Niue

The economy suffers from the typical Pacific island problems of

geographic isolation, few resources, and a small population.

Government expenditures regularly exceed revenues, and the shortfall

is made up by critically needed grants from New Zealand that are

used to pay wages to public employees. Niue has cut government

expenditures by reducing the public service by almost half. The

agricultural sector consists mainly of subsistence gardening,

although some cash crops are grown for export. Industry consists

primarily of small factories to process passion fruit, lime oil,

honey, and coconut cream. The sale of postage stamps to foreign

collectors is an important source of revenue. The island in recent

years has suffered a serious loss of population because of migration

of Niueans to New Zealand. Efforts to increase GDP include the

promotion of tourism and a financial services industry, although

Premier LAKATANI announced in February 2002 that Niue will shut down

the offshore banking industry. Economic aid from New Zealand in 2002

was about $2.6 million.

Norfolk Island

Tourism, the primary economic activity, has steadily

increased over the years and has brought a level of prosperity

unusual among inhabitants of the Pacific islands. The agricultural

sector has become self-sufficient in the production of beef,

poultry, and eggs.

Northern Mariana Islands

The economy benefits substantially from

financial assistance from the US. The rate of funding has declined

as locally generated government revenues have grown. The key tourist

industry employs about 50% of the work force and accounts for

roughly one-fourth of GDP. Japanese tourists predominate. Annual

tourist entries have exceeded one-half million in recent years, but

financial difficulties in Japan have caused a temporary slowdown.

The agricultural sector is made up of cattle ranches and small farms

producing coconuts, breadfruit, tomatoes, and melons. Garment

production is by far the most important industry with employment of

17,500 mostly Chinese workers and sizable shipments to the US under

duty and quota exemptions.

Norway

The Norwegian economy is a prosperous bastion of welfare

capitalism, featuring a combination of free market activity and

government intervention. The government controls key areas, such as

the vital petroleum sector (through large-scale state enterprises).

The country is richly endowed with natural resources - petroleum,

hydropower, fish, forests, and minerals - and is highly dependent on

its oil production and international oil prices; in 1999, oil and

gas accounted for 35% of exports. Only Saudi Arabia and Russia

export more oil than Norway. Norway opted to stay out of the EU

during a referendum in November 1994. The government has moved ahead

with privatization. With arguably the highest quality of life

worldwide, Norwegians still worry about that time in the next two

decades when the oil and gas begin to run out. Accordingly, Norway

has been saving its oil-boosted budget surpluses in a Government

Petroleum Fund, which is invested abroad and now is valued at more

than $43 billion. GDP growth was a lackluster 1% in 2002 and 2003

against the background of a faltering European economy.

Oman

Oman's economic performance improved significantly in 2000 due

largely to the upturn in oil prices. The government is moving ahead

with privatization of its utilities, the development of a body of

commercial law to facilitate foreign investment, and increased

budgetary outlays. Oman continues to liberalize its markets and

joined the World Trade Organization (WTrO) in November 2000. GDP

growth improved in 2001 despite the global slowdown and then fell

back to 2.2% in 2002. In order to reduce unemployment, the

government is trying to replace expatriate workers with local

workers. Another government objective is the development of the

nation's gas resources.

Pacific Ocean

The Pacific Ocean is a major contributor to the world

economy and particularly to those nations its waters directly touch.

It provides low-cost sea transportation between East and West,

extensive fishing grounds, offshore oil and gas fields, minerals,

and sand and gravel for the construction industry. In 1996, over 60%

of the world's fish catch came from the Pacific Ocean. Exploitation

of offshore oil and gas reserves is playing an ever-increasing role

in the energy supplies of US, Australia, NZ, China, and Peru. The

high cost of recovering offshore oil and gas, combined with the wide

swings in world prices for oil since 1985, has slowed but not

stopped new drillings.

Pakistan

Pakistan, an impoverished and underdeveloped country,

suffers from internal political disputes, low levels of foreign

investment, and a costly, ongoing confrontation with neighboring

India. Pakistan's economic prospects, although still marred by poor

human development indicators, continued to improve in 2002 following

unprecedented inflows of foreign assistance beginning in 2001.

Foreign exchange reserves have grown to record levels, supported

largely by fast growth in recorded worker remittances. Trade levels

rebounded after a sharp decline in late 2001. The government has

made significant inroads in macroeconomic reform since 2000, but

progress is beginning to slow. Although it is in the second year of

its $1.3 billion IMF Poverty Reduction and Growth Facility,

Islamabad continues to require waivers for politically difficult

reforms. Long-term prospects remain uncertain as development

spending remains low, regional tensions remain high, and political

tensions weaken Pakistan's commitment to lender-recommended economic

reforms. GDP growth will continue to hinge on crop performance;

dependence on foreign oil leaves the import bill vulnerable to

fluctuating oil prices; and efforts to open and modernize the

economy remain uneven.

Palau

The economy consists primarily of tourism, subsistence

agriculture and fishing. The government is the major employer of the

work force, relying heavily on financial assistance from the US.

Business and tourist arrivals numbered 50,000 in FY00/01. The

population enjoys a per capita income twice that of the Philippines

and much of Micronesia. Long-run prospects for the key tourist

sector have been greatly bolstered by the expansion of air travel in

the Pacific, the rising prosperity of leading East Asian countries,

and the willingness of foreigners to finance infrastructure

development.

Palmyra Atoll

no economic activity

Panama

Panama's economy is based primarily on a well-developed

services sector that accounts for three-fourths of GDP. Services

include operating the Panama Canal, banking, the Colon Free Zone,

insurance, container ports, flagship registry, and tourism. A slump

in Colon Free Zone and agricultural exports, the global slowdown,

and the withdrawal of US military forces held back economic growth

in 2000-02. The government has been backing public works programs,

tax reforms, new regional trade agreements, and development of

tourism in order to stimulate growth.

Papua New Guinea

Papua New Guinea is richly endowed with natural

resources, but exploitation has been hampered by rugged terrain and

the high cost of developing infrastructure. Agriculture provides a

subsistence livelihood for 85% of the population. Mineral deposits,

including oil, copper, and gold, account for 72% of export earnings.

The economy has faltered over the past three years but will probably

improve slightly in 2003. Former Prime Minister Mekere MORAUTA had

tried to restore integrity to state institutions, stabilize the

kina, restore stability to the national budget, privatize public

enterprises where appropriate, and ensure ongoing peace on

Bougainville. The government has had considerable success in

attracting international support, specifically gaining the backing

of the IMF and the World Bank in securing development assistance

loans. Significant challenges face Prime Minister Michael SOMARE,

including gaining further investor confidence, continuing efforts to

privatize government assets, and maintaining the support of members

of Parliament.

Paracel Islands

China announced plans in 1997 to open the islands

for tourism.

Paraguay

Paraguay has a market economy marked by a large informal

sector. The informal sector features both reexport of imported

consumer goods to neighboring countries as well as the activities of

thousands of microenterprises and urban street vendors. Because of

the importance of the informal sector, accurate economic measures

are difficult to obtain. A large percentage of the population

derives their living from agricultural activity, often on a

subsistence basis. The formal economy grew by an average of about 3%

annually in 1995-97; but GDP declined slightly in 1998, 1999, and

2000, rose slightly in 2001, only to fall again in 2002. On a per

capita basis, real income has stagnated at 1980 levels. Most

observers attribute Paraguay's poor economic performance to

political uncertainty, corruption, lack of progress on structural

reform, substantial internal and external debt, and deficient

infrastructure.

Peru

Thanks to foreign investment and the cooperation between the

government and the IMF and World Bank, growth was strong in 1994-97

and inflation was brought under control. In 1998, El Nino's impact

on agriculture, the financial crisis in Asia, and instability in

Brazilian markets undercut growth. The following year was again lean

year for Peru, with the aftermath of El Nino and the Asian financial

crisis working its way through the economy. Political instability

resulting from the presidential election and FUJIMORI's subsequent

departure from office limited growth in 2000. The downturn in the

global economy further curtailed growth in 2001. President TOLEDO,

who assumed the presidency in July 2001, has been working to

reinvigorate the economy and reduce unemployment. Economic growth in

2002 is estimated at 4.8%, led by construction in the retail and gas

sectors.

Philippines

In 1998, the Philippine economy - a mixture of

agriculture, light industry, and supporting services - deteriorated

as a result of spillover from the Asian financial crisis and poor

weather conditions. Growth fell to 0.6% in 1998 from 5% in 1997, but

recovered to about 3.3% in 1999, 4.5% in 2000, and 4.5% in 2001. In

2002, the Philippines recorded GDP growth of 4.4% but also incurred

a record budget deficit. As a result, the Philippines is burdened

with a public sector debt equal to more than 100% of GDP. Growth

eased to 3.8% in 2003. The government has promised economic reforms

including going forward with privatization, reforming the tax

system, and promoting additional trade integration within its

region. Considerable drive is required to update the educational

system and the road network.

Pitcairn Islands

The inhabitants of this tiny isolated economy exist

on fishing, subsistence farming, handicrafts, and postage stamps.

The fertile soil of the valleys produces a wide variety of fruits

and vegetables, including citrus, sugarcane, watermelons, bananas,

yams, and beans. Bartering is an important part of the economy. The

major sources of revenue are the sale of postage stamps to

collectors and the sale of handicrafts to passing ships.

Poland

Poland has steadfastly pursued a policy of economic

liberalization throughout the 1990s and today stands out as a

success story among transition economies. Even so, much remains to

be done. The privatization of small and medium state-owned companies

and a liberal law on establishing new firms has encouraged the

development of the private business sector, but legal and

bureaucratic obstacles alongside persistent corruption are hampering

its further development. Poland's agricultural sector remains

handicapped by structural problems, surplus labor, inefficient small

farms, and lack of investment. Restructuring and privatization of

"sensitive sectors" (e.g., coal, steel, railroads, and energy),

while recently initiated, have stalled due to a lack of political

will on the part of the government. Structural reforms in health

care, education, the pension system, and state administration have

resulted in larger than expected fiscal pressures. Further progress

in public finance depends mainly on privatization of Poland's

remaining state sector, the reduction of state employment, and an

overhaul of the tax code to incorporate the growing gray economy and

farmers most of whom pay no tax. The government's determination to

enter the EU has shaped most aspects of its economic policy and new

legislation; in June 2003, 77% of the voters approved membership,

now scheduled for May 2004. Improving Poland's export

competitiveness and containing the internal budget deficit are top

priorities. Due to political uncertainty, the zloty has recently

depreciated in relation to the euro and the dollar while currencies

of the other euro-zone aspirants have been appreciating. GDP per

capita equals that of the 3 Baltic states.

Portugal

Portugal has become a diversified and increasingly

service-based economy since joining the European Community in 1986.

Over the past decade, successive governments have privatized many

state-controlled firms and liberalized key areas of the economy,

including the financial and telecommunications sectors. The country

qualified for the European Monetary Union (EMU) in 1998 and began

circulating the euro on 1 January 2002 along with 11 other EU member

economies. Economic growth has been above the EU average for much of

the past decade, but fell back in 2001-03. GDP per capita stands at

70% of that of the leading EU economies. A poor educational system,

in particular, has been an obstacle to greater productivity and

growth. Portugal has been increasingly overshadowed by lower-cost

producers in Central Europe and Asia as a target for foreign direct

investment. The coalition government faces tough choices in its

attempts to boost Portugal's economic competitiveness and to keep

the budget deficit within the 3% EU ceiling.

Puerto Rico

Puerto Rico has one of the most dynamic economies in the

Caribbean region. A diverse industrial sector has far surpassed

agriculture as the primary locus of economic activity and income.

Encouraged by duty-free access to the US and by tax incentives, US

firms have invested heavily in Puerto Rico since the 1950s. US

minimum wage laws apply. Sugar production has lost out to dairy

production and other livestock products as the main source of income

in the agricultural sector. Tourism has traditionally been an

important source of income, with estimated arrivals of nearly 5

million tourists in 1999. Growth fell off in 2001-02, largely due to

the slowdown in the US economy.

Qatar

Oil and gas account for more than 55% of GDP, roughly 85% of

export earnings, and 70% of government revenues. Oil and gas have

given Qatar a per capita GDP comparable to that of the leading West

European industrial countries. Proved oil reserves of 14.5 billion

barrels should ensure continued output at current levels for 23

years. Production and export of natural gas are becoming

increasingly important to the economy. Qatar's proved reserves of

natural gas exceed 17.9 trillion cubic meters, more than 5% of the

world total and third largest in the world. Long-term goals feature

the development of offshore natural gas reserves. Since 2000, Qatar

has consistently posted trade surpluses largely because of high oil

prices and increased natural gas exports, and Qatar's economy is

expected to receive an added boost as it begins to increase liquid

natural gas exports.

Reunion

The economy has traditionally been based on agriculture, but

services now dominate. Sugarcane has been the primary crop for more

than a century, and in some years it accounts for 85% of exports.

The government has been pushing the development of a tourist

industry to relieve high unemployment, which amounts to one-third of

the labor force. The gap in Reunion between the well-off and the

poor is extraordinary and accounts for the persistent social

tensions. The white and Indian communities are substantially better

off than other segments of the population, often approaching

European standards, whereas minority groups suffer the poverty and

unemployment typical of the poorer nations of the African continent.

The outbreak of severe rioting in February 1991 illustrates the

seriousness of socioeconomic tensions. The economic well-being of

Reunion depends heavily on continued financial assistance from

France.

Romania

Romania began the transition from Communism in 1989 with a

largely obsolete industrial base and a pattern of output unsuited to

the country's needs. The country emerged in 2000 from a punishing

three-year recession thanks to strong demand in EU export markets.

Despite the global slowdown in 2001-02, strong domestic activity in

construction, agriculture, and consumption have kept growth above

4%. An IMF Standby Agreement, signed in 2001, has been accompanied

by slow but palpable gains in privatization, deficit reduction, and

the curbing of inflation. Nonetheless, recent macroeconomic gains

have done little to address Romania's widespread poverty, while

corruption and red tape hinder foreign investment.

Russia

A decade after the implosion of the Soviet Union in December

1991, Russia is still struggling to establish a modern market

economy and achieve strong economic growth. In contrast to its

trading partners in Central Europe - which were able within 3 to 5

years to overcome the initial production declines that accompanied

the launch of market reforms - Russia saw its economy contract for

five years, as the executive and legislature dithered over the

implementation of many of the basic foundations of a market economy.

Russia achieved a slight recovery in 1997, but the government's

stubborn budget deficits and the country's poor business climate

made it vulnerable when the global financial crisis swept through in

1998. The crisis culminated in the August depreciation of the ruble,

a debt default by the government, and a sharp deterioration in

living standards for most of the population. The economy

subsequently has rebounded, growing by an average of more than 6%

annually in 1999-2002 on the back of higher oil prices and the 60%

depreciation of the ruble in 1998. These GDP numbers, along with a

renewed government effort to advance lagging structural reforms,

have raised business and investor confidence over Russia's prospects

in its second decade of transition. Yet serious problems persist.

Oil, natural gas, metals, and timber account for more than 80% of

exports, leaving the country vulnerable to swings in world prices.

Russia's industrial base is increasingly dilapidated and must be

replaced or modernized if the country is to maintain vigorous

economic growth. Other problems include a weak banking system, a

poor business climate that discourages both domestic and foreign

investors, corruption, local and regional government intervention in

the courts, and widespread lack of trust in institutions. In 2003

President PUTIN further tightened his control over the "oligarchs,"

especially in the realm of political expression.

Rwanda

Rwanda is a poor rural country with about 90% of the

population engaged in (mainly subsistence) agriculture. It is the

most densely populated country in Africa; landlocked with few

natural resources and minimal industry. Primary foreign exchange

earners are coffee and tea. The 1994 genocide decimated Rwanda's

fragile economic base, severely impoverished the population,

particularly women, and eroded the country's ability to attract

private and external investment. However, Rwanda has made

substantial progress in stabilizing and rehabilitating its economy

to pre-1994 levels, although poverty levels are higher now. GDP has

rebounded, and inflation has been curbed. Export earnings, however,

have been hindered by low beverage prices, depriving the country of

much needed hard currency. Attempts to diversify into

non-traditional agriculture exports such as flowers and vegetables

have been stymied by a lack of adequate transportation

infrastructure. Despite Rwanda's fertile ecosystem, food production

often does not keep pace with population growth, requiring food to

be imported. Rwanda continues to receive substantial amounts of aid

money and was approved for IMF-World Bank Heavily Indebted Poor

Country (HIPC) initiative debt relief in late 2000. But Kigali's

high defense expenditures cause tension between the government and

international donors and lending agencies.

Saint Helena

The economy depends largely on financial assistance

from the UK, which amounted to about $5 million in 1997 or almost

one-half of annual budgetary revenues. The local population earns

income from fishing, the raising of livestock, and sales of

handicrafts. Because there are few jobs, 25% of the work force has

left to seek employment on Ascension Island, on the Falklands, and

in the UK.

Saint Kitts and Nevis

Sugar was the traditional mainstay of the

Saint Kitts economy until the 1970s. Although the crop still

dominates the agricultural sector, activities such as tourism,

export-oriented manufacturing, and offshore banking have assumed

larger roles in the economy. As tourism revenues are now the chief

source of the islands' foreign exchange, a decline in stopover

tourist arrivals following the September 11, 2001 terrorist attacks

has eroded government finances. The opening of a 1,000+ bed Marriott

hotel in February 2003 is expected to bring in much-needed revenue.

Saint Lucia

The recent changes in the EU import preference regime

and the increased competition from Latin American bananas have made

economic diversification increasingly important in Saint Lucia. The

island nation has been able to attract foreign business and

investment, especially in its offshore banking and tourism

industries. The manufacturing sector is the most diverse in the

Eastern Caribbean area, and the government is trying to revitalize

the banana industry. Economic fundamentals remain solid.

Saint Pierre and Miquelon

The inhabitants have traditionally earned

their livelihood by fishing and by servicing fishing fleets

operating off the coast of Newfoundland. The economy has been

declining, however, because of disputes with Canada over fishing

quotas and a steady decline in the number of ships stopping at Saint

Pierre. In 1992, an arbitration panel awarded the islands an

exclusive economic zone of 12,348 sq km to settle a longstanding

territorial dispute with Canada, although it represents only 25% of

what France had sought. The islands are heavily subsidized by France

to the great betterment of living standards. The government hopes an

expansion of tourism will boost economic prospects. Recent test

drilling for oil may pave the way for development of the energy

sector.

Saint Vincent and the Grenadines

Bananas and other agricultural

products remain the staple of this lower-middle income country's

economy. Although tourism and other services have been growing

moderately in recent years, the government has been ineffective at

introducing new industries. Unemployment remains high, and economic

growth hinges upon seasonal variations in the agricultural and

tourism sectors. Tropical storms wiped out substantial portions of

crops in 1994, 1995, and 2002, and tourism in the Eastern Caribbean

has suffered low arrivals following 11 September 2001. Saint Vincent

is home to a small offshore banking sector, but its restrictive

secrecy laws have come under international review. As of June 2001,

it remained on the Financial Action Task Force's list of

noncooperative jurisdictions. Saint Vincent is also the largest

producer of marijuana in the Eastern Caribbean and is increasingly

being used as a transshipment point for illegal narcotics from South

America.

Samoa

The economy of Samoa has traditionally been dependent on

development aid, family remittances from overseas, and agriculture

and fishing. The country is vulnerable to devastating storms.

Agriculture employs two-thirds of the labor force, and furnishes 90%

of exports, featuring coconut cream, coconut oil, and copra. The

manufacturing sector mainly processes agricultural products. The

decline of fish stocks in the area is a continuing problem. Tourism

is an expanding sector, accounting for 25% of GDP; about 88,000

tourists visited the islands in 2001. The Samoan Government has

called for deregulation of the financial sector, encouragement of

investment, and continued fiscal discipline, meantime protecting the

environment. Observers point to the flexibility of the labor market

as a basic strength for future economic advances. Foreign reserves

are in a relatively healthy state, the external debt is stable, and

inflation is low.

San Marino

The tourist sector contributes over 50% of GDP. In 2000

more than 3 million tourists visited San Marino. The key industries

are banking, wearing apparel, electronics, and ceramics. Main

agricultural products are wine and cheeses. The per capita level of

output and standard of living are comparable to those of the most

prosperous regions of Italy, which supplies much of its food.

Sao Tome and Principe

This small poor island economy has become

increasingly dependent on cocoa since independence 28 years ago.

Cocoa production has substantially declined in recent years because

of drought and mismanagement, but strengthening prices brighten

prospects for 2003. Sao Tome has to import all fuels, most

manufactured goods, consumer goods, and a substantial amount of

food. Over the years, it has been unable to service its external

debt and has had to depend on concessional aid and debt

rescheduling. Sao Tome benefited from $200 million in debt relief in

December 2000 under the Highly Indebted Poor Countries (HIPC)

program. Sao Tome's success in implementing structural reforms has

been rewarded by international donors, who pledged increased

assistance in 2001. Considerable potential exists for development of

a tourist industry, and the government has taken steps to expand

facilities in recent years. The government also has attempted to

reduce price controls and subsidies. Sao Tome is optimistic that

substantial petroleum discoveries are forthcoming in its territorial

waters in the oil-rich waters of the Gulf of Guinea; production

could begin as early as 2004.

Saudi Arabia

This is an oil-based economy with strong government

controls over major economic activities. Saudi Arabia has the

largest reserves of petroleum in the world (26% of the proved

reserves), ranks as the largest exporter of petroleum, and plays a

leading role in OPEC. The petroleum sector accounts for roughly 75%

of budget revenues, 45% of GDP, and 90% of export earnings. About

25% of GDP comes from the private sector. Roughly 4 million foreign

workers play an important role in the Saudi economy, for example, in

the oil and service sectors. The government in 1999 announced plans

to begin privatizing the electricity companies, which follows the

ongoing privatization of the telecommunications company. The

government is supporting private sector growth to lessen the

kingdom's dependence on oil and increase employment opportunities

for the swelling Saudi population. Priorities for government

spending in the short term include additional funds for the water

and sewage systems and for education. Water shortages and rapid

population growth constrain the government's efforts to increase

self-sufficiency in agricultural products.

Senegal

In January 1994, Senegal undertook a bold and ambitious

economic reform program with the support of the international donor

community. This reform began with a 50% devaluation of Senegal's

currency, the CFA franc, which was linked at a fixed rate to the

French franc. Government price controls and subsidies have been

steadily dismantled. After seeing its economy contract by 2.1% in

1993, Senegal made an important turnaround, thanks to the reform

program, with real growth in GDP averaging 5% annually during

1995-2002. Annual inflation had been pushed down to less than 1%,

but rose to an estimated 3.3% in 2001 and 3.0% in 2002. Investment

rose steadily from 13.8% of GDP in 1993 to 16.5% in 1997. As a

member of the West African Economic and Monetary Union (WAEMU),

Senegal is working toward greater regional integration with a

unified external tariff. Senegal also realized full Internet

connectivity in 1996, creating a miniboom in information

technology-based services. Private activity now accounts for 82% of

GDP. In 2003, GDP will probably again grow at about 5%. On the

negative side, Senegal faces deep-seated urban problems of chronic

unemployment, trade union militancy, juvenile delinquency, and drug

addiction.

Serbia and Montenegro

MILOSEVIC-era mismanagement of the economy, an

extended period of economic sanctions, and the damage to

Yugoslavia's infrastructure and industry during the war in Kosovo

have left the economy only half the size it was in 1990. Since the

ousting of former Federal Yugoslav President MILOSEVIC in October

2000, the Democratic Opposition of Serbia (DOS) coalition government

has implemented stabilization measures and embarked on an aggressive

market reform program. After renewing its membership in the IMF in

December 2000, Yugoslavia continued to reintegrate into the

international community by rejoining the World Bank (IBRD) and the

European Bank for Reconstruction and Development (EBRD). A World

Bank-European Commission sponsored Donors' Conference held in June

2001 raised $1.3 billion for economic restructuring. An agreement

rescheduling the country's $4.5 billion Paris Club government debts

was concluded in November 2001; it will write off 66% of the debt; a

similar debt relief agreement on its $2.8 billion London Club

commercial debt is still pending. The smaller republic of Montenegro

severed its economy from federal control and from Serbia during the

MILOSEVIC era and continues to maintain its own central bank, uses

the euro instead of the Yugoslav dinar as official currency,

collects customs tariffs, and manages its own budget. Kosovo, while

technically still part of the Federal Republic of Yugoslavia (now

Serbia and Montenegro) according to United Nations Security Council

Resolution 1244, is moving toward local autonomy under United

Nations Interim Administration Mission in Kosovo (UNMIK) and is

dependent on the international community for financial and technical

assistance. The euro and the Yugoslav dinar are official currencies,

and UNMIK collects taxes and manages the budget. The complexity of

Serbia and Montenegro political relationships, slow progress in

privatization, and stagnation in the European economy are holding

back the economy. Arrangements with the IMF, especially requirements

for fiscal discipline, are an important element in policy formation.

Severe unemployment remains a key political economic problem.

Seychelles

Since independence in 1976, per capita output in this

Indian Ocean archipelago has expanded to roughly seven times the old

near-subsistence level. Growth has been led by the tourist sector,

which employs about 30% of the labor force and provides more than

70% of hard currency earnings, and by tuna fishing. In recent years

the government has encouraged foreign investment in order to upgrade

hotels and other services. At the same time, the government has

moved to reduce the dependence on tourism by promoting the

development of farming, fishing, and small-scale manufacturing. A

sharp drop illustrated the vulnerability of the tourist sector in

1991-92 due largely to the Gulf war, and once again following the 11

September 2001 terrorist attacks on the US. Other issues facing the

government are the curbing of the budget deficit, including the

containment of social welfare costs, and further privatization of

public enterprises. Growth slowed in 1998-2002, due to sluggish

tourist and tuna sectors. Also, tight controls on exchange rates and

the scarcity of foreign exchange have impaired short-term economic

prospects. The black market value of the Seychelles rupee is half

the official exchange rate; without a devaluation of the currency

the tourist sector should remain sluggish as vacationers seek

cheaper destinations such as Comoros, Mauritius, and Madagascar.

Sierra Leone

Sierra Leone is an extremely poor African nation with

tremendous inequality in income distribution. It does have

substantial mineral, agricultural, and fishery resources. However,

the economic and social infrastructure is not well developed, and

serious social disorders continue to hamper economic development,

following a 11-year civil war. About two-thirds of the working-age

population engages in subsistence agriculture. Manufacturing

consists mainly of the processing of raw materials and of light

manufacturing for the domestic market. Plans continue to reopen

bauxite and rutile mines shut down during the conflict. The major

source of hard currency consists of the mining of diamonds. The fate

of the economy depends upon the maintenance of domestic peace and

the continued receipt of substantial aid from abroad, which is

essential to offset the severe trade imbalance and to supplement

government revenues.

Singapore

Singapore, a highly developed and successful free market

economy, enjoys a remarkably open and corruption-free environment,

stable prices, and one of the highest per capita GDPs in the world.

The economy depends heavily on exports, particularly in electronics

and manufacturing. It was hard hit in 2001-2002 by the global

recession and the slump in the technology sector. The government

hopes to establish a new growth path that will be less vulnerable to

the external business cycle than the current export-led model but is

unlikely to abandon efforts to establish Singapore as Southeast

Asia's financial and high-tech hub.

Slovakia

Slovakia has mastered much of the difficult transition from

a centrally planned economy to a modern market economy. The DZURINDA

government has made excellent progress in 2001-03 in macroeconomic

stabilization and structural reform. Major privatizations are nearly

complete, the banking sector is almost completely in foreign hands,

and foreign investment has picked up. Slovakia's economy exceeded

expectations in 2001-03, despite the general European slowdown.

Unemployment, at an unacceptable 15% in 2003, remains the economy's

Achilles heel. The government faces other strong challenges in 2004,

especially the cutting of budget and current account deficits, the

containment of inflation, and the strengthening of the health care

system.

Slovenia

Slovenia, with its historical ties to Western Europe,

enjoys a GDP per capita substantially higher than that of the other

transitioning economies of Central Europe. Privatization of the

economy proceeded at an accelerated pace in 2002-3, and the budget

deficit dropped from 3.0% of GDP in 2002 to 1.9% in 2003. Despite

the economic slowdown in Europe in 2001-03, Slovenia maintained 3%

growth. Structural reforms to improve the business environment allow

for greater foreign participation in Slovenia's economy and help to

lower unemployment. Further measures to curb inflation are also

needed. Corruption and the high degree of coordination between

government, business, and central bank policy are issues of concern

in the run-up to Slovenia's scheduled 1 May 2004 accession to the

European Union.

Solomon Islands

The bulk of the population depends on agriculture,

fishing, and forestry for at least part of their livelihood. Most

manufactured goods and petroleum products must be imported. The

islands are rich in undeveloped mineral resources such as lead,

zinc, nickel, and gold. However, severe ethnic violence, the closing

of key business enterprises, and an empty government treasury have

led to serious economic disarray, indeed near collapse. Tanker

deliveries of crucial fuel supplies (including those for electrical

generation) have become sporadic due to the government's inability

to pay and attacks against ships. Telecommunications are threatened

by the nonpayment of bills and by the lack of technical and

maintenance staff many of whom have left the country.

Somalia

Somalia's economic fortunes are being driven by its deep

political divisions. The northern area has declared its independence

as "Somaliland"; the central area, Puntland, is a self-declared

autonomous state; and the remaining southern portion is riddled with

the struggles of rival factions. Economic life continues, in part

because much activity is local and relatively easily protected.

Agriculture is the most important sector, with livestock normally

accounting for about 40% of GDP and about 65% of export earnings,

but Saudi Arabia's recent ban on Somali livestock, because of Rift

Valley Fever concerns, has severely hampered the sector. Nomads and

semi-nomads, who are dependent upon livestock for their livelihood,

make up a large portion of the population. Livestock, hides, fish,

charcoal, and bananas are Somalia's principal exports, while sugar,

sorghum, corn, qat, and machined goods are the principal imports.

Somalia's small industrial sector, based on the processing of

agricultural products, has largely been looted and sold as scrap

metal. Despite the seeming anarchy, Somalia's service sector has

managed to survive and grow. Telecommunication firms provide

wireless services in most major cities and offer the lowest

international call rates on the continent. In the absence of a

formal banking sector, money exchange services have sprouted

throughout the country, handling between $200 million and $500

million in remittances annually. Mogadishu's main market offers a

variety of goods from food to the newest electronic gadgets. Hotels

continue to operate, and security is provided by militias. The

ongoing civil disturbances and clan rivalries, however, have

interfered with any broad-based economic development and

international aid arrangements. In 2002 Somalia's overdue financial

obligations to the IMF continued to grow.

South Africa

South Africa is a middle-income, emerging market with

an abundant supply of natural resources; well-developed financial,

legal, communications, energy, and transport sectors; a stock

exchange that ranks among the 10 largest in the world; and a modern

infrastructure supporting an efficient distribution of goods to

major urban centers throughout the region. However, growth has not

been strong enough to lower South Africa's high unemployment rate;

and daunting economic problems remain from the apartheid era,

especially poverty and lack of economic empowerment among the

disadvantaged groups. High crime and HIV/AIDS infection rates also

deter investment. South African economic policy is fiscally

conservative, but pragmatic, focusing on targeting inflation and

liberalizing trade as means to increase job growth and household

income.

South Georgia and the South Sandwich Islands

Some fishing takes

place in adjacent waters. There is a potential source of income from

harvesting finfish and krill. The islands receive income from

postage stamps produced in the UK, sale of fishing licenses, and

harbor and landing fees from tourist vessels. Tourism from

specialized cruise ships is increasing rapidly.

Southern Ocean

Fisheries in 2000-01 (1 July to 30 June) landed

112,934 metric tons, of which 87% was krill and 11% Patagonian

toothfish. International agreements were adopted in late 1999 to

reduce illegal, unreported, and unregulated fishing, which in the

2000-01 season landed, by one estimate, 8,376 metric tons of

Patagonian and antarctic toothfish. In the 2000-01 antarctic summer

12,248 tourists, most of them seaborne, visited the Southern Ocean

and Antarctica, compared to 14,762 the previous year.

Spain

Spain's mixed capitalist economy supports a GDP that on a per

capita basis is 80% that of the four leading West European

economies. Its center-right government successfully worked to gain

admission to the first group of countries launching the European

single currency (the euro) on 1 January 1999. The AZNAR

administration has continued to advocate liberalization,

privatization, and deregulation of the economy and has introduced

some tax reforms to that end. Unemployment has been steadily falling

under the AZNAR administration but remains high at 11.7%. The

government intends to make further progress in changing labor laws

and reforming pension schemes, which are key to the sustainability

of both Spain's internal economic advances and its competitiveness

in a single currency area. A general strike in mid-2002 reduced

cooperation between labor and government. Growth of 2.4% in 2003 was

satisfactory given the background of a faltering European economy.

Adjusting to the monetary and other economic policies of an

integrated Europe - and reducing unemployment - will pose challenges

to Spain over the next few years.

Spratly Islands

Economic activity is limited to commercial fishing.

The proximity to nearby oil- and gas-producing sedimentary basins

suggests the potential for oil and gas deposits, but the region is

largely unexplored, and there are no reliable estimates of potential

reserves; commercial exploitation has yet to be developed.

Sri Lanka

In 1977, Colombo abandoned statist economic policies and

its import substitution trade policy for market-oriented policies

and export-oriented trade. Sri Lanka's most dynamic sectors now are

food processing, textiles and apparel, food and beverages,

telecommunications, and insurance and banking. By 1996 plantation

crops made up only 20% of exports (compared with 93% in 1970), while

textiles and garments accounted for 63%. GDP grew at an average

annual rate of 5.5% in the early 1990s until a drought and a

deteriorating security situation lowered growth to 3.8% in 1996. The

economy rebounded in 1997-2000 with average growth of 5.3%, but 2001

saw the first contraction in the country's history, -1.4%, due to a

combination of power shortages, severe budgetary problems, the

global slowdown, and continuing civil strife. Growth recovered to

3.2% in 2002. About 800,000 Sri Lankans work abroad, 90% in the

Middle East. They send home about $1 billion a year.

Sudan

Sudan has turned around a struggling economy with sound

economic policies and infrastructure investments, but it still faces

formidable economic problems, notably the low level of per capita

output. From 1997 to date, Sudan has been implementing IMF

macroeconomic reforms. In 1999 Sudan began exporting crude oil and

in the last quarter of 1999 recorded its first trade surplus, which,

along with monetary policy, has stabilized the exchange rate.

Increased oil production, revived light industry, and expanded

export processing zones helped maintain GDP growth at 5.1% in 2002.

Agriculture production remains Sudan's most important sector,

employing 80% of the work force and contributing 43% of GDP, but

most farms remain rain-fed and susceptible to drought. Chronic

domestic instability, lagging reforms, adverse weather, and weak

world agricultural prices - but, above all, the low starting point -

ensure that much of the population will remain at or below the

poverty line for years.

Suriname

The economy is dominated by the bauxite industry, which

accounts for more than 15% of GDP and 70% of export earnings.

Suriname's economic prospects for the medium term will depend on

renewed commitment to responsible monetary and fiscal policies and

to the introduction of structural reforms to liberalize markets and

promote competition. The government of Ronald VENETIAAN has begun an

austerity program, raised taxes, and attempted to control spending.

However, in 2002, President VENETIAAN agreed to a large pay raise

for civil servants, which threatens his earlier gains in stabilizing

the economy. The Dutch Government has agreed to restart the aid

flow, which will allow Suriname to access international development

financing. The short-term economic outlook depends on the

government's ability to control inflation and on the development of

projects in the bauxite and gold mining sectors.

Svalbard

Coal mining is the major economic activity on Svalbard. The

treaty of 9 February 1920 gives the 41 signatories equal rights to

exploit mineral deposits, subject to Norwegian regulation. Although

US, UK, Dutch, and Swedish coal companies have mined in the past,

the only companies still mining are Norwegian and Russian. The

settlements on Svalbard are essentially company towns. The Norwegian

state-owned coal company employs nearly 60% of the Norwegian

population on the island, runs many of the local services, and

provides most of the local infrastructure. There is also some

trapping of seal, polar bear, fox, and walrus.

Swaziland

In this small, landlocked economy, subsistence agriculture

occupies more than 80% of the population. The manufacturing sector

has diversified since the mid-1980s. Sugar and wood pulp remain

important foreign exchange earners. Mining has declined in

importance in recent years with only coal and quarry stone mines

remaining active. Surrounded by South Africa, except for a short

border with Mozambique, Swaziland is heavily dependent on South

Africa from which it receives nine-tenths of its imports and to

which it sends more than two-thirds of its exports. Customs duties

from the Southern African Customs Union and worker remittances from

South Africa substantially supplement domestically earned income.

The government is trying to improve the atmosphere for foreign

investment. Overgrazing, soil depletion, drought, and sometimes

floods persist as problems for the future. More than one-fourth of

the population needed emergency food aid in 2002 because of drought,

and more than one-third of the adult population was infected by

HIV/AIDS.

Sweden

Aided by peace and neutrality for the whole 20th century,

Sweden has achieved an enviable standard of living under a mixed

system of high-tech capitalism and extensive welfare benefits. It

has a modern distribution system, excellent internal and external

communications, and a skilled labor force. Timber, hydropower, and

iron ore constitute the resource base of an economy heavily oriented

toward foreign trade. Privately owned firms account for about 90% of

industrial output, of which the engineering sector accounts for 50%

of output and exports. Agriculture accounts for only 2% of GDP and

2% of the jobs. The government's commitment to fiscal discipline

resulted in a substantial budgetary surplus in 2001, which was cut

by more than half in 2002, due to the global economic slowdown,

revenue declines, and spending increases. The Swedish central bank

(the Riksbank) is focusing on price stability with its inflation

target of 2%. Growth remained sluggish in 2003. On September 14,

2003, Swedish voters turned down entry into the euro system,

concerned about the impact on democracy and sovereignty.

Switzerland

Switzerland is a prosperous and stable modern market

economy with low unemployment, a highly skilled labor force, and a

per capita GDP larger than that of the big western European

economies. The Swiss in recent years have brought their economic

practices largely into conformity with the EU's to enhance their

international competitiveness. Switzerland remains a safe haven for

investors, because it has maintained a degree of bank secrecy and

has kept up the franc's long-term external value. Reflecting the

anemic economic conditions of Europe, GDP growth dropped in 2001 to

about 0.8%, to 0.2% in 2002, and to -0.3% in 2003.

Syria

Syria's predominantly statist economy has been growing, on

average, more slowly than its 2.4% annual population growth rate,

causing a persistent decline in per capita GDP. Recent legislation

allows private banks to operate in Syria, although a private banking

sector will take years and further government cooperation to

develop. External factors such as the international war on

terrorism, the Israeli-Palestinian conflict, and the war between the

US-led coalition and Iraq probably will drive real annual GDP growth

levels back below their 3.5% spike in 2002. A long-run economic

constraint is the pressure on water supplies caused by rapid

population growth, industrial expansion, and increased water

pollution.

Taiwan

Taiwan has a dynamic capitalist economy with gradually

decreasing guidance of investment and foreign trade by government

authorities. In keeping with this trend, some large government-owned

banks and industrial firms are being privatized. Exports have

provided the primary impetus for industrialization. The trade

surplus is substantial, and foreign reserves are the world's third

largest. Agriculture contributes 2% to GDP, down from 32% in 1952.

While Taiwan is a major investor throughout Southeast Asia, China

has become the largest destination for investment and has overtaken

the US to become Taiwan's largest export market. Because of its

conservative financial approach and its entrepreneurial strengths,

Taiwan suffered little compared with many of its neighbors from the

Asian financial crisis in 1998. The global economic downturn,

combined with problems in policy coordination by the administration

and bad debts in the banking system, pushed Taiwan into recession in

2001, the first year of negative growth ever recorded. Unemployment

also reached record levels. Output recovered moderately in 2002 in

the face of continued global slowdown, fragile consumer confidence,

and bad bank loans. Growing economic ties with China are a dominant

long-term factor. Exports to China - mainly parts and equipment for

the assembly of goods for export to developed countries - drove

Taiwan's economic recovery in 2002.

Tajikistan

Tajikistan has the lowest per capita GDP among the 15

former Soviet republics. Only 8% to 10% of the land area is arable.

Cotton is the most important crop. Mineral resources, varied but

limited in amount, include silver, gold, uranium, and tungsten.

Industry consists only of a large aluminum plant, hydropower

facilities, and small obsolete factories mostly in light industry

and food processing. The civil war (1992-97) severely damaged the

already weak economic infrastructure and caused a sharp decline in

industrial and agricultural production. Even though 60% of its

people continue to live in abject poverty, Tajikistan has

experienced steady economic growth since 1997. Continued

privatization of medium and large state-owned enterprises will

further increase productivity. Tajikistan's economic situation,

however, remains fragile due to uneven implementation of structural

reforms, weak governance, widespread unemployment, and the external

debt burden. A debt restructuring agreement was reached with Russia

in December 2002, including an interest rate of 4%, a 3-year grace

period, and a US $49.8 million credit to the Central Bank of

Tajikistan.

Tanzania

Tanzania is one of the poorest countries in the world. The

economy depends heavily on agriculture, which accounts for half of

GDP, provides 85% of exports, and employs 80% of the work force.

Topography and climatic conditions, however, limit cultivated crops

to only 4% of the land area. Industry traditionally featured the

processing of agricultural products and light consumer goods. The

World Bank, the International Monetary Fund, and bilateral donors

have provided funds to rehabilitate Tanzania's out-of-date economic

infrastructure and to alleviate poverty. Growth in 1991-2002

featured a pickup in industrial production and a substantial

increase in output of minerals, led by gold. Oil and gas exploration

and development played an important role in this growth. Recent

banking reforms have helped increase private sector growth and

investment. Continued donor support and solid macroeconomic policies

should support continued real GDP growth of 5% in 2003.

Thailand

Thailand has a free enterprise economy and welcomes foreign

investment. Exports feature computers and electrical appliances.

After enjoying the world's highest growth rate from 1985 to 1995 -

averaging almost 9% annually - increased speculative pressure on

Thailand's currency in 1997 led to a crisis that uncovered financial

sector weaknesses and forced the government to float the baht. Long

pegged at 25 to the dollar, the baht reached its lowest point of 56

to the dollar in January 1998, and the economy contracted by 10.2%

that same year. Thailand then entered a recovery stage, expanding by

4.2% in 1999 and 4.4% in 2000, largely due to strong exports. An

ailing financial sector and the slow pace of corporate debt

restructuring, combined with a softening of global demand, slowed

growth to 1.4% in 2001. Increased consumption and investment

spending pushed GDP growth up to 5.2% in 2002 despite a sluggish

global economy.

Togo

This small sub-Saharan economy is heavily dependent on both

commercial and subsistence agriculture, which provides employment

for 65% of the labor force. Some basic foodstuffs must still be

imported. Cocoa, coffee, and cotton generate about 40% of export

earnings, with cotton being the most important cash crop. Togo is

the world's fourth-largest producer of phosphate, but production

fell an estimated 22% in 2002 due to power shortages and the cost of

developing new deposits. The government's decade-long effort,

supported by the World Bank and the IMF, to implement economic

reform measures, encourage foreign investment, and bring revenues in

line with expenditures has moved slowly. Progress depends on

following through on privatization, increased openness in government

financial operations, progress toward legislative elections, and

continued support from foreign donors.

Tokelau

Tokelau's small size (three villages), isolation, and lack

of resources greatly restrain economic development and confine

agriculture to the subsistence level. The people rely heavily on aid

from New Zealand - about $4 million annually - to maintain public

services, with annual aid being substantially greater than GDP. The

principal sources of revenue come from sales of copra, postage

stamps, souvenir coins, and handicrafts. Money is also remitted to

families from relatives in New Zealand.

Tonga

Tonga has a small, open economy with a narrow export base in

agricultural goods. Squash, coconuts, bananas, and vanilla beans are

the main crops, and agricultural exports make up two-thirds of total

exports. The country must import a high proportion of its food,

mainly from New Zealand. Tourism is the second-largest source of

hard currency earnings following remittances. The country remains

dependent on external aid and remittances from Tongan communities

overseas to offset its trade deficit. The government is emphasizing

the development of the private sector, especially the encouragement

of investment, and is committing increased funds for health and

education. Tonga has a reasonably sound basic infrastructure and

well-developed social services.

Trinidad and Tobago

Trinidad and Tobago has earned a reputation as

an excellent investment site for international businesses. A leading

performer the past four years has been the booming natural gas

sector. Tourism is a growing sector, although not proportionately as

important as in many other Caribbean islands. The economy benefits

from low inflation and a trade surplus. The year 2002 was marked by

solid growth in the oil sector, offset in part by domestic political

uncertainty.

Tromelin Island

no economic activity

Tunisia

Tunisia has a diverse economy, with important agricultural,

mining, energy, tourism, and manufacturing sectors. Governmental

control of economic affairs while still heavy has gradually lessened

over the past decade with increasing privatization, simplification

of the tax structure, and a prudent approach to debt. Real growth

averaged 5.4% in 1997-2001 but slowed to 1.9% in 2002 because of

agricultural drought, slow investment, and lackluster tourism.

Increased rainfall portends higher growth levels for 2003, but

continued regional tension from the war in Iraq will most likely

continue to suppress tourism earnings. Tunisia has agreed to

gradually remove barriers to trade with the European Union over the

next decade. Broader privatization, further liberalization of the

investment code to increase foreign investment, improvements in

government efficiency, and reduction of the trade deficit are among

the challenges for the future.

Turkey

Turkey's dynamic economy is a complex mix of modern industry

and commerce along with a traditional agriculture sector that in

2001 still accounted for 40% of employment. It has a strong and

rapidly growing private sector, yet the state still plays a major

role in basic industry, banking, transport, and communication. The

most important industry - and largest exporter - is textiles and

clothing, which is almost entirely in private hands. In recent years

the economic situation has been marked by erratic economic growth

and serious imbalances. Real GNP growth has exceeded 6% in many

years, but this strong expansion has been interrupted by sharp

declines in output in 1994, 1999, and 2001. Meanwhile, the public

sector fiscal deficit has regularly exceeded 10% of GDP - due in

large part to the huge burden of interest payments, which account

for more than 50% of central government spending. Inflation, in

recent years in the high double-digit range, fell to 26% in 2003.

Perhaps because of these problems, foreign direct investment in

Turkey remains low - less than $1 billion annually. In late 2000 and

early 2001 a growing trade deficit and serious weaknesses in the

banking sector plunged the economy into crisis - forcing Turkey to

float the lira and pushing the country into recession. Results in

2002-03 were much better, because of strong financial support from

the IMF and tighter fiscal policy. Continued slow global growth and

serious political tensions in the Middle East could result in

negative growth in 2004.

Turkmenistan

Turkmenistan is largely desert country with intensive

agriculture in irrigated oases and large gas and oil resources.

One-half of its irrigated land is planted in cotton, making it the

world's tenth-largest producer. With an authoritarian ex-Communist

regime in power and a tribally based social structure, Turkmenistan

has taken a cautious approach to economic reform, hoping to use gas

and cotton sales to sustain its inefficient economy. Privatization

goals remain limited. In 1998-2003, Turkmenistan suffered from the

continued lack of adequate export routes for natural gas and from

obligations on extensive short-term external debt. At the same time,

however, total exports rose by 38% in 2003, largely because of

higher international oil and gas prices. Overall prospects in the

near future are discouraging because of widespread internal poverty,

the burden of foreign debt, and the unwillingness of the government

to adopt market-oriented reforms. However, Turkmenistan's

cooperation with the international community in transporting

humanitarian aid to Afghanistan may foreshadow a change in the

atmosphere for foreign investment, aid, and technological support.

Turkmenistan's economic statistics are state secrets, and GDP and

other figures are subject to wide margins of error. In any event,

GDP increased substantially in 2003 because of a strong recovery in

agriculture and rapid industrial growth.

Turks and Caicos Islands

The Turks and Caicos economy is based on

tourism, fishing, and offshore financial services. Most capital

goods and food for domestic consumption are imported. The US is the

leading source of tourists, accounting for more than half of the

93,000 visitors in 1998. Major sources of government revenue include

fees from offshore financial activities and customs receipts.

Tourism fell by 6% in 2002 but appeared to be picking up at yearend.

Tuvalu

Tuvalu consists of a densely populated, scattered group of

nine coral atolls with poor soil. The country has no known mineral

resources and few exports. Subsistence farming and fishing are the

primary economic activities. Fewer than 1,000 tourists, on average,

visit Tuvalu annually. Government revenues largely come from the

sale of stamps and coins and worker remittances. About 1,000

Tuvaluans work in Nauru in the phosphate mining industry. Nauru has

begun repatriating Tuvaluans, however, as phosphate resources

decline. Substantial income is received annually from an

international trust fund established in 1987 by Australia, NZ, and

the UK and supported also by Japan and South Korea. Thanks to wise

investments and conservative withdrawals, this Fund has grown from

an initial $17 million to over $35 million in 1999. The US

government is also a major revenue source for Tuvalu, because of

payments from a 1988 treaty on fisheries. In an effort to reduce its

dependence on foreign aid, the government is pursuing public sector

reforms, including privatization of some government functions and

personnel cuts of up to 7%. In 1998, Tuvalu began deriving revenue

from use of its area code for "900" lines and in 2000, from the

lease of its ".tv" Internet domain name. Royalties from these new

technology sources could increase substantially over the next

decade. With merchandise exports only a fraction of merchandise

imports, continued reliance must be placed on fishing and

telecommunications license fees, remittances from overseas workers,

official transfers, and investment income from overseas assets.

Uganda

Uganda has substantial natural resources, including fertile

soils, regular rainfall, and sizable mineral deposits of copper and

cobalt. Agriculture is the most important sector of the economy,

employing over 80% of the work force. Coffee accounts for the bulk

of export revenues. Since 1986, the government - with the support of

foreign countries and international agencies - has acted to

rehabilitate and stabilize the economy by undertaking currency

reform, raising producer prices on export crops, increasing prices

of petroleum products, and improving civil service wages. The policy

changes are especially aimed at dampening inflation and boosting

production and export earnings. During 1990-2001, the economy turned

in a solid performance based on continued investment in the

rehabilitation of infrastructure, improved incentives for production

and exports, reduced inflation, gradually improved domestic

security, and the return of exiled Indian-Ugandan entrepreneurs.

Ongoing Ugandan involvement in the war in the Democratic Republic of

the Congo, corruption within the government, and slippage in the

government's determination to press reforms raise doubts about the

continuation of strong growth. In 2000, Uganda qualified for

enhanced Highly Indebted Poor Countries (HIPC) debt relief worth

$1.3 billion and Paris Club debt relief worth $145 million. These

amounts combined with the original HIPC debt relief added up to

about $2 billion. Growth for 2001-02 was solid despite continued

decline in the price of coffee, Uganda's principal export. Prospects

for 2003 are mixed, with probable strengthening of coffee prices yet

with halting growth in the economies of major export customers.

Ukraine

After Russia, the Ukrainian republic was far and away the

most important economic component of the former Soviet Union,

producing about four times the output of the next-ranking republic.

Its fertile black soil generated more than one-fourth of Soviet

agricultural output, and its farms provided substantial quantities

of meat, milk, grain, and vegetables to other republics. Likewise,

its diversified heavy industry supplied the unique equipment (for

example, large diameter pipes) and raw materials to industrial and

mining sites (vertical drilling apparatus) in other regions of the

former USSR. Ukraine depends on imports of energy, especially

natural gas, to meet some 85% of its annual energy requirements.

Shortly after independence in December 1991, the Ukrainian

Government liberalized most prices and erected a legal framework for

privatization, but widespread resistance to reform within the

government and the legislature soon stalled reform efforts and led

to some backtracking. Output by 1999 had fallen to less than 40% of

the 1991 level. Loose monetary policies pushed inflation to

hyperinflationary levels in late 1993. Ukraine's dependence on

Russia for energy supplies and the lack of significant structural

reform have made the Ukrainian economy vulnerable to external

shocks. Now in his second term, President KUCHMA has pledged to

reduce the number of government agencies, streamline the regulatory

process, create a legal environment to encourage entrepreneurs, and

enact a comprehensive tax overhaul. Reforms in the more politically

sensitive areas of structural reform and land privatization are

still lagging. Outside institutions - particularly the IMF - have

encouraged Ukraine to quicken the pace and scope of reforms. GDP in

2000 showed strong export-based growth of 6% - the first growth

since independence - and industrial production grew 12.9%. The

economy continued to expand in 2001 as real GDP rose 9% and

industrial output grew by over 14%. Growth of 4.1% in 2002 was more

moderate, in part a reflection of faltering growth in the developed

world. In general, growth has been undergirded by strong domestic

demand, low inflation, and solid consumer and investor confidence.

Growth was a sturdy 6% in 2003 despite a loss of mementum in needed

economic reforms.

United Arab Emirates

The UAE has an open economy with a high per

capita income and a sizable annual trade surplus. Its wealth is

based on oil and gas output (about 33% of GDP), and the fortunes of

the economy fluctuate with the prices of those commodities. Since

1973, the UAE has undergone a profound transformation from an

impoverished region of small desert principalities to a modern state

with a high standard of living. At present levels of production, oil

and gas reserves should last for more than 100 years. The government

has increased spending on job creation and infrastructure expansion

and is opening up its utilities to greater private sector

involvement.

United Kingdom

The UK, a leading trading power and financial center,

is one of the quartet of trillion dollar economies of Western

Europe. Over the past two decades the government has greatly reduced

public ownership and contained the growth of social welfare

programs. Agriculture is intensive, highly mechanized, and efficient

by European standards, producing about 60% of food needs with only

1% of the labor force. The UK has large coal, natural gas, and oil

reserves; primary energy production accounts for 10% of GDP, one of

the highest shares of any industrial nation. Services, particularly

banking, insurance, and business services, account by far for the

largest proportion of GDP while industry continues to decline in

importance. GDP growth slipped in 2001-03 as the global downturn,

the high value of the pound, and the bursting of the "new economy"

bubble hurt manufacturing and exports. Still, the economy is one of

the strongest in Europe; inflation, interest rates, and unemployment

remain low. The relatively good economic performance has complicated

the BLAIR government's efforts to make a case for Britain to join

the European Economic and Monetary Union (EMU). Critics point out,

however, that the economy is doing well outside of EMU, and they

point to public opinion polls that continue to show a majority of

Britons opposed to the single currency. Meantime, the government has

been speeding up the improvement of education, transport, and health

services, at a cost in higher taxes. The war in March-April 2003

between a US-led coalition and Iraq, together with the subsequent

problems of restoring the economy and the polity, involve a heavy

commitment of British military forces.

United States

The US has the largest and most technologically

powerful economy in the world, with a per capita GDP of $37,600. In

this market-oriented economy, private individuals and business firms

make most of the decisions, and the federal and state governments

buy needed goods and services predominantly in the private

marketplace. US business firms enjoy considerably greater

flexibility than their counterparts in Western Europe and Japan in

decisions to expand capital plant, lay off surplus workers, and

develop new products. At the same time, they face higher barriers to

entry in their rivals' home markets than the barriers to entry of

foreign firms in US markets. US firms are at or near the forefront

in technological advances, especially in computers and in medical,

aerospace, and military equipment, although their advantage has

narrowed since the end of World War II. The onrush of technology

largely explains the gradual development of a "two-tier labor

market" in which those at the bottom lack the education and the

professional/technical skills of those at the top and, more and

more, fail to get comparable pay raises, health insurance coverage,

and other benefits. Since 1975, practically all the gains in

household income have gone to the top 20% of households. The years

1994-2000 witnessed solid increases in real output, low inflation

rates, and a drop in unemployment to below 5%. The year 2001 saw the

end of boom psychology and performance, with output increasing only

0.3% and unemployment and business failures rising substantially.

The response to the terrorist attacks of 11 September 2001 showed

the remarkable resilience of the economy. Moderate recovery took

place in 2002, with the GDP growth rate rising to 2.45%. A major

short-term problem in first half 2002 was a sharp decline in the

stock market, fueled in part by the exposure of dubious accounting

practices in some major corporations. The war in March/April 2003

between a US-led coalition and Iraq shifted resources to military

industries and introduced uncertainties about investment and

employment in other sectors of the economy. Long-term problems

include inadequate investment in economic infrastructure, rapidly

rising medical and pension costs of an aging population, sizable

trade deficits, and stagnation of family income in the lower

economic groups.

Uruguay

Uruguay's economy is characterized by an export-oriented

agricultural sector, a well-educated workforce, and high levels of

social spending. After averaging growth of 5% annually during

1996-98, in 1999-2002 the economy suffered a major downturn,

stemming largely from lower demand in Argentina and Brazil, which

together account for nearly half of Uruguay's exports. Total GDP in

these four years dropped by nearly 20%, with 2002 the worst year.

Unemployment rose to nearly 20% in 2002, inflation surged, and the

burden of external debt doubled. Cooperation with the IMF and the US

has limited the damage, which is still extensive. Moves to

reschedule debt and promote economic recovery may help limit a

further decline in output in 2003.

Uzbekistan

Uzbekistan is a dry, landlocked country of which 11%

consists of intensely cultivated, irrigated river valleys. More than

60% of its population lives in densely populated rural communities.

Uzbekistan is now the world's second-largest cotton exporter, a

large producer of gold and oil, and a regionally significant

producer of chemicals and machinery. Following independence in

December 1991, the government sought to prop up its Soviet-style

command economy with subsidies and tight controls on production and

prices. Uzbekistan responded to the negative external conditions

generated by the Asian and Russian financial crises by emphasizing

import substitute industrialization and by tightening export and

currency controls within its already largely closed economy. The

government, while aware of the need to improve the investment

climate, sponsors measures that often increase, not decrease, the

government's control over business decisions. A sharp increase in

the inequality of income distribution has hurt the lower ranks of

society since independence.

Vanuatu

The economy is based primarily on subsistence or small-scale

agriculture, which provides a living for 65% of the population.

Fishing, offshore financial services, and tourism, with about 50,000

visitors in 1997, are other mainstays of the economy. Mineral

deposits are negligible; the country has no known petroleum

deposits. A small light industry sector caters to the local market.

Tax revenues come mainly from import duties. Economic development is

hindered by dependence on relatively few commodity exports,

vulnerability to natural disasters, and long distances from main

markets and between constituent islands. A severe earthquake in

November 1999 followed by a tsunami, caused extensive damage to the

northern island of Pentecote and left thousands homeless. Another

powerful earthquake in January 2002 caused extensive damage in the

capital, Port-Vila, and surrounding areas, and also was followed by

a tsunami. GDP growth rose less than 3% on average in the 1990s. In

response to foreign concerns, the government has promised to tighten

regulation of its offshore financial center. In mid-2002 the

government stepped up efforts to boost tourism. Australia and New

Zealand are the main suppliers of foreign aid.

Venezuela

Venezuela continues to be highly dependent on the

petroleum sector, which accounts for roughly one-third of GDP,

around 80% of export earnings, and more than half of government

operating revenues. Despite higher oil prices at the end of 2002 and

into 2003, domestic political instability, culminating in a

two-month national oil strike from December 2002 to February 2003,

temporarily halted economic activity. The economy is likely to

remain in a recession in 2003, after sinking an estimated 8.9

percent in 2002.

Vietnam

Vietnam is a poor, densely-populated country that has had to

recover from the ravages of war, the loss of financial support from

the old Soviet Bloc, and the rigidities of a centrally planned

economy. Substantial progress was achieved from 1986 to 1996 in

moving forward from an extremely low starting point - growth

averaged around 9% per year from 1993 to 1997. The 1997 Asian

financial crisis highlighted the problems in the Vietnamese economy

but, rather than prompting reform, reaffirmed the government's

belief that shifting to a market-oriented economy would lead to

disaster. GDP growth of 8.5% in 1997 fell to 6% in 1998 and 5% in

1999. Growth then rose to 6% to 7% in 2000-02 even against the

background of global recession. These numbers mask some major

difficulties in economic performance. Many domestic industries,

including coal, cement, steel, and paper, have reported large

stockpiles of inventory and tough competition from more efficient

foreign producers. Meanwhile, Vietnamese authorities have moved to

implement the structural reforms needed to modernize the economy and

to produce more competitive, export-driven industries. The

US-Vietnam Bilateral Trade Agreement entered into force near the end

of 2001 and is expected to significantly increase Vietnam's exports

to the US. The US is assisting Vietnam with implementing the legal

and structural reforms called for in the agreement.

Virgin Islands

Tourism is the primary economic activity, accounting

for more than 70% of GDP and 70% of employment. The islands normally

host 2 million visitors a year. The manufacturing sector consists of

petroleum refining, textiles, electronics, pharmaceuticals, and

watch assembly. The agricultural sector is small, with most food

being imported. International business and financial services are a

small but growing component of the economy. One of the world's

largest petroleum refineries is at Saint Croix. The islands are

subject to substantial damage from storms. The government is working

to improve fiscal discipline, support construction projects in the

private sector, expand tourist facilities, reduce crime, and protect

the environment.

Wake Island

Economic activity is limited to providing services to

contractors located on the island. All food and manufactured goods

must be imported.

Wallis and Futuna

The economy is limited to traditional subsistence

agriculture, with about 80% labor force earnings from agriculture

(coconuts and vegetables), livestock (mostly pigs), and fishing.

About 4% of the population is employed in government. Revenues come

from French Government subsidies, licensing of fishing rights to

Japan and South Korea, import taxes, and remittances from expatriate

workers in New Caledonia.

West Bank

Real per capita GDP for the West Bank and Gaza Strip

(WBGS) declined by about one-third between 1992 and 1996 due to the

combined effect of falling aggregate incomes and rapid population

growth. The downturn in economic activity was largely the result of

Israeli closure policies - the imposition of border closures in

response to security incidents in Israel - which disrupted labor and

commodity market relationships between Israel and the WBGS. The most

serious social effect of this downturn was rising 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 during the next five years decreased 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, which triggered tight Israeli closures of

Palestinian self-rule areas and severely disrupted trade and labor

movements. In 2001, and even more severely in 2002, Israeli military

measures in Palestinian Authority areas have resulted in the

destruction of much capital plant and administrative structure,

widespread business closures, and a sharp drop in GDP. Another major

loss has been the decline in earnings of Palestinian workers in

Israel. International aid of $2 billion in 2001-02 to the West Bank

and Gaza Strip have prevented the complete collapse of the economy.

Western Sahara

Western Sahara depends on pastoral nomadism, fishing,

and phosphate mining as the principal sources of income for the

population. The territory lacks sufficient rainfall for sustainable

agricultural production, and most of the food for the urban

population must be imported. All trade and other economic activities

are controlled by the Moroccan Government. Moroccan energy interests

in 2001 signed contracts to explore for oil off the coast of Western

Sahara, which has angered the Polisario. Incomes and standards of

living in Western Sahara are substantially below the Moroccan level.

World

Growth in global output (gross world product, GWP) fell from

4.8% in 2000 to 2.2% in 2001 and 2.7% in 2002. The causes:

sluggishness in the US economy (21% of GWP) and in the 15 EU

economies (19% of GWP); continued stagnation in the Japanese economy

(7.2% of GWP); and spillover effects in the less developed regions

of the world. China, the second-largest economy in the world (12% of

GWP), proved an exception, continuing its rapid annual growth,

officially announced as 8% but estimated by many observers as

perhaps two percentage points lower. Russia (2.6% of GWP), with 4%

growth, continued to make uneven progress, its GDP per capita still

only one-third that of the leading industrial nations. The other 14

successor nations of the USSR and the other old Warsaw Pact nations

again experienced widely divergent growth rates; the three Baltic

nations continued as strong performers, in the 5% range of growth.

The developing nations also varied in their growth results, with

many countries facing population increases that erode gains in

output. Externally, the nation-state, as a bedrock

economic-political institution, is steadily losing control over

international flows of people, goods, funds, and technology.

Internally, the central government often finds its control over

resources slipping as separatist regional movements - typically

based on ethnicity - gain momentum, e.g., in many of the successor

states of the former Soviet Union, in the former Yugoslavia, in

India, in Indonesia, and in Canada. Externally, the central

government is losing decision-making powers to international bodies.

In Western Europe, governments face the difficult political problem

of channeling resources away from welfare programs in order to

increase investment and strengthen incentives to seek employment.

The addition of 80 million people each year to an already

overcrowded globe is exacerbating the problems of pollution,

desertification, underemployment, epidemics, and famine. Because of

their own internal problems and priorities, the industrialized

countries devote insufficient resources to deal effectively with the

poorer areas of the world, which, at least from the economic point

of view, are becoming further marginalized. The introduction of the

euro as the common currency of much of Western Europe in January

1999, while paving the way for an integrated economic powerhouse,

poses economic risks because of varying levels of income and

cultural and political differences among the participating nations.

The terrorist attacks on the US on 11 September 2001 accentuate a

further growing risk to global prosperity, illustrated, for example,

by the reallocation of resources away from investment to

anti-terrorist programs. The opening of war in March 2003 between a

US-led coalition and Iraq added new uncertainties to global economic

prospects. (For specific economic developments in each country of

the world in 2002, see the individual country entries.)

Yemen

Yemen, one of the poorest countries in the Arab world,

reported strong growth in the mid-1990s with the onset of oil

production, but has been harmed by periodic declines in oil prices.

Yemen has embarked on an IMF-supported structural adjustment program

designed to modernize and streamline the economy, which has led to

substantial foreign debt relief and restructuring. International

donors, meeting in Paris in October 2002, agreed on a further $2.3

billion economic support package. Yemen has worked to maintain tight

control over spending and implement additional components of the IMF

program. A high population growth rate and internal political

dissension complicate the government's task.

Zambia

Despite progress in privatization and budgetary reform,

Zambia's economic growth remains below the 5% to 7% necessary to

reduce poverty significantly. Privatization of government-owned

copper mines relieved the government from covering mammoth losses

generated by the industry and greatly improved the chances for

copper mining to return to profitability and spur economic growth.

However, low mineral prices have slowed the benefits of privatizing

the mines and have reduced incentives for further private investment

in the sector. Cooperation continues with international bodies on

programs to reduce poverty.

Zimbabwe

The government of Zimbabwe faces a wide variety of

difficult economic problems as it struggles with an unsustainable

fiscal deficit, an overvalued exchange rate, soaring inflation, and

bare shelves. Its 1998-2002 involvement in the war in the Democratic

Republic of the Congo, for example, drained hundreds of millions of

dollars from the economy. Badly needed support from the IMF has been

suspended because of the country's failure to meet budgetary goals.

Inflation rose from an annual rate of 32% in 1998 to 59% in 1999, to

60% in 2000, to over 100% by yearend 2001, to 228% in early 2003.

The government's land reform program, characterized by chaos and

violence, has nearly destroyed the commercial farming sector, the

traditional source of exports and foreign exchange and the provider

of 400,000 jobs.