty Reduction and Growth Facility (PRGF) program worth $4.3 million. In April 2011 the country completed a Threshold Country Program with The Millennium Challenge Corporation to help increase tax revenues, reform customs, and improve the business environment. Considerable potential exists for development of a tourist industry, and the government has taken steps to expand facilities in recent years. The government also has attempted to reduce price controls and subsidies. Potential exists for the development of petroleum resources in Sao Tome and Principe's territorial waters in the oil-rich Gulf of Guinea, which are being jointly developed in a 60-40 split with Nigeria, but any actual production is at least several years off. The first production licenses were sold in 2004, though a dispute over licensing with Nigeria delayed the country''s receipt of more than $20 million in signing bonuses for almost a year. Maintaining control of inflation, fiscal discipline, and increasing flows of foreign direct investment into the oil sector are the major economic problems facing the country.
Saudi Arabia Saudi Arabia has an oil-based economy with strong government controls over major economic activities. It possesses about 17% of the world's proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 80% of budget revenues, 45% of GDP, and 90% of export earnings. Saudi Arabia is encouraging the growth of the private sector in order to diversify its economy and to employ more Saudi nationals. Diversification efforts are focusing on power generation, telecommunications, natural gas exploration, and petrochemical sectors. Over 5 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors, while Riyadh is struggling to reduce unemployment among its own nationals. Saudi officials are particularly focused on employing its large youth population, which generally lacks the education and technical skills the private sector needs. Riyadh has substantially boosted spending on job training and education, most recently with the opening of the King Abdallah University of Science and Technology - Saudi Arabia's first co-educational university. As part of its effort to attract foreign investment, Saudi Arabia acceded to the WTO in 2005. The government has begun establishing six "economic cities" in different regions of the country to promote foreign investment and plans to spend $373 billion between 2010 and 2014 on social development and infrastructure projects to advance Saudi Arabia''s economic development.
Senegal Senegal relies heavily on donor assistance and foreign direct investment. The country's key export industries are phosphate mining, fertilizer production, and commercial fishing. The country is also working on iron ore and oil exploration projects. After seeing its economy contract by 2.1% in 1993, Senegal made an important turnaround, thanks to an economic reform program backed by the donor community, which led to real growth in GDP averaging over 5% annually during 1995-2007. Annual inflation was pushed down to the single digits. The global economic downturn reduced growth to 2.2% in 2009. The IMF completed a non-dispersing, Policy Support Initiative program in 2010 and approved a new three-year policy support instrument in December 2010 to assist with economic reforms. Senegal also receives disbursements from a $540 million Millennium Challenge Account for infrastructure and agriculture development. In 2012, the economy began to rebound after a weak 2011. The economy continues to suffer from unreliable power supply, which has led to public protests and high unemployment and has prompted migrants to flee Senegal in search of better job opportunities in Europe.
Serbia Serbia has a transitional economy mostly dominated by market forces, but the state sector remains large and many institutional reforms are needed. The economy relies on manufacturing and exports, driven largely by foreign investment. MILOSEVIC-era mismanagement of the economy, an extended period of international economic sanctions, civil war, and the damage to Yugoslavia's infrastructure and industry during the NATO airstrikes in 1999 left the economy only half the size it was in 1990. After the ousting of former Federal Yugoslav President MILOSEVIC in September 2000, the Democratic Opposition of Serbia (DOS) coalition government implemented stabilization measures and embarked on a market reform program. After renewing its membership in the IMF in December 2000, Serbia continued to reintegrate into the international community by rejoining the World Bank (IBRD) and the European Bank for Reconstruction and Development (EBRD). Serbia has made progress in trade liberalization and enterprise restructuring and privatization, but many large enterprises - including the power utilities, telecommunications company, natural gas company, national air carrier, and others - remain in state hands. Serbia has made some progress towards EU membership, signing a Stabilization and Association Agreement with Brussels in May 2008, and with full implementation of the Interim Trade Agreement with the EU in February 2010, gained candidate status in March 2012. Serbia's negotiations with the World Trade Organization are advanced, with the country's complete ban on the trade and cultivation of agricultural biotechnology products representing the primary remaining obstacle to accession. Serbia's program with the IMF was frozen in early 2012 because the 2012 budget approved by parliament deviated from the program parameters; the arrangement is now void. High unemployment and stagnant household incomes are ongoing political and economic problems. Structural economic reforms needed to ensure the country's long-term prosperity have largely stalled since the onset of the global financial crisis. The economy slipped by an estimated 2.0% in 2012, following growth of 1.6% in 2011, 1.0% in 2010, and a 3.5% contraction in 2009. Growing deficits constrain the use of stimulus efforts to revive the economy and contribute to growing concern of a public debt crisis, given that Serbia's total public debt as a share of GDP doubled between 2008 and 2012, reaching 61.5% of GDP at the end of 2012. Further, Serbia's concerns about inflation and exchange rate stability preclude the use of expansionary monetary policy. Serbia adopted a new long-term economic growth plan in 2010 that calls for a quadrupling of exports over ten years and heavy investments in basic infrastructure. In 2012, however, exports fell by 3.6% compared to 2011, largely as a result of the halt in production at the former US Steel plant and a summer drought that slashed agricultural production. Major challenges ahead include: high unemployment rates and the need for job creation; high government expenditures for salaries, pensions, and unemployment benefits; a growing need for new government borrowing; rising public and private foreign debt; attracting new foreign direct investment; and getting the IMF program back on track. Other serious challenges include an inefficient judicial system, high levels of corruption, and an aging population. Factors favorable to Serbia's economic growth include a strategic location, a relatively inexpensive and skilled labor force, and free trade agreements with the EU, Russia, Turkey, and countries that are members of the Central European Free Trade Agreement (CEFTA).
Seychelles since independence in 1976, per capita output in this Indian Ocean archipelago has expanded to roughly seven times the pre-independence, near-subsistence level, moving the island into the upper-middle-income group of countries. Growth has been led by the tourist sector, which employs about 30% of the labor force and provides more than 70% of hard currency earnings, and by tuna fishing. In recent years, the government has encouraged foreign investment to upgrade hotels and other services. At the same time, the government has moved to reduce the dependence on tourism by promoting the development of farming, fishing, and small-scale manufacturing. In July 2008 the government defaulted on a Euro amortizing note worth roughly US$80 million, leading to a downgrading of Seychelles credit rating. In an effort to obtain loans to service its debt, Seychelles in November 2008 signed a standby arrangement with the IMF that mandated floating the exchange rate, removing foreign exchange controls, cutting government spending, and tightening monetary policy. In response to Seychelles' successful implementation of these policies, the IMF upgraded Seychelles to a three-year extended fund facility (EFF) of $31 million in December 2009. In 2008, GDP fell more than 1% due to declining tourism and the initial effects of liberalization, but the economy recovered in 2010-11 after the reforms took hold and tourism increased. Growth slowed again in 2012 with flagging tourism from Russia and the United Arab Emirates. Seychelles is attempting to implement further structural reforms, including overhauling the tax system, reorganizing of state enterprises, and deregulating the finance and communications sectors.
Sierra Leone Sierra Leone is an extremely poor nation with tremendous inequality in income distribution. While it possesses substantial mineral, agricultural, and fishery resources, its physical and social infrastructure has yet to recover from the civil war, and serious social disorders continue to hamper economic development. Nearly half of the working-age population engages in subsistence agriculture. Manufacturing consists mainly of the processing of raw materials and of light manufacturing for the domestic market. Alluvial diamond mining remains the major source of hard currency earnings, accounting for nearly half of Sierra Leone's exports. The fate of the economy depends upon the maintenance of domestic peace and the continued receipt of substantial aid from abroad, which is essential to offset the severe trade imbalance and supplement government revenues. The IMF completed a Poverty Reduction and Growth Facility program that helped stabilize economic growth and reduce inflation and in 2010 approved a new program worth $45 million over three years. Political stability has led to a revival of economic activity such as the rehabilitation of bauxite and rutile mining, which are set to benefit from planned tax incentives. A number of offshore oil discoveries were announced in 2009 and 2010. The development of these reserves, which could be significant, is still several years away, however, growth skyrocketed to more than 20% in 2012, as exploitation activities began.
Singapore Singapore has a highly developed and successful free-market economy. It enjoys a remarkably open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries. The economy depends heavily on exports, particularly in consumer electronics, information technology products, pharmaceuticals, and on a growing financial services sector. Real GDP growth averaged 8.6% between 2004 and 2007. The economy contracted 0.8% in 2009 as a result of the global financial crisis, but rebounded 14.8% in 2010, on the strength of renewed exports, before slowing to 5.2% in 2011 and 1.3% in 2012, largely a result of soft demand for exports during the second European recession. Over the longer term, the government hopes to establish a new growth path that focuses on raising productivity, which has sunk to an average of about 1.0% in the last decade. Singapore has attracted major investments in pharmaceuticals and medical technology production and will continue efforts to establish Singapore as Southeast Asia's financial and high-tech hub.
Sint Maarten The economy of Sint Maarten centers around tourism with nearly four-fifths of the labor force engaged in this sector. Nearly two million visitors come to the island each year by cruise ship and roughly 500,000 visitors arrived through Princess Juliana International Airport in 2012. Cruise ships and yachts also call on Sint Maarten's numerous ports and harbors. No significant agriculture and limited local fishing means that almost all food must be imported. Energy resources and manufactured goods are also imported. Sint Maarten had the highest per capita income among the five islands that formerly comprised the Netherlands Antilles.
Slovakia Slovakia has made significant economic reforms since its separation from the Czech Republic in 1993. Reforms to the taxation, healthcare, pension, and social welfare systems helped Slovakia consolidate its budget and get on track to join the EU in 2004 after a period of relative stagnation in the early and mid 1990s and to adopt the euro in January 2009. Major privatizations are nearly complete, the banking sector is almost entirely in foreign hands, and the government has helped facilitate a foreign investment boom with business friendly policies. Slovakia's economic growth exceeded expectations in 2001-08 despite a general European slowdown. Foreign direct investment (FDI), especially in the automotive and electronic sectors, fueled much of the growth until 2008. Cheap and skilled labor, low taxes, no dividend taxes, a relatively liberal labor code, and a favorable geographical location are Slovakia's main advantages for foreign investors. The economy contracted 5% in 2009 primarily as a result of smaller inflows of FDI and reduced demand for Slovakia''s exports before rebounding in 2010-11, but growth slowed in 2012 due to weakening external demand. The government of Prime Minister Robert FICO in 2012 implemented tax increases on higher-earning individuals and corporations, effectively scrapping Slovakia''s flat tax to help meet budget deficit targets of 4.9% of GDP in 2012 and 3% of GDP in 2013.
Slovenia Slovenia became the first 2004 European Union entrant to adopt the euro (on 1 January 2007) and has experienced one of the most stable political and economic transitions in Central and Southeastern Europe. With the highest per capita GDP in Central Europe, Slovenia has excellent infrastructure, a well-educated work force, and a strategic location between the Balkans and Western Europe. Privatization has lagged since 2002, and the economy has one of the highest levels of state control in the EU. Structural reforms to improve the business environment have allowed for somewhat greater foreign participation in Slovenia's economy and helped to lower unemployment. In March 2004, Slovenia became the first transition country to graduate from borrower status to donor partner at the World Bank. In 2007, Slovenia was invited to begin the process for joining the OECD; it became a member in 2012. Despite its economic success, foreign direct investment (FDI) in Slovenia has lagged behind the region average, and taxes remain relatively high. Furthermore, the labor market is often seen as inflexible, and legacy industries are losing sales to more competitive firms in China, India, and elsewhere. In 2009, the global recession caused the economy to contract - through falling exports and industrial production - by 8%, and unemployment to rise. Although growth resumed in 2010, it dipped into negative territory in 2012 and the unemployment rate continued to rise, approaching 12% in 2012.
Solomon Islands The bulk of the population depends on agriculture, fishing, and forestry for at least part of its livelihood. Most manufactured goods and petroleum products must be imported. The islands are rich in undeveloped mineral resources such as lead, zinc, nickel, and gold. Prior to the arrival of The Regional Assistance Mission to the Solomon Islands (RAMSI), severe ethnic violence, the closing of key businesses, and an empty government treasury culminated in economic collapse. RAMSI's efforts to restore law and order and economic stability have led to modest growth as the economy rebuilds.
Somalia Despite the lack of effective national governance, Somalia has maintained a healthy informal economy, largely based on livestock, remittance/money transfer companies, and telecommunications. Agriculture is the most important sector with livestock normally accounting for about 40% of GDP and more than 50% of export earnings. Nomads and semi-pastoralists, who are dependent upon livestock for their livelihood, make up a large portion of the population. Livestock, hides, fish, charcoal, and bananas are Somalia's principal exports, while sugar, sorghum, corn, qat, and machined goods are the principal imports. Somalia's small industrial sector, based on the processing of agricultural products, has largely been looted and the machinery sold as scrap metal. Somalia''s service sector has grown. Telecommunication firms provide wireless services in most major cities and offer the lowest international call rates on the continent. In the absence of a formal banking sector, money transfer/remittance services have sprouted throughout the country, handling up to $1.6 billion in remittances annually. Mogadishu''s main market offers a variety of goods from food to the newest electronic gadgets. Hotels continue to operate and are supported with private-security militias. Somalia''s arrears to the IMF have continued to grow. Somalia''s capital city - Mogadishu - has enjoyed a rebirth following the departure of al-Shabaab in August 2011. Mogadishu has witnessed the development of the city''s first gas stations, supermarkets, and flights between Europe (Istanbul-Mogadishu) since the collapse of central authority in 1991. This economic growth has yet to expand outside of Mogadishu.
South Africa South Africa is a middle-income, emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors and a stock exchange that is the 15th largest in the world. Even though the country possesses modern infrastructure that support a relatively efficient distribution of goods to major urban centers throughout the region, some components retard growth. The economy began to slow in the second half of 2007 due to an electricity crisis. State power supplier Eskom encountered problems with aging plants and meeting electricity demand necessitating "load-shedding" cuts in 2007 and 2008 to residents and businesses in the major cities. Subsequently, the global financial crisis reduced commodity prices and world demand. GDP fell nearly 2% in 2009 but has recovered since then. Unemployment, poverty, and inequality remain a challenge, with official unemployment at nearly 25% of the work force. Eskom has built two new power stations and installed new power demand management programs to improve power grid reliability. South Africa's economic policy has focused on controlling inflation, however, the country has had significant budget deficits that restrict its ability to deal with pressing economic problems. The current government faces growing pressure from special interest groups to use state-owned enterprises to deliver basic services to low-income areas and to increase job growth.
South Georgia and South Sandwich Islands Some fishing takes place in adjacent waters. There is a potential source of income from harvesting finfish and krill. The islands receive income from postage stamps produced in the UK, sale of fishing licenses, and harbor and landing fees from tourist vessels. Tourism from specialized cruise ships is increasing rapidly.
South Sudan Industry and infrastructure in landlocked South Sudan are severely underdeveloped and poverty is widespread, following several decades of civil war with Sudan. Subsistence agriculture provides a living for the vast majority of the population. Property rights are tentative and price signals are missing because markets are not well organized. South Sudan has little infrastructure - just 60 km of paved roads. Electricity is produced mostly by costly diesel generators and running water is scarce. The government spends large sums of money to maintain a big army; delays in paying salaries have periodically resulted in riots by unruly soldiers. Ethnic conflicts have resulted in a large number of civilian deaths and displacement. South Sudan depends largely on imports of goods, services, and capital from the north. Despite these disadvantages, South Sudan does have abundant natural resources. South Sudan produces nearly three-fourths of the former Sudan's total oil output of nearly a half million barrels per day. The government of South Sudan derives nearly 98% of its budget revenues from oil. Oil is exported through two pipelines that run to refineries and shipping facilities at Port Sudan on the Red Sea, and the 2005 oil sharing agreement with Khartoum called for a 50-50 sharing of oil revenues between the two entities. That deal expired on 9 July 2011, however, when South Sudan became an independent country. The economy of South Sudan undoubtedly will remain linked to Sudan for some time, given the long lead time and great expense required to build another pipeline. In early 2012 South Sudan suspended production of oil because of its dispute with Sudan over transshipment fees. This had a devastating impact on GDP, which declined by at least 55% in 2012. South Sudan holds one of the richest agricultural areas in Africa with fertile soils and abundant water supplies. Currently the region supports 10-20 million head of cattle. South Sudan does not have large external debt or structural trade deficits and has received more than $4 billion in foreign aid since 2005, largely from the UK, US, Norway, and Netherlands. Following independence, South Sudan's central bank issued a new currency, the South Sudanese Pound, allowing a short grace period for turning in the old currency. Annual inflation peaked at 79% in May 2012. Long-term problems include alleviating poverty, maintaining macroeconomic stability, improving tax collection and financial management, focusing resources on speeding growth, and improving the business environment.
Southern Ocean Fisheries in 2006-07 landed 126,976 metric tons, of which 82% (104,586 tons) was krill (Euphausia superba) and 9.5% (12,027 tons) Patagonian toothfish (Dissostichus eleginoides - also known as Chilean sea bass), compared to 127,910 tons in 2005-06 of which 83% (106,591 tons) was krill and 9.7% (12,396 tons) Patagonian toothfish (estimated fishing from the area covered by the Convention of the Conservation of Antarctic Marine Living Resources (CCAMLR), which extends slightly beyond the Southern Ocean area). International agreements were adopted in late 1999 to reduce illegal, unreported, and unregulated fishing, which in the 2000-01 season landed, by one estimate, 8,376 metric tons of Patagonian and Antarctic toothfish. In the 2007-08 Antarctic summer, 45,213 tourists visited the Southern Ocean, compared to 35,552 in 2006-07, and 29,799 in 2005-06 (estimates provided to the Antarctic Treaty by the International Association of Antarctica Tour Operators (IAATO), and does not include passengers on overflights and those flying directly in and out of Antarctica).
Spain After almost 15 years of above average GDP growth, the Spanish economy began to slow in late 2007 and entered into a recession in the second quarter of 2008. GDP contracted by 3.7% in 2009, ending a 16-year growth trend, and by another 0.3% in 2010; GDP expanded 0.4% in 2011, before contracting 1.4% in 2012. The economy has once again fallen into recession as deleveraging in the private sector, fiscal consolidation, and continued high unemployment weigh on domestic demand and investment, even as exports have shown signs of resiliency. The unemployment rate rose from a low of about 8% in 2007 to 26.0% in 2012. The economic downturn has also hurt Spain's public finances. The government budget deficit peaked at 11.2% of GDP in 2010 and the process to reduce this imbalance has been slow despite the central government's efforts to raise new tax revenue and cut spending. Spain reduced its budget deficit to 9.4% of GDP in 2011, and roughly 7.4% of GDP in 2012, above the 6.3% target negotiated between Spain and the EU. Although Spain''s large budget deficit and poor economic growth prospects remain a source of concern for foreign investors, the government''s ongoing efforts to cut spending and introduce flexibility into the labor markets are intended to assuage these concerns. The government is also taking steps to shore up the banking system, namely by using up to $130 billion in EU funds to recapitalize struggling banks exposed to the collapsed domestic construction and real estate sectors.
Spratly Islands Economic activity is limited to commercial fishing. The proximity to nearby oil- and gas-producing sedimentary basins suggests the potential for oil and gas deposits, but the region is largely unexplored. There are no reliable estimates of potential reserves. Commercial exploitation has yet to be developed.
Sri Lanka Sri Lanka continues to experience strong economic growth following the end of the 26-year conflict with the Liberation Tigers of Tamil Eelam (LTTE). The government has been pursuing large-scale reconstruction and development projects in its efforts to spur growth in war-torn and disadvantaged areas, develop small and medium enterprises and increase agricultural productivity. The government's high debt payments and bloated civil service have contributed to historically high budget deficits, but fiscal consolidation efforts and strong GDP growth in recent years have helped bring down the government's fiscal deficit. However, low tax revenues are a major concern. The 2008-09 global financial crisis and recession exposed Sri Lanka''s economic vulnerabilities and nearly caused a balance of payments crisis. Growth slowed to 3.5% in 2009. Economic activity rebounded with the end of the war and an IMF agreement, resulting in two straight years of 8% growth in 2010-11. Growth moderated to about 6% in 2012. Agriculture slowed due to a drought and weak global demand affected exports and trade. In early 2012, Sri Lanka floated the rupee, resulting in a sharp depreciation, and took steps to curb imports. A large trade deficit remains a concern. Strong remittances from Sri Lankan workers abroad have helped to offset the trade deficit.
Sudan Sudan is an extremely poor country that has had to deal with social conflict, civil war, and the July 2011 secession of South Sudan - the region of the country that had been responsible for about three-fourths of the former Sudan's total oil production. The oil sector had driven much of Sudan's GDP growth since it began exporting oil in 1999. For nearly a decade, the economy boomed on the back of increases in oil production, high oil prices, and significant inflows of foreign direct investment. Following South Sudan''s secession, Sudan has struggled to maintain economic stability, because oil earnings now provide a far lower share of the country''s need for hard currency and for budget revenues. Sudan is attempting to generate new sources of revenues, such as from gold mining, while carrying out an austerity program to reduce expenditures. Agricultural production continues to employ 80% of the work force. Sudan introduced a new currency, still called the Sudanese pound, following South Sudan''s secession, but the value of the currency has fallen since its introduction. Khartoum formally devalued the currency in June 2012, when it passed austerity measures that included gradually repealing fuel subsidies. Sudan also faces rising inflation, which reached 47% on an annual basis in November 2012. Ongoing conflicts in Southern Kordofan, Darfur, and the Blue Nile states, lack of basic infrastructure in large areas, and reliance by much of the population on subsistence agriculture ensure that much of the population will remain at or below the poverty line for years to come.
Suriname The economy is dominated by the mining industry, with exports of alumina, gold, and oil accounting for about 85% of exports and 25% of government revenues, making the economy highly vulnerable to mineral price volatility. Economic growth, which reached about 7% in 2008, owing to sizeable foreign investment in mining and oil, slowed to 2.2% in 2009 as investment waned and the country earned less from its commodity exports when global prices for most commodities fell. Trade picked up, boosting Suriname's economic growth about 4% per year in 2010-12, but the government's budget remained strained. Inflation rose from 1.3% in 2009 to 17.7% in 2011. In January 2011, the government devalued the currency by 20% and raised taxes to reduce the budget deficit. As a result of these measures, inflation receded to 6% in 2012. Suriname''s economic prospects for the medium term will depend on continued commitment to responsible monetary and fiscal policies and to the introduction of structural reforms to liberalize markets and promote competition.
Svalbard Coal mining, tourism, and international research are the major revenue sources on Svalbard. Coal mining is the dominant economic activity and a treaty of 9 February 1920 gave the 41 signatories equal rights to exploit mineral deposits, subject to Norwegian regulation. Although US, UK, Dutch, and Swedish coal companies have mined in the past, the only companies still engaging in this are Norwegian and Russian. The settlements on Svalbard are essentially company towns. The Norwegian state-owned coal company employs nearly 60% of the Norwegian population on the island, runs many of the local services, and provides most of the local infrastructure. There is also some hunting of seal, reindeer, and fox. Goods such as alcohol, tobacco, and vehicles, normally highly taxed on mainland Norway, are considerably cheaper in Svalbard in an effort by the Norwegian government to entice more people to live on the Arctic archipelago. By law, the Norwegians collect only enough taxes to pay for the needs of the local government; none of tax proceeds go to Norway.
Swaziland Surrounded by South Africa, except for a short border with Mozambique, Swaziland depends heavily on South Africa from which it receives more than 90% of its imports and to which it sends 60% of its exports. Swaziland's currency is pegged to the South African rand, effectively subsuming Swaziland's monetary policy to South Africa. The government is heavily dependent on customs duties from the Southern African Customs Union (SACU), and worker remittances from South Africa supplement domestically earned income. Subsistence agriculture employs approximately 70% of the population. The manufacturing sector has diversified since the mid-1980s. Sugar and wood pulp were major foreign exchange earners; however, the wood pulp producer closed in January 2010, and sugar is now the main export earner. Mining has declined in importance in recent years with only coal and quarry stone mines remaining active. Customs revenues plummeted due to the global economic crisis and a drop in South African imports. The resulting decline in revenue has pushed the country into a fiscal crisis. Swaziland is looking to other countries, including South Africa, for assistance, but continues to struggle to meet its monthly payroll and fund government programs. With an estimated 40% unemployment rate, Swaziland''s need to increase the number and size of small and medium enterprises and attract foreign direct investment is acute. Overgrazing, soil depletion, drought, and floods persist as problems for the future. More than one-fourth of the population needed emergency food aid in 2006-07 because of drought, and more than one-quarter of the adult population has been infected by HIV/AIDS.
Sweden Aided by peace and neutrality for the whole of the 20th century, Sweden has achieved an enviable standard of living under a mixed system of high-tech capitalism and extensive welfare benefits. It has a modern distribution system, excellent internal and external communications, and a highly skilled labor force. In September 2003, Swedish voters turned down entry into the euro system concerned about the impact on the economy and sovereignty. Timber, hydropower, and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. Privately owned firms account for vast majority of industrial output, of which the engineering sector accounts for about 50% of output and exports. Agriculture accounts for little more than 1% of GDP and of employment. Until 2008, Sweden was in the midst of a sustained economic upswing, boosted by increased domestic demand and strong exports. This and robust finances offered the center-right government considerable scope to implement its reform program aimed at increasing employment, reducing welfare dependence, and streamlining the state's role in the economy. Despite strong finances and underlying fundamentals, the Swedish economy slid into recession in the third quarter of 2008 and the contraction continued in 2009 as deteriorating global conditions reduced export demand and consumption. Strong exports of commodities and a return to profitability by Sweden's banking sector drove the strong rebound in 2010, which continued in 2011, but growth slipped to 1.2% in 2012. The government proposed stimulus measures in 2012 to curb the effects of a global economic slowdown and boost employment and growth.
Switzerland Switzerland is a peaceful, prosperous, and modern market economy with low unemployment, a highly skilled labor force, and a per capita GDP among the highest in the world. Switzerland's economy benefits from a highly developed service sector, led by financial services, and a manufacturing industry that specializes in high-technology, knowledge-based production. Its economic and political stability, transparent legal system, exceptional infrastructure, efficient capital markets, and low corporate tax rates also make Switzerland one of the world's most competitive economies. The Swiss have brought their economic practices largely into conformity with the EU's to enhance their international competitiveness, but some trade protectionism remains, particularly for its small agricultural sector. The fate of the Swiss economy is tightly linked to that of its neighbors in the euro zone, which purchases half of all Swiss exports. The global financial crisis of 2008 and resulting economic downturn in 2009 stalled export demand and put Switzerland in a recession. The Swiss National Bank (SNB) during this period effectively implemented a zero-interest rate policy to boost the economy as well as prevent appreciation of the franc, and Switzerland's economy recovered in 2010 with 3.0% growth. The sovereign debt crises currently unfolding in neighboring euro-zone countries pose a significant risk to Switzerland's financial stability and are driving up demand for the Swiss franc by investors seeking a safe-haven currency. The independent SNB has upheld its zero-interest rate policy and conducted major market interventions to prevent further appreciation of the Swiss franc, but parliamentarians have urged it to do more to weaken the currency. The franc's strength has made Swiss exports less competitive and weakened the country's growth outlook; GDP growth fell to 1.9% in 2011 and 0.8% in 2012. Switzerland has also come under increasing pressure from individual neighboring countries, the EU, the US, and international institutions to reform its banking secrecy laws. Consequently, the government agreed to conform to OECD regulations on administrative assistance in tax matters, including tax evasion. The government has renegotiated its double taxation agreements with numerous countries, including the US, to incorporate the OECD standard, and is considering the possibility of imposing taxes on bank deposits held by foreigners. These steps will have a lasting impact on Switzerland's long history of bank secrecy.
Syria Despite modest economic growth and reform prior to the outbreak of unrest, Syria's economy continues to suffer the effects of the ongoing conflict that began in 2011. The economy further contracted in 2012 because of international sanctions and reduced domestic consumption and production, and inflation has risen sharply. The government has struggled to address the effects of economic decline, which include dwindling foreign exchange reserves, rising budget and trade deficits, and the decreasing value of the Syrian pound. Prior to the unrest, Damascus began liberalizing economic policies, including cutting lending interest rates, opening private banks, consolidating multiple exchange rates, raising prices on some subsidized items, and establishing the Damascus Stock Exchange. The economy remains highly regulated by the government. Long-run economic constraints include foreign trade barriers, declining oil production, high unemployment, rising budget deficits, and increasing pressure on water supplies caused by heavy use in agriculture, rapid population growth, industrial expansion, and water pollution.
Taiwan Taiwan has a dynamic capitalist economy with gradually decreasing government guidance of investment and foreign trade. Exports, led by electronics, machinery, and petrochemicals have provided the primary impetus for economic development. This heavy dependence on exports exposes the economy to fluctuations in world demand. In 2009, Taiwan's GDP contracted 1.8%, due primarily to a 13.1% year-on-year decline in exports. In 2010 GDP grew 10.7%, as exports returned to the level of previous years, and in 2011, grew 4.0%. In 2012, however, growth fell to 1.3%, because of softening global demand. Taiwan's diplomatic isolation, low birth rate, and rapidly aging population are major long-term challenges. Free trade agreements have proliferated in East Asia over the past several years, but except for the landmark Economic Cooperation Framework Agreement (ECFA) signed with China in June 2010, so far Taiwan has been excluded from this greater economic integration in part because of its diplomatic status. Negotiations continue on such follow-on components of ECFA regarding trade in goods and services. The MA administration has said that the ECFA will serve as a stepping stone toward trade pacts with other key trade partners, which Taiwan subsequently launched with Singapore and New Zealand. Taiwan's Total Fertility rate of just over one child per woman is among the lowest in the world, raising the prospect of future labor shortages, falling domestic demand, and declining tax revenues. Taiwan's population is aging quickly, with the number of people over 65 accounting for 11.2% of the island's total population as of 2012. The island runs a large trade surplus largely because of its surplus with China, and its foreign reserves are the world's fifth largest, behind China, Japan, Saudi Arabia, and Russia. In 2006 China overtook the US to become Taiwan's second-largest source of imports after Japan. China is also the island's number one destination for foreign direct investment. Three financial memorandums of understanding, covering banking, securities, and insurance, took effect in mid-January 2010, opening the island to greater investments from the mainland's financial firms and institutional investors, and providing new opportunities for Taiwan financial firms to operate in China. In August 2012, Taiwan Central Bank signed a memorandum of understanding on cross-Strait currency settlement with its Chinese counterpart. The MOU allows for the direct settlement of Chinese RMB and the New Taiwan dollar across the Strait, which could help develop Taiwan into a local RMB hub. Closer economic links with the mainland bring greater opportunities for the Taiwan economy, but also poses new challenges as the island becomes more economically dependent on China while political differences remain unresolved.
Tajikistan Tajikistan has one of the lowest per capita GDPs among the 15 former Soviet republics. Because of a lack of employment opportunities in Tajikistan, more than one million Tajik citizens work abroad, almost all of them in Russia, supporting families in Tajikistan through remittances. Less than 7% of the land area is arable. Cotton is the most important crop, and its production is closely monitored, and in many cases controlled, by the government. In the wake of the National Bank of Tajikistan's admission in December 2007 that it had improperly lent money to investors in the cotton sector, the IMF canceled its program in Tajikistan. A reform agenda is underway, according to which over half a billion dollars in farmer debt has been forgiven, and IMF assistance has been reinstated. Mineral resources include silver, gold, uranium, and tungsten. Industry consists mainly of a large aluminum plant, hydropower facilities, and small obsolete factories mostly in light industry and food processing. The civil war (1992-97) severely damaged the already weak economic infrastructure and caused a sharp decline in industrial and agricultural production. Tajikistan's economic situation remains fragile due to uneven implementation of structural reforms, corruption, weak governance, seasonal power shortages, and the external debt burden. Electricity output expanded with the completion of the Sangtuda-1 hydropower dam - finished in 2009 with Russian investment. The smaller Sangtuda-2, built with Iranian investment, began operating in 2012. The government of Tajikistan is pinning major hopes on the massive Roghun dam which, if finished according to Tajik plans, will be the tallest dam in the world and significantly expand electricity output. The World Bank is funding two feasibility studies for the dam (technical-economic, and social-environmental), scheduled to be completed in mid-2013. In January 2010, the government began selling shares in the Roghun enterprise to its population, ultimately raising over $180 million but Tajikistan will still need significant investment to complete the dam. According to numerous reports, many Tajik individuals and businesses were forced to buy shares. The coerced share sales finally ended in mid-2010 under intense criticism from donors, particularly the IMF. Food and fuel prices in 2011 increased to the highest levels seen since 2002 due in part to an increase in rail transport tariffs through Uzbekistan. Tajikistan imports approximately 60% of its food and 90% of that comes by rail. Uzbekistan closed one of the rail lines into Tajikistan in late 2011, hampering the transit of goods to and from the southern part of the country.
Tanzania Tanzania is one of the world's poorest economies in terms of per capita income, however, it has achieved high overall growth rates based on gold production and tourism. Tanzania has largely completed its transition to a liberalized market economy, though the government retains a presence in sectors such as telecommunications, banking, energy, and mining. The economy depends on agriculture, which accounts for more than one-quarter of GDP, provides 85% of exports, and employs about 80% of the work force. The World Bank, the IMF, and bilateral donors have provided funds to rehabilitate Tanzania's aging economic infrastructure, including rail and port infrastructure that are important trade links for inland countries. Recent banking reforms have helped increase private-sector growth and investment, and the government has increased spending on agriculture to 7% of its budget. The financial sector in Tanzania has expanded in recent years and foreign-owned banks account for about 48% of the banking industry''s total assets. Competition among foreign commercial banks has resulted in significant improvements in the efficiency and quality of financial services, though interest rates are still relatively high, reflecting high fraud risk. All land in Tanzania is owned by the government, which can lease land for up to 99 years. Proposed reforms to allow for land ownership, particularly foreign land ownership, remain unpopular. Continued donor assistance and solid macroeconomic policies supported a positive growth rate, despite the world recession. In 2008, Tanzania received the world''s largest Millennium Challenge Compact grant, worth $698 million, and in December 2012 the Millennium Challenge Corporation selected Tanzania for a second Compact. Dar es Salaam used fiscal stimulus and loosened monetary policy to ease the impact of the global recession. GDP growth in 2009-12 was a respectable 6% per year due to high gold prices and increased production.
Thailand With a well-developed infrastructure, a free-enterprise economy, generally pro-investment policies, and strong export industries, Thailand achieved steady growth due largely to industrial and agriculture exports - mostly electronics, agricultural commodities, automobiles and parts, and processed foods. Thailand is trying to maintain growth by encouraging domestic consumption and public investment to offset weak exports in 2012. Unemployment, at less than 1% of the labor force, stands as one of the lowest levels in the world, which puts upward pressure on wages in some industries. Thailand also attracts nearly 2.5 million migrant workers from neighboring countries. The Thai government is implementing a nation-wide 300 baht ($10) per day minimum wage policy and deploying new tax reforms designed to lower rates on middle-income earners. The Thai economy has weathered internal and external economic shocks in recent years. The global economic crisis severely cut Thailand's exports, with most sectors experiencing double-digit drops. In 2009, the economy contracted 2.3%. However, in 2010, Thailand's economy expanded 7.8%, its fastest pace since 1995, as exports rebounded. In late 2011 growth was interrupted by historic flooding in the industrial areas in Bangkok and its five surrounding provinces, crippling the manufacturing sector. Industry recovered from the second quarter of 2012 onward with GDP growth at 5.5% in 2012. The government has approved flood mitigation projects worth $11.7 billion, which were started in 2012, to prevent similar economic damage, and an additional $75 billion for infrastructure over the next seven years with a plan to start in 2013.
Timor-Leste Since its 1999 independence, Timor-Leste has faced great challenges in rebuilding its infrastructure, strengthening the civil administration, and generating jobs for young people entering the work force. The development of oil and gas resources in offshore waters has greatly supplemented government revenues. This technology-intensive industry, however, has done little to create jobs for the unemployed in part because there are no production facilities in Timor-Leste. Gas is piped to Australia. In June 2005, the National Parliament unanimously approved the creation of a Petroleum Fund to serve as a repository for all petroleum revenues and to preserve the value of Timor-Leste's petroleum wealth for future generations. The Fund held assets of US$9.3 billion as of December 2011. The economy continues to recover from the mid-2006 outbreak of violence and civil unrest, which disrupted both private and public sector economic activity. Government spending increased markedly from 2009 through 2012, primarily on basic infrastructure, including electricity and roads. Limited experience in procurement and infrastructure building has hampered these projects. The underlying economic policy challenge the country faces remains how best to use oil-and-gas wealth to lift the non-oil economy onto a higher growth path and to reduce poverty. Timor-Leste had a balanced budget in 2012 with government expenditures of $1.7 billion focusing on development of public infrastructure. On the strength of its oil-wealth, the economy has achieved real growth of approximately 10% per year for the last several years, among the highest sustained growth rates in the world.
Togo This small, sub-Saharan economy depends heavily on both commercial and subsistence agriculture, which provides employment for a significant share of the labor force. Some basic foodstuffs must still be imported. Cocoa, coffee, and cotton generate about 40% of export earnings with cotton being the most important cash crop. Togo is among the world's largest producers of phosphate and Togo seeks to develop its carbonate phosphate reserves. The government's decade-long effort, supported by the World Bank and the IMF, to implement economic reform measures, encourage foreign investment, and bring revenues in line with expenditures has moved slowly. Progress depends on follow through on privatization, increased openness in government financial operations, progress toward legislative elections, and continued support from foreign donors. Foreign direct investment inflows have slowed over recent years. Togo completed its IMF Extended Credit Facility in 2011 and reached a HIPC debt relief completion point in 2010 at which 95% of the country's debt was forgiven. Togo continues to work with the IMF on structural reforms.
Tokelau Tokelau's small size (three villages), isolation, and lack of resources greatly restrain economic development and confine agriculture to the subsistence level. The people rely heavily on aid from New Zealand - about $10 million annually in 2008 and 2009 - to maintain public services. New Zealand's support amounts to 80% of Tokelau''s recurrent government budget. An international trust fund, currently worth nearly US$32 million, was established in 2004 to provide Tokelau an independent source of revenue. The principal sources of revenue come from sales of copra, postage stamps, souvenir coins, and handicrafts. Money is also remitted to families from relatives in New Zealand.
Tonga Tonga has a small, open, South Pacific island economy. It has a narrow export base in agricultural goods. Squash, vanilla beans, and yams are the main crops. Agricultural exports, including fish, make up two-thirds of total exports. The country must import a high proportion of its food, mainly from New Zealand. The country remains dependent on external aid and remittances from Tongan communities overseas to offset its trade deficit. Tourism is the second-largest source of hard currency earnings following remittances. Tonga had 39,000 visitors in 2006. The government is emphasizing the development of the private sector, especially the encouragement of investment, and is committing increased funds for health and education. Tonga has a reasonably sound basic infrastructure and well developed social services. High unemployment among the young, moderate inflation, pressures for democratic reform, and rising civil service expenditures are major issues facing the government.
Trinidad and Tobago Trinidad and Tobago has earned a reputation as an excellent investment site for international businesses and has one of the highest growth rates and per capita incomes in Latin America. Economic growth between 2000 and 2007 averaged slightly over 8%, significantly above the regional average of about 3.7% for that same period; however, GDP has slowed down since then and contracted during 2009-2011 due to depressed natural gas prices and changing markets. Growth had been fueled by investments in liquefied natural gas, petrochemicals, and steel with additional upstream and downstream investment planned. Trinidad and Tobago is the leading Caribbean producer of oil and gas, and its economy is heavily dependent upon these resources but it also supplies manufactured goods, notably food products and beverages, as well as cement to the Caribbean region. Oil and gas account for about 40% of GDP and 80% of exports, but only 5% of employment. Oil production has declined over the last decade as the country focused the majority of its efforts on natural gas. However, declining reserves, lack of government investment in the sector, and the changing global gas market raises concern for the long-term growth of the country's energy sector. Although Trinidad and Tobago enjoys cheap electricity from natural gas, the renewable energy sector has recently garnered increased interest. The country is also a regional financial center with a well-regulated and stable financial system. Other sectors the Government of Trinidad and Tobago targeted for increased investment and projected growth include tourism, agriculture, information and communications technology, and shipping. The economy benefits from a growing trade surplus with the US. The US is Trinidad and Tobago's leading trade partner. The previous MANNING administration benefited from fiscal surpluses fueled by the dynamic export sector; however, declines in oil and gas prices have reduced government revenues, challenging the current government's commitment to maintaining high levels of public investment. Crime and bureaucratic hurdles continue to be the biggest deterrents for attracting more foreign direct investment and business.
Tunisia Tunisia's diverse, market-oriented economy has long been cited as a success story in Africa and the Middle East, but it faces an array of challenges during the country's ongoing political transition. Following an ill-fated experiment with socialist economic policies in the 1960s, Tunisia embarked on a successful strategy focused on bolstering exports, foreign investment, and tourism, all of which have become central to the country''s economy. Key exports now include textiles and apparel, food products, petroleum products, chemicals, and phosphates, with about 80% of exports bound for Tunisia''s main economic partner, the European Union. Tunisia''s liberal strategy, coupled with investments in education and infrastructure, fueled decades of 4-5% annual GDP growth and improving living standards. Former President (1987-2011) Zine el Abidine BEN ALI continued these policies, but as his reign wore on cronyism and corruption stymied economic performance and unemployment rose among the country''s growing ranks of university graduates. These grievances contributed to the January 2011 overthrow of BEN ALI, sending Tunisia''s economy into a tailspin as tourism and investment declined sharply. As the economy recovers, Tunisia''s government faces challenges reassuring businesses and investors, bringing budget and current account deficits under control, shoring up the country''s financial system, bringing down high unemployment, and reducing economic disparities between the more developed coastal region and the impoverished interior.
Turkey Turkey's largely free-market economy is increasingly driven by its industry and service sectors, although its traditional agriculture sector still accounts for about 25% of employment. An aggressive privatization program has reduced state involvement in basic industry, banking, transport, and communication, and an emerging cadre of middle-class entrepreneurs is adding dynamism to the economy and expanding production beyond the traditional textiles and clothing sectors. The automotive, construction, and electronics industries, are rising in importance and have surpassed textiles within Turkey's export mix. Oil began to flow through the Baku-Tbilisi-Ceyhan pipeline in May 2006, marking a major milestone that will bring up to 1 million barrels per day from the Caspian to market. Several gas pipelines projects also are moving forward to help transport Central Asian gas to Europe through Turkey, which over the long term will help address Turkey's dependence on imported oil and gas to meet 97% of its energy needs. After Turkey experienced a severe financial crisis in 2001, Ankara adopted financial and fiscal reforms as part of an IMF program. The reforms strengthened the country's economic fundamentals and ushered in an era of strong growth - averaging more than 6% annually until 2008. Global economic conditions and tighter fiscal policy caused GDP to contract in 2009, but Turkey's well-regulated financial markets and banking system helped the country weather the global financial crisis and GDP rebounded strongly to 9.2% in 2010, as exports returned to normal levels following the recession. Growth dropped to approximately 3% in 2012. Turkey's public sector debt to GDP ratio has fallen to about 40%, and at least one rating agency upgraded Turkey's debt to investment grade in 2012. Turkey remains dependent on often volatile, short-term investment to finance its large trade deficit. The stock value of FDI stood at $117 billion at year-end 2012. Inflows have slowed because of continuing economic turmoil in Europe, the source of much of Turkey's FDI. Turkey's relatively high current account deficit, uncertainty related to monetary policy-making, and political turmoil within Turkey's neighborhood leave the economy vulnerable to destabilizing shifts in investor confidence.
Turkmenistan Turkmenistan is largely a desert country with intensive agriculture in irrigated oases and sizeable gas and oil resources. The two largest crops are cotton, most of which is produced for export, and wheat, which is domestically consumed. Although agriculture accounts for roughly 8% of GDP, it continues to employ nearly half of the country's workforce. Turkmenistan's authoritarian regime has taken a cautious approach to economic reform, hoping to use gas and cotton export revenues to sustain its inefficient and highly corrupt economy. Privatization goals remain limited. From 1998-2005, Turkmenistan suffered from the continued lack of adequate export routes for natural gas and from obligations on extensive short-term external debt. At the same time, however, total exports rose by an average of roughly 15% per year from 2003-08, largely because of higher international oil and gas prices. Additional pipelines to China, that began operation in early 2010, and increased pipeline capacity to Iran, have expanded Turkmenistan''s export routes for its gas. Overall prospects in the near future are discouraging because of endemic corruption, a poor educational system, government misuse of oil and gas revenues, and Ashgabat''s reluctance to adopt market-oriented reforms. The majority of Turkmenistan''s economic statistics are state secrets. The present government established a State Agency for Statistics, but GDP numbers and other publicized figures are subject to wide margins of error. In particular, the rate of GDP growth is uncertain. Since his election, President BERDIMUHAMEDOW unified the country''s dual currency exchange rate, ordered the redenomination of the manat, reduced state subsidies for gasoline, and initiated development of a special tourism zone on the Caspian Sea. Although foreign investment is encouraged, and some improvements in macroeconomic policy have been made, numerous bureaucratic obstacles impede international business activity.
Turks and Caicos Islands The Turks and Caicos economy is based on tourism, offshore financial services, and fishing. Most capital goods and food for domestic consumption are imported. The US is the leading source of tourists, accounting for more than three-quarters of the 175,000 visitors that arrived in 2004. Major sources of government revenue also include fees from offshore financial activities and customs receipts.
Tuvalu Tuvalu consists of a densely populated, scattered group of nine coral atolls with poor soil. Only eight of the atolls are inhabited. The country has no known mineral resources and few exports and is almost entirely dependent upon imported food and fuel. Subsistence farming and fishing are the primary economic activities. Fewer than 1,000 tourists, on average, visit Tuvalu annually. Job opportunities are scarce and public sector workers make up most of those employed. About 15% of the adult male population work as seamen on merchant ships abroad, and remittances are a vital source of income contributing around $2 million in 2007. Substantial income is received annually from the Tuvalu Trust Fund (TTF) an international trust fund established in 1987 by Australia, NZ, and the UK and supported also by Japan and South Korea. Thanks to wise investments and conservative withdrawals, this fund grew from an initial $17 million to an estimated value of $77 million in 2006. The TTF contributed nearly $9 million towards the government budget in 2006 and is an important cushion for meeting shortfalls in the government's budget. The US Government is also a major revenue source for Tuvalu because of payments from a 1988 treaty on fisheries. In an effort to ensure financial stability and sustainability, the government is pursuing public sector reforms, including privatization of some government functions and personnel cuts. Tuvalu also derives royalties from the lease of its ".tv" Internet domain name with revenue of more than $2 million in 2006. A minor source of government revenue comes from the sale of stamps and coins. With merchandise exports only a fraction of merchandise imports, continued reliance must be placed on fishing and telecommunications license fees, remittances from overseas workers, official transfers, and income from overseas investments. Growing income disparities and the vulnerability of the country to climatic change are among leading concerns for the nation.
Uganda Uganda has substantial natural resources, including fertile soils, regular rainfall, small deposits of copper, gold, and other minerals, and recently discovered oil. Uganda has never conducted a national minerals survey. Agriculture is the most important sector of the economy, employing over 80% of the work force. Coffee accounts for the bulk of export revenues. Since 1986, the government - with the support of foreign countries and international agencies - has acted to rehabilitate and stabilize the economy by undertaking currency reform, raising producer prices on export crops, increasing prices of petroleum products, and improving civil service wages. The policy changes are especially aimed at dampening inflation and boosting production and export earnings. Since 1990 economic reforms ushered in an era of solid economic growth based on continued investment in infrastructure, improved incentives for production and exports, lower inflation, better domestic security, and the return of exiled Indian-Ugandan entrepreneurs. Uganda has received about $2 billion in multilateral and bilateral debt relief. In 2007 Uganda received $10 million for a Millennium Challenge Account Threshold Program. The global economic downturn hurt Uganda's exports; however, Uganda's GDP growth has largely recovered due to past reforms and sound management of the downturn. Oil revenues and taxes will become a larger source of government funding as oil comes on line in the next few years. Rising food and fuel prices in 2011 led to protests. Instability in South Sudan is a risk for the Ugandan economy because Uganda''s main export partner is Sudan, and Uganda is a key destination for Sudanese refugees. Unreliable power, high energy costs, inadequate transportation infrastructure, and corruption inhibit economic development and investor confidence.
Ukraine After Russia, the Ukrainian republic was the most important economic component of the former Soviet Union, producing about four times the output of the next-ranking republic. Its fertile black soil generated more than one-fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied the unique equipment (for example, large diameter pipes) and raw materials to industrial and mining sites (vertical drilling apparatus) in other regions of the former USSR. Shortly after independence in August 1991, the Ukrainian Government liberalized most prices and erected a legal framework for privatization, but widespread resistance to reform within the government and the legislature soon stalled reform efforts and led to some backtracking. Output by 1999 had fallen to less than 40% of the 1991 level. Ukraine's dependence on Russia for energy supplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to external shocks. Ukraine depends on imports to meet about three-fourths of its annual oil and natural gas requirements and 100% of its nuclear fuel needs. After a two-week dispute that saw gas supplies cutoff to Europe, Ukraine agreed to 10-year gas supply and transit contracts with Russia in January 2009 that brought gas prices to "world" levels. The strict terms of the contracts have further hobbled Ukraine's cash-strapped state gas company, Naftohaz. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the pace and scope of reforms to foster economic growth. Ukrainian Government officials eliminated most tax and customs privileges in a March 2005 budget law, bringing more economic activity out of Ukraine's large shadow economy, but more improvements are needed, including fighting corruption, developing capital markets, and improving the legislative framework. Ukraine's economy was buoyant despite political turmoil between the prime minister and president until mid-2008. Real GDP growth exceeded 7% in 2006-07, fueled by high global prices for steel - Ukraine's top export - and by strong domestic consumption, spurred by rising pensions and wages. A drop in steel prices and Ukraine's exposure to the global financial crisis due to aggressive foreign borrowing lowered growth in 2008. Ukraine reached an agreement with the IMF for a $16.4 billion Stand-By Arrangement in November 2008 to deal with the economic crisis, but the program quickly stalled due to the Ukrainian Government's lack of progress in implementing reforms. The economy contracted nearly 15% in 2009, among the worst economic performances in the world. In April 2010, Ukraine negotiated a price discount on Russian gas imports in exchange for extending Russia's lease on its naval base in Crimea. In August 2010, Ukraine, under the YANUKOVYCH Administration, reached a new agreement with the IMF for a $15.1 billion Stand-By Agreement. Economic growth resumed in 2010 and 2011, buoyed by exports. After initial disbursements, the IMF program stalled in early 2011 due to the Ukrainian Government's lack of progress in implementing key gas sector reforms, namely gas tariff increases. Economic growth slowed in the second half of 2012 with Ukraine finishing the year in technical recession following two consecutive quarters of negative growth.
United Arab Emirates The UAE has an open economy with a high per capita income and a sizable annual trade surplus. Successful efforts at economic diversification have reduced the portion of GDP based on oil and gas output to 25%. Since the discovery of oil in the UAE more than 30 years ago, the country has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living. The government has increased spending on job creation and infrastructure expansion and is opening up utilities to greater private sector involvement. In April 2004, the UAE signed a Trade and Investment Framework Agreement with Washington and in November 2004 agreed to undertake negotiations toward a Free Trade Agreement with the US; however, those talks have not moved forward. The country's Free Trade Zones - offering 100% foreign ownership and zero taxes - are helping to attract foreign investors. The global financial crisis, tight international credit, and deflated asset prices constricted the economy in 2009. UAE authorities tried to blunt the crisis by increasing spending and boosting liquidity in the banking sector. The crisis hit Dubai hardest, as it was heavily exposed to depressed real estate prices. Dubai lacked sufficient cash to meet its debt obligations, prompting global concern about its solvency. The UAE Central Bank and Abu Dhabi-based banks bought the largest shares. In December 2009 Dubai received an additional $10 billion loan from the emirate of Abu Dhabi. Dependence on oil, a large expatriate workforce, and growing inflation pressures are significant long-term challenges. The UAE's strategic plan for the next few years focuses on diversification and creating more opportunities for nationals through improved education and increased private sector employment.
United Kingdom The UK, a leading trading power and financial center, is the second largest economy in Europe after Germany. Over the past two decades, the government has greatly reduced public ownership and contained the growth of social welfare programs. Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs with less than 2% of the labor force. The UK has large coal, natural gas, and oil resources, but its oil and natural gas reserves are declining and the UK became a net importer of energy in 2005. Services, particularly banking, insurance, and business services, account by far for the largest proportion of GDP while industry continues to decline in importance. After emerging from recession in 1992, Britain's economy enjoyed the longest period of expansion on record during which time growth outpaced most of Western Europe. In 2008, however, the global financial crisis hit the economy particularly hard, due to the importance of its financial sector. Sharply declining home prices, high consumer debt, and the global economic slowdown compounded Britain's economic problems, pushing the economy into recession in the latter half of 2008 and prompting the then BROWN (Labour) government to implement a number of measures to stimulate the economy and stabilize the financial markets; these include nationalizing parts of the banking system, temporarily cutting taxes, suspending public sector borrowing rules, and moving forward public spending on capital projects. Facing burgeoning public deficits and debt levels, in 2010 the CAMERON-led coalition government (between Conservatives and Liberal Democrats) initiated a five-year austerity program, which aimed to lower London's budget deficit from over 10% of GDP in 2010 to nearly 1% by 2015. In November 2011, Chancellor of the Exchequer George OSBORNE announced additional austerity measures through 2017 because of slower-than-expected economic growth and the impact of the euro-zone debt crisis. The CAMERON government raised the value added tax from 17.5% to 20% in 2011. It has pledged to reduce the corporation tax rate to 21% by 2014. The Bank of England (BoE) implemented an asset purchase program of up to £375 billion (approximately $605 billion) as of December 2012. During times of economic crisis, the BoE coordinates interest rate moves with the European Central Bank, but Britain remains outside the European Economic and Monetary Union (EMU). In 2012, weak consumer spending and subdued business investment weighed on the economy. GDP fell 0.1%, and the budget deficit remained stubbornly high at 7.7% of GDP. Public debt continued to increase.
United States The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $49,800. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets. US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment; their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households. Since 1996, dividends and capital gains have grown faster than wages or any other category of after-tax income. Imported oil accounts for nearly 55% of US consumption. Crude oil prices doubled between 2001 and 2006, the year home prices peaked; higher gasoline prices ate into consumers' budgets and many individuals fell behind in their mortgage payments. Oil prices climbed another 50% between 2006 and 2008, and bank foreclosures more than doubled in the same period. Besides dampening the housing market, soaring oil prices caused a drop in the value of the dollar and a deterioration in the US merchandise trade deficit, which peaked at $840 billion in 2008. The sub-prime mortgage crisis, falling home prices, investment bank failures, tight credit, and the global economic downturn pushed the United States into a recession by mid-2008. GDP contracted until the third quarter of 2009, making this the deepest and longest downturn since the Great Depression. To help stabilize financial markets, in October 2008 the US Congress established a $700 billion Troubled Asset Relief Program (TARP). The government used some of these funds to purchase equity in US banks and industrial corporations, much of which had been returned to the government by early 2011. In January 2009 the US Congress passed and President Barack OBAMA signed a bill providing an additional $787 billion fiscal stimulus to be used over 10 years - two-thirds on additional spending and one-third on tax cuts - to create jobs and to help the economy recover. In 2010 and 2011, the federal budget deficit reached nearly 9% of GDP. In 2012 the federal government reduced the growth of spending and the deficit shrank to 7.6% of GDP. Wars in Iraq and Afghanistan required major shifts in national resources from civilian to military purposes and contributed to the growth of the budget deficit and public debt. Through 2011, the direct costs of the wars totaled nearly $900 billion, according to US government figures. US revenues from taxes and other sources are lower, as a percentage of GDP, than those of most other countries. In March 2010, President OBAMA signed into law the Patient Protection and Affordable Care Act, a health insurance reform that was designed to extend coverage to an additional 32 million American citizens by 2016, through private health insurance for the general population and Medicaid for the impoverished. Total spending on health care - public plus private - rose from 9.0% of GDP in 1980 to 17.9% in 2010. In July 2010, the president signed the DODD-FRANK Wall Street Reform and Consumer Protection Act, a law designed to promote financial stability by protecting consumers from financial abuses, ending taxpayer bailouts of financial firms, dealing with troubled banks that are "too big to fail," and improving accountability and transparency in the financial system - in particular, by requiring certain financial derivatives to be traded in markets that are subject to government regulation and oversight. In December 2012, the Federal Reserve Board announced plans to purchase $85 billion per month of mortgage-backed and Treasury securities in an effort to hold down long-term interest rates, and to keep short term rates near zero until unemployment drops to 6.5% from the December rate of 7.8%, or until inflation rises above 2.5%. Long-term problems include stagnation of wages for lower-income families, inadequate investment in deteriorating infrastructure, rapidly rising medical and pension costs of an aging population, energy shortages, and sizable current account and budget deficits - including significant budget shortages for state governments.
United States Pacific Island Wildlife Refuges no economic activity
Uruguay Uruguay has a free market economy characterized by an export-oriented agricultural sector, a well-educated work force, and high levels of social spending. Following financial difficulties in the late 1990s and early 2000s, economic growth for Uruguay averaged 8% annually during the period 2004-08. The 2008-09 global financial crisis put a brake on Uruguay's vigorous growth, which decelerated to 2.6% in 2009. Nevertheless, the country managed to avoid a recession and keep positive growth rates, mainly through higher public expenditure and investment, and GDP growth reached 8.9% in 2010 but fell to about 3.5% in 2012, the result of a renewed slowdown in the global economy and in Uruguay's main trade partners and Common Market of the South (Mercosur) counterparts, Argentina and Brazil. Uruguay has sought to expand trade within Mercosur and with non-Mercosur members. Uruguay''s total merchandise trade with Mercosur since 2006 has increased by nearly 70% to more than $5 billion while its total trade with the world has almost doubled to roughly $20 billion.
Uzbekistan Uzbekistan is a dry, landlocked country; 11% of the land is intensely cultivated, in irrigated river valleys. More than 60% of the population lives in densely populated rural communities. Export of hydrocarbons, primarily natural gas, provided 18.5% of foreign exchange earnings in 2011 and 35.1% in the first nine months of 2012. Other major export earners include gold and cotton. Despite ongoing efforts to diversify crops, Uzbekistani agriculture remains largely centered around cotton, although production has dropped by 35% since 1991. Uzbekistan is now the world's fifth largest cotton exporter and sixth largest producer. The country is aggressively addressing international criticism for the use of child labor in its cotton harvest. Following independence in September 1991, the government sought to prop up its Soviet-style command economy with subsidies and tight controls on production and prices. While aware of the need to improve the investment climate, the government still sponsors measures that often increase, not decrease, its control over business decisions. A sharp increase in the inequality of income distribution has hurt the lower ranks of society since independence. In 2003, the government accepted Article VIII obligations under the IMF, providing for full currency convertibility. However, strict currency controls and tightening of borders have lessened the effects of convertibility and have also led to some shortages that have further stifled economic activity. The Central Bank often delays or restricts convertibility, especially for consumer goods. According to official statistics, Uzbekistan has posted GDP growth of over 8% per year for several years, driven primarily by state-led investments and a favorable export environment. Growth may slip in 2013 as a result of lower export prices due to the continuing European recession. In the past Uzbekistani authorities have accused US and other foreign companies operating in Uzbekistan of violating Uzbekistani tax laws and have frozen their assets, with several new expropriations in 2012. At the same time, the Uzbekistani Government has actively courted several major US and international corporations, offering attractive financing and tax advantages, and has landed a significant US investment in the automotive industry, including the opening of a powertrain manufacturing facility in Tashkent in November 2011. Uzbekistan has seen few effects from the global economic downturn, primarily due to its relative isolation from the global financial markets.
Vanuatu This South Pacific island economy is based primarily on small-scale agriculture, which provides a living for about two-thirds of the population. Fishing, offshore financial services, and tourism, with nearly 197,000 visitors in 2008, are other mainstays of the economy. Mineral deposits are negligible; the country has no known petroleum deposits. A small light industry sector caters to the local market. Tax revenues come mainly from import duties. Economic development is hindered by dependence on relatively few commodity exports, vulnerability to natural disasters, and long distances from main markets and between constituent islands. In response to foreign concerns, the government has promised to tighten regulation of its offshore financial center. In mid-2002, the government stepped up efforts to boost tourism through improved air connections, resort development, and cruise ship facilities. Agriculture, especially livestock farming, is a second target for growth. Australia and New Zealand are the main suppliers of tourists and foreign aid.
Venezuela Venezuela remains highly dependent on oil revenues, which account for roughly 95% of export earnings, about 45% of federal budget revenues, and around 12% of GDP. Fueled by high oil prices, record government spending helped to boost GDP growth by 4.2% in 2011, after a sharp drop in oil prices caused an economic contraction in 2009-10. Government spending, minimum wage hikes, and improved access to domestic credit created an increase in consumption which combined with supply problems to cause higher inflation - roughly 26% in 2011 and 21% in 2012. President Hugo CHAVEZ's efforts to increase the government's control of the economy by nationalizing firms in the agribusiness, financial, construction, oil, and steel sectors have hurt the private investment environment, reduced productive capacity, and slowed non-petroleum exports. In the first half of 2010 Venezuela faced the prospect of lengthy nationwide blackouts when its main hydroelectric power plant - which provides more than 35% of the country's electricity - nearly shut down. In May 2010, CHAVEZ closed the unofficial foreign exchange market - the "parallel market" - in an effort to stem inflation and slow the currency's depreciation. In June 2010, the government created the "Transaction System for Foreign Currency Denominated Securities" to replace the "parallel" market. In December 2010, CHAVEZ eliminated the dual exchange rate system and unified the exchange rate at 4.3 bolivars per dollar. In January 2011, CHAVEZ announced the second devaluation of the bolivar within twelve months. In December 2010, the National Assembly passed a package of five organic laws designed to complete the transformation of the Venezuelan economy in line with CHAVEZ's vision of 21st century socialism. In 2012, Venezuela continued to wrestle with a housing crisis, high inflation, an electricity crisis, and rolling food and goods shortages - all of which were fallout from the government's unorthodox economic policies. The budget deficit for the entire government reached 17% of GDP in 2012, and public debt as a percent of GDP climbed steeply to 49%, despite record oil prices.
Vietnam Vietnam is a densely-populated developing country that has been transitioning from the rigidities of a centrally-planned economy since 1986. Vietnamese authorities have reaffirmed their commitment to economic modernization in recent years. Vietnam joined the World Trade Organization in January 2007, which has promoted more competitive, export-driven industries. Vietnam became an official negotiating partner in the Trans-Pacific Partnership trade agreement in 2010. Agriculture's share of economic output has continued to shrink from about 25% in 2000 to less than 22% in 2012, while industry's share increased from 36% to nearly 41% in the same period. State-owned enterprises account for roughly 40% of GDP. Poverty has declined significantly, and Vietnam is working to create jobs to meet the challenge of a labor force that is growing by more than one million people every year. The global recession hurt Vietnam's export-oriented economy, with GDP in 2012 growing at 5%, the slowest rate of growth since 1999. In 2012, however, exports increased by more than 18%, year-on-year; several administrative actions brought the trade deficit back into balance. Between 2008 and 2011, Vietnam's managed currency, the dong, was devalued in excess of 20%, but its value remained stable in 2012. Foreign direct investment inflows fell 4.5% to $10.5 billion in 2012. Foreign donors have pledged $6.5 billion in new development assistance for 2013. Hanoi has oscillated between promoting growth and emphasizing macroeconomic stability in recent years. In February 2011, the government shifted from policies aimed at achieving a high rate of economic growth, which had stoked inflation, to those aimed at stabilizing the economy, through tighter monetary and fiscal control. Although Vietnam unveiled a broad, "three pillar" economic reform program in early 2012, proposing the restructuring of public investment, state-owned enterprises, and the banking sector, little perceptible progress had been made by early 2013. Vietnam's economy continues to face challenges from an undercapitalized banking sector. Non-performing loans weigh heavily on banks and businesses. In September 2012, the official bad debt ratio climbed to 8.8%, though some independent analysts believe it could be higher than 15%.
Virgin Islands Tourism, trade, and other services are the primary economic activities, accounting for roughly 57% of GDP and about half of total civilian employment in 2010. Goods-producing industries accounted for 23% of GDP in 2010 and government represented 20%. The islands hosted nearly 2.74 million visitors - 2.2 million cruise ship and 536,000 air passengers - in 2011. The manufacturing sector consists of rum distilling, electronics, pharmaceuticals, and watch assembly. The agriculture sector is small, with most food being imported. The islands are vulnerable to damage from storms. The government is working to improve fiscal discipline, to support construction projects in the private sector, to expand tourist facilities, to reduce crime, and to protect the environment.
Wake Island Economic activity is limited to providing services to military personnel and contractors located on the island. All food and manufactured goods must be imported.
Wallis and Futuna The economy is limited to traditional subsistence agriculture, with 80% of labor force earnings from agriculture (coconuts and vegetables), livestock (mostly pigs), and fishing. About 4% of the population is employed in government. Revenues come from French Government subsidies, licensing of fishing rights to Japan and South Korea, import taxes, and remittances from expatriate workers in New Caledonia.
West Bank The West Bank - the larger of the two areas comprising the Palestinian territories - has sustained a moderate rate of economic growth since 2008. Inflows of donor aid and government spending have driven most of the gains, however. Private sector development has been weak. After a multiyear downturn following the start of the second intifada in 2000, overall standard-of-living measures have recovered and now exceed levels seen in the late 1990s. Despite the Palestinian Authority's (PA) successful implementation of economic and security reforms and the easing of some movement and access restrictions by the Israeli Government, Israeli closure policies continue to disrupt labor and trade flows, industrial capacity, and basic commerce, eroding the productive capacity of the West Bank economy. The biggest impediments to economic improvements in the West Bank remain Palestinians' inability to access land and resources in Israeli-controlled areas, import and export restrictions, and a high-cost capital structure. The PA for the foreseeable future will continue to rely heavily on donor aid for its budgetary needs, and West Bank economic activity will depend largely on the PA''s ability to attract such aid.
Western Sahara Western Sahara has a small market-based economy whose main industries are fishing, phosphate mining, and pastoral nomadism. The territory's arid desert climate makes sedentary agriculture difficult, and Western Sahara imports much of its food. The Moroccan Government administers Western Sahara's economy and is a key source of employment, infrastructure development, and social spending in the territory. Western Sahara''s unresolved legal status makes the exploitation of its natural resources a contentious issue between Morocco and the Polisario. Morocco and the EU in July 2006 signed a four-year agreement allowing European vessels to fish off the coast of Morocco, including the disputed waters off the coast of Western Sahara, but this agreement was terminated in 2011. Oil has never been found in Western Sahara in commercially significant quantities, but Morocco and the Polisario have quarreled over who has the right to authorize and benefit from oil exploration in the territory. Western Sahara''s main long-term economic challenge is the development of a more diverse set of industries capable of providing greater employment and income to the territory.
World The international financial crisis of 2008-09 led to the first downturn in global output since 1946 and presented the world with a major new challenge: determining what mix of fiscal and monetary policies to follow to restore growth and jobs, while keeping inflation and debt under control. Financial stabilization and stimulus programs that started in 2009-11, combined with lower tax revenues in 2009-10, required most countries to run large budget deficits. Treasuries issued new public debt - totaling $7.6 trillion since 2008 - to pay for the additional expenditures. To keep interest rates low, most central banks monetized that debt, injecting large sums of money into their economies - between December 2008 and December 2012 the global money supply increased by more than 31%. Governments now are faced with the difficult task of spurring current growth and employment without saddling their economies with so much debt that they sacrifice long-term growth and financial stability. And when economic activity picks up, central banks will confront the difficult task of containing inflation without raising interest rates so high they snuff out further growth.

Fiscal and monetary data for 2012 are currently available for 180 countries, which together account for 98.5% of World GDP. Of the 180 countries, 85 pursued unequivocally expansionary policies, boosting government spending while also expanding their money supply relatively rapidly - faster than the world average of 4.1%; 37 followed restrictive fiscal and monetary policies, reducing government spending and holding money growth to less than the 4.1% average; and the remaining 58 followed a mix of counterbalancing fiscal and monetary policies, either reducing government spending while accelerating money growth, or boosting spending while curtailing money growth.

(For more information, see attached spreadsheet, Fiscal and Monetary Data, 2008-2012.)

In 2012, fiscal policy shifted towards greater austerity for a majority of the countries. In an attempt to attack their deficit and debt problems head-on, nearly 5 out of 6 countries slowed the rate of growth of government spending, and 1 in 3 countries actually lowered the level of their expenditures. The global growth rate for government expenditures dropped from 5.9% in 2010 and 10.1% in 2011, to just 1.4% in 2012. Roughly 1 out of 3 central banks tightened monetary policy, decelerating the rate of growth of their money supply, and about 1 out of 7 actually withdrew money from circulation. Growth of the global money supply, as measured by the narrowly defined M1, slowed from 8.7% in 2009 and 10.4% in 2010 to 5.2% in 2011 and 4.1% in 2012.

These policy choices significantly affected economic performance. The global budget deficit narrowed to roughly $2.7 trillion in 2012, or 3.8% of World GDP. But growth of the world economy slipped from 5.1% in 2010 and 3.7% in 2011, to just 3.1% in 2012. And world unemployment increased to 9.2%.

Countries with expansionary fiscal and monetary policies achieved significantly higher rates of growth, lower unemployment, higher growth of tax revenues, and greater success reducing the public debt burden than those countries that chose contractionary policies. In 2012, the 85 countries that followed a pro-growth approach achieved a median GDP growth rate of 4.9%, compared to just 0.8% for the 37 countries with restrictive fiscal and monetary policies, a difference of more than 4 percentage points. Among the 85, China grew 7.8%, Indonesia 6.0%, Mexico 4.0%, Russia 3.4%, Turkey 3.0%, the United States 2.2%, and Canada 1.9%, while among the 37, Brazil grew 1.3%, Germany 0.7%, France 0.1%, Belgium -0.2%, Netherlands -0.5%, Spain -1.4%, and Italy -2.3%. The median unemployment rate for the 37 countries jumped to 11.5%, while the median for the pro-growth countries held steady at 7.3%.

Faster GDP growth and lower unemployment rates translated into increased tax revenues and a lower debt burden. Revenues for the 85 expansionary countries grew at a median rate of 10.8%, whereas tax revenues fell at a median rate of 6.2% for the 37 countries that chose austere economic policies. Budget balances improved for about half of the 37, but, for most, debt grew faster than GDP, and the median level of their public debt as a share of GDP increased 2.5 percentage points, to 57.8%. On the other hand, budget balances deteriorated for most of the 85 pro-growth countries, but GDP growth outpaced increases in debt, and the median level of public debt as a share of GDP actually declined slightly (-0.1 percentage points).

The world recession has suppressed inflation rates - world inflation declined 1.0 percentage point in 2012 to about 4.0%. At the same time, the median inflation rate for the 85 pro-growth countries, at 5.5%, was 2.5 percentage points higher than that for the countries that followed more austere fiscal and monetary policies. Overall, the latter countries also improved their current account balances by shedding imports; as a result, current account balances deteriorated for most of the countries that pursued pro-growth policies. Slower growth of world income reduced import demand and crude oil prices fell. Consequently, the dollar value of world trade grew just 1% in 2012, compared with 18% in 2011.

Beyond the current global slowdown, the world faces several long-standing economic challenges. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, waste-disposal, epidemics, water-shortages, famine, over-fishing of oceans, deforestation, desertification, and depletion of non-renewable resources. The nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, services, funds, and technology. The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, has created economic risks because the participating nations have varying income levels and growth rates, and hence, require a different mix of monetary and fiscal policies. Governments, especially in Western Europe, face the difficult political problem of channeling resources away from welfare programs in order to increase investment and strengthen incentives to seek employment. Because of their own internal problems and priorities, the industrialized countries are unable to devote sufficient resources to deal effectively with the poorer areas of the world, which, at least from an economic point of view, are becoming further marginalized. The terrorist attacks on the US on 11 September 2001 accentuated a growing risk to global prosperity - the diversion of resources away from capital investments to counter-terrorist programs.

Despite these vexing problems, the world economy also shows great promise. Technology has made possible further advances in a wide range of fields, from agriculture, to medicine, alternative energy, metallurgy, and transportation. Improved global communications have greatly reduced the costs of international trade, helping the world gain from the international division of labor, raise living standards, and reduce income disparities among nations. Much of the resilience of the world economy in the aftermath of the financial crisis resulted from government and central bank leaders around the globe working in concert to stem the financial onslaught, knowing well the lessons of past economic failures.
Yemen Yemen is a low income country that is highly dependent on declining oil resources for revenue. Petroleum accounts for roughly 25% of GDP and 70% of government revenue. Yemen has tried to counter the effects of its declining oil resources by diversifying its economy through an economic reform program initiated in 2006 that is designed to bolster non-oil sectors of the economy and foreign investment. In October 2009, Yemen exported its first liquefied natural gas as part of this diversification effort. In January 2010, the international community established the Friends of Yemen group that aims to support Yemen's efforts toward economic and political reform. In 2012, the Friends of Yemen pledged over $7 billion in assistance to Yemen. The Yemeni Government also endorsed a Mutual Accountability Framework to facilitate the efficient implementation of donor aid. The unrest that began in early 2011 caused GDP to plunge more than 15% in 2011, and about 2% in 2012. Availability of basic services, including electricity, water, and fuel, has improved since the transition, but progress toward achieving more sustainable economic stability has been slow and uneven. Yemen continues to face difficult long-term challenges, including declining water resources, high unemployment, and a high population growth rate.
Zambia Zambia's economy has experienced strong growth in recent years, with real GDP growth in 2005-12 more than 6% per year. Privatization of government-owned copper mines in the 1990s relieved the government from covering mammoth losses generated by the industry and greatly increased copper mining output and profitability to spur economic growth. Copper output has increased steadily since 2004, due to higher copper prices and foreign investment. In 2005, Zambia qualified for debt relief under the Highly Indebted Poor Country Initiative, consisting of approximately US$6 billion in debt relief. Poverty remains a significant problem in Zambia, despite a stronger economy. Zambia's dependency on copper makes it vulnerable to depressed commodity prices, but record high copper prices and a bumper maize crop in 2010 helped Zambia rebound quickly from the world economic slowdown that began in 2008. Zambia has made some strides to improve the ease of doing business. A high birth rate, relatively high HIV/AIDS burden, and market distorting agricultural policies have meant that Zambia''s economic growth has not dramatically decreased the stubbornly high poverty rate.
Zimbabwe Zimbabwe's economy is growing despite continuing political uncertainty. Following a decade of contraction from 1998 to 2008, Zimbabwe's economy recorded real growth of more than 9% per year in 2010-11, before slowing to 5% in 2012, due in part to a poor harvest and low diamond revenues. However, the government of Zimbabwe still faces a number of difficult economic problems, including infrastructure and regulatory deficiencies, ongoing indigenization pressure, policy uncertainty, a large external debt burden, and insufficient formal employment. Zimbabwe''s 1998-2002 involvement in the war in the Democratic Republic of the Congo drained hundreds of millions of dollars from the economy. The government''s subsequent land reform program, characterized by chaos and violence, badly damaged the commercial farming sector, the traditional source of exports and foreign exchange and the provider of 400,000 jobs, turning Zimbabwe into a net importer of food products. Until early 2009, the Reserve Bank of Zimbabwe routinely printed money to fund the budget deficit, causing hyperinflation. Dollarization in early 2009 - which allowed currencies such as the Botswana pula, the South Africa rand, and the US dollar to be used locally - ended hyperinflation and reduced inflation to about 10%, but exposed structural weaknesses that continue to inhibit broad-based growth.