This page was last updated on 18 December, 2003

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@2116 Economy - overview

Afghanistan

Afghanistan is an extremely poor, landlocked country,

highly dependent on foreign aid, farming and livestock raising

(sheep and goats), and trade with neighboring countries. Economic

considerations have played second fiddle to political and military

upheavals during more than two decades of war, including the nearly

10-year Soviet military occupation (which ended 15 February 1989).

During that conflict, one-third of the population fled the country,

with Pakistan and Iran sheltering a combined peak of 4 to 6 million

refugees. Gross domestic product has fallen substantially over the

past 20 years because of the loss of labor and capital and the

disruption of trade and transport; severe drought added to the

nation's difficulties in 1998-2002. The majority of the population

continues to suffer from insufficient food, clothing, housing, and

medical care, and a dearth of jobs, problems exacerbated by

political uncertainties and the general level of lawlessness.

International efforts to rebuild Afghanistan were addressed at the

Tokyo Donors Conference for Afghan Reconstruction in January 2002,

when $4.5 billion was pledged, $1.7 billion for 2002. Of that

approximately $900 million was directed to humanitarian aid - food,

clothing, and shelter - and another $90 million for the Afghan

Transitional Authority. Further World Bank and other aid came in

2003. Priority areas for reconstruction include upgrading education,

health, and sanitation facilities; providing income generating

opportunities; enhancing administrative and security arrangements,

especially in regional areas; developing the agricultural sector;

rebuilding transportation, energy, and telecommunication

infrastructure; and reabsorbing 2 million returning refugees. The

replacement of the opium trade - which may account for one-third of

GDP - and the search for oil and gas resources in the northern

region are two major long-term issues.

Albania

Poor and backward by European standards, Albania is making

the difficult transition to a more modern open-market economy. The

government has taken measures to curb violent crime and to spur

economic activity and trade. The economy is bolstered by remittances

from abroad of $400-$600 million annually, mostly from Greece and

Italy; this helps offset the sizable trade deficit. Agriculture,

which accounts for half of GDP, is held back because of frequent

drought and the need to modernize equipment and consolidate small

plots of land. Severe energy shortages are forcing small firms out

of business, increasing unemployment, scaring off foreign investors,

and spurring inflation. The government plans to boost energy imports

to relieve the shortages. In addition, the government is moving to

improve the poor national road network, a long-standing barrier to

sustained economic growth.

Algeria

The hydrocarbons sector is the backbone of the economy,

accounting for roughly 60% of budget revenues, 30% of GDP, and over

95% of export earnings. Algeria has the fifth-largest reserves of

natural gas in the world and is the second-largest gas exporter; it

ranks 14th in oil reserves. Algeria's financial and economic

indicators improved during the mid-1990s, in part because of policy

reforms supported by the IMF and debt rescheduling from the Paris

Club. Algeria's finances in 2000-03 benefited from substantial trade

surpluses, record foreign exchange reserves, and reductions in

foreign debt. Real GDP has risen due to higher oil output and

increased government spending. The government's continued efforts to

diversify the economy by attracting foreign and domestic investment

outside the energy sector, however, has had little success in

reducing high unemployment and improving living standards.

American Samoa

This is a traditional Polynesian economy in which

more than 90% of the land is communally owned. Economic activity is

strongly linked to the US, with which American Samoa conducts most

of its foreign trade. Tuna fishing and tuna processing plants are

the backbone of the private sector, with canned tuna the primary

export. Transfers from the US Government add substantially to

American Samoa's economic well-being. Attempts by the government to

develop a larger and broader economy are restrained by Samoa's

remote location, its limited transportation, and its devastating

hurricanes. Tourism, a developing sector, has been held back by the

recurring financial difficulties in East Asia.

Andorra

Tourism, the mainstay of Andorra's tiny, well-to-do economy,

accounts for roughly 80% of GDP. An estimated 9 million tourists

visit annually, attracted by Andorra's duty-free status and by its

summer and winter resorts. Andorra's comparative advantage has

recently eroded as the economies of neighboring France and Spain

have been opened up, providing broader availability of goods and

lower tariffs. The banking sector, with its "tax haven" status, also

contributes substantially to the economy. Agricultural production is

limited - only 2% of the land is arable - and most food has to be

imported. The principal livestock activity is sheep raising.

Manufacturing output consists mainly of cigarettes, cigars, and

furniture. Andorra is a member of the EU Customs Union and is

treated as an EU member for trade in manufactured goods (no tariffs)

and as a non-EU member for agricultural products.

Angola

Angola has been an economy in disarray because of a quarter

century of nearly continuous warfare. An apparently durable peace

was established after the death of rebel leader Jonas SAVIMBI on

February 22, 2002, but consequences from the conflict continue

including the impact of wide-spread land mines. Subsistence

agriculture provides the main livelihood for 85% of the population.

Oil production and the supporting activities are vital to the

economy, contributing about 45% to GDP and more than half of

exports. Much of the country's food must still be imported. To fully

take advantage of its rich natural resources - gold, diamonds,

extensive forests, Atlantic fisheries, and large oil deposits -

Angola will need to continue reforming government policies. While

Angola made progress in bringing inflation down further, from 325%

in 2000 to about 106% in 2002, the government has failed to make

sufficient progress on reforms recommended by the IMF such as

increasing foreign exchange reserves and promoting greater

transparency in government spending. Increased oil production should

bring about 6% GDP growth in 2003.

Anguilla

Anguilla has few natural resources, and the economy depends

heavily on luxury tourism, offshore banking, lobster fishing, and

remittances from emigrants. Increased activity in the tourism

industry, which has spurred the growth of the construction sector,

has contributed to economic growth. Anguillan officials have put

substantial effort into developing the offshore financial sector,

which is small, but growing. In the medium term, prospects for the

economy will depend largely on the tourism sector and, therefore, on

revived income growth in the industrialized nations as well as on

favorable weather conditions.

Antarctica

Fishing off the coast and tourism, both based abroad,

account for the limited economic activity. Antarctic fisheries in

2000-01 (1 July-30 June) reported landing 112,934 metric tons.

Unregulated fishing, particularly of tooth fish, is a serious

problem. Allegedly illegal fishing in antarctic waters in 1998

resulted in the seizure (by France and Australia) of at least eight

fishing ships. The Convention on the Conservation of Antarctic

Marine Living Resources determines the recommended catch limits for

marine species. A total of 12,248 tourists visited in the 2000-01

antarctic summer, down from the 14,762 who visited the previous

year. Nearly all of them were passengers on 21 commercial

(nongovernmental) ships and several yachts that made trips during

the summer. Most tourist trips lasted approximately two weeks.

Antigua and Barbuda

Tourism continues to dominate the economy,

accounting for more than half of GDP. Weak tourist arrival numbers

since early 2000 have slowed the economy, however, and pressed the

government into a tight fiscal corner. The dual-island nation's

agricultural production is focused on the domestic market and

constrained by a limited water supply and a labor shortage stemming

from the lure of higher wages in tourism and construction.

Manufacturing comprises enclave-type assembly for export with major

products being bedding, handicrafts, and electronic components.

Prospects for economic growth in the medium term will continue to

depend on income growth in the industrialized world, especially in

the US, which accounts for slightly more than one-third of tourist

arrivals.

Arctic Ocean

Economic activity is limited to the exploitation of

natural resources, including petroleum, natural gas, fish, and seals.

Argentina

Argentina benefits from rich natural resources, a highly

literate population, an export-oriented agricultural sector, and a

diversified industrial base. Over the past decade, however, the

country has suffered recurring economic problems of inflation,

external debt, capital flight, and budget deficits. Growth in 2000

was a negative 0.8%, as both domestic and foreign investors remained

skeptical of the government's ability to pay debts and maintain the

peso's fixed exchange rate with the US dollar. The economic

situation worsened in 2001 with the widening of spreads on Argentine

bonds, massive withdrawals from the banks, and a further decline in

consumer and investor confidence. Government efforts to achieve a

"zero deficit," to stabilize the banking system, and to restore

economic growth proved inadequate in the face of the mounting

economic problems. The peso's peg to the dollar was abandoned in

January 2002, and the peso was floated in February; the exchange

rate plunged and inflation picked up rapidly, but by mid-2002 the

economy had stabilized, albeit at a lower level. Strong demand for

the peso compelled the Central Bank to intervene in foreign exchange

markets to curb its appreciation in early 2003. Led by record

exports, the economy began to recover with output up 5.5% in 2003,

unemployment falling, and inflation sliced to 4.2% at year-end.

Armenia

Under the old Soviet central planning system, Armenia had

developed a modern industrial sector, supplying machine tools,

textiles, and other manufactured goods to sister republics in

exchange for raw materials and energy. Since the implosion of the

USSR in December 1991, Armenia has switched to small-scale

agriculture away from the large agroindustrial complexes of the

Soviet era. The agricultural sector has long-term needs for more

investment and updated technology. The privatization of industry has

been at a slower pace, but has been given renewed emphasis by the

current administration. Armenia is a food importer, and its mineral

deposits (copper, gold, bauxite) are small. The ongoing conflict

with Azerbaijan over the ethnic Armenian-dominated region of

Nagorno-Karabakh and the breakup of the centrally directed economic

system of the former Soviet Union contributed to a severe economic

decline in the early 1990s. By 1994, however, the Armenian

Government had launched an ambitious IMF-sponsored economic program

that has resulted in positive growth rates in 1995-2003. Armenia

also has managed to slash inflation, stabilize the local currency

(the dram), and privatize most small- and medium-sized enterprises.

The chronic energy shortages Armenia suffered in the early and

mid-1990s have been offset by the energy supplied by one of its

nuclear power plants at Metsamor. Armenia is now a net energy

exporter, although it does not have sufficient generating capacity

to replace Metsamor, which is under international pressure to close.

The electricity distribution system was privatized in 2002.

Armenia's severe trade imbalance has been offset somewhat by

international aid, domestic restructuring of the economy, and

foreign direct investment. Economic ties with Russia remain close,

especially in the energy sector.

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.

Construction has boomed, with hotel capacity five times the 1985

level. In addition, the reopening of the country's oil refinery in

1993, a major source of employment and foreign exchange earnings,

has further spurred growth. Aruba's small labor force and low

unemployment rate have led to a large number of unfilled job

vacancies, despite sharp rises in wage rates in recent years.

Tourist arrivals have declined in the aftermath of the 11 September

2001 terrorist attacks on the US. The government now must deal with

a budget deficit and a negative trade balance.

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, the 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 a prosperous Western-style capitalist

economy, with a per capita GDP on par with the four dominant West

European economies. Rising output in the domestic economy has been

offsetting the global slump, and business and consumer confidence

remains robust. Australia's emphasis on reforms is another key

factor behind the economy's strength. The stagnant economic

conditions in major export partners and the impact of the worst

drought in 100 years cast a shadow over prospects for 2003.

Austria

Austria, with its well-developed market economy and high

standard of living, is closely tied to other EU economies,

especially Germany's. Membership in the EU has drawn an influx of

foreign investors attracted by Austria's access to the single

European market and proximity to EU aspirant economies. Slowing

growth in Germany and elsewhere in the world held the economy to

only 1.2% growth in 2001, 0.6% in 2002, and 0.8% in 2003.. To meet

increased competition from both EU and Central European countries,

Austria will need to emphasize knowledge-based sectors of the

economy, continue to deregulate the service sector, and lower its

tax burden. A key issue is the encouragement of much greater

participation in the labor market by its ageing population.

Azerbaijan

Azerbaijan's number one export is oil. 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 thus far 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. 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. One obstacle to

economic progress is the need for stepped up foreign investment in

the non-energy sector. A second obstacle is the continuing conflict

with Armenia over the Nagorno-Karabakh region. Trade with Russia and

the other former Soviet republics is declining in importance while

trade is building with Turkey and the nations of Europe. Long-term

prospects will depend on world oil prices, the location of new

pipelines in the region, and Azerbaijan's ability to manage its oil

wealth.

Bahamas, The

The Bahamas is a stable, developing nation with an

economy heavily dependent on tourism and offshore banking. Tourism

alone accounts for more than 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 the

slowdown in the US economy and the attacks of 11 September 2001 held

back growth in these sectors in 2002. Manufacturing and agriculture

together 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, which depends on growth in the US,

the source of most of the visitors.

Bahrain

In Bahrain, petroleum production and refining account for

about 60% of export receipts, 60% of government revenues, and 30% of

GDP. With its highly developed communication and transport

facilities, Bahrain is home to numerous multinational firms with

business in the Gulf. Bahrain is dependent on Saudi Arabia for oil

granted as aid. A large share of exports consists of petroleum

products made from refining imported crude. Construction proceeds on

several major industrial projects. Unemployment, especially among

the young, and the depletion of oil and underground water resources

are major long-term economic problems.

Baker Island

no economic activity

Bangladesh

Despite sustained domestic and international efforts to

improve economic and demographic prospects, Bangladesh remains a

poor, overpopulated, and ill-governed nation. Although 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. Major impediments to growth

include frequent cyclones and floods, inefficient state-owned

enterprises, inadequate port facilities, a rapidly growing labor

force that cannot be absorbed by agriculture, delays in exploiting

energy resources (natural gas), insufficient power supplies, and

slow implementation of economic reforms. Economic reform is stalled

in many instances by political infighting and corruption at all

levels of government. Progress also has been blocked by opposition

from the bureaucracy, public sector unions, and other vested

interest groups. The BNP government, led by Prime Minister Khaleda

ZIA, has the parliamentary strength to push through needed reforms,

but the party's political will to do so has been lacking in key

areas.

Barbados

Historically, the Barbadian economy had been dependent on

sugarcane cultivation and related activities, but production in

recent years has diversified into manufacturing and tourism.

Offshore finance and information services are important foreign

exchange earners, and there is also a light-manufacturing sector.

The government continues its efforts to reduce unemployment, to

encourage direct foreign investment, and to privatize remaining

state-owned enterprises. The economy contracted in 2002 mainly due

to a 3% decline in tourism. Growth should be positive in 2003, the

precise level largely dependent on economic conditions in the US and

Europe.

Bassas da India

no economic activity

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

enterprise. In addition to the burdens imposed by high inflation and

persistent trade deficits, businesses have been subject to pressure

on the part of 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. Close

relations with Russia, possibly leading to reunion, color the

pattern of economic developments. For the time being, Belarus

remains self-isolated from the West and its open-market economies.

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 about 100% of GDP, and the government has succeeded in balancing

its budget. Belgium, together with 11 of its EU partners, began

circulating the euro currency in January 2002. Economic growth in

2001-03 dropped sharply due to the global economic slowdown.

Prospects for 2004 again depend largely on recovery in the EU and

the US.

Belize

In this small, essentially private enterprise economy the

tourism industry is the number one foreign exchange earner followed

by cane sugar, citrus, marine products, bananas, and garments. The

government's expansionary monetary and fiscal policies, initiated in

September 1998, led to GDP growth of 6.5% in 1999, 10.8% in 2000,

4.6% in 2001, and 3.7% in 2002. Major concerns continue to be the

sizable trade deficit and foreign debt. 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 a stable 5% in the past six

years, but rapid population rise 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. The 2001 privatization policy should continue in

telecommunications, water, electricity, and agriculture in spite of

initial government reluctance. The Paris Club and bilateral

creditors have eased the external debt situation, while pressing for

speeded-up structural reforms.

Bermuda

Bermuda enjoys one of the highest per capita incomes in the

world, with its economy primarily based on providing financial

services for international business and luxury facilities for

tourists. The effects of 11 September 2001 have had both positive

and negative ramifications for Bermuda. On the positive side, a

number of new reinsurance companies have located on the island,

contributing to the expansion of an already robust international

business sector. On the negative side, Bermuda's tourism industry -

which derives over 80% of its visitors from the US - has been

severely hit as American tourists have chosen not to travel. Tourism

rebounded somewhat in 2002, but remains below the pre-11 September

level. Most capital equipment and food must be imported. Bermuda's

industrial sector is small, although construction continues to be

important. Agriculture is limited, only 6% of the land being arable.

Bhutan

The economy, one of the world's smallest and least developed,

is based on agriculture and forestry, providing the main livelihood

for more than 90% 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. Bhutan's hydropower potential and its attraction for

tourists are key resources. The government has made some progress in

expanding the nation's productive base and improving social welfare.

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. Detailed controls and

uncertain policies in areas like industrial licensing, trade, labor,

and finance continue to hamper foreign investment.

Bolivia

Bolivia, long one of the poorest and least developed Latin

American countries, made considerable progress in the 1990s toward

the development of a market-oriented economy. Successes under

President SANCHEZ DE LOZADA (1993-97) included the signing of a free

trade agreement with Mexico and becoming an associate member of the

Southern Cone Common Market (Mercosur), as well as the privatization

of the state airline, telephone company, railroad, electric power

company, and oil company. Growth slowed in 1999, in part due to

tight government budget policies, which limited needed

appropriations for anti-poverty programs, and the fallout from the

Asian financial crisis. In 2000, major civil disturbances held down

growth to 2.5%. Bolivia's GDP failed to grow in 2001 due to the

global slowdown and laggard domestic activity. Growth picked up

slightly in 2002, but the first quarter of 2003 saw extensive civil

riots and looting and loss of confidence in the government. Bolivia

will remain highly dependent on foreign aid unless and until it can

develop its substantial natural resources.

Bosnia and Herzegovina

Bosnia and Herzegovina ranked next to The

Former Yugoslav Republic of 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. Industry has been greatly

overstaffed, one reflection of the socialist economic structure of

Yugoslavia. TITO had pushed the development of military industries

in the republic with the result that Bosnia hosted a number of

Yugoslavia's defense plants. The bitter interethnic warfare in

Bosnia caused production to plummet by 80% from 1990 to 1995,

unemployment to soar, and human misery to multiply. 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. GDP remains

far below the 1990 level. Economic data are of limited use because,

although both entities issue figures, national-level statistics are

limited. Moreover, official data do not capture the large share of

black market activity. The marka - the national currency introduced

in 1998 - is now pegged to the euro, and the Central Bank of Bosnia

and Herzegovina has dramatically increased its reserve holdings.

Implementation of privatization, however, has been slow, and local

entities only reluctantly support national-level institutions.

Banking reform accelerated in 2001 as all the Communist-era payments

bureaus were shut down. The country receives substantial amounts of

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 growth

rates since independence in 1966. 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 $9,500 in 2002. 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 nine-tenths of export earnings. Tourism,

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 is 21%, but

unofficial estimates place it closer to 40%. HIV/AIDS infection

rates are the highest in the world and threaten Botswana's

impressive economic gains. Long-term prospects are overshadowed by

the prospects of a leveling off in diamond mining production.

Bouvet Island

no economic activity; declared a nature reserve

Brazil

Possessing large and well-developed agricultural, mining,

manufacturing, and service sectors, Brazil's economy outweighs that

of all other South American countries and is expanding its presence

in world markets. The maintenance of large current account deficits

via capital account surpluses became problematic as investors became

more risk averse to emerging markets as a consequence of the Asian

financial crisis in 1997 and the Russian bond default in August

1998. After crafting a fiscal adjustment program and pledging

progress on structural reform, Brazil received a $41.5 billion

IMF-led international support program in November 1998. In January

1999, the Brazilian Central Bank announced that the real would no

longer be pegged to the US dollar. The consequent devaluation helped

moderate the downturn in economic growth in 1999, and the country

posted moderate GDP growth in 2000. Economic growth slowed

considerably in 2001-03 - to less than 2% - because of a slowdown in

major markets and the hiking of interest rates by the Central Bank

to combat inflationary pressures. New president DA SILVA, who took

office 1 January 2003, has given priority to reforming the complex

tax code, trimming the overblown civil service pension system, and

continuing the fight against inflation.

British Indian Ocean Territory

All economic activity is concentrated

on the largest island of Diego Garcia, where joint UK-US defense

facilities are located. Construction projects and various services

needed to support the military installations are done by military

and contract employees from the UK, Mauritius, the Philippines, and

the US. There are no industrial or agricultural activities on the

islands. When the Ilois return, they plan to reestablish sugarcane

production and fishing.

British Virgin Islands

The economy, one of the most stable and

prosperous in the Caribbean, is highly dependent on tourism,

generating an estimated 45% of the national income. An estimated

350,000 tourists, mainly from the US, visited the islands in 1998.

Tourism suffered in 2002 because of the lackluster US economy. In

the mid-1980s, the government began offering offshore registration

to companies wishing to incorporate in the islands, and

incorporation fees now generate substantial revenues. Roughly

400,000 companies were on the offshore registry by yearend 2000. The

adoption of a comprehensive insurance law in late 1994, which

provides a blanket of confidentiality with regulated statutory

gateways for investigation of criminal offenses, is expected to make

the British Virgin Islands even more attractive to international

business. Livestock raising is the most important agricultural

activity; poor soils limit the islands' ability to meet domestic

food requirements. Because of traditionally close links with the US

Virgin Islands, the British Virgin Islands has used the dollar as

its currency since 1959.

Brunei

This small, wealthy economy encompasses a mixture of foreign

and domestic entrepreneurship, government regulation, welfare

measures, and village tradition. Crude oil and natural gas

production account for nearly half of GDP. Per capita GDP is far

above most other Third World countries, and substantial income from

overseas investment supplements income from domestic production. The

government provides for all medical services and subsidizes rice and

housing. Brunei's leaders are concerned that steadily increased

integration in the world economy will undermine internal social

cohesion, although it became a more prominent player by serving as

chairman for the 2000 APEC (Asian Pacific Economic Cooperation)

forum. Plans for the future include upgrading the labor force,

reducing unemployment, strengthening the banking and tourist

sectors, and, in general, further widening the economic base beyond

oil and gas.

Bulgaria

Bulgaria, a former communist country striving to enter the

European Union, has experienced macroeconomic stability and strong

growth since a major economic downturn in 1996 led to the fall of

the then socialist government. As a result, the government became

committed to economic reform and responsible fiscal planning. A $300

million stand-by agreement negotiated with the IMF at the end of

2001 has supported government efforts to overcome high rates of

poverty and unemployment.

Burkina Faso

One of the poorest countries in the world, landlocked

Burkina Faso has few natural resources, a fragile soil, and a highly

unequal distribution of income. About 90% of the population is

engaged in (mainly subsistence) agriculture, which is vulnerable to

variations in rainfall. Industry remains dominated by unprofitable

government-controlled corporations. Following the African franc

currency devaluation in January 1994 the government updated its

development program in conjunction with international agencies, and

exports and economic growth have increased. Maintenance of

macroeconomic progress depends on continued low inflation, reduction

in the trade deficit, and reforms designed to encourage private

investment. The internal crisis in neighboring Cote d'Ivoire

continues to hurt trade and industrial prospects and deepens the

need for international assistance.

Burma

Burma is a resource-rich country that suffers from abject

rural poverty. The military regime took steps in the early 1990s to

liberalize the economy after decades of failure under the "Burmese

Way to Socialism", but those efforts have since stalled. Burma has

been unable to achieve monetary or fiscal stability, resulting in an

economy that suffers from serious macroeconomic imbalances -

including a steep inflation rate and an official exchange rate that

overvalues the Burmese kyat by more than 100 times the market rate.

In addition, most overseas development assistance ceased after the

junta suppressed the democracy movement in 1988 and subsequently

ignored the results of the 1990 election. Burma is data poor, and

official statistics are often dated and inaccurate. Published

estimates of Burma's foreign trade are greatly understated because

of the size of the black market and border trade - often estimated

to be one to two times the official economy.

Burundi

Burundi is a landlocked, resource-poor country with an

underdeveloped manufacturing sector. The economy is predominantly

agricultural with roughly 90% of the population dependent on

subsistence agriculture. Economic growth depends on coffee and tea

exports, which account for 90% of foreign exchange earnings. The

ability to pay for imports, therefore, rests primarily on weather

conditions and international coffee and tea prices. The Tutsi

minority, 14% of the population, dominates the government and the

coffee trade at the expense of the Hutu majority, 85% of the

population. Since October 1993 an ethnic-based war has resulted in

the death of over 200,000 persons, sent 800,000 refugees into

Tanzania, and displaced 525,000 others internally. Doubts about the

prospects for sustainable peace continue to impede development. Only

one in two children go to school, and approximately one in ten

adults has HIV/AIDS. Food, medicine, and electricity remain in short

supply.

Cambodia

Cambodia's economy slowed dramatically in 1997-1998 due to

the regional economic crisis, civil violence, and political

infighting. Foreign investment and tourism fell off. In 1999, the

first full year of peace in 30 years, progress was made on economic

reforms and growth resumed at 5.0%. Despite severe flooding, GDP

grew at 5.0% in 2000, 6.3% in 2001, and 5.2% in 2002. Tourism was

Cambodia's fastest growing industry, with arrivals up 34% in 2000

and up another 40% in 2001 before the September 11, 2001 terrorist

attacks in the US. Even given these stout growth estimates, the

long-term development of the economy after decades of war remains a

daunting challenge. The population lacks education and productive

skills, particularly in the poverty-ridden countryside, which

suffers from an almost total lack of basic infrastructure. Fear of

renewed political instability and corruption within the government

discourage foreign investment and delay foreign aid. The government

is addressing these issues with assistance from bilateral and

multilateral donors.

Cameroon

Because of its oil resources and favorable agricultural

conditions, Cameroon has one of the best-endowed primary commodity

economies in sub-Saharan Africa. Still, it faces many of the serious

problems facing other underdeveloped countries, such as a top-heavy

civil service and a generally unfavorable climate for business

enterprise. Since 1990, the government has embarked on various IMF

and World Bank programs designed to spur business investment,

increase efficiency in agriculture, improve trade, and recapitalize

the nation's banks. In June 2000, the government completed an

IMF-sponsored, three-year structural adjustment program; however,

the IMF is pressing for more reforms, including increased budget

transparency, privatization, and poverty reduction programs.

International oil and cocoa prices have considerable impact on the

economy.

Canada

As an affluent, high-tech industrial society, Canada today

closely resembles the US in its market-oriented economic system,

pattern of production, and high living standards. Since World War

II, the impressive growth of the manufacturing, mining, and service

sectors has transformed the nation from a largely rural economy into

one primarily industrial and urban. The 1989 US-Canada Free Trade

Agreement (FTA) and the 1994 North American Free Trade Agreement

(NAFTA) (which includes Mexico) touched off a dramatic increase in

trade and economic integration with the US. As a result of the close

cross-border relationship, the economic sluggishness in the United

States in 2001-02 had a negative impact on the Canadian economy.

Real growth averaged nearly 3% during 1993-2000, but declined in

2001, with moderate recovery in 2002. Unemployment is up, with

contraction in the manufacturing and natural resource sectors.

Nevertheless, given its great natural resources, skilled labor

force, and modern capital plant Canada enjoys solid economic

prospects. Two shadows loom, the first being the continuing

constitutional impasse between English- and French-speaking areas,

which has been raising the specter of a split in the federation.

Another long-term concern is the flow south to the US of

professionals lured by higher pay, lower taxes, and the immense

high-tech infrastructure. A key strength in the economy is the

substantial trade surplus.

Cape Verde

This island economy suffers from a poor natural resource

base, including serious water shortages exacerbated by cycles of

long-term drought. The economy is service-oriented, with commerce,

transport, tourism, and public services accounting for 72% of GDP.

Although nearly 70% of the population lives in rural areas, the

share of agriculture in GDP in 2001 was only 11%, of which fishing

accounts for 1.5%. About 82% of food must be imported. The fishing

potential, mostly lobster and tuna, is not fully exploited. Cape

Verde annually runs a high trade deficit, financed by foreign aid

and remittances from emigrants; remittances supplement GDP by more

than 20%. Economic reforms are aimed at developing the private

sector and attracting foreign investment to diversify the economy.

Prospects for 2003 depend heavily on the maintenance of aid flows,

tourism, remittances, and the momentum of the government's

development program.

Cayman Islands

With no direct taxation, the islands are a thriving

offshore financial center. More than 40,000 companies were

registered in the Cayman Islands as of 1998, including almost 600

banks and trust companies; banking assets exceed $500 billion. A

stock exchange was opened in 1997. Tourism is also a mainstay,

accounting for about 70% of GDP and 75% of foreign currency

earnings. The tourist industry is aimed at the luxury market and

caters mainly to visitors from North America. Total tourist arrivals

exceeded 1.2 million in 1997, with 600,000 from the US. About 90% of

the islands' food and consumer goods must be imported. The

Caymanians enjoy one of the highest outputs per capita and one of

the highest standards of living in the world.

Central African Republic

Subsistence agriculture, together with

forestry, remains the backbone of the economy of the Central African

Republic (CAR), with more than 70% of the population living in

outlying areas. The agricultural sector generates half of GDP.

Timber has accounted for about 16% of export earnings and the

diamond industry for 54%. Important constraints to economic

development include the CAR's landlocked position, a poor

transportation system, a largely unskilled work force, and a legacy

of misdirected macroeconomic policies. Factional fighting between

the government and its opponents remains a drag on economic

revitalization, with GDP growth likely to be no more than 1.3% in

2003. Distribution of income is extraordinarily unequal. Grants from

France and the international community can only partially meet

humanitarian needs.

Chad

Chad's primarily agricultural economy will continue to be

boosted by major oilfield and pipeline projects that began in 2000.

Over 80% of Chad's population relies on subsistence farming and

stock raising for its livelihood. Cotton, cattle, and gum arabic

provide the bulk of Chad's export earnings, but Chad will begin to

export oil in 2004. Chad's economy has long been handicapped by its

landlocked position, high energy costs, and a history of

instability. Chad relies on foreign assistance and foreign capital

for most public and private sector investment projects. A consortium

led by two US companies has been investing $3.7 billion to develop

oil reserves estimated at 1 billion barrels in southern Chad. Oil

production is scheduled to come on stream in late 2003.

Chile

Chile has a market-oriented economy characterized by a high

level of foreign trade. During the early 1990s, Chile's reputation

as a role model for economic reform was strengthened when the

democratic government of Patricio AYLWIN - which took over from the

military in 1990 - deepened the economic reform initiated by the

military government. Growth in real GDP averaged 8% during 1991-97,

but fell to half that level in 1998 because of tight monetary

policies implemented to keep the current account deficit in check

and because of lower export earnings - the latter a product of the

global financial crisis. A severe drought exacerbated the recession

in 1999, reducing crop yields and causing hydroelectric shortfalls

and electricity rationing, and Chile experienced negative economic

growth for the first time in more than 15 years. Despite the effects

of the recession, Chile maintained its reputation for strong

financial institutions and sound policy that have given it the

strongest sovereign bond rating in South America. By the end of

1999, exports and economic activity had begun to recover, and growth

rebounded to 4.4% in 2000. Growth fell back to 2.8% in 2001 and 1.8%

in 2002, largely due to lackluster global growth and the devaluation

of the Argentine peso. Unemployment remains stubbornly high, putting

pressure on President LAGOS to improve living standards. One bright

spot was the signing of a free trade agreement with the US, which

will take effect on 1 January 2004.

China

In late 1978 the Chinese leadership began moving the economy

from a sluggish, Soviet-style centrally planned economy to a more

market-oriented system. Whereas the system operates within a

political framework of strict Communist control, the economic

influence of non-state organizations and individual citizens has

been steadily increasing. The authorities switched to a system of

household and village responsibility in agriculture in place of the

old collectivization, increased the authority of local officials and

plant managers in industry, permitted a wide variety of small-scale

enterprises in services and light manufacturing, and opened the

economy to increased foreign trade and investment. The result has

been a quadrupling of GDP since 1978. In 2003, with its 1.3 billion

people but a GDP of just $5,000 per capita, China stood as the

second-largest economy in the world after the US (measured on a

purchasing power parity basis). Agriculture and industry have posted

major gains, especially in coastal areas near Hong Kong and opposite

Taiwan, where foreign investment has helped spur output of both

domestic and export goods. The leadership, however, often has

experienced - as a result of its hybrid system - the worst results

of socialism (bureaucracy and lassitude) and of capitalism (windfall

gains and growing income disparities). China thus has periodically

backtracked, retightening central controls at intervals. The

government has struggled to (a) collect revenues due from provinces,

businesses, and individuals; (b) reduce corruption and other

economic crimes; and (c) keep afloat the large state-owned

enterprises, many of which had been shielded from competition by

subsidies and had been losing the ability to pay full wages and

pensions. From 80 to 120 million surplus rural workers are adrift

between the villages and the cities, many subsisting through

part-time low-paying jobs. Popular resistance, changes in central

policy, and loss of authority by rural cadres have weakened China's

population control program, which is essential to maintaining

long-term growth in living standards. Another long-term threat to

growth is the deterioration in the environment, notably air

pollution, soil erosion, and the steady fall of the water table

especially in the north. China continues to lose arable land because

of erosion and economic development. Beijing says it will intensify

efforts to stimulate growth through spending on infrastructure -

such as water control and power grids - and poverty relief and

through rural tax reform aimed at eliminating arbitrary local levies

on farmers. Accession to the World Trade Organization helps

strengthen China's ability to maintain strong growth rates but at

the same time puts additional pressure on the hybrid system of

strong political controls and growing market influences. China has

benefited from a huge expansion in computer internet use. Foreign

investment remains a strong element in China's remarkable economic

growth.

Christmas Island

Phosphate mining had been the only significant

economic activity, but in December 1987 the Australian Government

closed the mine. In 1991, the mine was reopened. With the support of

the government, a $34 million casino opened in 1993. The casino

closed in 1998. The Australian Government in 2001 agreed to support

the creation of a commercial space-launching site on the island,

slated to begin operation in 2003.

Clipperton Island

Although 115 species of fish have been identified

in the territorial waters of Clipperton Island, the only economic

activity is tuna fishing.

Cocos (Keeling) Islands

Grown throughout the islands, coconuts are

the sole cash crop. Small local gardens and fishing contribute to

the food supply, but additional food and most other necessities must

be imported from Australia. There is a small tourist industry.

Colombia

Colombia's economy suffers from weak domestic and foreign

demand, austere government budgets, and serious internal armed

conflict. Other economic problems facing the new president URIBE

range from reforming the pension system to reducing high

unemployment. Two of Colombia's leading exports, oil and coffee,

face an uncertain future; new exploration is needed to offset

declining oil production, while coffee harvests and prices are

depressed. Colombian business leaders are calling for greater

progress in solving the conflict with insurgent groups. On the

positive side, several international financial institutions have

praised the economic reforms introduced by President URIBE and have

pledged enough funding to cover Colombia's debt servicing costs in

2003.

Comoros

One of the world's poorest countries, Comoros is made up of

three islands that have inadequate transportation links, a young and

rapidly increasing population, and few natural resources. The low

educational level of the labor force contributes to a subsistence

level of economic activity, high unemployment, and a heavy

dependence on foreign grants and technical assistance. Agriculture,

including fishing, hunting, and forestry, contributes 40% to GDP,

employs 80% of the labor force, and provides most of the exports.

The country is not self-sufficient in food production; rice, the

main staple, accounts for the bulk of imports. The government -

which is hampered by internal political disputes - is struggling to

upgrade education and technical training, to privatize commercial

and industrial enterprises, to improve health services, to diversify

exports, to promote tourism, and to reduce the high population

growth rate. Increased foreign support is essential if the goal of

4% annual GDP growth is to be met. Remittances from 150,000 Comorans

abroad help supplement GDP.

Congo, Democratic Republic of the

The economy of the Democratic

Republic of the Congo - a nation endowed with vast potential wealth

- has declined drastically since the mid-1980s. The war, which began

in August 1998, has dramatically reduced national output and

government revenue, has increased external debt, and has resulted in

the deaths from war, famine, and disease of perhaps 3.5 million

people. Foreign businesses have curtailed operations due to

uncertainty about the outcome of the conflict, lack of

infrastructure, and the difficult operating environment. The war has

intensified the impact of such basic problems as an uncertain legal

framework, corruption, inflation, and lack of openness in government

economic policy and financial operations. Conditions improved in

late 2002 with the withdrawal of a large portion of the invading

foreign troops. A number of IMF and World Bank missions have met

with the government to help it develop a coherent economic plan, and

President KABILA has begun implementing reforms. Much economic

activity lies outside the GDP data.

Congo, Republic of the

The economy is a mixture of village

agriculture and handicrafts, an industrial sector based largely on

oil, support services, and a government characterized by budget

problems and overstaffing. Oil has supplanted forestry as the

mainstay of the economy, providing a major share of government

revenues and exports. In the early 1980s, rapidly rising oil

revenues enabled the government to finance large-scale development

projects with GDP growth averaging 5% annually, one of the highest

rates in Africa. The government has mortgaged a substantial portion

of its oil earnings, contributing to a shortage of revenues. The 12

January 1994 devaluation of Franc Zone currencies by 50% resulted in

inflation of 61% in 1994, but inflation has subsided since. Economic

reform efforts continued with the support of international

organizations, notably the World Bank and the IMF. The reform

program came to a halt in June 1997 when civil war erupted. Denis

SASSOU-NGUESSO, who returned to power when the war ended in October

1997, publicly expressed interest in moving forward on economic

reforms and privatization and in renewing cooperation with

international financial institutions. However, economic progress was

badly hurt by slumping oil prices and the resumption of armed

conflict in December 1998, which worsened the republic's budget

deficit. The current administration presides over an uneasy internal

peace and faces difficult economic problems of stimulating recovery

and reducing poverty.

Cook Islands

Like many other South Pacific island nations, the Cook

Islands' economic development is hindered by the isolation of the

country from foreign markets, the limited size of domestic markets,

lack of natural resources, periodic devastation from natural

disasters, and inadequate infrastructure. Agriculture provides the

economic base with major exports made up of copra and citrus fruit.

Manufacturing activities are limited to fruit processing, clothing,

and handicrafts. Trade deficits are offset by remittances from

emigrants and by foreign aid, overwhelmingly from New Zealand. In

the 1980s and 1990s, the country lived beyond its means, maintaining

a bloated public service and accumulating a large foreign debt.

Subsequent reforms, including the sale of state assets, the

strengthening of economic management, the encouragement of tourism,

and a debt restructuring agreement, have rekindled investment and

growth.

Coral Sea Islands

no economic activity

Costa Rica

Costa Rica's basically stable economy depends on tourism,

agriculture, and electronics exports. Poverty has been substantially

reduced over the past 15 years, and a strong social safety net has

been put into place. At the same time, distribution of income

remains severely unequal. Foreign investors remain attracted by the

country's political stability and high education levels, and tourism

continues to bring in foreign exchange. However, traditional export

sectors have not kept pace. Low coffee prices and an overabundance

of bananas have hurt the agricultural sector. The government

continues to grapple with its large deficit and massive internal

debt, with the need to modernize the state-owned electricity and

telecommunications sector, and with the problem of bringing down

inflation.

Cote d'Ivoire

Cote d'Ivoire is among the world's largest producers

and exporters of coffee, cocoa beans, and palm oil. Consequently,

the economy is highly sensitive to fluctuations in international

prices for these products and to weather conditions. Despite

government attempts to diversify the economy, it is still largely

dependent on agriculture and related activities, which engage

roughly 68% of the population. After several years of lagging

performance, the Ivorian economy began a comeback in 1994, due to

the 50% devaluation of the CFA franc and improved prices for cocoa

and coffee, growth in nontraditional primary exports such as

pineapples and rubber, limited trade and banking liberalization,

offshore oil and gas discoveries, and generous external financing

and debt rescheduling by multilateral lenders and France. Moreover,

government adherence to donor-mandated reforms led to a jump in

growth to 5% annually during 1996-99. Growth was negative in 2000-02

because of the difficulty of meeting the conditions of international

donors, continued low prices of key exports, and severe civil war

fighting.

Croatia

Before the dissolution of Yugoslavia, the Republic of

Croatia, after Slovenia, was the most prosperous and industrialized

area, with a per capita output perhaps one-third above the Yugoslav

average. The economy emerged from its mild recession in 2000 with

tourism the main factor, but massive structural unemployment remains

a key negative element. The government's failure to press the

economic reforms needed to spur growth is largely the result of

coalition politics and public resistance, particularly from the

trade unions. Opponents fear reforms would cut jobs, wages, and

social benefits. The government has a heavy backload of civil cases,

many involving tenure land. The country is likely to experience only

moderate growth without disciplined fiscal and structural reform.

Cuba

The government continues to balance the need for economic

loosening against a desire for firm political control. It has

undertaken limited reforms in recent years to increase enterprise

efficiency and alleviate serious shortages of food, consumer goods,

and services but is unlikely to implement extensive changes. A major

feature of the economy is the dichotomy between relatively efficient

export enclaves and inefficient domestic sectors. The average

Cuban's standard of living remains at a lower level than before the

severe economic depression of the early 1990s, which was caused by

the loss of Soviet aid and domestic inefficiencies. High oil import

prices, recessions in key export markets, damage from Hurricanes

Isidore and Lili, and the tourist slump after 11 September 2001

hampered growth in 2002.

Cyprus

The Greek Cypriot economy is prosperous but highly

susceptible to external shocks. Erratic growth rates over the past

decade reflect the economy's vulnerability to swings in tourist

arrivals, caused by political instability in the region and

fluctuations in economic conditions in Western Europe. Economic

policy is focused on meeting the criteria for admission to the EU.

As in the Turkish sector, water shortages are a perennial problem; a

few desalination plants are now online. The Turkish Cypriot economy

has roughly one-third of the per capita GDP of the south. Because it

is recognized only by Turkey, it has had much difficulty arranging

foreign financing and investment. It remains heavily dependent on

agriculture and government service, which together employ about half

of the work force. To compensate for the economy's weakness, Turkey

provides grants and loans to support economic development. Ankara

provided $200 million in 2002 and pledged $450 million for the

2003-05 period. Future events throughout the island will be highly

influenced by the outcome of negotiations on the UN-sponsored

agreement to unite the Greek and Turkish areas and by the

arrangements under which the island joins the EU.

Czech Republic

One of the most stable and prosperous of the

post-Communist states, the Czech Republic has been recovering from

recession since mid-1999. Growth in 2000-03 was supported by exports

to the EU, primarily to Germany, and a near doubling of foreign

direct investment. Domestic demand is playing an ever more important

role in underpinning growth as interest rates drop and the

availability of credit cards and mortgages increases. High current

account deficits - averaging around 5% of GDP in the last several

years - could be a persistent problem. Inflation is under control.

The EU put the Czech Republic just behind Poland and Hungary in

preparations for accession, which will give further impetus and

direction to structural reform. Moves to complete banking,

telecommunications, and energy privatization will encourage

additional foreign investment, while intensified restructuring among

large enterprises and banks and improvements in the financial sector

should strengthen output growth. But revival in the European

economies remains essential to stepped-up growth.

Denmark

This thoroughly modern market economy features high-tech

agriculture, up-to-date small-scale and corporate industry,

extensive government welfare measures, comfortable living standards,

a stable currency, and high dependence on foreign trade. Denmark is

a net exporter of food and energy and enjoys a comfortable balance

of payments surplus. Government objectives include streamlining the

bureaucracy and further privatization of state assets. The

government has been successful in meeting, and even exceeding, the

economic convergence criteria for participating in the third phase

(a common European currency) of the European Economic and Monetary

Union (EMU), but Denmark has decided not to join the 12 other EU

members in the euro; even so, the Danish Krone remains pegged to the

euro. Given the sluggish state of the European economy, growth in

2003 was a mere 1.1%.

Djibouti

The economy is based on service activities connected with

the country's strategic location and status as a free trade zone in

northeast Africa. Two-thirds of the inhabitants live in the capital

city, the remainder being mostly nomadic herders. Scanty rainfall

limits crop production to fruits and vegetables, and most food must

be imported. Djibouti provides services as both a transit port for

the region and an international transshipment and refueling center.

It has few natural resources and little industry. The nation is,

therefore, heavily dependent on foreign assistance to help support

its balance of payments and to finance development projects. An

unemployment rate of 50% continues to be a major problem. Inflation

is not a concern, however, because of the fixed tie of the franc to

the US dollar. Per capita consumption dropped an estimated 35% over

the last seven years because of recession, civil war, and a high

population growth rate (including immigrants and refugees). Faced

with a multitude of economic difficulties, the government has fallen

in arrears on long-term external debt and has been struggling to

meet the stipulations of foreign aid donors. Another factor limiting

growth is the negative impact on port activity now that Ethiopia has

more trade route options.

Dominica

The Dominican economy depends on agriculture, primarily

bananas, and remains highly vulnerable to climatic conditions and

international economic developments. Hurricane Luis devastated the

country's banana crop in 1995 after tropical storms wiped out a

quarter of the 1994 crop. The economy subsequently has been fueled

by increases in construction, soap production, and tourist arrivals.

Development of the tourism industry remains difficult however,

because of the rugged coastline, lack of beaches, and the absence of

an international airport. Economic growth is sluggish, and

unemployment is greater than 20%. The government has been attempting

to develop an offshore financial sector in order to diversify the

island's production base.

Dominican Republic

The Dominican Republic's economy experienced

dramatic growth over the last decade, even though the economy was

hit hard by Hurricane Georges in 1998. Although the country has long

been viewed primarily as an exporter of sugar, coffee, and tobacco,

in recent years the service sector has overtaken agriculture as the

economy's largest employer, due to growth in tourism and free trade

zones. The country suffers from marked income inequality; the

poorest half of the population receives less than one-fifth of GNP,

while the richest 10% enjoy nearly 40% of national income. Growth

probably will slow in 2003 with reduced tourism and expected low

growth in the US economy, the source of 87% of export revenues.

East Timor

In late 1999, about 70% of the economic infrastructure of

East Timor was laid waste by Indonesian troops and anti-independence

militias, and 260,000 people fled westward. Over the next three

years, however, a massive international program, manned by 5,000

peacekeepers (8,000 at peak) and 1,300 police officers, led to

substantial reconstruction in both urban and rural areas. By

mid-2002, all but about 50,000 of the refugees had returned. The

country faces great challenges in continuing the rebuilding of

infrastructure and the strengthening of the infant civil

administration. One promising long-term project is the planned

development of oil resources in nearby waters.

Ecuador

Ecuador has substantial oil resources and rich agricultural

areas. Because the country exports primary products such as oil,

bananas, and shrimp, fluctuations in world market prices can have a

substantial domestic impact. Ecuador joined the World Trade

Organization (WTrO) in 1996, but has failed to comply with many of

its accession commitments. The aftermath of El Nino and depressed

oil market of 1997-98 drove Ecuador's economy into a free-fall in

1999. The beginning of 1999 saw the banking sector collapse, which

helped precipitate an unprecedented default on external loans later

that year. Continued economic instability drove a 70% depreciation

of the currency throughout 1999, which forced a desperate government

to "dollarize" the currency regime in 2000. The move stabilized the

currency, but did not stave off the ouster of the government.

Gustavo NOBOA, who assumed the presidency in January 2000, has

managed to pass substantial economic reforms and mend relations with

international financial institutions. Ecuador completed its first

standby agreement since 1986 when the IMF Board approved a 10

December 2001 disbursement of $96 million, the final installment of

a $300 million standby credit agreement. In February 2003, newly

installed president Lucio GUTIERREZ faced a budget gap and massive

foreign debt. He has pledged to use oil revenues to pay off debt and

is seeking additional IMF support.

Egypt

Egypt improved its macroeconomic performance throughout most

of the last decade by following IMF advice on fiscal, monetary, and

structural reform policies. As a result, Egypt managed to tame

inflation, slash budget deficits, and attract more foreign

investment. In the past four years, however, the pace of reform has

slackened, and excessive spending on national infrastructure

projects has widened budget deficits again. Lower foreign exchange

earnings since 1998 resulted in pressure on the Egyptian pound and

periodic dollar shortages. Monetary pressures have increased since

11 September 2001 because of declines in tourism and Suez Canal

tolls, and Egypt has devalued the pound several times in the past

year. The development of a gas export market is a major bright spot

for future growth prospects. In the short term, regional tensions

will continue to affect tourism and hold back prospects for economic

expansion.

El Salvador

In recent years, this Central American economy has been

suffering from a weak tax collection system, factory closings, the

aftermaths of Hurricane Mitch of 1998 and the devastating

earthquakes of early 2001, and weak world coffee prices. On the

bright side, inflation has fallen to single digit levels, and total

exports have grown substantially. The trade deficit has been offset

by annual remittances of almost $2 billion from Salvadorans living

abroad and by external aid. The US dollar is now the legal tender.

Because competitor countries have fluctuating exchange rates, El

Salvador must face the challenge of raising productivity and

lowering costs.

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 unsuccessfully trying

to agree on a "shadow" fiscal management program with the World Bank

and IMF. Businesses, for the most part, are owned by government

officials and their family members. Undeveloped natural resources

include titanium, iron ore, manganese, uranium, and alluvial gold.

Growth will remain strong in 2003, led by oil.

Eritrea

Since independence from Ethiopia on 24 May 1993, Eritrea has

faced the economic problems of a small, desperately poor country.

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 -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. Erratic rainfall and the delayed demobilization

of agriculturalists from the military kept cereal production well

below normal, holding down growth in 2002. Eritrea's economic future

depends upon its ability to master social problems such as

illiteracy, unemployment, and low skills, and to open its economy to

private enterprise so the diaspora's money and expertise can foster

economic growth.

Estonia

Estonia, as a new member of the World Trade Organization, is

steadily moving toward a modern market economy with increasing ties

to the West, including the pegging of its currency to the euro. The

economy benefits from strong electronics and telecoms sectors. A

major goal is accession to the EU, possibly by 2004. The economy is

greatly influenced by developments in Finland, Sweden, and Germany,

three major trading partners. The high current account deficit

remains a concern.

Ethiopia

Ethiopia's poverty-stricken economy is based on

agriculture, which accounts for half of GDP, 85% 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 $270 million in 2000/01, but

historically low prices have seen many farmers switching to qat to

supplement their income. The war with Eritrea in 1999-2000 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. Under

Ethiopia's land tenure system, the government 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. Strong growth in 2002 resulted

from good rainfall early in the year, the cessation of hostilities,

and renewed foreign aid and debt relief. But drought struck again

late in 2002, and the World Food Program (WFP) estimates 14 million

Ethiopians need food immediately to survive into 2003. The

government estimates than annual growth of 7% is needed to reduce

poverty, yet the maintenance of 5% in 2003 will be quite difficult

(one estimate is for 1.5% growth).

Europa Island

no economic activity

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 Falklands

exclusive fishing zone. These license fees total more than $40

million per year, which goes to 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 has had a strong performance since

1994, mostly as a result of increasing fish landings and high and

stable export prices. Unemployment is falling and there are signs of

labor shortages in several sectors. The positive economic

development has helped the Faroese Home Rule Government produce

increasing budget surpluses, which in turn help to reduce the large

public debt, most of it owed to Denmark. However, the total

dependence on fishing makes the Faroese economy extremely

vulnerable, and the present fishing efforts appear in excess of what

is a sustainable level of fishing in the long term. Oil finds close

to the Faroese area give hope for deposits in the immediate Faroese

area, which may eventually lay the basis for a more diversified

economy and thus lessen dependence on Danish economic assistance.

Aided by a substantial annual subsidy (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 and a growing tourist

industry - with 300,000 to 400,000 tourists annually - are the major

sources of foreign exchange. Sugar processing makes up one-third of

industrial activity. Long-term problems include low investment,

uncertain land ownership rights, and the government's ability to

manage its budget.

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, with exports equaling

almost one-third of GDP. 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. Rapidly increasing

integration with Western Europe - Finland was one of the 11

countries joining the European Economic and Monetary Union (EMU) on

1 January 1999 - will dominate the economic picture over the next

several years. Growth in 2003 was held back by the global slowdown

but will pick up in 2004 provided the world economy suffers no

further blows.

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

Socialist-led government has partially or fully privatized many

large companies, banks, and insurers, but still retains controlling

stakes in several leading firms, including Air France, France

Telecom, Renault, and Thales, and remains dominant 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. The current government has lowered

income taxes and introduced measures to boost employment. At the end

of 2002 the government was focusing on the problems of the high cost

of labor and labor market inflexibility resulting from the 35-hour

workweek and restrictions on lay-offs. The government was also

pushing for pension reforms and simplification of administrative

procedures. The tax burden remains one of the highest in Europe. The

current economic slowdown and inflexible budget items have pushed

the deficit above the EU's 3% debt limit. Business investment

remains listless because of low rates of capital utilization, high

debt, and the steep cost of capital.

French Guiana

The economy is tied closely to the larger French

economy through subsidies and imports. Besides the French space

center at Kourou (which accounts for 25% of GDP), fishing and

forestry are the most important economic activities. Forest and

woodland cover 90% of the country. The large reserves of tropical

hardwoods, not fully exploited, support an expanding sawmill

industry that provides sawn logs for export. Cultivation of crops is

limited to the coastal area, where the population is largely

concentrated; rice and manioc are the major crops. French Guiana is

heavily dependent on imports of food and energy. Unemployment is a

serious problem, particularly among younger workers.

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 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

nations of sub-Saharan Africa. This has supported a sharp decline in

extreme poverty; yet 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. Devaluation of its Francophone currency by 50%

on 12 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 mandate

progress in privatization and fiscal discipline. France provided

additional financial support in January 1997 after Gabon had 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

in 1999-2000 helped growth, but drops in production hampered Gabon

from fully realizing potential gains. 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. 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 important mineral or other natural

resources 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 government's 1998 seizure of the private peanut firm

Alimenta eliminated the largest purchaser of Gambian groundnuts; the

following two marketing seasons have seen substantially lower prices

and sales. A decline in tourism in 2000 has also held back growth.

Unemployment and underemployment rates are extremely high. Shortrun

economic progress remains highly dependent on sustained bilateral

and multilateral aid, on responsible government economic management

as forwarded by IMF technical help and advice, and on expected

growth in the construction sector.