Occupying the northeast corner of the African continent, Egypt
is bisected by the highly fertile Nile valley, where most economic
activity takes place. In the last 30 years, the government has
reformed the highly centralized economy it inherited from President
Gamel Abdel NASSER. In 2005, Prime Minister Ahmed NAZIF's government
reduced personal and corporate tax rates, reduced energy subsidies,
and privatized several enterprises. The stock market boomed, and GDP
grew about 5% per year in 2005-06, and topped 7% in 2007. Despite
these achievements, the government has failed to raise living
standards for the average Egyptian, and has had to continue
providing subsidies for basic necessities. The subsidies have
contributed to a sizeable budget deficit - roughly 7.5% of GDP in
2007 - and represent a significant drain on the economy. Foreign
direct investment has increased significantly in the past two years,
but the NAZIF government will need to continue its aggressive
pursuit of reforms in order to sustain the spike in investment and
growth and begin to improve economic conditions for the broader
population. Egypt's export sectors - particularly natural gas - have
bright prospects.
El Salvador
The smallest country in Central America, El Salvador has
the third largest economy, but growth has been modest in recent
years. Robust growth in non-traditional exports have offset declines
in the maquila exports, while remittances and external aid offset
the trade deficit from high oil prices and strong import demand for
consumer and intermediate goods. El Salvador leads the region in
remittances per capita with inflows equivalent to nearly all export
income. Implementation in 2006 of the Central America-Dominican
Republic Free Trade Agreement (CAFTA), which El Salvador was the
first to ratify, has strengthened an already positive export trend.
With the adoption of the US dollar as its currency in 2001, El
Salvador lost control over monetary policy and must concentrate on
maintaining a disciplined fiscal policy. The current government has
pursued economic diversification, with some success in promoting
textile production, international port services, and tourism through
tax incentives. It is committed to opening the economy to trade and
investment, and has embarked on a wave of privatizations extending
to telecom, electricity distribution, banking, and pension funds. In
late 2006, the government and the Millennium Challenge Corporation
signed a five-year, $461 million compact to stimulate economic
growth and reduce poverty in the country's northern region through
investments in education, public services, enterprise development,
and transportation infrastructure.
Equatorial Guinea
The discovery and exploitation of large oil
reserves have contributed to dramatic economic growth in recent
years. Forestry, farming, and fishing are also major components of
GDP. Subsistence farming predominates. 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. No longer eligible for concessional financing because
of large oil revenues, the government has been trying to agree on a
"shadow" fiscal management program with the World Bank and IMF.
Government officials and their family members own most businesses.
Undeveloped natural resources include titanium, iron ore, manganese,
uranium, and alluvial gold. Growth remained strong in 2007, led by
oil.
Eritrea
Since independence from Ethiopia in 1993, Eritrea has faced
the economic problems of a small, desperately poor country,
accentuated by the recent implementation of 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, the economy is
largely based on subsistence agriculture, with 80% of the population
involved in farming and herding. The Ethiopian-Eritrea war in
1998-2000 severely hurt Eritrea's economy. GDP growth fell to zero
in 1999 and to -12.1% in 2000. The May 2000 Ethiopian offensive into
northern Eritrea caused some $600 million in property damage and
loss, including losses of $225 million in livestock and 55,000
homes. The attack prevented planting of crops in Eritrea's most
productive region, causing food production to drop by 62%. Even
during the war, Eritrea developed its transportation infrastructure,
asphalting new roads, improving its ports, and repairing war-damaged
roads and bridges. Since the war ended, the government has
maintained a firm grip on the economy, expanding the use of the
military and party-owned businesses to complete Eritrea's
development agenda. The government strictly controls the use of
foreign currency, limiting access and availability. Few private
enterprises remain in Eritrea. Eritrea's economy is heavily
dependent on taxes paid by members of the diaspora. Erratic rainfall
and the delayed demobilization of agriculturalists from the military
continue to interfere with agricultural production, and Eritrea's
recent harvests have not been able to meet the food needs of the
country. The government continues to place its hope for additional
revenue on the development of several international mining projects.
Despite difficulties for international companies in working with the
Eritrean government, a Canadian mining company signed a contract
with the GSE in 2007 and plans to begin mineral extraction in 2010.
Eritrea also anticipates opening a free trade zone at the port of
Massawa in 2008. Eritrea's economic future depends upon its ability
to master social problems such as illiteracy, unemployment, and low
skills, and more importantly, on the government's willingness to
support a true market economy.
Estonia
Estonia, a 2004 European Union entrant, has a modern
market-based economy and one of the highest per capita income levels
in Central Europe. The economy benefits from strong electronics and
telecommunications sectors and strong trade ties with Finland,
Sweden, and Germany. The current government has pursued relatively
sound fiscal policies, resulting in balanced budgets and low public
debt. In 2007, however, a large current account deficit and rising
inflation put pressure on Estonia's currency, which is pegged to the
euro, highlighting the need for growth in export-generating
industries.
Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, accounting for almost half of GDP, 60% of exports, and
80% of total employment. The agricultural sector suffers from
frequent drought and poor cultivation practices. Coffee is critical
to the Ethiopian economy with exports of some $350 million in 2006,
but historically low prices have seen many farmers switching to qat
to supplement income. The war with Eritrea in 1998-2000 and
recurrent drought have buffeted the economy, in particular coffee
production. In November 2001, Ethiopia qualified for debt relief
from the Highly Indebted Poor Countries (HIPC) initiative, and in
December 2005 the IMF voted to forgive Ethiopia's debt to the body.
Under Ethiopia's constitution, the state owns all land and provides
long-term leases to the tenants; the system continues to hamper
growth in the industrial sector as entrepreneurs are unable to use
land as collateral for loans. Drought struck again late in 2002,
leading to a 3.3% decline in GDP in 2003. Normal weather patterns
helped agricultural and GDP growth recover during 2004-07.
European Union
Internally, the EU is attempting to lower trade
barriers, adopt a common currency, and move toward convergence of
living standards. Internationally, the EU aims to bolster Europe's
trade position and its political and economic power. Because of the
great differences in per capita income among member states (from
$7,000 to $69,000) and historic national animosities, the EU faces
difficulties in devising and enforcing common policies. For example,
since 2003 Germany and France have flouted the member states' treaty
obligation to prevent their national budgets from running more than
a 3% deficit. In 2004 and 2007, the EU admitted 10 and two
countries, respectively, that are, in general, less advanced
technologically and economically than the other 15. Eleven
established EU member states introduced the euro as their common
currency on 1 January 1999 (Greece did so two years later), but the
UK, Sweden, and Denmark chose not to participate. Of the 12 most
recent member states, only Slovenia (1 January 2007) and Cyprus and
Malta (1 January 2008) have adopted the euro; the remaining nine are
legally required to adopt the currency upon meeting EU's fiscal and
monetary convergence criteria.
Falkland Islands (Islas Malvinas)
The economy was formerly based on
agriculture, mainly sheep farming, but today fishing contributes the
bulk of economic activity. In 1987, the government began selling
fishing licenses to foreign trawlers operating within the Falkland
Islands' exclusive fishing zone. These license fees total more than
$40 million per year, which help support the island's health,
education, and welfare system. Squid accounts for 75% of the fish
taken. Dairy farming supports domestic consumption; crops furnish
winter fodder. Exports feature shipments of high-grade wool to the
UK and the sale of postage stamps and coins. The islands are now
self-financing except for defense. The British Geological Survey
announced a 200-mile oil exploration zone around the islands in
1993, and early seismic surveys suggest substantial reserves capable
of producing 500,000 barrels per day; to date, no exploitable site
has been identified. An agreement between Argentina and the UK in
1995 seeks to defuse licensing and sovereignty conflicts that would
dampen foreign interest in exploiting potential oil reserves.
Tourism, especially eco-tourism, is increasing rapidly, with about
30,000 visitors in 2001. Another large source of income is interest
paid on money the government has in the bank. The British military
presence also provides a sizeable economic boost.
Faroe Islands
The Faroese economy is dependent on fishing, which
makes the economy vulnerable to price swings. Since 2003 the Faroese
economy has picked up as a result of higher prices for fish and for
housing. Unemployment is minimal and government finances are
relatively sound. Oil finds close to the Islands give hope for
economically recoverable deposits, which could eventually lay the
basis for a more diversified economy and lessen dependence on Danish
economic assistance. Aided by a substantial annual subsidy (about
15% of GDP) from Denmark, the Faroese have a standard of living not
far below the Danes and other Scandinavians.
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.
The coup has created a difficult business climate. Tourist arrivals
for 2007 are estimated to be down almost 6%, with substantial job
losses in the service sector. In July 2007 the Reserve Bank of Fiji
announced the economy was expected to contract by 3.1% in 2007.
Fiji's current account deficit reached 23% of GDP in 2006. 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.
Finland
Finland has a highly industrialized, largely free-market
economy with per capita output roughly that of the UK, France,
Germany, and Italy. Its key economic sector is manufacturing -
principally the wood, metals, engineering, telecommunications, and
electronics industries. Trade is important; exports equal nearly
two-fifths of GDP. Finland excels in high-tech exports, e.g., 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. High unemployment remains a
persistent problem. In 2007 Russia announced plans to impose high
tariffs on raw timber exported to Finland. The Finnish pulp and
paper industry will be threatened if these duties are put into place
in 2008 and 2009, and the matter is now being handled by the
European Union.
France
France is in the midst of transition from a well-to-do modern
economy that has featured extensive government ownership and
intervention to one that relies more on market mechanisms. The
government has partially or fully privatized many large companies,
banks, and insurers, and has ceded stakes in such leading firms as
Air France, France Telecom, Renault, and Thales. It maintains a
strong presence in some sectors, particularly power, public
transport, and defense industries. The telecommunications sector is
gradually being opened to competition. 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. Widespread opposition to labor reform has in recent years
hampered the government's ability to revitalize the economy. In
2007, the government launched divisive labor reform efforts that
will continue into 2008. France's tax burden remains one of the
highest in Europe (nearly 50% of GDP in 2005). France brought the
budget deficit within the eurozone's 3%-of-GDP limit for the first
time in 2007 and has reduced unemployment to roughly 8%. With at
least 75 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.
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 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 of
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 oil sector now accounts for 50% of GDP. Gabon continues
to face fluctuating prices for its oil, timber, and manganese
exports. Despite the abundance of natural wealth, poor fiscal
management hobbles the economy. The devaluation of the CFA franc -
its currency - by 50% in January 1994 sparked a one-time
inflationary surge, to 35%; the rate dropped to 6% in 1996. The IMF
provided a one-year standby arrangement in 1994-95, a three-year
Enhanced Financing Facility (EFF) at near commercial rates beginning
in late 1995, and stand-by credit of $119 million in October 2000.
Those agreements mandated progress in privatization and fiscal
discipline. France provided additional financial support in January
1997 after Gabon met IMF targets for mid-1996. In 1997, an IMF
mission to Gabon criticized the government for overspending on
off-budget items, overborrowing from the central bank, and slipping
on its schedule for privatization and administrative reform. The
rebound of oil prices since 1999 have helped growth, but drops in
production have hampered Gabon from fully realizing potential gains,
and will continue to temper the gains for most of this decade. In
December 2000, Gabon signed a new agreement with the Paris Club to
reschedule its official debt. A follow-up bilateral repayment
agreement with the US was signed in December 2001. Gabon signed a
14-month Stand-By Arrangement with the IMF in May 2004, and received
Paris Club debt rescheduling later that year. Short-term progress
depends on an upbeat world economy and fiscal and other adjustments
in line with IMF policies.
Gambia, The
The Gambia has no confirmed mineral or natural resource
deposits and has a limited agricultural base. About 75% of the
population depends on crops and livestock for its livelihood.
Small-scale manufacturing activity features the processing of
peanuts, fish, and hides. Reexport trade normally constitutes a
major segment of economic activity, but a 1999 government-imposed
preshipment inspection plan, and instability of the Gambian dalasi
(currency) have drawn some of the reexport trade away from The
Gambia. The Gambia's natural beauty and proximity to Europe has made
it one of the larger markets for tourism in West Africa. The
government's 1998 seizure of the private peanut firm Alimenta
eliminated the largest purchaser of Gambian groundnuts. Despite an
announced program to begin privatizing key parastatals, no plans
have been made public that would indicate that the government
intends to follow through on its promises. Unemployment and
underemployment rates remain extremely high; short-run economic
progress depends on sustained bilateral and multilateral aid, on
responsible government economic management, on continued technical
assistance from the IMF and bilateral donors, and on expected growth
in the construction sector.
Gaza Strip
High population density, limited land access, and strict
internal and external security controls have kept economic
conditions in the Gaza Strip - the smaller of the two areas under
the Palestinian Authority (PA)- even more degraded than in the West
Bank. The beginning of the second intifada in September 2000 sparked
an economic downturn, largely the result of Israeli closure
policies; these policies, which were imposed to address security
concerns in Israel, disrupted labor and trade access to and from the
Gaza Strip. In 2001, and even more severely in 2003, Israeli
military measures in PA areas resulted in the destruction of
capital, the disruption of administrative structures, and widespread
business closures. The Israeli withdrawal from the Gaza Strip in
September 2005 offered some medium-term opportunities for economic
growth, but continued Israeli-imposed crossings closures, which
became more restrictive after Hamas violently took over the
territory in June 2007, have resulted in widespread private sector
layoffs and shortages of most goods.
Georgia
Georgia's economy has sustained robust GDP growth of close
to 10% in 2006 and 12% in 2007, based on strong inflows of foreign
investment and robust government spending. However, a widening trade
deficit and higher inflation are emerging risks to the economy.
Areas of recent improvement include increasing foreign direct
investment as well as growth in the construction, banking services
and mining sectors. Georgia's main economic activities include the
cultivation of agricultural products such as grapes, citrus fruits,
and hazelnuts; mining of manganese and copper; and output of a small
industrial sector producing alcoholic and nonalcoholic beverages,
metals, machinery, aircraft and chemicals. The country imports
nearly all its needed supplies of natural gas and oil products. It
has sizeable hydropower capacity, a growing component of its energy
supplies. Despite the severe damage the economy suffered due to
civil strife in the 1990s, Georgia, with the help of the IMF and
World Bank, has made substantial economic gains since 2000,
achieving positive GDP growth and curtailing inflation. Georgia's
GDP growth neared 10% in 2006 and 2007 despite restrictions on
commerce with Russia. Areas of recent improvement include increased
foreign direct investment as well as growth in the construction,
banking services, and mining sectors. In addition, the reinvigorated
privatization process has met with success. However, a widening
trade deficit and higher inflation are emerging risks to the
economy. Georgia has suffered from a chronic failure to collect tax
revenues; however, the new government is making progress and has
reformed the tax code, improved tax administration, increased tax
enforcement, and cracked down on corruption. Government revenues
have increased nearly four fold since 2003. Due to improvements in
customs and financial (tax) enforcement, smuggling is a declining
problem. Georgia has overcome the chronic energy shortages of the
past by renovating hydropower plants and by bringing newly available
natural gas supplies from Azerbaijan. It also has an increased
ability to pay for more expensive gas imports from Russia. The
country is pinning its hopes for long-term growth on a determined
effort to reduce regulation, taxes and corruption in order to
attract foreign investment. The construction on 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.