Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past two decades, successive governments have privatized
many state-controlled firms and liberalized key areas of the
economy, including the financial and telecommunications sectors. The
country qualified for the European Monetary Union (EMU) in 1998 and
began circulating the euro on 1 January 2002 along with 11 other EU
member economies. Economic growth had been above the EU average for
much of the 1990s, but fell back in 2001-07. GDP per capita stands
at roughly two-thirds of the EU-27 average. A poor educational
system, in particular, has been an obstacle to greater productivity
and growth. Portugal has been increasingly overshadowed by
lower-cost producers in Central Europe and Asia as a target for
foreign direct investment. The budget deficit surged to an all-time
high of 6% of GDP in 2005, but the government reduced the deficit to
2.6% in 2007 - a year ahead of Portugal's targeted schedule.
Nonetheless, the government faces tough choices in its attempts to
boost Portugal's economic competitiveness while keeping the budget
deficit within the eurozone's 3%-of-GDP ceiling.
Puerto Rico
Puerto Rico has one of the most dynamic economies in the
Caribbean region. A diverse industrial sector has far surpassed
agriculture as the primary locus of economic activity and income.
Encouraged by duty-free access to the US and by tax incentives, 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 nearly 5
million tourists in 2004. Growth fell off in 2001-03, largely due to
the slowdown in the US economy, recovered in 2004-05, but declined
again in 2006-07.
Qatar
Qatar is in the midst of an economic boom supported by its
expanding production of natural gas and oil. Economic policy is
focused on development of Qatar's nonassociated natural gas reserves
and increasing private and foreign investment in non-energy sectors.
Oil and gas account for more than 60% of GDP, roughly 85% of export
earnings, and 70% of government revenues. Oil and gas have made
Qatar the highest per-capita income country and one of the world's
fastest growing. Sustained high oil prices and increased natural gas
exports in recent years have helped build Qatar's budget and trade
surpluses and foreign reserves. Proved oil reserves of more than 15
billion barrels should ensure continued output at current levels for
22 years. Qatar's proved reserves of natural gas are roughly 25
trillion cubic meters, about 15% of the world total and third
largest in the world. Qatar has permitted substantial foreign
investment in the development of its gas fields during the last
decade and became the world's top liquefied natural gas (LNG)
exporter in 2007.
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 have fueled strong GDP growth in recent
years, but have led to large current account imbalances. Romania's
macroeconomic gains have only recently started to spur creation of a
middle class and address Romania's widespread poverty. Corruption
and red tape continue to handicap its business environment.
Inflation rose in 2007 for the first time in eight years, driven in
part by the depreciation of the currency, rising energy costs, a
nation-wide drought affecting food prices, and a relaxation of
fiscal discipline. Romania hopes to adopt the euro by 2014.
Russia
Russia ended 2007 with its ninth straight year of growth,
averaging 7% annually since the financial crisis of 1998. Although
high oil prices and a relatively cheap ruble initially drove this
growth, since 2003 consumer demand and, more recently, investment
have played a significant role. Over the last six years, fixed
capital investments have averaged real gains greater than 10% per
year and personal incomes have achieved real gains more than 12% per
year. During this time, poverty has declined steadily and the middle
class has continued to expand. Russia has also improved its
international financial position since the 1998 financial crisis.
The federal budget has run surpluses since 2001 and ended 2007 with
a surplus of about 3% of GDP. Over the past several years, Russia
has used its stabilization fund based on oil taxes to prepay all
Soviet-era sovereign debt to Paris Club creditors and the IMF.
Foreign debt is approximately one-third of GDP. The state component
of foreign debt has declined, but commercial debt to foreigners has
risen strongly. Oil export earnings have allowed Russia to increase
its foreign reserves from $12 billion in 1999 to some $470 billion
at yearend 2007, the third largest reserves in the world. During
President PUTIN's first administration, a number of important
reforms were implemented in the areas of tax, banking, labor, and
land codes. These achievements have raised business and investor
confidence in Russia's economic prospects, with foreign direct
investment rising from $14.6 billion in 2005 to approximately $45
billion in 2007. In 2007, Russia's GDP grew 8.1%, led by
non-tradable services and goods for the domestic market, as opposed
to oil or mineral extraction and exports. Rising inflation returned
in the second half of 2007, driven largely by unsterilized capital
inflows and by rising food costs, and approached 12% by year-end. In
2006, Russia signed a bilateral market access agreement with the US
as a prelude to possible WTO entry, and its companies are involved
in global merger and acquisition activity in the oil and gas,
metals, and telecom sectors. Despite Russia's recent success,
serious problems persist. Oil, natural gas, metals, and timber
account for more than 80% of exports and 30% of government revenues,
leaving the country vulnerable to swings in world commodity prices.
Russia's manufacturing base is dilapidated and must be replaced or
modernized if the country is to achieve broad-based economic growth.
The banking system, while increasing consumer lending and growing at
a high rate, is still small relative to the banking sectors of
Russia's emerging market peers. Political uncertainties associated
with this year's power transition, corruption, and lack of trust in
institutions continue to dampen domestic and foreign investor
sentiment. PUTIN has granted more influence to forces within his
government that desire to reassert state control over the economy.
Russia has made little progress in building the rule of law, the
bedrock of a modern market economy. The government has promised
additional legislative amendments to make its intellectual property
protection WTO-consistent, but enforcement remains problematic.
Rwanda
Rwanda is a poor rural country with about 90% of the
population engaged in (mainly subsistence) agriculture. It is the
most densely populated country in Africa and is landlocked with few
natural resources and minimal industry. Primary foreign exchange
earners are coffee and tea. The 1994 genocide decimated Rwanda's
fragile economic base, severely impoverished the population,
particularly women, and eroded 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, although poverty levels are higher now. GDP has
rebounded and inflation has been curbed. Despite Rwanda's fertile
ecosystem, food production often does not keep pace with population
growth, 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. Rwanda also
received Millennium Challenge Account Threshold status in 2006. 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, although
energy shortages, instability in neighboring states, and lack of
adequate transportation linkages to other countries continue to
handicap growth.
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
The economy depends largely on financial assistance
from the UK, which will amount to about $27 million in FY06/07 or
almost 70% 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
Sugar was the traditional mainstay of the
Saint Kitts economy until the 1970s. Following the 2005 harvest, the
government closed the sugar industry after decades of losses of 3-4%
of GDP annually. To compensate for employment losses, the government
has embarked on a program to diversify the agricultural sector and
to stimulate other sectors of the economy. Activities such as
tourism, export-oriented manufacturing, and offshore banking have
assumed larger roles in the economy and have contributed to the
recent robust growth. Tourism revenues are now the chief source of
the islands' foreign exchange; about 341,800 tourists visited Nevis
in 2005. The current government is constrained by a high debt
burden, public debt reached 190% of GDP by the end of 2005, 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, with a surge in foreign direct investment in
2006, attributed to the construction of several tourism projects.
Tourism is the main source of foreign exchange, with almost 900,000
arrivals in 2007. The manufacturing sector is the most diverse in
the Eastern Caribbean area, and the government is trying to
revitalize the banana industry. Saint Lucia is vulnerable to a
variety of external shocks including declines in European Union
banana preferences, volatile tourism receipts, natural disasters,
and dependence on foreign oil. High debt servicing obligations
constrain the KING administration's ability to respond to adverse
external shocks. Economic fundamentals remain solid, even though
unemployment needs to be reduced.
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
Economic growth slowed slightly in
2007 after reaching a 10 year high of nearly 7% in 2006, but is
expected to remain robust, hinging upon seasonal variations in the
agricultural and tourism sectors and a recent increase in
construction activity. This lower-middle-income country is
vulnerable to natural disasters - tropical storms wiped out
substantial portions of crops in 1994, 1995, and 2002. In 2007, the
islands had more than 200,000 tourist arrivals, mostly to the
Grenadines. 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 debt burden - 25 percent
of current revenues are directed towards debt servicing.
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 two-thirds of the labor force and furnishes 90%
of exports, featuring coconut cream, coconut oil, and copra. The
fish catch declined during the El Nino of 2002-03 but returned to
normal by mid-2005. 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; 116,000 tourists visited the islands in 2006. 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
The tourist sector contributes over 50% of GDP. In 2006
more than 2.1 million tourists visited San Marino. The key
industries are banking, clothing and apparel, electronics, and
ceramics. Main agricultural products are wine and cheeses. The per
capita level of output and standard of living are comparable to
those of the most prosperous regions of Italy, which supplies much
of its food.
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 has to import all fuels, most
manufactured goods, consumer goods, and a substantial amount of
food. Over the years, it has had difficulty servicing its external
debt and has relied heavily on concessional aid and debt
rescheduling. Sao Tome 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, Sao Tome signed on to a new 3-year IMF
Poverty Reduction and Growth Facility (PRGF) program worth $4.3
million. 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. Sao Tome is optimistic about the development
of petroleum resources in its territorial waters in the oil-rich
Gulf of Guinea, which are being jointly developed in a 60-40 split
with Nigeria. The first production licenses were sold in 2004,
though a dispute over licensing with Nigeria delayed Sao Tome's
receipt of more than $20 million in signing bonuses for almost a
year. Real GDP growth exceeded 6% in 2007, as a result of increases
in public expenditures and oil-related capital investment.
Saudi Arabia
Saudi Arabia has an oil-based economy with strong
government controls over major economic activities. It possesses
more than 20% 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 75% of budget revenues, 45% of
GDP, and 90% of export earnings. About 40% of GDP comes from the
private sector. Roughly 5.5 million foreign workers play an
important role in the Saudi economy, particularly in the oil and
service sectors. High oil prices have boosted growth, government
revenues, and Saudi ownership of foreign assets, while enabling
Riyadh to pay down domestic debt. The government is encouraging
private sector growth - especially in power generation,
telecommunications, natural gas exploration, and petrochemicals - to
lessen the kingdom's dependence on oil exports and to increase
employment opportunities for the swelling Saudi population, nearly
40% of which are youths under 15 years old. Unemployment is high,
and the large youth population generally lacks the education and
technical skills the private sector needs. Riyadh has substantially
boosted spending on job training and education, infrastructure
development, and government salaries. As part of its effort to
attract foreign investment and diversify the economy, Saudi Arabia
acceded to the WTO in December 2005 after many years of
negotiations. The government has announced plans to establish six
"economic cities" in different regions of the country to promote
development and diversification.
Senegal
In January 1994, Senegal undertook a bold and ambitious
economic reform program with the support of the international donor
community. This reform began with a 50% devaluation of Senegal's
currency, the CFA franc, which was linked at a fixed rate to the
French franc. Government price controls and subsidies have been
steadily dismantled. After seeing its economy contract by 2.1% in
1993, Senegal made an important turnaround, thanks to the reform
program, with real growth in GDP averaging over 5% annually during
1995-2007. Annual inflation had been pushed down to the low single
digits. As a member of the West African Economic and Monetary Union
(WAEMU), Senegal is working toward greater regional integration with
a unified external tariff and a more stable monetary policy. High
unemployment, however, continues to prompt illegal migrants to flee
Senegal in search of better job opportunities in Europe. Senegal was
also beset by an energy crisis that caused widespread blackouts in
2006 and 2007. The phosphate industry has struggled for two years to
secure capital, and reduced output has directly impacted GDP. In
2007, Senegal signed agreements for major new mining concessions for
iron, zircon, and gold with foreign companies. Firms from Dubai have
agreed to manage and modernize Dakar's maritime port, and create a
new special economic zone. Senegal still relies heavily upon outside
donor assistance. Under the IMF's Highly Indebted Poor Countries
(HIPC) debt relief program, Senegal has benefited from eradication
of two-thirds of its bilateral, multilateral, and private-sector
debt. In 2007, Senegal and the IMF agreed to a new, non-disbursing,
Policy Support Initiative program.
Serbia
MILOSEVIC-era mismanagement of the economy, an extended
period of economic sanctions, 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,
a down-sized Yugoslavia continued to reintegrate into the
international community by rejoining the World Bank (IBRD) and the
European Bank for Reconstruction and Development (EBRD). A World
Bank-European Commission sponsored Donors' Conference held in June
2001 raised $1.3 billion for economic restructuring. In November
2001, the Paris Club agreed to reschedule the country's $4.5 billion
public debt and wrote off 66% of the debt. In July 2004, the London
Club of private creditors forgave $1.7 billion of debt just over
half the total owed. Belgrade has made only minimal progress in
restructuring and privatizing its holdings in major sectors of the
economy, including energy and telecommunications. It has made
halting progress towards EU membership and is currently pursuing a
Stabilization and Association Agreement with Brussels. Serbia is
also pursuing membership in the World Trade Organization.
Unemployment remains an ongoing political and economic problem.
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. Sharp drops illustrated the vulnerability of the
tourist sector in 1991-92 due largely to the Gulf War and once again
following the 11 September 2001 terrorist attacks on the US.
Economic growth slowed in 1998-2002 and fell in 2003-04, due to
sluggish tourist and tuna sectors, but resumed in 2005-07. Real GDP
grew by 5.8% in 2007, driven by tourism and a boom in
tourism-related construction. The Seychelles rupee was allowed to
depreciate in 2006 after being overvalued for years and fell by 10%
in the first 9 months of 2007.
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 is not well developed, 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 has completed a Poverty Reduction and
Growth Facility program that helped stabilize economic growth and
reduce inflation. A recent increase in political stability has led
to a revival of economic activity such as the rehabilitation of
bauxite and rutile mining.