Economic output in the Gaza Strip - under the
responsibility of the Palestinian Authority since the Cairo
Agreement of May 1994 - declined by about one-third between 1992 and
1996. The downturn was largely the result of Israeli closure
policies - the imposition of generalized border closures in response
to security incidents in Israel - which disrupted previously
established labor and commodity market relationships between Israel
and the WBGS (West Bank and Gaza Strip). The most serious negative
social effect of this downturn was the emergence of high
unemployment; unemployment in the WBGS during the 1980s was
generally under 5%; by 1995 it had risen to over 20%. Israel's use
of comprehensive closures decreased during the next few years and,
in 1998, Israel implemented new policies to reduce the impact of
closures and other security procedures on the movement of
Palestinian goods and labor. These changes fueled an almost
three-year-long economic recovery in the West Bank and Gaza Strip;
real GDP grew by 5% in 1998 and 6% in 1999. Recovery was upended in
the last quarter of 2000 with the outbreak of violence, triggering
tight Israeli closures of Palestinian self-rule areas and a severe
disruption of trade and labor movements. In 2001, and even more
severely in 2002, Israeli military measures in Palestinian Authority
areas resulted in the destruction of capital plant and
administrative structure, widespread business closures, and a sharp
drop in GDP. Another major loss has been the decline in income
earned by Palestinian workers in Israel. International aid of $2
billion in 2001-02 to the Gaza Strip and West Bank have prevented
the complete collapse of the economy.
Georgia
Georgia's main economic activities include the cultivation
of agricultural products such as citrus fruits, tea, hazelnuts, and
grapes; mining of manganese and copper; and output of a small
industrial sector producing alcoholic and nonalcoholic beverages,
metals, machinery, and chemicals. The country imports the bulk of
its energy needs, including natural gas and oil products. Its only
sizable internal energy resource is hydropower. Despite the severe
damage the economy has suffered due to civil strife, Georgia, with
the help of the IMF and World Bank, has made substantial economic
gains since 1995, achieving positive GDP growth and curtailing
inflation. However, the Georgian Government suffers from limited
resources due to a chronic failure to collect tax revenues. Georgia
also suffers from energy shortages; it privatized the T'bilisi
distribution network in 1998, but collection rates are low, making
the venture unprofitable. The country is pinning its hopes for
long-term growth on its role as a transit state for pipelines and
trade. The start of construction on the Baku-T'bilisi-Ceyhan oil
pipeline and the Baku-T'bilisi-Erzerum gas pipeline will bring
much-needed investment and job opportunities.
Germany
Germany's affluent and technologically powerful economy has
turned in a weak performance throughout much of the 1990s and early
2000s. The modernization and integration of the eastern German
economy continues to be a costly long-term problem, with annual
transfers from west to east amounting to roughly $70 billion.
Germany's ageing population, combined with high unemployment, has
pushed social security outlays to a level exceeding contributions
from workers. Structural rigidities in the labor market - including
strict regulations on laying off workers and the setting of wages on
a national basis - have made unemployment a chronic problem. Growth
in 2002 and 2003 fell short of 1%. Corporate restructuring and
growing capital markets are setting the foundations that could allow
Germany to meet the long-term challenges of European economic
integration and globalization, particularly if labor market
rigidities are further addressed. In the short run, however, the
fall in government revenues and the rise in expenditures have raised
the deficit above the EU's 3% debt limit.
Ghana
Well endowed with natural resources, Ghana has roughly twice
the per capita output of the poorer countries in West Africa. Even
so, Ghana remains heavily dependent on international financial and
technical assistance. Gold, timber, and cocoa production are major
sources of foreign exchange. The domestic economy continues to
revolve around subsistence agriculture, which accounts for 36% of
GDP and employs 60% of the work force, mainly small landholders.
Ghana opted for debt relief under the Heavily Indebted Poor Country
(HIPC) program in 2002. Policy priorities include tighter monetary
and fiscal policies, accelerated privatization, and improvement of
social services.
Gibraltar
Gibraltar benefits from an extensive shipping trade,
offshore banking, and its position as an international conference
center. The British military presence has been sharply reduced and
now contributes about 7% to the local economy, compared with 60% in
1984. The financial sector, tourism (almost 5 million visitors in
1998), shipping services fees, and duties on consumer goods also
generate revenue. The financial sector, the shipping sector, and
tourism each contribute 25%-30% of GDP. Telecommunications accounts
for another 10%. In recent years, Gibraltar has seen major
structural change from a public to a private sector economy, but
changes in government spending still have a major impact on the
level of employment.
Glorioso Islands
no economic activity
Greece
Greece has a mixed capitalist economy with the public sector
accounting for half of GDP and with per capita GDP 70% of the
leading euro-zone economies. Tourism provides 15% of GDP. Immigrants
make up nearly one-fifth of the work force, mainly in menial jobs.
Greece is a major beneficiary of EU aid, equal to about 3.3% of GDP.
The economy has improved steadily with economic growth averaging 4%
since 1997, exceeding EU growth by more than 1 percentage point.
Remaining challenges include the reduction of the public debt,
inflation, and unemployment; and further restructuring of the
economy, including privatizing several state enterprises,
undertaking pension and other reforms, and minimizing bureaucratic
inefficiencies. The Olympic Games will be held in Athens in mid-2004.
Greenland
The economy remains critically dependent on exports of
fish and substantial support from the Danish Government, which
supplies about half of government revenues. The public sector,
including publicly owned enterprises and the municipalities, plays
the dominant role in the economy. Despite several interesting
hydrocarbon and minerals exploration activities, it will take
several years before production can materialize. Tourism is the only
sector offering any near-term potential, and even this is limited
due to a short season and high costs.
Grenada
Grenada relies on tourism as its main source of foreign
exchange, especially since the construction of an international
airport in 1985. Strong performances in construction and
manufacturing, together with the development of an offshore
financial industry, have also contributed to growth in national
output.
Guadeloupe
The Caribbean economy depends on agriculture, tourism,
light industry, and services. It also depends on France for large
subsidies and imports. Tourism is a key industry, with most tourists
from the US; an increasingly large number of cruise ships visit the
islands. The traditional sugarcane crop is slowly being replaced by
other crops, such as bananas (which now supply about 50% of export
earnings), eggplant, and flowers. Other vegetables and root crops
are cultivated for local consumption, although Guadeloupe is still
dependent on imported food, mainly from France. Light industry
features sugar and rum production. Most manufactured goods and fuel
are imported. Unemployment is especially high among the young.
Hurricanes periodically devastate the economy.
Guam
The economy depends on US military spending, tourism, and the
export of fish and handicrafts. Total US grants, wage payments, and
procurement outlays amounted to $1 billion in 1998. Over the past 20
years, the tourist industry has grown rapidly, creating a
construction boom for new hotels and the expansion of older ones.
More than 1 million tourists visit Guam each year. The industry has
recently suffered setbacks because of the continuing Japanese
slowdown; the Japanese normally make up almost 90% of the tourists.
Most food and industrial goods are imported. Guam faces the problem
of building up the civilian economic sector to offset the impact of
military downsizing.
Guatemala
The agricultural sector accounts for about one-fourth of
GDP, two-thirds of exports, and half of the labor force. Coffee,
sugar, and bananas are the main products. Former President ARZU
(1996-2000) worked to implement a program of economic liberalization
and political modernization. President PORTILLO has continued the
liberalization program but with more sporadic results. The 1996
signing of the peace accords, which ended 36 years of civil war,
removed a major obstacle to foreign investment, but numerous
corruption scandals associated with the PORTILLO administration have
dampened investor confidence. The distribution of income remains
highly unequal, with perhaps 75% of the population below the poverty
line. Ongoing challenges include increasing the government revenues,
negotiating further assistance from international donors, upgrading
both government and private financial operations, and narrowing the
trade deficit. A free trade agreement between the US and Central
American countries promises greater access to US and neighboring
markets.
Guernsey
Financial services - banking, fund management, insurance,
etc. - account for about 55% of total income in this tiny Channel
Island economy. Tourism, manufacturing, and horticulture, mainly
tomatoes and cut flowers, have been declining. Light tax and death
duties make Guernsey a popular tax haven. The evolving economic
integration of the EU nations is changing the rules of the game
under which Guernsey operates.
Guinea
Guinea possesses major mineral, hydropower, and agricultural
resources, yet remains an underdeveloped nation. The country
possesses over 30% of the world's bauxite reserves and is the
second-largest bauxite producer. The mining sector accounted for
about 75% of exports in 1999. Long-run improvements in government
fiscal arrangements, literacy, and the legal framework are needed if
the country is to move out of poverty. The government made
encouraging progress in budget management in 1997-99, and reform
progress was praised in the World Bank/IMF October 2000 assessment.
However, fighting along the Sierra Leonean and Liberian borders has
caused major economic disruptions. In addition to direct defense
costs, the violence has led to a sharp decline in investor
confidence. Foreign mining companies have reduced expatriate staff,
while panic buying has created food shortages and inflation in local
markets. Multilateral aid - including Heavily Indebted Poor
Countries (HIPC) debt relief - and single digit inflation permitted
moderate 3.7% growth in 2002. Growth should strengthen in 2003
because of a slowly improving security situation and increased
investor confidence.
Guinea-Bissau
One of the 10 poorest countries in the world,
Guinea-Bissau depends mainly on farming and fishing. Cashew crops
have increased remarkably in recent years, and the country now ranks
sixth in cashew production. Guinea-Bissau exports fish and seafood
along with small amounts of peanuts, palm kernels, and timber. Rice
is the major crop and staple food. However, intermittent fighting
between Senegalese-backed government troops and a military junta
destroyed much of the country's infrastructure and caused widespread
damage to the economy in 1998; the civil war led to a 28% drop in
GDP that year, with partial recovery in 1999-2002. Before the war,
trade reform and price liberalization were the most successful part
of the country's structural adjustment program under IMF
sponsorship. The tightening of monetary policy and the development
of the private sector had also begun to reinvigorate the economy.
Because of high costs, the development of petroleum, phosphate, and
other mineral resources is not a near-term prospect. However,
unexploited offshore oil reserves could provide much-needed revenue
in the long run. The inequality of income distribution is one of the
most extreme in the world. The government and international donors
continue to work out plans to forward economic development from a
lamentably low base. Government drift and indecision, however, have
resulted in low growth in 2002 and dim prospects for 2003.
Guyana
The Guyanese economy has exhibited moderate economic growth
in 2001-02, based on expansion in the agricultural and mining
sectors, a more favorable atmosphere for business initiatives, a
more realistic exchange rate, fairly low inflation, and the
continued support of international organizations. Chronic problems
include a shortage of skilled labor and a deficient infrastructure.
The government is juggling a sizable external debt against the
urgent need for expanded public investment. The bauxite mining
sector should benefit in the near term by restructuring and partial
privatization.
Haiti
About 80% of the population lives in abject poverty. Nearly
70% of all Haitians depend on the agriculture sector, which consists
mainly of small-scale subsistence farming and employs about
two-thirds of the economically active work force. Following
legislative elections in May 2000, fraught with irregularities,
international donors - including the US and EU - suspended almost
all aid to Haiti. The economy shrank an estimated 1.2% in 2001 and
an estimated 0.9% in 2002. The contraction will likely intensify in
2003 unless a political agreement with donors is reached on economic
policy. Suspended aid and loan disbursements totaled more than $500
million at the start of 2003.
Heard Island and McDonald Islands
No indigenous economic activity,
but the Australian Government allows limited fishing around the
islands.
Holy See (Vatican City)
This unique, noncommercial economy is
supported financially by an annual tax on Roman Catholic dioceses
throughout the world, as well as by special collections (known as
Peter's Pence); the sale of postage stamps, coins, medals, and
tourist mementos; fees for admission to museums; and the sale of
publications. Investments and real estate income also account for a
sizable portion of revenue. The incomes and living standards of lay
workers are comparable to those of counterparts who work in the city
of Rome.
Honduras
Honduras, one of the poorest countries in the Western
Hemisphere with an extraordinarily unequal distribution of income,
is banking on expanded trade privileges under the Enhanced Caribbean
Basin Initiative and on debt relief under the Heavily Indebted Poor
Countries (HIPC) initiative. While the country has met most of its
macroeconomic targets, it failed to meet the IMF's goals to
liberalize its energy and telecommunications sectors. Growth remains
dependent on the status of the US economy, its major trading
partner, on commodity prices, particularly coffee, and on reduction
of the high crime rate.
Hong Kong
Hong Kong has a free market economy highly dependent on
international trade. Natural resources are limited, and food and raw
materials must be imported. Imports and exports, including
reexports, each exceed GDP in dollar value. Even before Hong Kong
reverted to Chinese administration on 1 July 1997 it had extensive
trade and investment ties with China. Hong Kong has been further
integrating its economy with China because China's growing openness
to the world economy has increased competitive pressure on Hong
Kong's service industries, and Hong Kong's re-export business from
China is a major driver of growth. Per capita GDP compares with the
level in the four big economies of Western Europe. GDP growth
averaged a strong 5% in 1989-1997, but Hong Kong suffered two
recessions in the past 6 years because of the Asian financial crisis
in 1998 and the global downturn of 2001-2002. The Severe Acute
Respiratory Syndrome (SARS) outbreak has also battered Hong Kong's
economy but the resumption of strong growth began in 2003.
Howland Island
no economic activity
Hungary
Hungary has made the transition from a centrally planned to
a market economy, with a per capita income one-half that of the Big
Four European nations. Hungary continues to demonstrate strong
economic growth and to work toward accession to the European Union
in May 2004. The private sector accounts for over 80% of GDP.
Foreign ownership of and investment in Hungarian firms are
widespread, with cumulative foreign direct investment totaling more
than $23 billion since 1989. Hungarian sovereign debt was upgraded
in 2000 to the second-highest rating among all the Central European
transition economies. Inflation has declined substantially, from 14%
in 1998 to 4.7% in 2003; unemployment has persisted around the 6%
level. Germany is by far Hungary's largest economic partner.
Short-term issues include the reduction of the public sector deficit
to 3% in 2004 and avoiding unjustified increases in wages.
Iceland
Iceland's Scandinavian-type economy is basically
capitalistic, yet with an extensive welfare system (including
generous housing subsidies), low unemployment, and remarkably even
distribution of income. In the absence of other natural resources
(except for abundant hydrothermal and geothermal power), the economy
depends heavily on the fishing industry, which provides 70% of
export earnings and employs 12% of the work force. The economy
remains sensitive to declining fish stocks as well as to
fluctuations in world prices for its main exports: fish and fish
products, aluminum, and ferrosilicon. Government policies include
reducing the budget and current account deficits, limiting foreign
borrowing, containing inflation, revising agricultural and fishing
policies, diversifying the economy, and privatizing state-owned
industries. The government remains opposed to EU membership,
primarily because of Icelanders' concern about losing control over
their fishing resources. Iceland's economy has been diversifying
into manufacturing and service industries in the last decade, and
new developments in software production, biotechnology, and
financial services are taking place. The tourism sector is also
expanding, with the recent trends in ecotourism and whale watching.
Growth had been remarkably steady in 1996-2001 at 3%-5%, but could
not be sustained in 2002 in an environment of global recession.
Growth resumed in 2003, and inflation dropped back from 5% to 2%.
India
India's economy encompasses traditional village farming,
modern agriculture, handicrafts, a wide range of modern industries,
and a multitude of support services. Overpopulation severely
handicaps the economy and about a quarter of the population is too
poor to be able to afford an adequate diet. Government controls have
been reduced on imports and foreign investment, and privatization of
domestic output has proceeded slowly. The economy has posted an
excellent average growth rate of 6% since 1990, reducing poverty by
about 10 percentage points. India has large numbers of well-educated
people skilled in the English language; India is a major exporter of
software services and software workers; the information technology
sector leads the strong growth pattern. The World Bank and others
worry about the continuing public-sector budget deficit, running at
approximately 10% of GDP in 1997-2002. In 2003 the state-owned
Indian Bank substantially reduced non-performing loans, attracted
new customers, and turned a profit. Deep-rooted problems remain,
notably conflicts among political and cultural groups.
Indian Ocean
The Indian Ocean provides major sea routes connecting
the Middle East, Africa, and East Asia with Europe and the Americas.
It carries a particularly heavy traffic of petroleum and petroleum
products from the oilfields of the Persian Gulf and Indonesia. Its
fish are of great and growing importance to the bordering countries
for domestic consumption and export. Fishing fleets from Russia,
Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainly
for shrimp and tuna. Large reserves of hydrocarbons are being tapped
in the offshore areas of Saudi Arabia, Iran, India, and western
Australia. An estimated 40% of the world's offshore oil production
comes from the Indian Ocean. Beach sands rich in heavy minerals and
offshore placer deposits are actively exploited by bordering
countries, particularly India, South Africa, Indonesia, Sri Lanka,
and Thailand.
Indonesia
Indonesia, a vast polyglot nation, faces severe economic
development problems stemming from secessionist movements and the
low level of security in the regions; the lack of reliable legal
recourse in contract disputes; corruption; weaknesses in the banking
system; and strained relations with the IMF. Investor confidence
will remain low and few new jobs will be created under these
circumstances. In November 2001, Indonesia agreed with the IMF on a
series of economic reforms in 2002, thus enabling further IMF
disbursements. Negotiations with the IMF and bilateral donors
continued in 2002. Keys to future growth remain internal reform, the
build-up of the confidence of international donors and investors,
and a strong comeback in the global economy.
Iran
Iran's economy is a mixture of central planning, state
ownership of oil and other large enterprises, village agriculture,
and small-scale private trading and service ventures. President
KHATAMI has continued to follow the market reform plans of former
President RAFSANJANI and has indicated that he will pursue
diversification of Iran's oil-reliant economy although he has made
little progress toward that goal. Relatively high oil prices in
recent years have enabled Iran to amass some $15 billion in foreign
exchange reserves, but have not solved Iran's structural economic
problems, including high unemployment and inflation.
Iraq
Iraq's economy is dominated by the oil sector, which has
traditionally provided about 95% of foreign exchange earnings. In
the 1980s financial problems caused by massive expenditures in the
eight-year war with Iran and damage to oil export facilities by Iran
led the government to implement austerity measures, borrow heavily,
and later reschedule foreign debt payments; Iraq suffered economic
losses from the war of at least $100 billion. After hostilities
ended in 1988, oil exports gradually increased with the construction
of new pipelines and restoration of damaged facilities. Iraq's
seizure of Kuwait in August 1990, subsequent international economic
sanctions, and damage from military action by an international
coalition beginning in January 1991 drastically reduced economic
activity. Although government policies supporting large military and
internal security forces and allocating resources to key supporters
of the regime have hurt the economy, implementation of the UN's
oil-for-food program beginning in December 1996 helped improve
conditions for the average Iraqi citizen. Iraq was allowed to export
limited amounts of oil in exchange for food, medicine, and some
infrastructure spare parts. In December 1999 the UN Security Council
authorized Iraq to export under the program as much oil as required
to meet humanitarian needs. Oil exports have recently been more than
three-quarters prewar level. However, 28% of Iraq's export revenues
under the program have been deducted to meet UN Compensation Fund
and UN administrative expenses. The drop in GDP in 2001-02 was
largely the result of the global economic slowdown and lower oil
prices. Per capita food imports increased significantly, while
medical supplies and health care services steadily improved. Per
capita output and living standards were still well below the prewar
level, but any estimates have a wide range of error. The military
victory of the US-led coalition in March-April 2003 resulted in the
shutdown of much of the central economic administrative structure
and the loss of a comparatively small amount of capital plant.
Ireland
Ireland is a small, modern, trade-dependent economy with
growth averaging a robust 8% in 1995-2002. The global slowdown,
especially in the information technology sector, pressed growth down
to 2.7% in 2003. Agriculture, once the most important sector, is now
dwarfed by industry and services. Industry accounts for 46% of GDP
and about 80% of exports and employs 28% of the labor force.
Although exports remain the primary engine for Ireland's growth, the
economy has also benefited from a rise in consumer spending,
construction, and business investment. Per capita GDP is 10% above
that of the four big European economies. Over the past decade, the
Irish Government has implemented a series of national economic
programs designed to curb inflation, reduce government spending,
increase labor force skills, and promote foreign investment. Ireland
joined in launching the euro currency system in January 1999 along
with 10 other EU nations.
Israel
Israel has a technologically advanced market economy with
substantial government participation. It depends on imports of crude
oil, grains, raw materials, and military equipment. Despite limited
natural resources, Israel has intensively developed its agricultural
and industrial sectors over the past 20 years. Israel imports
significant quantities of grain but is largely self-sufficient in
other agricultural products. Cut diamonds, high-technology
equipment, and agricultural products (fruits and vegetables) are the
leading exports. Israel usually posts sizable current account
deficits, which are covered by large transfer payments from abroad
and by foreign loans. Roughly half of the government's external debt
is owed to the US, which is its major source of economic and
military aid. The influx of Jewish immigrants from the former USSR
during the period 1989-99, coupled with the opening of new markets
at the end of the Cold War, energized Israel's economy, which grew
rapidly in the early 1990s; growth began moderating in 1996 when the
government imposed tighter fiscal and monetary policies and the
immigration bonus petered out. Growth was a strong 7.2% in 2000, but
the bitter Israeli-Palestinian conflict, difficulties in the
high-technology, construction, and tourist sectors, and fiscal
austerity in the face of growing inflation led to small declines in
GDP in 2001 and 2002.
Italy
Italy has a diversified industrial economy with roughly the
same total and per capita output as France and the UK. This
capitalistic economy remains divided into a developed industrial
north, dominated by private companies, and a less developed,
welfare-dependent agricultural south, with 20% unemployment. Most
raw materials needed by industry and more than 75% of energy
requirements are imported. Over the past decade, Italy has pursued a
tight fiscal policy in order to meet the requirements of the
Economic and Monetary Unions and has benefited from lower interest
and inflation rates. The current government has enacted numerous
short-term reforms aimed at improving competitiveness and long-term
growth. Italy has moved slowly, however, on implementing needed
structural reforms, such as lightening the high tax burden and
overhauling Italy's rigid labor market and over-generous pension
system, because of the current economic slowdown and opposition from
labor unions.
Jamaica
The economy, which depends heavily on tourism and bauxite,
has been stagnant since 1995. After five years of recession, the
economy inched ahead, by 0.8% in 2000, 1.7% in 2001, and 0.8% in
2002; the global economic slowdown, particularly in the United
States after the 11 September 2001 terrorist attacks, has stunted
the economic recovery. Serious problems include: high interest
rates; increased foreign competition; a pressured, sometimes
sliding, exchange rate; a widening merchandise trade deficit; and a
growing internal debt, the result of government bailouts to various
ailing sectors of the economy, particularly the financial sector.
Depressed economic conditions have led to increased civil unrest,
including serious violent crime. Jamaica's medium-term prospects
will depend upon encouraging investment and tourism, maintaining a
competitive exchange rate, selling off reacquired firms, and
implementing proper fiscal and monetary policies.
Jan Mayen
Jan Mayen is a volcanic island with no exploitable natural
resources. Economic activity is limited to providing services for
employees of Norway's radio and meteorological stations located on
the island.
Japan
Government-industry cooperation, a strong work ethic, mastery
of high technology, and a comparatively small defense allocation (1%
of GDP) helped Japan advance with extraordinary rapidity to the rank
of second-most-technologically-powerful economy in the world after
the US and third-largest economy after the US and China. One notable
characteristic of the economy is the working together of
manufacturers, suppliers, and distributors in closely-knit groups
called keiretsu. A second basic feature has been the guarantee of
lifetime employment for a substantial portion of the urban labor
force. Both features are now eroding. Industry, the most important
sector of the economy, is heavily dependent on imported raw
materials and fuels. The much smaller agricultural sector is highly
subsidized and protected, with crop yields among the highest in the
world. Usually self-sufficient in rice, Japan must import about 50%
of its requirements of other grain and fodder crops. Japan maintains
one of the world's largest fishing fleets and accounts for nearly
15% of the global catch. For three decades overall real economic
growth had been spectacular: a 10% average in the 1960s, a 5%
average in the 1970s, and a 4% average in the 1980s. Growth slowed
markedly in the 1990s, averaging just 1.7%, largely because of the
aftereffects of overinvestment during the late 1980s and
contractionary domestic policies intended to wring speculative
excesses from the stock and real estate markets. Government efforts
to revive economic growth have met with little success and were
further hampered in 2000-2003 by the slowing of the US, European,
and Asian economies. Japan's huge government debt, which is
approaching 150% of GDP, and the ageing of the population are two
major long-run problems. Robotics constitutes a key long-term
economic strength with Japan possessing 410,000 of the world's
720,000 "working robots." Internal conflict over the proper way to
reform the ailing banking system continues.
Jarvis Island
no economic activity
Jersey
The economy is based largely on international financial
services, agriculture, and tourism. Potatoes, cauliflower, tomatoes,
and especially flowers are important export crops, shipped mostly to
the UK. The Jersey breed of dairy cattle is known worldwide and
represents an important export income earner. Milk products go to
the UK and other EU countries. In 1996 the finance sector accounted
for about 60% of the island's output. Tourism, another mainstay of
the economy, accounts for 24% of GDP. In recent years, the
government has encouraged light industry to locate in Jersey, with
the result that an electronics industry has developed alongside the
traditional manufacturing of knitwear. All raw material and energy
requirements are imported, as well as a large share of Jersey's food
needs. Light taxes and death duties make the island a popular tax
haven.
Johnston Atoll
Economic activity is limited to providing services to
US military personnel and contractors located on the island. All
food and manufactured goods must be imported.
Jordan
Jordan is a small Arab country with inadequate supplies of
water and other natural resources such as oil. Debt, poverty, and
unemployment are fundamental problems, but King ABDALLAH since
assuming the throne in 1999 has undertaken some broad economic
reforms in a long-term effort to improve living standards. Amman in
the past three years has worked closely with the IMF, practiced
careful monetary policy, and made significant headway with
privatization. The government also has liberalized the trade regime
sufficiently to secure Jordan's membership in the WTrO (2000), a
free trade accord with US (2000), and an association agreement with
the EU (2001). These measures have helped improve productivity and
have put Jordan on the foreign investment map. The US-led war in
Iraq in 2003 dealt an economic blow to Jordan, which was dependent
on Iraq for discounted oil. It remains unclear how Jordan will
finance energy imports in the absence of such a deal. Other ongoing
challenges include fiscal adjustment to reduce the budget deficit
and broader investment incentives to promote job-creating ventures.
Juan de Nova Island
Up to 12,000 tons of guano are mined per year.
Kazakhstan
Kazakhstan, the largest of the former Soviet republics in
territory, excluding Russia, possesses enormous fossil fuel reserves
as well as plentiful supplies of other minerals and metals. It also
is a large agricultural - livestock and grain - producer.
Kazakhstan's industrial sector rests on the extraction and
processing of these natural resources and also on a growing
machine-building sector specializing in construction equipment,
tractors, agricultural machinery, and some defense items. The
breakup of the USSR in December 1991 and the collapse in demand for
Kazakhstan's traditional heavy industry products resulted in a
short-term contraction of the economy, with the steepest annual
decline occurring in 1994. In 1995-97, the pace of the government
program of economic reform and privatization quickened, resulting in
a substantial shifting of assets into the private sector. Kazakhstan
enjoyed double-digit growth in 2000-01 - and a solid 9.5% in 2002 -
thanks largely to its booming energy sector, but also to economic
reform, good harvests, and foreign investment. The opening of the
Caspian Consortium pipeline in 2001, from western Kazakhstan's
Tengiz oilfield to the Black Sea, substantially raised export
capacity. The country has embarked upon an industrial policy
designed to diversify the economy away from overdependence on the
oil sector, by developing light industry. Additionally, the policy
aims to reduce the influence of foreign investment and foreign
personnel; the government has engaged in several disputes with
foreign oil companies over the terms of production agreements, and
tensions continue.
Kenya
Kenya, the regional hub for trade and finance in East Africa,
is hampered by corruption and reliance upon several primary goods
whose prices remain low. Following strong economic growth in 1995
and 1996, Kenya's economy has stagnated, with GDP growth failing to
keep up with the rate of population growth. In 1997, the IMF
suspended Kenya's Enhanced Structural Adjustment Program due to the
government's failure to maintain reforms and curb corruption. A
severe drought from 1999 to 2000 compounded Kenya's problems,
causing water and energy rationing and reducing agricultural output.
As a result, GDP contracted by 0.3% in 2000. The IMF, which had
resumed loans in 2000 to help Kenya through the drought, again
halted lending in 2001 when the government failed to institute
several anticorruption measures. Despite the return of strong rains
in 2001, weak commodity prices, endemic corruption, and low
investment limited Kenya's economic growth to 1%. Growth fell below
1% in 2002 because of erratic rains, low investor confidence, meager
donor support, and political infighting up to the elections. In the
key December 27, 2002 elections, Daniel Arap MOI's 24-year-old reign
ended, and a new opposition government took on the formidable
economic problems facing the nation. Substantial donor support and
rooting out corruption are essential to making Kenya realize its
substantial economic potential.
Kingman Reef
no economic activity
Kiribati
A remote country of 33 scattered coral atolls, Kiribati has
few natural resources. Commercially viable phosphate deposits were
exhausted at the time of independence from the UK in 1979. Copra and
fish now represent the bulk of production and exports. The economy
has fluctuated widely in recent years. Economic development is
constrained by a shortage of skilled workers, weak infrastructure,
and remoteness from international markets. Tourism provides more
than one-fifth of GDP. The financial sector is at an early stage of
development as is the expansion of private sector initiatives.
Foreign financial aid from UK, Japan, Australia, New Zealand, and
China is a critical supplement to GDP, equal to 25%-50% of GDP in
recent years. Remittances from workers abroad account for more than
$5 million each year.
Korea, North
North Korea, one of the world's most centrally planned
and isolated economies, faces desperate economic conditions.
Industrial capital stock is nearly beyond repair as a result of
years of underinvestment and spare parts shortages. Industrial and
power output have declined in parallel. The nation has suffered its
tenth year of food shortages because of a lack of arable land;
collective farming; weather-related problems, including major
drought in 2000; and chronic shortages of fertilizer and fuel.
Massive international food aid deliveries have allowed the regime to
escape mass starvation since 1995-96, but the population remains the
victim of prolonged malnutrition and deteriorating living
conditions. Large-scale military spending eats up resources needed
for investment and civilian consumption. Recently, the regime has
placed emphasis on earning hard currency, developing information
technology, addressing power shortages, and attracting foreign aid,
but in no way at the expense of relinquishing central control over
key national assets or undergoing widespread market-oriented
reforms. In 2003, heightened political tensions with key donor
countries and general donor fatigue have held down the flow of
desperately needed food aid and have threatened fuel aid as well.
Korea, South
As one of the Four Tigers of East Asia, South Korea has
achieved an incredible record of growth and integration into the
high-tech modern world economy. Three decades ago GDP per capita was
comparable with levels in the poorer countries of Africa and Asia.
Today its GDP per capita is 18 times North Korea's and equal to the
lesser economies of the European Union. This success through the
late 1980s was achieved by a system of close government/business
ties, including directed credit, import restrictions, sponsorship of
specific industries, and a strong labor effort. The government
promoted the import of raw materials and technology at the expense
of consumer goods and encouraged savings and investment over
consumption. The Asian financial crisis of 1997-99 exposed
longstanding weaknesses in South Korea's development model,
including high debt/equity ratios, massive foreign borrowing, and an
undisciplined financial sector. Growth plunged to a negative 6.6% in
1998, then strongly recovered to 10.8% in 1999 and 9.2% in 2000.
Growth fell back to 3.3% in 2001 because of the slowing global
economy, falling exports, and the perception that much-needed
corporate and financial reforms had stalled. Led by consumer
spending and exports, growth in 2002 was an impressive 6.2%, despite
anemic global growth, followed by moderate 2.8% growth in 2003. In
2003 the six-day work week was reduced to five days.
Kuwait
Kuwait is a small, rich, relatively open economy with proved
crude oil reserves of about 98 billion barrels - 10% of world
reserves. Petroleum accounts for nearly half of GDP, 95% of export
revenues, and 80% of government income. Kuwait's climate limits
agricultural development. Consequently, with the exception of fish,
it depends almost wholly on food imports. About 75% of potable water
must be distilled or imported. Kuwait continues its discussions with
foreign oil companies to develop fields in the northern part of the
country. Oil production declined by an estimated 8% in 2002 but is
expected to return to the 2001 level in 2003.
Kyrgyzstan
Kyrgyzstan is a small, poor, mountainous country with a
predominantly agricultural economy. Cotton, tobacco, wool, and meat
are the main agricultural products, although only tobacco and cotton
are exported in any quantity. Industrial exports include gold,
mercury, uranium, and natural gas and electricity. Kyrgyzstan has
been fairly progressive in carrying out market reforms, such as an
improved regulatory system and land reform. Kyrgyzstan was the first
CIS country to be accepted into the World Trade Organization. With
fits and starts, inflation has been lowered to an estimated 7% in
2001, 2.1% in 2002, and 4.0% in 2003. Much of the government's stock
in enterprises has been sold. Drops in production had been severe
after the breakup of the Soviet Union in December 1991, but by
mid-1995 production began to recover and exports began to increase.
Growth was held down to 2.1% in 1998 largely because of the
spillover from Russia's economic difficulties, but moved ahead to
3.6% in 1999, 5% in 2000, and 5% again in 2001. The drop in output
at the Kumtor gold mine sparked a 0.5% decline in GDP in 2002 and
again in 2003. On the positive side, the government and the
international financial institutions have been engaged in a
comprehensive medium-term poverty reduction and economic growth
strategy. Further restructuring of domestic industry and success in
attracting foreign investment are keys to future growth.
Laos
The government of Laos - one of the few remaining official
Communist states - began decentralizing control and encouraging
private enterprise in 1986. The results, starting from an extremely
low base, were striking - growth averaged 7% in 1988-2001 except
during the short-lived drop caused by the Asian financial crisis
beginning in 1997. Despite this high growth rate, Laos remains a
country with a primitive infrastructure; it has no railroads, a
rudimentary road system, and limited external and internal
telecommunications. Electricity is available in only a few urban
areas. Subsistence agriculture accounts for half of GDP and provides
80% of total employment. The economy will continue to benefit from
aid from the IMF and other international sources and from new
foreign investment in food processing and mining.
Latvia
Latvia's transitional economy recovered from the 1998 Russian
financial crisis, largely due to the SKELE government's budget
stringency and a gradual reorientation of exports toward EU
countries, lessening Latvia's trade dependency on Russia. The
majority of companies, banks, and real estate have been privatized,
although the state still holds sizable stakes in a few large
enterprises. Latvia officially joined the World Trade Organization
in February 1999. Preparing for EU membership continues as a top
foreign policy goal. The current account and internal government
deficits remain major concerns, but the government's efforts to
increase efficiency in revenue collection may lessen the budget
deficit.
Lebanon
The 1975-91 civil war seriously damaged Lebanon's economic
infrastructure, cut national output by half, and all but ended
Lebanon's position as a Middle Eastern entrepot and banking hub.
Peace enabled the central government to restore control in Beirut,
begin collecting taxes, and regain access to key port and government
facilities. Economic recovery was helped by a financially sound
banking system and resilient small- and medium-scale manufacturers.
Family remittances, banking services, manufactured and farm exports,
and international aid provided the main sources of foreign exchange.
Lebanon's economy made impressive gains since the launch in 1993 of
"Horizon 2000," the government's $20 billion reconstruction program.
Real GDP grew 8% in 1994, 7% in 1995, 4% in 1996 and in 1997, but
slowed to 1.2% in 1998, -1.6% in 1999, -0.6% in 2000, 0.8% in 2001,
and 1.5% in 2002. During the 1990s annual inflation fell to almost
0% from more than 100%. Lebanon has rebuilt much of its war-torn
physical and financial infrastructure. The government nonetheless
faces serious challenges in the economic arena. It has funded
reconstruction by borrowing heavily - mostly from domestic banks. In
order to reduce the ballooning national debt, the re-installed
HARIRI government began an economic austerity program to rein in
government expenditures, increase revenue collection, and privatize
state enterprises. The HARIRI government met with international
donors at the Paris II conference in November 2002 to seek bilateral
assistance restructuring its domestic debt at lower rates of
interest. While privatization of state-owned enterprises had not
occurred by the end of 2002, the government had successfully avoided
a currency devaluation and debt default in 2002.
Lesotho
Small, landlocked, and mountainous, Lesotho relies on
remittances from miners employed in South Africa and customs duties
from the Southern Africa Customs Union for the majority of
government revenue, but the government has strengthened its tax
system to reduce dependency on customs duties. Completion of a major
hydropower facility in January 1998 now permits the sale of water to
South Africa, also generating royalties for Lesotho. As the number
of mineworkers has declined steadily over the past several years, a
small manufacturing base has developed based on farm products that
support the milling, canning, leather, and jute industries and a
rapidly growing apparel-assembly sector. The economy is still
primarily based on subsistence agriculture, especially livestock,
although drought has decreased agricultural activity. The extreme
inequality in the distribution of income remains a major drawback.
Lesotho has signed an Interim Poverty Reduction and Growth Facility
with the IMF.
Liberia
Civil war and misgovernment have destroyed much of Liberia's
economy, especially the infrastructure in and around Monrovia. Many
businessmen have fled the country, taking capital and expertise with
them. Some have returned; many will not. Richly endowed with water,
mineral resources, forests, and a climate favorable to agriculture,
Liberia had been a producer and exporter of basic products -
primarily raw timber and rubber. Local manufacturing, mainly foreign
owned, had been small in scope. The restoration of the
infrastructure and the raising of incomes in this ravaged economy
depend on the settlement of civil warfare, the implementation of
sound macro- and micro-economic policies, including the
encouragement of foreign investment, and generous support from donor
countries.
Libya
The socialist-oriented economy depends primarily upon revenues
from the oil sector, which contribute practically all export
earnings and about one-quarter of GDP. These oil revenues and a
small population give Libya one of the highest per capita GDPs in
Africa, but little of this income flows down to the lower orders of
society. Import restrictions and inefficient resource allocations
have led to periodic shortages of basic goods and foodstuffs. The
nonoil manufacturing and construction sectors, which account for
about 20% of GDP, have expanded from processing mostly agricultural
products to include the production of petrochemicals, iron, steel,
and aluminum. Climatic conditions and poor soils severely limit
agricultural output, and Libya imports about 75% of its food. Higher
oil prices in the last three years led to an increase in export
revenues, which has improved macroeconomic balances but has done
little to stimulate broad-based economic growth. Libya is making
slow progress toward economic liberalization and the upgrading of
economic infrastructure, but truly market-based reforms will be slow
in coming.
Liechtenstein
Despite its small size and limited natural resources,
Liechtenstein has developed into a prosperous, highly
industrialized, free-enterprise economy with a vital financial
service sector and living standards on a par with its large European
neighbors. The Liechtenstein economy is widely diversified with a
large number of small businesses. Low business taxes - the maximum
tax rate is 20% - and easy incorporation rules have induced many
holding or so-called letter box companies to establish nominal
offices in Liechtenstein, providing 30% of state revenues. The
country participates in a customs union with Switzerland and uses
the Swiss franc as its national currency. It imports more than 90%
of its energy requirements. Liechtenstein has been a member of the
European Economic Area (an organization serving as a bridge between
the European Free Trade Association (EFTA) and the EU) since May
1995. The government is working to harmonize its economic policies
with those of an integrated Europe.
Lithuania
Lithuania, the Baltic state that has conducted the most
trade with Russia, has slowly rebounded from the 1998 Russian
financial crisis. Unemployment remains high, still 10.7% in 2003,
but is improving. Growing domestic consumption and increased
investment have furthered recovery. Trade has been increasingly
oriented toward the West. Lithuania has gained membership in the
World Trade Organization and has moved ahead with plans to join the
EU. Privatization of the large, state-owned utilities, particularly
in the energy sector, is nearing completion. Overall, more than 80%
of enterprises have been privatized. Foreign government and business
support have helped in the transition from the old command economy
to a market economy.
Luxembourg
This stable, high-income economy features solid growth,
low inflation, and low unemployment. The industrial sector,
initially dominated by steel, has become increasingly diversified to
include chemicals, rubber, and other products. Growth in the
financial sector, which now accounts for about 22% of GDP, has more
than compensated for the decline in steel. Most banks are
foreign-owned and have extensive foreign dealings. Agriculture is
based on small family-owned farms. The economy depends on foreign
and trans-border workers for more than 30% of its labor force.
Although Luxembourg, like all EU members, has suffered from the
global economic slump, the country has maintained a fairly strong
growth rate and enjoys an extraordinarily high standard of living.
Macau
Macau's economy four years after reversion to China remains
one of the most open in the world. The territory's net exports of
goods and services account for 39% of GDP with tourism and apparel
exports as the mainstays. Although the territory was hit hard by the
1998 Asian financial crisis and the global downturn in 2001, its
economy grew an estimated 9.5% in 2002. A rapid rise in the number
of mainland visitors because of China's easing of restrictions on
travel drove the recovery. The budget also returned to surplus in
2002 because of the surge in visitors from China and a hike in taxes
on gambling profits, which generated about 63% of government
revenue. The liberalization of Macao's gambling monopoly may
contribute to GDP growth, as the three companies awarded gambling
licenses have pledged to invest $2.2 billion - roughly 33% of GDP -
in the territory. Much of Macau's textile industry may move to the
mainland as the Multi-Fiber Agreement is phased out. The territory
may have to rely more on gambling and trade-related services to
generate growth. Growth fell to 4% in 2003, according to early
government forecasts, with the drop in large measure due to concerns
over the Severe Acute Respiratory Syndrome (SARS).
Macedonia, The Former Yugoslav Republic of
At independence in
November 1991, Macedonia was the least developed of the Yugoslav
republics, producing a mere 5% of the total federal output of goods
and services. The collapse of Yugoslavia ended transfer payments
from the center and eliminated advantages from inclusion in a de
facto free trade area. An absence of infrastructure, UN sanctions on
Yugoslavia, one of its largest markets, and a Greek economic embargo
over a dispute about the country's constitutional name and flag
hindered economic growth until 1996. GDP subsequently rose each year
through 2000. However, the leadership's commitment to economic
reform, free trade, and regional integration was undermined by the
ethnic Albanian insurgency of 2001. The economy shrank 4.5% because
of decreased trade, intermittent border closures, increased deficit
spending on security needs, and investor uncertainty. Growth barely
recovered in 2002 to 0.3%, then rose to 2.8% in 2003. Unemployment
at one-third of the workforce remains the most critical economic
problem. But even this issue is overshadowed by the fragile
political situation.
Madagascar
Having discarded past socialist economic policies,
Madagascar has since the mid 1990s followed a World Bank and IMF led
policy of privatization and liberalization, which has placed the
country on a slow and steady growth path. Agriculture, including
fishing and forestry, is a mainstay of the economy, accounting for
one-fourth of GDP and employing four-fifths of the population.
Export earnings primarily are earned in the small industrial sector,
which features textile manufacturing and agriculture processing.
Deforestation and erosion, aggravated by the use of firewood as the
primary source of fuel are serious concerns. The separatist
political crisis of 2002 undermined macroeconomic stability, with
the estimated drop in output being subject to a wide margin of
error. Poverty reduction will be the centerpiece of economic policy
for the next few years.
Malawi
Landlocked Malawi ranks among the world's least developed
countries. The economy is predominately agricultural, with about 90%
of the population living in rural areas. Agriculture accounted for
nearly 40% of GDP and 88% of export revenues in 2001. The economy
depends on substantial inflows of economic assistance from the IMF,
the World Bank, and individual donor nations. In late 2000, Malawi
was approved for relief under the Heavily Indebted Poor Countries
(HIPC) program. In November 2002 the World Bank approved a $50
million drought recovery package, which is to be used for famine
relief. The government faces strong challenges, e.g., to fully
develop a market economy, to improve educational facilities, to face
up to environmental problems, to deal with the rapidly growing
problem of HIV/AIDS, and to satisfy foreign donors that fiscal
discipline is being tightened. The performance of the tobacco sector
is key to short-term growth as tobacco accounts for over 50% of
exports.
Malaysia
Malaysia, a middle-income country, transformed itself from
1971 through the late 1990s from a producer of raw materials into an
emerging multi-sector economy. Growth was almost exclusively driven
by exports - particularly of electronics - and, as a result Malaysia
was hard hit by the global economic downturn and the slump in the
Information Technology (IT) sector in 2001. GDP in 2001 grew only
0.5% due to an estimated 11% contraction in exports, but a
substantial fiscal stimulus package mitigated the worst of the
recession and the economy rebounded in 2002. Healthy foreign
exchange reserves and relatively small external debt make it
unlikely that Malaysia will experience a crisis similar to the one
in 1997, but the economy remains vulnerable to a more protracted
slowdown in Japan and the US, top export destinations and key
sources of foreign investment.
Maldives
Tourism, Maldives largest industry, accounts for 20% of GDP
and more than 60% of the Maldives' foreign exchange receipts. Over
90% of government tax revenue comes from import duties and
tourism-related taxes. Almost 400,000 tourists visited the islands
in 1998. Fishing is a second leading sector. The Maldivian
Government began an economic reform program in 1989 initially by
lifting import quotas and opening some exports to the private
sector. Subsequently, it has liberalized regulations to allow more
foreign investment. Agriculture and manufacturing continue to play a
lesser role in the economy, constrained by the limited availability
of cultivable land and the shortage of domestic labor. Most staple
foods must be imported. Industry, which consists mainly of garment
production, boat building, and handicrafts, accounts for about 18%
of GDP. Maldivian authorities worry about the impact of erosion and
possible global warming on their low-lying country; 80% of the area
is one meter or less above sea level.
Mali
Mali is among the poorest countries in the world, with 65% of
its land area desert or semidesert and with a highly unequal
distribution of income. Economic activity is largely confined to the
riverine area irrigated by the Niger. About 10% of the population is
nomadic and some 80% of the labor force is engaged in farming and
fishing. Industrial activity is concentrated on processing farm
commodities. Mali is heavily dependent on foreign aid and vulnerable
to fluctuations in world prices for cotton, its main export, along
with gold. The government has continued its successful
implementation of an IMF-recommended structural adjustment program
that is helping the economy grow, diversify, and attract foreign
investment. Mali's adherence to economic reform and the 50%
devaluation of the African franc in January 1994 have pushed up
economic growth to a sturdy 5% average in 1996-2002. Worker
remittances and external trade routes have been jeopardized by
continued unrest in neighboring Cote d'Ivoire.
Malta
Major resources are limestone, a favorable geographic
location, and a productive labor force. Malta produces only about
20% of its food needs, has limited fresh water supplies, and has no
domestic energy sources. The economy is dependent on foreign trade,
manufacturing (especially electronics and textiles), and tourism.
Malta is privatizing state-controlled firms and liberalizing markets
in order to prepare for membership in the European Union. The island
remains divided politically, however, over the question of joining
the EU. Continued sluggishness in the global economy is holding back
exports, tourism, and overall growth.
Man, Isle of
Offshore banking, manufacturing, and tourism are key
sectors of the economy. The government's policy of offering
incentives to high-technology companies and financial institutions
to locate on the island has paid off in expanding employment
opportunities in high-income industries. As a result, agriculture
and fishing, once the mainstays of the economy, have declined in
their shares of GDP. Trade is mostly with the UK. The Isle of Man
enjoys free access to EU markets.
Marshall Islands
US Government assistance is the mainstay of this
tiny island economy. Agricultural production is primarily
subsistence and is concentrated on small farms; the most important
commercial crops are coconuts and breadfruit. Small-scale industry
is limited to handicrafts, tuna processing, and copra. The tourist
industry, now a small source of foreign exchange employing less than
10% of the labor force, remains the best hope for future added
income. The islands have few natural resources, and imports far
exceed exports. Under the terms of the Compact of Free Association,
the US has provided more than $1 billion in aid since 1986.
Negotiations have continued for an extended agreement. Government
downsizing, drought, a drop in construction, the decline in tourism
and foreign investment due to the Asian financial difficulties, and
less income from the renewal of fishing vessel licenses have held
GDP growth to an average of 1% over the past decade.
Martinique
The economy is based on sugarcane, bananas, tourism, and
light industry. Agriculture accounts for about 6% of GDP and the
small industrial sector for 11%. Sugar production has declined, with
most of the sugarcane now used for the production of rum. Banana
exports are increasing, going mostly to France. The bulk of meat,
vegetable, and grain requirements must be imported, contributing to
a chronic trade deficit that requires large annual transfers of aid
from France. Tourism, which employs more than 11,000 people, has
become more important than agricultural exports as a source of
foreign exchange.
Mauritania
Half the population still depends on agriculture and
livestock for a livelihood, even though many of the nomads and
subsistence farmers were forced into the cities by recurrent
droughts in the 1970s and 1980s. Mauritania has extensive deposits
of iron ore, which account for nearly 40% of total exports. The
decline in world demand for this ore, however, has led to cutbacks
in production. The nation's coastal waters are among the richest
fishing areas in the world, but overexploitation by foreigners
threatens this key source of revenue. The country's first deepwater
port opened near Nouakchott in 1986. In the past, drought and
economic mismanagement resulted in a buildup of foreign debt. In
February 2000, Mauritania qualified for debt relief under the
Heavily Indebted Poor Countries (HIPC) initiative and in December
2001 received strong support from donor and lending countries at a
triennial Consultative Group review. In 2001, exploratory oil wells
in tracts 80 km offshore indicated potential extraction at current
world oil prices. A new investment code approved in December 2001
improved the opportunities for direct foreign investment. Ongoing
negotiations with the IMF involve problems of economic reforms and
fiscal discipline. Substantial oil production and exports probably
will not begin until 2005.
Mauritius
Since independence in 1968, Mauritius has developed from a
low-income, agriculturally based economy to a middle-income
diversified economy with growing industrial, financial, and tourist
sectors. For most of the period, annual growth has been in the order
of 5% to 6%. This remarkable achievement has been reflected in more
equitable income distribution, increased life expectancy, lowered
infant mortality, and a much-improved infrastructure. Sugarcane is
grown on about 90% of the cultivated land area and accounts for 25%
of export earnings. The government's development strategy centers on
foreign investment. Mauritius has attracted more than 9,000 offshore
entities, many aimed at commerce in India and South Africa, and
investment in the banking sector alone has reached over $1 billion.
Mauritius, with its strong textile sector and responsible fiscal
management, has been well poised to take advantage of the Africa
Growth and Opportunity Act (AGOA). The government is encouraging
foreign investment in the information technology field.
Mayotte
Economic activity is based primarily on the agricultural
sector, including fishing and livestock raising. Mayotte is not
self-sufficient and must import a large portion of its food
requirements, mainly from France. The economy and future development
of the island are heavily dependent on French financial assistance,
an important supplement to GDP. Mayotte's remote location is an
obstacle to the development of tourism.
Mexico
Mexico has a free market economy with a mixture of modern and
outmoded industry and agriculture, increasingly dominated by the
private sector. Recent administrations have expanded competition in
seaports, railroads, telecommunications, electricity, natural gas
distribution, and airports. Income distribution remains highly
unequal. Trade with the US and Canada has tripled since the
implementation of NAFTA in 1994. Following 6.9% growth in 2000, real
GDP fell 0.3% in 2001, recovering to only a plus 1% in 2002, with
the US slowdown the principal cause. Mexico implemented free trade
agreements with Guatemala, Honduras, El Salvador, and the European
Free Trade Area in 2001, putting more than 90% of trade under free
trade agreements. Foreign direct investment reached $25 billion in
2001, of which $12.5 billion came from the purchase of Mexico's
second-largest bank, Banamex, by Citigroup.
Micronesia, Federated States of
Economic activity consists primarily
of subsistence farming and fishing. The islands have few mineral
deposits worth exploiting, except for high-grade phosphate. The
potential for a tourist industry exists, but the remote location, a
lack of adequate facilities, and limited air connections hinder
development. In November 2002, the country experienced a further
reduction in future revenues from the Compact of Free Association -
the agreement with the US in which Micronesia received $1.3 billion
in financial and technical assistance over a 15-year period until
2001. The country's medium-term economic outlook appears fragile due
not only to the reduction in US assistance but also to the slow
growth of the private sector. Geographical isolation and a poorly
developed infrastructure remain major impediments to long-term
growth.
Midway Islands
The economy is based on providing support services
for the national wildlife refuge activities located on the islands.
All food and manufactured goods must be imported.
Moldova
Moldova remains a very poor country despite recent progress
from its small economic base. It enjoys a favorable climate and good
farmland but has no major mineral deposits. As a result, the economy
depends heavily on agriculture, featuring fruits, vegetables, wine,
and tobacco. Moldova must import all of its supplies of oil, coal,
and natural gas, largely from Russia. Energy shortages contributed
to sharp production declines after the breakup of the Soviet Union
in 1991. As part of an ambitious reform effort, Moldova introduced a
convertible currency, freed all prices, stopped issuing preferential
credits to state enterprises, backed steady land privatization,
removed export controls, and freed interest rates. The government
entered into agreements with the World Bank and the IMF to promote
growth and reduce poverty. The economy returned to positive growth,
of 2.1% in 2000, 6.1% in 2001, 7.2% in 2002, and 5.3% in 2003.
Further reforms will come slowly because of strong political forces
backing government controls. The economy remains vulnerable to
higher fuel prices, poor agricultural weather, and the skepticism of
foreign investors.
Monaco
Monaco, situated on the French Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. In 2001, a major new construction project will extend the
pier used by cruise ships in the main harbor. The principality has
successfully sought to diversify into services and small,
high-value-added, nonpolluting industries. The state has no income
tax and low business taxes and thrives as a tax haven both for
individuals who have established residence and for foreign companies
that have set up businesses and offices. The state retains
monopolies in a number of sectors, including tobacco, the telephone
network, and the postal service. Living standards are high, roughly
comparable to those in prosperous French metropolitan areas. Monaco
does not publish national income figures; the estimates below are
extremely rough.
Mongolia
Economic activity traditionally has been based on
agriculture and breeding of livestock. Mongolia also has extensive
mineral deposits; copper, coal, molybdenum, tin, tungsten, and gold
account for a large part of industrial production. Soviet
assistance, at its height one-third of GDP, disappeared almost
overnight in 1990-1991 at the time of the dismantlement of the USSR.
Mongolia was driven into deep recession, prolonged by the Mongolian
People's Revolutionary Party's (MPRP) reluctance to undertake
serious economic reform. The Democratic Coalition (DC) government
embraced free-market economics, eased price controls, liberalized
domestic and international trade, and attempted to restructure the
banking system and the energy sector. Major domestic privatization
programs were undertaken, as well as the fostering of foreign
investment through international tender of the oil distribution
company, a leading cashmere company, and banks. Reform was held back
by the ex-Communist MPRP opposition and by the political instability
brought about through four successive governments under the DC.
Economic growth picked up in 1997-1999 after stalling in 1996 due to
a series of natural disasters and declines in world prices of copper
and cashmere. In August and September 1999, the economy suffered
from a temporary Russian ban on exports of oil and oil products, and
Mongolia remains vulnerable in this sector. Mongolia joined the
World Trade Organization (WTrO) in 1997. The international donor
community pledged over $300 million per year at the Consultative
Group Meeting, held in Ulaanbaatar in June 1999. The MPRP
government, elected in July 2000, is anxious to improve the
investment climate; it must also deal with a heavy burden of
external debt. Falling prices for Mongolia's mainly primary sector
exports, widespread opposition to privatization, and adverse effects
of weather on agriculture in early 2000 and 2001 restrained real GDP
growth in 2000-2001. Despite drought problems in 2002, GDP rose
4.0%, followed by a solid 5.0% increase in 2003. The first
applications under the land privatization law have been marked by a
number of disputes over particular sites. Russia claims Mongolia
owes it $11 billion from the old Soviet period; any settlement could
substantially increase Mongolia's foreign debt burden.
Montserrat
Severe volcanic activity, which began in July 1995, has
put a damper on this small, open economy. A catastrophic eruption in
June 1997 closed the airports and seaports, causing further economic
and social dislocation. Two-thirds of the 12,000 inhabitants fled
the island. Some began to return in 1998, but lack of housing
limited the number. The agriculture sector continued to be affected
by the lack of suitable land for farming and the destruction of
crops. Prospects for the economy depend largely on developments in
relation to the volcano and on public sector construction activity.
The UK has launched a three-year $122.8 million aid program to help
reconstruct the economy. Half of the island is expected to remain
uninhabitable for another decade.
Morocco
Morocco faces the problems typical of developing countries -
restraining government spending, reducing constraints on private
activity and foreign trade, and achieving sustainable economic
growth. Following structural adjustment programs supported by the
IMF, World Bank, and the Paris Club, the dirham is now fully
convertible for current account transactions, and reforms of the
financial sector have been implemented. Droughts depressed activity
in the key agricultural sector and contributed to a stagnant economy
in 1999 and 2000. During that time, however, Morocco reported large
foreign exchange inflows from the sale of a mobile telephone license
and partial privatization of the state-owned telecommunications
company. Favorable rainfall in 2001 led to a growth of 6.5%. Good
harvest conditions continued to support GDP growth in 2002.
Formidable long-term challenges include: servicing the external
debt; modernizing the industrial sector; preparing the economy for
freer trade with the EU and US; and improving education and
attracting foreign investment to boost living standards and job
prospects for Morocco's youth.
Mozambique
At independence in 1975, Mozambique was one of the
world's poorest countries. Socialist mismanagement and a brutal
civil war from 1977-92 exacerbated the situation. In 1987, the
government embarked on a series of macroeconomic reforms designed to
stabilize the economy. These steps, combined with donor assistance
and with political stability since the multi-party elections in
1994, have led to dramatic improvements in the country's growth
rate. Inflation was brought to single digits during the late 1990s
although it returned to double digits in 2000-02. Fiscal reforms,
including the introduction of a value-added tax and reform of the
customs service, have improved the government's revenue collection
abilities. In spite of these gains, Mozambique remains dependent
upon foreign assistance for much of its annual budget, and the
majority of the population remains below the poverty line.
Subsistence agriculture continues to employ the vast majority of the
country's workforce. A substantial trade imbalance persists although
the opening of the MOZAL aluminum smelter, the country's largest
foreign investment project to date has increased export earnings.
Additional investment projects in titanium extraction and processing
and garment manufacturing should further close the import/export
gap. Mozambique's once substantial foreign debt has been reduced
through forgiveness and rescheduling under the IMF's Heavily
Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is
now at a manageable level.
Namibia
The economy is heavily dependent on the extraction and
processing of minerals for export. Mining accounts for 20% of GDP.
Rich alluvial diamond deposits make Namibia a primary source for
gem-quality diamonds. Namibia is the fourth-largest exporter of
nonfuel minerals in Africa, the world's fifth-largest producer of
uranium, and the producer of large quantities of lead, zinc, tin,
silver, and tungsten. The mining sector employs only about 3% of the
population while about half of the population depends on subsistence
agriculture for its livelihood. Namibia normally imports about 50%
of its cereal requirements; in drought years food shortages are a
major problem in rural areas. A high per capita GDP, relative to the
region, hides the great inequality of income distribution; nearly
one-third of Namibians had annual incomes of less than $1400 in
constant 1994 dollars, according to a 1993 study. The Namibian
economy is closely linked to South Africa with the Namibian dollar
pegged to the South African rand. Privatization of several
enterprises in coming years may stimulate long-run foreign
investment.
Nauru
Revenues of this tiny island have come from exports of
phosphates, but reserves are expected to be exhausted within a few
years. Phosphate production has declined since 1989, as demand has
fallen in traditional markets and as the marginal cost of extracting
the remaining phosphate increases, making it less internationally
competitive. While phosphates have given Nauruans one of the highest
per capita incomes in the Third World, few other resources exist
with most necessities being imported, including fresh water from
Australia. The rehabilitation of mined land and the replacement of
income from phosphates are serious long-term problems. In
anticipation of the exhaustion of Nauru's phosphate deposits,
substantial amounts of phosphate income have been invested in trust
funds to help cushion the transition and provide for Nauru's
economic future. The government has been borrowing heavily from the
trusts to finance fiscal deficits. To cut costs the government has
called for a freeze on wages, a reduction of over-staffed public
service departments, privatization of numerous government agencies,
and closure of some overseas consulates. In recent years Nauru has
encouraged the registration of offshore banks and corporations. Tens
of billions of dollars have been channeled through their accounts.
Few comprehensive statistics on the Nauru economy exist, with
estimates of Nauru's GDP varying widely.
Navassa Island
no economic activity
Nepal
Nepal is among the poorest and least developed countries in
the world with 42% of its population living below the poverty line.
Agriculture is the mainstay of the economy, providing a livelihood
for over 80% of the population and accounting for 40% of GDP.
Industrial activity mainly involves the processing of agricultural
produce including jute, sugarcane, tobacco, and grain. Textile and
carpet production, accounting for about 80% of foreign exchange
earnings in recent years, contracted in 2001-02 due to the overall
slowdown in the world economy and pressures by Maoist insurgents on
factory owners and workers. Security concerns in the wake of the
Maoist conflict and the September 11, 2001 terrorist attacks in the
US have led to a decrease in tourism, another key source of foreign
exchange. Since 1991, the government has been moving forward with
economic reforms, e.g., by reducing business licenses and
registration requirements to simplify investment procedures,
reducing subsidies, privatizing state industries, and laying off
civil servants. Nepal has considerable scope for exploiting its
potential in hydropower and tourism, areas of recent foreign
investment interest. Prospects for foreign trade or investment in
other sectors will remain poor, however, because of the small size
of the economy, its technological backwardness, its remoteness, its
landlocked geographic location, and its susceptibility to natural
disaster. The international community's role of funding more than
60% of Nepal's development budget and more than 28% of total
budgetary expenditures will likely continue as a major ingredient of
growth.
Netherlands
The Netherlands is a prosperous and open economy
depending heavily on foreign trade. The economy is noted for stable
industrial relations, moderate unemployment and inflation, a sizable
current account surplus, and an important role as a European
transportation hub. Industrial activity is predominantly in food
processing, chemicals, petroleum refining, and electrical machinery.
A highly mechanized agricultural sector employs no more than 4% of
the labor force but provides large surpluses for the food-processing
industry and for exports. The Netherlands, along with 11 of its EU
partners, began circulating the euro currency on 1 January 2002. The
country continues to be one of the leading European nations for
attracting foreign direct investment. Economic growth slowed
considerably in 2001-03, as part of the global economic slowdown,
but for the four years before that, annual growth averaged nearly
4%, well above the EU average. The government is wrestling with a
deteriorating budget position, and is moving toward the EU 3% limit.
Netherlands Antilles
Tourism, petroleum refining, and offshore
finance are the mainstays of this small economy, which is closely
tied to the outside world. Although GDP has declined or remained
even in each of the past six years, the islands enjoy a high per
capita income and a well-developed infrastructure compared with
other countries in the region. Almost all consumer and capital goods
are imported, the US and Mexico being the major suppliers. Poor
soils and inadequate water supplies hamper the development of
agriculture.
New Caledonia
New Caledonia has about 25% of the world's known
nickel resources. Only a small amount of the land is suitable for
cultivation, and food accounts for about 20% of imports. In addition
to nickel, substantial financial support from France - equal to more
than one-fourth of GDP - and tourism are keys to the health of the
economy. Substantial new investment in the nickel industry, combined
with the recovery of global nickel prices, brightens the economic
outlook for the next several years.
New Zealand
Since 1984 the government has accomplished major
economic restructuring, transforming New Zealand from an agrarian
economy dependent on concessionary British market access to a more
industrialized, free market economy that can compete globally. This
dynamic growth has boosted real incomes (but left behind many at the
bottom of the ladder), broadened and deepened the technological
capabilities of the industrial sector, and contained inflationary
pressures. While per capita incomes have been rising, however, they
remain below the level of the four largest EU economies, and there
is some government concern that New Zealand is not closing the gap.
New Zealand is heavily dependent on trade - particularly in
agricultural products - to drive growth, and it has been affected by
the global economic slowdown and the slump in commodity prices. Thus
far the New Zealand economy has been relatively resilient, although
growth may slow to 2.5% in 2003.
Nicaragua
Nicaragua, one of the hemisphere's poorest countries,
faces low per capita income, flagging socio-economic indicators, and
huge external debt. Distribution of income is one of the most
unequal on the globe. While the country has made progress toward
macroeconomic stability over the past few years, a banking crisis
and scandal has shaken the economy. Nicaragua will continue to be
dependent on international aid and debt relief under the Heavily
Indebted Poor Countries (HIPC) initiative. Donors have made aid
conditional on the openness of government financial operation,
poverty alleviation, and human rights. Nicaragua met the conditions
for additional debt service relief in December 2000. Growth should
move up moderately in 2003 because of increased private investment
and exports.
Niger
Niger is a poor, landlocked Sub-Saharan nation, whose economy
centers on subsistence agriculture, animal husbandry, and reexport
trade, and increasingly less on uranium, because of declining world
demand. The 50% devaluation of the West African franc in January
1994 boosted exports of livestock, cowpeas, onions, and the products
of Niger's small cotton industry. The government relies on bilateral
and multilateral aid - which was suspended following the April 1999
coup d'etat - for operating expenses and public investment. In
2000-01, the World Bank approved a structural adjustment loan of
$105 million to help support fiscal reforms. However, reforms could
prove difficult given the government's bleak financial situation.
The IMF approved a $73 million poverty reduction and growth facility
for Niger in 2000 and announced $115 million in debt relief under
the Heavily Indebted Poor Countries (HIPC) initiative. Further
disbursements of aid occurred in 2002. Future growth may be
sustained by exploitation of oil, gold, coal, and other mineral
resources.
Nigeria
The oil-rich Nigerian economy, long hobbled by political
instability, corruption, and poor macroeconomic management, is
undergoing substantial reform under the new civilian administration.
Nigeria's former military rulers failed to diversify the economy
away from overdependence on the capital-intensive oil sector, which
provides 20% of GDP, 95% of foreign exchange earnings, and about 65%
of budgetary revenues. The largely subsistence agricultural sector
has failed to keep up with rapid population growth, and Nigeria,
once a large net exporter of food, now must import food. Following
the signing of an IMF stand-by agreement in August 2000, Nigeria
received a debt-restructuring deal from the Paris Club and a $1
billion credit from the IMF, both contingent on economic reforms.
The agreement was allowed to expire by the IMF in November 2001,
however, and Nigeria apparently received much less multilateral
assistance than expected in 2002. Nonetheless, increases in foreign
oil investment and oil production kept growth at 3% in 2002. The
government lacks the strength to implement the market-oriented
reforms urged by the IMF, such as modernization of the banking
system; to curb inflation by blocking excessive wage demands; and to
resolve regional disputes over the distribution of earnings from the
oil industry. When the uncertainties in the global economy are added
in, estimates of Nigeria's prospects for 2003 must have a wide
margin of error.