Since the breakup of the Soviet Union in 1991, Armenia has
made progress in implementing many economic reforms including
privatization, price reforms, and prudent fiscal policies. The
conflict with Azerbaijan over the ethnic Armenian-dominated region
of Nagorno-Karabakh contributed to a severe economic decline in the
early 1990s. By 1994, however, the Armenian Government launched an
ambitious IMF-sponsored economic liberalization program that
resulted in positive growth rates. Economic growth has averaged over
13% in recent years. Armenia has managed to reduce poverty, slash
inflation, stabilize its currency, and privatize most small- and
medium-sized enterprises. 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. Nuclear power plants
built at Metsamor in the 1970s were closed following the 1988 Spitak
Earthquake, though they sustained no damage. One of the two reactors
was re-opened in 1995, but the Armenian government is under
international pressure to close it due to concerns that the Soviet
era design lacks important safeguards. Metsamor provides 40 percent
of the country's electricity - hydropower accounts for about
one-fourth. Economic ties with Russia remain close, especially in
the energy sector. The electricity distribution system was
privatized in 2002 and bought by Russia's RAO-UES in 2005.
Construction of a pipeline to deliver natural gas from Iran to
Armenia is halfway completed and is scheduled to be commissioned by
January 2009. Armenia has some mineral deposits (copper, gold,
bauxite). Pig iron, unwrought copper, and other nonferrous metals
are Armenia's highest valued exports. 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 will be more difficult to implement.
Despite strong economic growth, Armenia's unemployment rate remains
high. Armenia will need to pursue additional economic reforms in
order to improve its economic competitiveness and to build on recent
improvements in poverty and unemployment, especially given its
economic isolation from two of its nearest neighbors, Turkey and
Azerbaijan.
Aruba
Tourism is the mainstay of the small, open Aruban economy,
with offshore banking and oil refining and storage also important.
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. In addition, the country's oil refinery reopened in
1993, providing a major source of employment, foreign exchange
earnings, and growth. Tourist arrivals have rebounded strongly
following a dip after the 11 September 2001 attacks. The island
experiences only a brief low season, and hotel occupancy in 2004
averaged 80%, compared to 68% throughout the rest of the Caribbean.
The government has made cutting the budget and trade deficits a high
priority.
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
Australia has an enviable, strong economy with a per
capita GDP on par with the four dominant West European economies.
Robust business and consumer confidence and high export prices for
raw materials and agricultural products are fueling the economy,
particularly in mining states. Australia's emphasis on reforms, low
inflation, a housing market boom, and growing ties with China have
been key factors behind the economy's 16 solid years of expansion.
Drought, robust import demand, and a strong currency have pushed the
trade deficit up in recent years, while infrastructure bottlenecks
and a tight labor market are constraining growth in export volumes
and stoking inflation. Australia's budget has been in surplus since
2002 due to strong revenue growth.
Austria
Austria, with its well-developed market economy and high
standard of living, is closely tied to other EU economies,
especially Germany's. The Austrian economy also benefits greatly
from strong commercial relations, especially in the banking and
insurance sectors, with central, eastern, and southeastern Europe.
The economy features a large service sector, a sound industrial
sector, and a small, but highly developed agricultural sector.
Membership in the EU has drawn an influx of foreign investors
attracted by Austria's access to the single European market and
proximity to the new EU economies. The outgoing government has
successfully pursued a comprehensive economic reform program, aimed
at streamlining government and creating a more competitive business
environment, further strengthening Austria's attractiveness as an
investment location. It has implemented effective pension reforms;
however, lower taxes in 2005-06 led to a small budget deficit in
2006 and 2007. Boosted by strong exports, growth nevertheless
reached 3.3% in both 2006 and 2007, although the economy may slow in
2008 because of the strong euro, high oil prices, and problems in
international financial markets. To meet increased competition -
especially from new EU members and Central European countries -
Austria will need to continue restructuring, emphasizing
knowledge-based sectors of the economy, and encouraging greater
labor flexibility and greater labor participation by its aging
population.
Azerbaijan
Azerbaijan's high economic growth in 2006 and 2007 is
attributable to large and growing oil exports. Azerbaijan's oil
production declined through 1997, but has registered an increase
every year since. Negotiation of production-sharing arrangements
(PSAs) with foreign firms, which have committed $60 billion to
long-term oilfield development, should generate the funds needed to
spur future industrial development. Oil production under the first
of these PSAs, with the Azerbaijan International Operating Company,
began in November 1997. A consortium of Western oil companies began
pumping 1 million barrels a day from a large offshore field in early
2006, through a $4 billion pipeline it built from Baku to Turkey's
Mediterranean port of Ceyhan. By 2010 revenues from this project
will double the country's current GDP. Azerbaijan shares all the
formidable problems of the former Soviet republics in making the
transition from a command to a market economy, but its considerable
energy resources brighten its long-term prospects. Baku has only
recently begun making progress on economic reform, and old economic
ties and structures are slowly being replaced. Several other
obstacles impede Azerbaijan's economic progress: the need for
stepped up foreign investment in the non-energy sector, the
continuing conflict with Armenia over the Nagorno-Karabakh region,
pervasive corruption, and elevated inflation. 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 will depend on world oil prices, the location of new oil
and gas pipelines in the region, and Azerbaijan's ability to manage
its energy wealth.
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. Steady
growth in tourism receipts and a boom in construction of new hotels,
resorts, and residences had led to solid GDP growth in recent years,
but tourist arrivals have been on the decline since 2006. Financial
services constitute the second-most important sector of the Bahamian
economy and, when combined with business services, account for about
36% of GDP. However, since December 2000, when the government
enacted new regulations on the financial sector, many international
businesses have left The Bahamas. Manufacturing and agriculture
combined contribute approximately a tenth of GDP and show little
growth, despite government incentives aimed at those sectors.
Overall growth prospects in the short run rest heavily on the
fortunes of the tourism sector. Tourism, in turn, depends on growth
in the US, the source of more than 80% of the visitors.
Bahrain
With its highly developed communication and transport
facilities, Bahrain is home to numerous multinational firms with
business in the Gulf. Petroleum production and refining account for
over 60% of Bahrain's export receipts, over 70% of government
revenues, and 11% of GDP (exclusive of allied industries),
underpinning Bahrain's strong economic growth in recent years.
Aluminum is Bahrain's second major export after oil. Other major
segments of Bahrain's economy are the financial and construction
sectors. Bahrain is focused on Islamic banking and is competing on
an international scale with Malaysia as a worldwide banking center.
Bahrain is actively pursuing the diversification and privatization
of its economy to reduce the country's dependence on oil. As part of
this effort, in August 2006 Bahrain and the US implemented a Free
Trade Agreement (FTA), the first FTA between the US and a Gulf
state. Continued strong growth hinges on Bahrain's ability to
acquire new natural gas supplies as feedstock to support its
expanding petrochemical and aluminum industries. Unemployment,
especially among the young, and the depletion of oil and underground
water resources are long-term economic problems.
Bangladesh
The economy has grown 5-6% over the past few years
despite inefficient state-owned enterprises, delays in exploiting
natural gas resources, 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, nearly
two-thirds of Bangladeshis are employed in the agriculture sector,
with rice as the single-most-important product. Garment exports and
remittances from Bangladeshis working overseas, mainly in the Middle
East and East Asia, fuel economic growth.
Barbados
Historically, the Barbadian economy was dependent on
sugarcane cultivation and related activities. However, production in
recent years has diversified into light industry and tourism, with
about three-quarters of GDP and 80% of exports being attributed to
services. Growth has rebounded since 2003, bolstered by increases in
construction projects and tourism revenues - reflecting its success
in the higher-end segment. The country enjoys one of the highest per
capita incomes in the region and an investment grade rating which
benefits from its political stability and stable institutions.
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. The government continues its efforts to reduce
unemployment, to encourage direct foreign investment, and to
privatize remaining state-owned enterprises.
Belarus
Belarus has seen little structural reform since 1995, when
President LUKASHENKO launched the country on the path of "market
socialism." In keeping with this policy, LUKASHENKO reimposed
administrative controls over prices and currency exchange rates and
expanded the state's right to intervene in the management of private
enterprises. Since 2005, the government has re-nationalized a number
of private companies. In addition, businesses have been subject to
pressure by central and local governments, e.g., arbitrary changes
in regulations, numerous rigorous inspections, retroactive
application of new business regulations, and arrests of "disruptive"
businessmen and factory owners. A wide range of redistributive
policies has helped those at the bottom of the ladder; the Gini
coefficient is among the lowest in the world. Because of these
restrictive economic policies, Belarus has had trouble attracting
foreign investment. Nevertheless, GDP growth has been strong in
recent years, reaching nearly 7% in 2007, despite the roadblocks of
a tough, centrally directed economy with a high, but decreasing,
rate of inflation. Belarus receives heavily discounted oil and
natural gas from Russia and much of Belarus' growth can be
attributed to the re-export of Russian oil at market prices. Trade
with Russia - by far its largest single trade partner - decreased in
2007, largely as a result of a change in the way the Value Added Tax
(VAT) on trade was collected. Russia has introduced an export duty
on oil shipped to Belarus, which will increase gradually through
2009, and a requirement that Belarusian duties on re-exported
Russian oil be shared with Russia - 80% will go to Russia in 2008,
and 85% in 2009. Russia also increased Belarusian natural gas prices
from $47 per thousand cubic meters (tcm) to $100 per tcm in 2007,
and plans to increase prices gradually to world levels by 2011.
Russia's recent policy of bringing energy prices for Belarus to
world market levels may result in a slowdown in economic growth in
Belarus over the next few years. Some policy measures, including
tightening of fiscal and monetary policies, improving energy
efficiency, and diversifying exports, have been introduced, but
external borrowing has been the main mechanism used to manage the
growing pressures on the economy.
Belgium
This modern, private-enterprise economy has capitalized on
its central geographic location, highly developed transport network,
and diversified industrial and commercial base. Industry is
concentrated mainly in the populous Flemish area in the north. With
few natural resources, Belgium must import substantial quantities of
raw materials and export a large volume of manufactures, making its
economy unusually dependent on the state of world markets. Roughly
three-quarters of its trade is with other EU countries. Public debt
is more than 85% of GDP. On the positive side, the government has
succeeded in balancing its budget, and income distribution is
relatively equal. Belgium began circulating the euro currency in
January 2002. Economic growth in 2001-03 dropped sharply because of
the global economic slowdown, with moderate recovery in 2004-07.
Economic growth and foreign direct investment are expected to slow
down in 2008, due to credit tightening, falling consumer and
business confidence, and above average inflation. However, with the
successful negotiation of the 2008 budget and devolution of power
within the government, political tensions seem to be easing and
could lead to an improvement in the economic outlook for 2008.
Belize
In this small, essentially private-enterprise economy,
tourism is the number one foreign exchange earner 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 sturdy GDP growth
averaging nearly 4% in 1999-2007. Oil discoveries in 2006 bolstered
the economic growth in 2006 and 2007. Major concerns continue to be
the sizable trade deficit and unsustainable foreign debt. In
February 2007, the government restructured nearly all of its public
external commercial debt, which will reduce interest payments and
relieve liquidity concerns. A key short-term objective remains the
reduction of poverty with the help of international donors.
Benin
The economy of Benin remains underdeveloped and dependent on
subsistence agriculture, cotton production, and regional trade.
Growth in real output has averaged around 5% in the past seven
years, but rapid population growth has offset much of this increase.
Inflation has subsided over the past several years. In order to
raise growth still further, 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 though the government annulled the
privatization of Benin's state cotton company in November 2007 after
the discovery of irregularities in the bidding process. The Paris
Club and bilateral creditors have eased the external debt situation,
with Benin benefiting from a G8 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.
Bermuda
Bermuda enjoys the third highest per capita income in the
world, more than 50% higher than that of the US. Its economy is
primarily based on providing financial services for international
business and luxury facilities for tourists. A number of reinsurance
companies relocated to the island following the 11 September 2001
attacks and again after Hurricane Katrina in August 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 but remains the
island's number two industry. Most capital equipment and food must
be imported. Bermuda's industrial sector is small, although
construction continues to be important; the average cost of a house
in June 2003 had risen to $976,000. Agriculture is limited with only
20% of the land being arable.
Bhutan
The economy, one of the world's smallest and least developed,
is based on agriculture and forestry, which provide the main
livelihood for more than 60% 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
dependence 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. Detailed controls and
uncertain policies in areas such as industrial licensing, trade,
labor, and finance continue to hamper foreign investment. Hydropower
exports to India had a major impact on growth in 2007.
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, which was
made the sole exporter of natural gas. The law also required that
the state energy company regain control over the five companies that
were privatized during the 1990s - a process that is still underway.
In 2006, higher earnings for mining and hydrocarbons exports pushed
the current account surplus to about 12% of GDP and the government's
higher tax take produced a fiscal surplus after years of large
deficits. Debt relief from the G8 - announced in 2005 - also has
significantly reduced Bolivia's public sector debt burden. Private
investment as a share of GDP, however, remains among the lowest in
Latin America, and inflation reached double-digit levels in 2007.
Bosnia and Herzegovina
Bosnia and Herzegovina ranked next to
Macedonia as the poorest republic in the old Yugoslav federation.
Although agriculture is almost all in private hands, farms are small
and inefficient, and the republic traditionally is a net importer of
food. The private sector is growing and foreign investment is slowly
increasing, but government spending, at nearly 40% of adjusted GDP,
remains unreasonably high. The interethnic warfare in Bosnia 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 at
high percentage rates from a low base; but output growth slowed in
2000-02. Part of the lag in output was made up in 2003-07 when GDP
growth exceeded 5% per year. National-level statistics are limited
and do not capture the large share of black market activity. 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. Implementing
privatization, however, has been slow, particularly in the
Federation, although more successful in the Republika Srpska.
Banking reform accelerated in 2001 as all the Communist-era payments
bureaus were shut down; foreign banks, primarily from Western
Europe, now control most of the banking sector. A sizeable current
account deficit and high unemployment rate remain the two most
serious macroeconomic problems. On 1 January 2006 a new value-added
tax (VAT) went into effect. The VAT has been successful in capturing
much of the gray market economy and has developed into a significant
and predictable source of revenues for all layers of government.
Bosnia and Herzegovina became a full member of the Central European
Free Trade Agreement in September 2007. The country receives
substantial reconstruction assistance and humanitarian aid from the
international community but will have to prepare for an era of
declining assistance.
Botswana
Botswana has maintained one of the world's highest economic
growth rates since independence in 1966, though growth slowed to
4.7% annually in 2006-07. Through fiscal discipline and sound
management, Botswana has transformed itself from one of the poorest
countries in the world to a middle-income country with a per capita
GDP of nearly $15,000 in 2007. 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 and for 70-80% of export earnings. Tourism,
financial services, subsistence farming, and cattle raising are
other key sectors. On the downside, the government must deal with
high rates of unemployment and poverty. Unemployment officially was
23.8% in 2004, but unofficial estimates place it closer to 40%.
HIV/AIDS infection rates are the second highest in the world and
threaten Botswana's impressive economic gains. An expected leveling
off in diamond mining production overshadows long-term prospects.