Germany's affluent and technologically powerful economy -
the fifth largest in the world in PPP terms - showed considerable
improvement in 2007 with 2.6% growth. After a long period of
stagnation with an average growth rate of 0.7% between 2001-05 and
chronically high unemployment, stronger growth led to a considerable
fall in unemployment to about 8% near the end of 2007. Among the
most important reasons for Germany's high unemployment during the
past decade were macroeconomic stagnation, the declining level of
investment in plant and equipment, company restructuring, flat
domestic consumption, structural rigidities in the labor market,
lack of competition in the service sector, and high interest rates.
The modernization and integration of the eastern German economy
continues to be a costly long-term process, with annual transfers
from west to east amounting to roughly $80 billion. The former
government of Chancellor Gerhard SCHROEDER launched a comprehensive
set of reforms of labor market and welfare-related institutions. The
current government of Chancellor Angela MERKEL has initiated other
reform measures, such as a gradual increase in the mandatory
retirement age from 65 to 67 and measures to increase female
participation in the labor market. Germany's aging population,
combined with high chronic unemployment, has pushed social security
outlays to a level exceeding contributions, but higher government
revenues from the cyclical upturn in 2006-07 and a 3% rise in the
value-added tax pushed Germany's budget deficit well below the EU's
3% debt limit. Corporate restructuring and growing capital markets
are setting the foundations that could help Germany meet the
long-term challenges of European economic integration and
globalization, although some economists continue to argue the need
for change in inflexible labor and services markets. Growth may fall
below 2% in 2008 as the strong euro, high oil prices, tighter credit
markets, and slowing growth abroad take their toll.
Ghana
Well endowed with natural resources, Ghana has roughly twice
the per capita output of the poorest countries in West Africa. Even
so, Ghana remains heavily dependent on international financial and
technical assistance. Gold and cocoa production, and individual
remittances, are major sources of foreign exchange. The domestic
economy continues to revolve around agriculture, which accounts for
about 35% of GDP and employs about 55% of the work force, mainly
small landholders. 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. Thematic priorities under its current Growth and Poverty
Reduction Strategy, which also provides the framework for
development partner assistance, are: macroeconomic stability;
private sector competitiveness; human resource development; and good
governance and civic responsibility. Sound macro-economic management
along with high prices for gold and cocoa helped sustain GDP growth
in 2007. Ghana signed a Millennium Challenge Corporation (MCC)
Compact in 2006, which aims to assist in transforming Ghana's
agricultural sector.
Gibraltar
Self-sufficient Gibraltar benefits from an extensive
shipping trade, offshore banking, and its position as an
international conference center. 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), shipping services fees, and
duties on consumer goods also generate revenue. The financial
sector, the shipping sector, and tourism each contribute 25%-30% of
GDP. Telecommunications accounts for another 10%. 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 the public sector
accounting for about 40% of GDP and with per capita GDP at least 75%
of the leading euro-zone economies. Tourism provides 15% of GDP.
Immigrants make up nearly one-fifth of the work force, mainly in
agricultural and unskilled jobs. Greece is a major beneficiary of EU
aid, equal to about 3.3% of annual GDP. The Greek economy grew by
nearly 4.0% per year between 2003 and 2007, due partly to
infrastructural spending related to the 2004 Athens Olympic Games,
and in part to an increased availability of credit, which has
sustained record levels of consumer spending. Greece violated the
EU's Growth and Stability Pact budget deficit criteria of no more
than 3% of GDP from 2001 to 2006, but finally met that criteria in
2007. Public debt, inflation, and unemployment are above the
euro-zone average, but are falling. The Greek Government continues
to grapple with cutting government spending, reducing the size of
the public sector, and reforming the labor and pension systems, in
the face of often vocal opposition from the country's powerful labor
unions and the general public. The economy remains an important
domestic political issue in Greece and, while the ruling New
Democracy government has had some success in improving economic
growth and reducing the budget deficit, Athens faces long-term
challenges in its effort to continue its economic reforms,
especially social security reform and privatization.
Greenland
The economy remains critically dependent on exports of
fish and a substantial subsidy from the Danish Government, which
supplies about half of government revenues. The public sector,
including publicly owned enterprises and the municipalities, plays
the dominant role in the economy. Several interesting hydrocarbon
and mineral exploration activities are ongoing. Press reports in
early 2007 indicated that two international aluminum companies were
considering building smelters in Greenland to take advantage of
local hydropower potential. Tourism is the only sector offering any
near-term potential, and even this is limited due to a short season
and high costs. Air Greenland began summer-season direct flights to
the US east coast in May 2007, potentially opening a major new
tourism market.
Grenada
Grenada relies on tourism as its main source of foreign
exchange, especially since the construction of an international
airport in 1985. Strong performances in construction and
manufacturing, together with the development of an offshore
financial industry, have also contributed to growth in national
output. Grenada has rebounded from the devastating effects of
Hurricanes Ivan (2004) and Emily (2005), but is now saddled with the
debt burden from the rebuilding process. The agricultural sector,
particularly nutmeg and cocoa cultivation, has gradually recovered,
and the tourism sector has seen substantial increases in foreign
direct investment as the regional share of the tourism market
increases.
Guam
The economy depends largely on US military spending and
tourism. Total US grants, wage payments, and procurement outlays
amounted to $1.3 billion in 2004. Over the past 30 years, the
tourist industry has grown to become the largest income source
following national defense. The Guam economy continues to experience
expansion in both its tourism and military sectors.
Guatemala
Guatemala is the most populous of the Central American
countries with a GDP per capita roughly one-half that of Argentina,
Brazil, and Chile. The agricultural sector accounts for about
one-tenth of GDP, two-fifths of exports, and half of the labor
force. Coffee, sugar, and bananas are the main products, with sugar
exports benefiting from increased global demand for ethanol. The
1996 signing of peace accords, which ended 36 years of civil war,
removed a major obstacle to foreign investment, and Guatemala since
then has pursued important reforms and macroeconomic stabilization.
On 1 July 2006, the Central American Free Trade Agreement (CAFTA)
entered into force between the US and Guatemala and has since
spurred increased investment in the export sector. The distribution
of income remains highly unequal with about 56% of the population
below the poverty line. Other ongoing challenges include increasing
government revenues, negotiating further assistance from
international donors, upgrading both government and private
financial operations, curtailing drug trafficking and rampant crime,
and narrowing the trade deficit. 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-thirds of exports.
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. The evolving economic integration of
the EU nations is changing the environment under which Guernsey
operates.
Guinea
Guinea possesses major mineral, hydropower, and agricultural
resources, yet remains an underdeveloped nation. The country has
almost half of the world's bauxite reserves and is the
second-largest bauxite producer. The mining sector accounts for over
70% of exports. Long-run improvements in government fiscal
arrangements, literacy, and the legal framework are needed if the
country is to move out of poverty. Investor confidence has been
sapped by rampant corruption, a lack of electricity and other
infrastructure, a lack of skilled workers, and the political
uncertainty due to the failing health of President Lansana CONTE.
Guinea is trying to reengage with the IMF and World Bank, which cut
off most assistance in 2003, and is working closely with technical
advisors from the U.S. Treasury Department, the World Bank and IMF,
seeking to return to a fully funded program. Growth rose slightly in
2006-07, primarily due to increases in global demand and commodity
prices on world markets, but the standard of living fell. The Guinea
franc depreciated sharply as the prices for basic necessities like
food and fuel rose beyond the reach of most Guineans.
Dissatisfaction with economic conditions prompted nationwide strikes
in February and June 2006.
Guinea-Bissau
One of the five poorest countries in the world,
Guinea-Bissau depends mainly on farming and fishing. Cashew crops
have increased remarkably in recent years, and the country now ranks
sixth in cashew production. 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. Before the war,
trade reform and price liberalization were the most successful part
of the country's structural adjustment program under IMF
sponsorship. The tightening of monetary policy and the development
of the private sector had also begun to reinvigorate the economy.
Because of high costs, the development of petroleum, phosphate, and
other mineral resources is not a near-term prospect. Offshore oil
prospecting is underway in several sectors but has not yet led to
commercially viable crude deposits. The inequality of income
distribution is one of the most extreme in the world. The government
and international donors continue to work out plans to forward
economic development from a lamentably low base. 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. Government drift
and indecision, however, resulted in continued low growth in
2002-06. Higher raw material prices boosted growth to 3.7% in 2007.
Guyana
The Guyanese economy exhibited moderate economic growth in
2001-07, based on expansion in the agricultural and mining sectors,
a more favorable atmosphere for business initiatives, a more
realistic exchange rate, fairly low inflation, and the continued
support of international organizations. Economic recovery since the
2005 flood-related contraction has been buoyed by increases in
remittances and foreign direct investment. Chronic problems include
a shortage of skilled labor and a deficient infrastructure. The
government is 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 nearly 48% of GDP.
The bauxite mining sector should benefit in the near term from
restructuring and partial privatization, and the state-owned sugar
industry will conduct efficiency increasing modernizations. Export
earnings from agriculture and mining have fallen sharply, while the
import bill has risen, driven by higher energy prices. Guyana's
entrance into the Caricom Single Market and Economy (CSME) in
January 2006 will broaden the country's export market, primarily in
the raw materials sector.
Haiti
Haiti is the poorest country in the Western Hemisphere, with
80% of the population living under the poverty line and 54% in
abject poverty. Two-thirds 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. A
macroeconomic program developed in 2005 with the help of the
International Monetary Fund helped the economy grow 3.5% in 2007,
the highest growth rate since 1999. US economic engagement under the
Haitian Hemispheric Opportunity through Partnership Encouragement
(HOPE) Act, passed in December 2006, has boosted the garment and
automotive parts exports and investment by providing tariff-free
access to the US. Haiti suffers from high inflation, a lack of
investment because of insecurity and limited infrastructure, and a
severe trade deficit. In 2005, Haiti paid its arrears to the World
Bank, paving the way for reengagement with the Bank. The government
relies on formal international economic assistance for fiscal
sustainability. Remittances are the primary source of foreign
exchange, equaling nearly a quarter of GDP and more than twice the
earnings from exports.
Heard Island and McDonald Islands
The islands have no indigenous
economic activity, but the Australian Government allows limited
fishing in the surrounding waters.
Holy See (Vatican City)
This unique, noncommercial economy is
supported financially by an annual contribution (known as Peter's
Pence) from Roman Catholic dioceses throughout the world; by the
sale of postage stamps, coins, medals, and tourist mementos; by fees
for admission to museums; and by the sale of publications.
Investments and real estate income also account for a sizable
portion of revenue. 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 and
one of the poorest countries in the Western Hemisphere, with an
extraordinarily unequal distribution of income and massive
unemployment, is banking on expanded trade under the US-Central
America Free Trade Agreement (CAFTA) and on debt relief under the
Heavily Indebted Poor Countries (HIPC) initiative. Despite
improvements in tax collections, the government's fiscal deficit is
growing due to increases in current expenditures and financial
losses from the state energy and telephone companies. Honduras is
the fastest growing remittance destination in the region with
inflows representing over a quarter of GDP, equivalent to nearly
three-quarters of exports. The economy relies heavily on a narrow
range of exports, notably bananas and coffee, making it vulnerable
to natural disasters and shifts in commodity prices, however,
investments in the maquila and non-traditional export sectors are
slowly diversifying the economy. Growth remains dependent on the
economy of the US, its largest trading partner, and on reduction of
the high crime rate, as a means of attracting and maintaining
investment.
Hong Kong
Hong Kong has a free market economy highly dependent on
international trade. In 2006, the total value of goods and services
trade, including the sizable share of reexports, was equivalent to
400% of GDP. The territory has become increasingly integrated with
mainland China over the past few years through trade, tourism, and
financial links. The mainland has long been Hong Kong's largest
trading partner, accounting for 46% of Hong Kong's total trade by
value in 2006. 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 13.6 million in 2006, when they outnumbered
visitors from all other countries combined. Hong Kong has also
established itself as the premier stock market for Chinese firms
seeking to list abroad. Bolstered by several successful initial
public offerings in early 2007, by September 2007 mainland companies
accounted for one-third of the firms listed on the Hong Kong Stock
Exchange, and more than half of the Exchange's market
capitalization. During the past decade, as Hong Kong's manufacturing
industry moved to the mainland, its service industry has grown
rapidly and now accounts for 91% of the territory's GDP. Hong Kong's
natural resources are limited, and food and raw materials must be
imported. GDP growth averaged a strong 5% from 1989 to 2007, despite
the economy suffering two recessions during the Asian financial
crisis in 1997-98 and the global downturn in 2001-02. 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-25 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 totaling more
than $60 billion since 1989. Hungary issues investment-grade
sovereign debt. International observers, however, have expressed
concerns over Hungary's fiscal and current account deficits. In
2007, Hungary eliminated a trade deficit that had persisted for
several years. Inflation declined from 14% in 1998 to a low of 3.7%
in 2006, but jumped to 7.8% in 2007. Unemployment has persisted
above 6%. Hungary's labor force participation rate of 57% is one of
the lowest in the Organization for Economic Cooperation and
Development (OECD). Germany is by far Hungary's largest economic
partner. Policy challenges include cutting the public sector deficit
to 4% of GDP by 2008, from about 6% in 2007. The government's
austerity program of tax hikes and subsidy cuts has reduced
Hungary's large budget deficit, but the reforms have dampened
domestic consumption, slowing GDP growth to about 2% in 2007. The
government will need to pass additional reforms to ensure the
long-term stability of public finances. The government plans to
eventually lower its public sector deficit to below 3% of GDP to
adopt the euro.
Iceland
Iceland's Scandinavian-type economy is basically
capitalistic, yet with an extensive welfare system (including
generous housing subsidies), low unemployment, and remarkably even
distribution of income. In the absence of other natural resources
(except for abundant geothermal power), the economy depends heavily
on the fishing industry, which provides 70% of export earnings and
employs 6% of the work force. The economy 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. Substantial foreign investment in the aluminum and
hydropower sectors has boosted economic growth which, nevertheless,
has been volatile and characterized by recurrent imbalances.
Government policies include reducing the current account deficit,
limiting foreign borrowing, containing inflation, revising
agricultural and fishing policies, and diversifying the economy. The
government remains opposed to EU membership, primarily because of
Icelanders' concern about losing control over their fishing
resources. Iceland's economy has been diversifying into
manufacturing and service industries in the last decade, and new
developments in software production, biotechnology, and financial
services are taking place. The tourism sector is also expanding,
with the recent trends in ecotourism and whale watching. The 2006
closure of the US military base at Keflavik had very little impact
on the national economy; Iceland's low unemployment rate aided
former base employees in finding alternate employment.
India
India's diverse economy encompasses traditional village
farming, modern agriculture, handicrafts, a wide range of modern
industries, and a multitude of services. Services are the major
source of economic growth, accounting for more than half of India's
output with less than one third of its labor force. About
three-fifths of the work force is in agriculture, leading the United
Progressive Alliance (UPA) government to articulate an economic
reform program that includes developing basic infrastructure to
improve the lives of the rural poor and boost economic performance.
The government has reduced controls on foreign trade and investment.
Higher limits on foreign direct investment were permitted in a few
key sectors, such as telecommunications. However, tariff spikes in
sensitive categories, including agriculture, and incremental
progress on economic reforms still hinder foreign access to India's
vast and growing market. Privatization of government-owned
industries remains stalled and continues to generate political
debate; populist pressure from within the UPA government and from
its Left Front allies continues to restrain needed initiatives. The
economy has posted an average growth rate of more than 7% in the
decade since 1997, reducing poverty by about 10 percentage points.
India achieved 8.5% GDP growth in 2006, and again in 2007,
significantly expanding production of manufactures. India is
capitalizing on its large numbers of well-educated people skilled in
the English language to become a major exporter of software services
and software workers. Economic expansion has helped New Delhi
continue to make progress in reducing its federal fiscal deficit.
However, strong growth combined with easy consumer credit and a real
estate boom fueled inflation concerns in 2006 and 2007, leading to a
series of central bank interest rate hikes that have slowed credit
growth and eased inflation concerns. The huge and growing population
is the fundamental social, economic, and environmental problem.
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.