Australia has an enviable, strong economy with a per
capita GDP on par with the four dominant West European economies.
Emphasis on reforms, low inflation, a housing market boom, and
growing ties with China have been key factors over the course of the
economy's 17 solid years of expansion. Robust business and consumer
confidence and high export prices for raw materials and agricultural
products fueled the economy in recent years, particularly in mining
states. Drought, robust import demand, and a strong currency pushed
the trade deficit up however, while infrastructure bottlenecks and a
tight labor market constrained growth in export volumes and stoked
inflation through mid-2008. The unwinding of the yen-based carry
trade in late 2008 has contributed to a weakening of the Australian
dollar. Tight global liquidity has challenged Australia's banking
sector, which relies heavily on international wholesale markets for
funding. The economy remains relatively healthy despite falling
export commodity prices. The government plans to counter slowing
growth in 2009 with fiscal stimulus efforts.
Austria
Austria, with its well-developed market economy and high
standard of living, is closely tied to other EU economies,
especially Germany's. Its economy features a large service sector, a
sound industrial sector, and a small, but highly developed
agricultural sector. Following several years of solid foreign demand
for Austrian exports and record employment growth, the global
economic downturn in 2008 led to a recession that is likely to
persist through 2009. The government's stabilization measures could
increase the budget deficit to about 2.8% of GDP in 2009 and above
3% in 2010, from about 0.6% in 2008. The Austrian economy has
benefited greatly in the past from strong commercial relations,
especially in the banking and insurance sectors, with central,
eastern, and southeastern Europe, but these sectors have been
vulnerable to recent international financial instabilities, and some
of Austria's largest banks have required government support. Even
after the global economic outlook improves, Austria will need to
continue restructuring, emphasizing knowledge-based sectors of the
economy, and encouraging greater labor flexibility and greater labor
participation to offset its aging population and exceedingly low
fertility rate.
Azerbaijan
Azerbaijan's high economic growth during 2006-08 is
attributable to large and growing oil exports, but the non-energy
sector also featured double-digit growth in 2008, spurred by growth
in the construction, banking, and real estate sectors. However, the
current global economic slowdown presents some challenges for the
Azerbaijani economy as oil prices have plummeted since mid-2008 and
local banks face a more uncertain international financial
environment. Azerbaijan's oil production declined through 1997, but
has registered an increase every year since. Negotiation of
production-sharing arrangements (PSAs) with foreign firms, which
have committed $60 billion to long-term oilfield development, should
generate the funds needed to spur future industrial development. Oil
production under the first of these PSAs, with the Azerbaijan
International Operating Company, began in November 1997. A
consortium of Western oil companies built a $4 billion pipeline from
Baku to Turkey's Mediterranean port of Ceyhan which will pump 1.2
million barrels a day from a large offshore field when at full
capacity. Azerbaijan shares all the formidable problems of the
former Soviet republics in making the transition from a command to a
market economy, but its considerable energy resources brighten its
medium-term prospects. Baku has only recently begun making progress
on economic reform, and old economic ties and structures are slowly
being replaced. Several other obstacles impede Azerbaijan's economic
progress: the need for stepped up foreign investment in the
non-energy sector, the continuing conflict with Armenia over the
Nagorno-Karabakh region, pervasive corruption, and potential for a
sharp downturn in the construction and real estate sectors. Trade
with Russia and the other former Soviet republics is declining in
importance, while trade is building with Turkey and the nations of
Europe. Long-term prospects will depend on world oil prices, the
location of new oil and gas pipelines in the region, and
Azerbaijan's ability to manage its energy wealth to promote
sustainable growth in non-energy sectors of the economy and spur
employment.
Bahamas, The
The Bahamas is one of the wealthiest Caribbean
countries with an economy heavily dependent on tourism and offshore
banking. Tourism together with tourism-driven construction and
manufacturing accounts for approximately 60% of GDP and directly or
indirectly employs half of the archipelago's labor force. Steady
growth in tourism receipts and a boom in construction of new hotels,
resorts, and residences had led to solid GDP growth in recent years,
but tourist arrivals have been on the decline since 2006 and will
likely drop even further in 2009. Tourism, in turn, depends on
growth in the US, the source of more than 80% of the visitors. To
help offset the effect of the global economic downturn, particularly
on employment, the INGRAHAM administration plans to engage in
infrastructure projects. Financial services constitute the
second-most important sector of the Bahamian economy and, when
combined with business services, account for about 36% of GDP.
However, since December 2000, when the government enacted new
regulations on the financial sector, many international businesses
have left The Bahamas. Manufacturing and agriculture combined
contribute approximately a tenth of GDP and show little growth,
despite government incentives aimed at those sectors. Overall growth
prospects in the short run rest heavily on the fortunes of the
tourism sector.
Bahrain
With its highly developed communication and transport
facilities, Bahrain is home to numerous multinational firms with
business in the Gulf. Petroleum production and refining account for
over 60% of Bahrain's export receipts, over 70% of government
revenues, and 11% of GDP (exclusive of allied industries),
underpinning Bahrain's strong economic growth in recent years.
Aluminum is Bahrain's second major export after oil. Other major
segments of Bahrain's economy are the financial and construction
sectors. Bahrain is focused on Islamic banking and is competing on
an international scale with Malaysia as a worldwide banking center.
Bahrain is actively pursuing the diversification and privatization
of its economy to reduce the country's dependence on oil. As part of
this effort, in August 2006 Bahrain and the US implemented a Free
Trade Agreement (FTA), the first FTA between the US and a Gulf
state. Continued strong growth hinges on Bahrain's ability to
acquire new natural gas supplies as feedstock to support its
expanding petrochemical and aluminum industries. Unemployment,
especially among the young, and the depletion of oil and underground
water resources are long-term economic problems. The global
financial crisis is likely to result in slower economic growth for
Bahrain during 2009 as tight international credit and a slowing
global economy cause funding for many non-oil projects to dry up.
Lower oil prices may also cause Bahrain's budget to slip back into
deficit.
Bangladesh
The economy has grown 5-6% per year since 1996 despite
inefficient state-owned enterprises, delays in exploiting natural
gas resources, insufficient power supplies, and slow implementation
of economic reforms. Bangladesh remains a poor, overpopulated, and
inefficiently-governed nation. Although more than half of GDP is
generated through the service sector, nearly two-thirds of
Bangladeshis are employed in the agriculture sector, with rice as
the single-most-important product. Garment exports and remittances
from Bangladeshis working overseas, mainly in the Middle East and
East Asia, fuel economic growth. In 2008 Bangladesh pursued a
monetary policy aimed at maintaining high employment, but created
higher inflation in the process.
Barbados
Historically, the Barbadian economy was dependent on
sugarcane cultivation and related activities. However, in recent
years the economy has diversified into light industry and tourism
with about three-quarters of GDP and 80% of exports being attributed
to services. Growth has rebounded since 2003, bolstered by increases
in construction projects and tourism revenues, reflecting its
success in the higher-end segment, but the sector will likely face
declining revenues with the global economic downturn. The country
enjoys one of the highest per capita incomes in the region. Offshore
finance and information services are important foreign exchange
earners and thrive from having the same time zone as eastern US
financial centers and a relatively highly educated workforce. The
government continues its efforts to reduce unemployment, to
encourage direct foreign investment, and to privatize remaining
state-owned enterprises. The public debt-to-GDP ratio of about 80%
will likely widen as the THOMPSON administration engages in a more
expansionary fiscal policy.
Belarus
Belarus has seen little structural reform since 1995, when
President LUKASHENKO launched the country on the path of "market
socialism." In keeping with this policy, LUKASHENKO reimposed
administrative controls over prices and currency exchange rates and
expanded the state's right to intervene in the management of private
enterprises. Since 2005, the government has re-nationalized a number
of private companies. In addition, businesses have been subject to
pressure by central and local governments, e.g., arbitrary changes
in regulations, numerous rigorous inspections, retroactive
application of new business regulations, and arrests of "disruptive"
businessmen and factory owners. A wide range of redistributive
policies has helped those at the bottom of the ladder; the Gini
coefficient is among the lowest in the world. Because of these
restrictive economic policies, Belarus has had trouble attracting
foreign investment. Nevertheless, government statistics indicate GDP
growth has been strong in recent years, reaching 10% in 2008,
despite the roadblocks of a tough, centrally directed economy with a
high rate of inflation. Belarus receives discounted oil and natural
gas from Russia and much of Belarus' growth can be attributed to the
re-export of Russian oil at market prices. Trade with Russia - by
far its largest single trade partner - decreased in 2007-08, largely
as a result of a change in the way the Value Added Tax (VAT) on
trade was collected. Russia has introduced an export duty on oil
shipped to Belarus, which will increase gradually through 2009, and
a requirement that Belarusian duties on re-exported Russian oil be
shared with Russia - 80% was slated to go to Russia in 2008, and 85%
in 2009. Russia also increased Belarusian natural gas prices from
$47 per thousand cubic meters (tcm)in 2006 to $100 per tcm in 2007,
and to $128 per tcm in 2008, and plans to increase prices gradually
to world levels by 2011. Russia's recent policy of bringing energy
prices for Belarus to world market levels may result in a slowdown
in economic growth in Belarus over the next few years. Some policy
measures, including improving energy efficiency and diversifying
exports, have been introduced, but external borrowing has been the
main mechanism used to manage the growing pressures on the economy.
Belarus felt the effects of the global financial crisis in late 2008
and reached agreement with Russia in November for a $2 billion
stabilization loan and with the IMF for a $2.5 billion stand-by
agreement in January 2009. In line with IMF conditionality, Belarus
devalued the ruble approximately 20% in January 2009 and has
tightened some fiscal and monetary policies. Belarus's economic
growth is likely to slow in 2009 as it faces decreasing demand for
its exports, and will find it difficult to increase external
borrowing if the credit markets continue to tighten.
Belgium
This modern, private-enterprise economy has capitalized on
its central geographic location, highly developed transport network,
and diversified industrial and commercial base. Industry is
concentrated mainly in the populous Flemish area in the north. With
few natural resources, Belgium must import substantial quantities of
raw materials and export a large volume of manufactures, making its
economy unusually dependent on the state of world markets. Roughly
three-quarters of its trade is with other EU countries. Public debt
is more than 80% of GDP. On the positive side, the government
succeeded in balancing its budget during the 2000-2008 period, and
income distribution is relatively equal. Belgium began circulating
the euro currency in January 2002. Economic growth and foreign
direct investment dropped in 2008. In 2009 Belgium is likely to have
negative growth, growing unemployment, and a 3% budget deficit,
stemming from the worldwide banking crisis.
Belize
In this small, essentially private-enterprise economy,
tourism is the number one foreign exchange earner followed by
exports of marine products, citrus, cane sugar, bananas, and
garments. The government's expansionary monetary and fiscal
policies, initiated in September 1998, led to sturdy GDP growth
averaging nearly 4% in 1999-2007, though growth slipped to 3.8% in
2008 as a result of the global slowdown, natural disasters, and the
drop in the price of oil. Oil discoveries in 2006 bolstered the
economic growth. Exploration efforts continue and a small increase
in production is expected in 2009. Major concerns continue to be the
sizable trade deficit and unsustainable foreign debt equivalent to
nearly 70% of GDP. In February 2007, the government restructured
nearly all of its public external commercial debt, which helped
reduce interest payments and relieve some of the country's liquidity
concerns. A key short-term objective remains the reduction of
poverty with the help of international donors.
Benin
The economy of Benin remains underdeveloped and dependent on
subsistence agriculture, cotton production, and regional trade.
Growth in real output has averaged around 5% in the past seven
years, but rapid population growth has offset much of this increase.
Inflation has subsided over the past several years. In order to
raise growth still further, Benin plans to attract more foreign
investment, place more emphasis on tourism, facilitate the
development of new food processing systems and agricultural
products, and encourage new information and communication
technology. Specific projects to improve the business climate by
reforms to the land tenure system, the commercial justice system,
and the financial sector were included in Benin's $307 million
Millennium Challenge Account grant signed in February 2006. The 2001
privatization policy continues in telecommunications, water,
electricity, and agriculture though the government annulled the
privatization of Benin's state cotton company in November 2007 after
the discovery of irregularities in the bidding process. The Paris
Club and bilateral creditors have eased the external debt situation,
with Benin benefiting from a G8 debt reduction announced in July
2005, while pressing for more rapid structural reforms. An
insufficient electrical supply continues to adversely affect Benin's
economic growth though the government recently has taken steps to
increase domestic power production.
Bermuda
Bermuda enjoys the third highest per capita income in the
world more than 50% higher than that of the US. Its economy is
primarily based on providing financial services for international
business and luxury facilities for tourists. A number of reinsurance
companies relocated to the island following the 11 September 2001
attacks and again after Hurricane Katrina in August 2005
contributing to the expansion of an already robust international
business sector. Bermuda's tourism industry - which derives over 80%
of its visitors from the US - continues to struggle but remains the
island's number two industry. Most capital equipment and food must
be imported. Bermuda's industrial sector is small, although
construction continues to be important; the average cost of a house
in June 2003 had risen to $976,000. Agriculture is limited with only
20% of the land being arable.
Bhutan
The economy, one of the world's smallest and least developed,
is based on agriculture and forestry, which provide the main
livelihood for more than 60% of the population. Agriculture consists
largely of subsistence farming and animal husbandry. Rugged
mountains dominate the terrain and make the building of roads and
other infrastructure difficult and expensive. The economy is closely
aligned with India's through strong trade and monetary links and
dependence on India's financial assistance. The industrial sector is
technologically backward, with most production of the cottage
industry type. Most development projects, such as road construction,
rely on Indian migrant labor. Model education, social, and
environment programs are underway with support from multilateral
development organizations. Each economic program takes into account
the government's desire to protect the country's environment and
cultural traditions. For example, the government, in its cautious
expansion of the tourist sector, encourages visits by upscale,
environmentally conscientious tourists. Detailed controls and
uncertain policies in areas such as industrial licensing, trade,
labor, and finance continue to hamper foreign investment. Hydropower
exports to India have boosted Bhutan's overall growth, even though
GDP fell in 2008 as a result of a slowdown in India, its predominant
export market. New hydropower projects will be the driving force
behind Bhutan's ability to create employment and sustain growth in
the coming years.
Bolivia
Bolivia is one of the poorest and least developed countries
in Latin America. Following a disastrous economic crisis during the
early 1980s, reforms spurred private investment, stimulated economic
growth, and cut poverty rates in the 1990s. The period 2003-05 was
characterized by political instability, racial tensions, and violent
protests against plans - subsequently abandoned - to export
Bolivia's newly discovered natural gas reserves to large northern
hemisphere markets. In 2005, the government passed a controversial
hydrocarbons law that imposed significantly higher royalties and
required foreign firms then operating under risk-sharing contracts
to surrender all production to the state energy company. In early
2008, higher earnings for mining and hydrocarbons exports pushed the
current account surplus to 9.4% of GDP and the government's higher
tax take produced a fiscal surplus after years of large deficits.
Private investment as a share of GDP, however, remains among the
lowest in Latin America, and inflation remained at double-digit
levels in 2008. The decline in commodity prices in late 2008, the
lack of foreign investment in the mining and hydrocarbon sectors,
and the suspension of trade benefits with the United States will
pose challenges for the Bolivian economy in 2009.
Bosnia and Herzegovina
The interethnic warfare in Bosnia and
Herzegovina caused production to plummet by 80% from 1992 to 1995
and unemployment to soar. With an uneasy peace in place, output
recovered in 1996-99 at high percentage rates from a low base; but
output growth slowed in 2000-02. Part of the lag in output was made
up in 2003-08 when GDP growth exceeded 5% per year. Banking reform
accelerated in 2001 as all the Communist-era payments bureaus were
shut down; foreign banks, primarily from Western Europe, now control
most of the banking sector. The konvertibilna marka (convertible
mark or BAM)- the national currency introduced in 1998 - is pegged
to the euro, and confidence in the currency and the banking sector
has increased. Bosnia's private sector is growing and foreign
investment is slowly increasing, but government spending, at nearly
40% of adjusted GDP, remains high because of redundant government
offices at the state, entity and municipal level. Implementing
privatization, however, has been slow, particularly in the
Federation where political division between ethnically-based
political parties makes agreement on economic policy more difficult.
A sizeable current account deficit and high unemployment rate remain
the two most serious macroeconomic problems. Successful
implementation of a value-added tax in 2006 provided a predictable
source of revenue for the government and helped rein in gray market
activity. National-level statistics have also improved over time but
a large share of economic activity remains unofficial and
unrecorded. Bosnia and Herzegovina became a full member of the
Central European Free Trade Agreement in September 2007. Bosnia's
economy has been largely sheltered from the global financial
downtown although key economic indicators have worsened. Key
exporters in the metal, automobile and wood processing industries
have reported a worsening performance and have announced layoffs and
output reductions.
Botswana
Botswana has maintained one of the world's highest economic
growth rates since independence in 1966, though growth fell below 5%
in 2007-08. Through fiscal discipline and sound management, Botswana
has transformed itself from one of the poorest countries in the
world to a middle-income country with a per capita GDP of $13,300 in
2008. Two major investment services rank Botswana as the best credit
risk in Africa. Diamond mining has fueled much of the expansion and
currently accounts for more than one-third of GDP and for 70-80% of
export earnings. Tourism, financial services, subsistence farming,
and cattle raising are other key sectors. On the downside, the
government must deal with high rates of unemployment and poverty.
Unemployment officially was 23.8% in 2004, but unofficial estimates
place it closer to 40%. HIV/AIDS infection rates are the second
highest in the world and threaten Botswana's impressive economic
gains. An expected leveling off in diamond mining production
overshadows long-term prospects.
Bouvet Island
no economic activity; declared a nature reserve
Brazil
Characterized by large and well-developed agricultural,
mining, manufacturing, and service sectors, Brazil's economy
outweighs that of all other South American countries and Brazil is
expanding its presence in world markets. From 2003 to 2007, Brazil
ran record trade surpluses and recorded its first current account
surpluses since 1992. Productivity gains coupled with high commodity
prices contributed to the surge in exports. Brazil improved its debt
profile in 2006 by shifting its debt burden toward real denominated
and domestically held instruments. LULA da Silva restated his
commitment to fiscal responsibility by maintaining the country's
primary surplus during the 2006 election. Following his second
inauguration in October of that year, LULA da Silva announced a
package of further economic reforms to reduce taxes and increase
investment in infrastructure. Brazil's debt achieved investment
grade status early in 2008, but the government's attempt to achieve
strong growth while reducing the debt burden created inflationary
pressures. For most of 2008, the Central Bank embarked on a
restrictive monetary policy to stem these pressures. Since the onset
of the global financial crisis in September, Brazil's currency and
its stock market - Bovespa - have significantly lost value, -41% for
Bovespa for the year ending 30 December 2008. Brazil incurred
another current account deficit in 2008, as world demand and prices
for commodities dropped in the second-half of the year.
British Indian Ocean Territory
All economic activity is concentrated
on the largest island of Diego Garcia, where a joint UK-US military
facility is located. Construction projects and various services
needed to support the military installation are performed by
military and contract employees from the UK, Mauritius, the
Philippines, and the US. There are no industrial or agricultural
activities on the islands. The territory earns foreign exchange by
selling fishing licenses and postage stamps.