Colombia has experienced accelerating growth between 2002
and 2007, with expansion above 7% in 2007, chiefly due to
advancements in domestic security, to rising commodity prices, and
to President URIBE's promarket economic policies. Colombia's
sustained growth helped reduce poverty by 20% and cut unemployment
by 25% since 2002. Additionally, investor friendly reforms to
Colombia's hydrocarbon sector and the US-Colombia Trade Promotion
Agreement (CTPA) negotiations have attracted record levels of
foreign investment. Inequality, underemployment,and narcotrafficking
remain significant challenges, and Colombia's infrastructure
requires significant updating in order to sustain expansion.
Economic growth slipped in 2008 as a result of the global financial
crisis and weakening demand for Colombia's exports. In response,
URIBE's administration has cut capital controls, arranged for
emergency credit lines from multilateral institutions, and promoted
investment incentives such as Colombia's modernized free trade zone
mechanism, legal stability contracts, and new bilateral investment
treaties and trade agreements. The government has also encouraged
exporters to diversify their customer base away from the United
States and Venezuela, Colombia's largest trading partners.
Nevertheless, the business sector continues to be concerned about
the impact of a global recession on Colombia's exports, as well as
the approval of the CTPA, which is stalled in the US Congress.
Comoros
One of the world's poorest countries, Comoros is made up of
three islands that have inadequate transportation links, a young and
rapidly increasing population, and few natural resources. The low
educational level of the labor force contributes to a subsistence
level of economic activity, high unemployment, and a heavy
dependence on foreign grants and technical assistance. Agriculture,
including fishing, hunting, and forestry, contributes 40% to GDP,
employs 80% of the labor force, and provides most of the exports.
The country is not self-sufficient in food production; rice, the
main staple, accounts for the bulk of imports. The government -
which is hampered by internal political disputes - is struggling to
upgrade education and technical training, privatize commercial and
industrial enterprises, improve health services, diversify exports,
promote tourism, and reduce the high population growth rate. The
political problems have inhibited growth, which has averaged only
about 1% in 2006-08. Remittances from 150,000 Comorans abroad help
supplement GDP.
Congo, Democratic Republic of the
The economy of the Democratic
Republic of the Congo - a nation endowed with vast potential wealth
- is slowly recovering from two decades of decline. Conflict that
began in August 1998 has dramatically reduced national output and
government revenue, increased external debt, and resulted in the
deaths of more than 5 million people from violence, famine, and
disease. Foreign businesses curtailed operations due to uncertainty
about the outcome of the conflict, lack of infrastructure, and the
difficult operating environment. Conditions began to improve in late
2002 with the withdrawal of a large portion of the invading foreign
troops. The transitional government reopened relations with
international financial institutions and international donors, and
President KABILA began implementing reforms, although progress has
been slow and the International Monetary Fund curtailed their
program for the DRC at the end of March 2006 because of fiscal
overruns. Much economic activity still occurs in the informal
sector, and is not reflected in GDP data. Renewed activity in the
mining sector, the source of most export income, boosted Kinshasa's
fiscal position and GDP growth from 2006-2008, however, renewed
strife in the second half of 2008, combined with a fall in world
market prices for the DRC's key mineral exports inflicted major
damage on the economy and halted growth. Government reforms may lead
to increased government revenues, outside budget assistance, and
foreign direct investment, although an uncertain legal framework,
corruption, a lack of transparency in government policy are
long-term problems. The DRC government has applied to the IMF for an
Exogenous Shock Facility in the amount of $200 million to help it
deal with its deteriorating financial situation, and the World Bank
will consider a separate $100 million in emergency funding. The
global recession probably will cut economic growth in 2009 to half
its 2008 level.
Congo, Republic of the
The economy is a mixture of subsistence
agriculture, an industrial sector based largely on oil, and support
services, and a government characterized by budget problems and
overstaffing. Oil has supplanted forestry as the mainstay of the
economy, providing a major share of government revenues and exports.
In the early 1980s, rapidly rising oil revenues enabled the
government to finance large-scale development projects with GDP
growth averaging 5% annually, one of the highest rates in Africa.
The government has mortgaged a substantial portion of its oil
earnings through oil-backed loans that have contributed to a growing
debt burden and chronic revenue shortfalls. Economic reform efforts
have been undertaken with the support of international
organizations, notably the World Bank and the IMF. However, the
reform program came to a halt in June 1997 when civil war erupted.
Denis SASSOU-NGUESSO, who returned to power when the war ended in
October 1997, publicly expressed interest in moving forward on
economic reforms and privatization and in renewing cooperation with
international financial institutions. Economic progress was badly
hurt by slumping oil prices and the resumption of armed conflict in
December 1998, which worsened the republic's budget deficit. The
current administration presides over an uneasy internal peace and
faces difficult economic challenges of stimulating recovery and
reducing poverty. Recovery of oil prices has boosted the economy's
GDP and near-term prospects. In March 2006, the World Bank and the
International Monetary Fund (IMF) approved Heavily Indebted Poor
Countries (HIPC) treatment for Congo.
Cook Islands
Like many other South Pacific island nations, the Cook
Islands' economic development is hindered by the isolation of the
country from foreign markets, the limited size of domestic markets,
lack of natural resources, periodic devastation from natural
disasters, and inadequate infrastructure. Agriculture, employing
more than one-quarter of the working population, provides the
economic base with major exports made up of copra and citrus fruit.
Black pearls are the Cook Islands' leading export. Manufacturing
activities are limited to fruit processing, clothing, and
handicrafts. Trade deficits are offset by remittances from emigrants
and by foreign aid overwhelmingly from New Zealand. In the 1980s and
1990s, the country lived beyond its means, maintaining a bloated
public service and accumulating a large foreign debt. Subsequent
reforms, including the sale of state assets, the strengthening of
economic management, the encouragement of tourism, and a debt
restructuring agreement, have rekindled investment and growth.
Coral Sea Islands
no economic activity
Costa Rica
Costa Rica's basically stable economy depends on tourism,
agriculture, and electronics exports. Exports have become more
diversified in the past 10 years due to the growth of the high-tech
manufacturing sector, which is dominated by the microprocessor
industry and the production of medical devices. Tourism continues to
bring in foreign exchange, as Costa Rica's impressive biodiversity
makes it a key destination for ecotourism. Foreign investors remain
attracted by the country's political stability and relatively high
education levels, as well as the fiscal incentives offered in the
free-trade zones. Costa Rica has attracted one of the highest levels
of foreign direct investment per capita in Latin America. Poverty
has remained around 20% for nearly 20 years, and the strong social
safety net that had been put into place by the government has eroded
due to increased financial constraints on government expenditures.
Immigration from Nicaragua has increasingly become a concern for the
government. The estimated 300,000-500,000 Nicaraguans in Costa Rica
legally and illegally are an important source of - mostly unskilled
- labor, but also place heavy demands on the social welfare system.
Under the ARIAS administration, the government has made strides in
reducing internal and external debt - in 2007, Costa Rica had its
first budget surplus in 50 years. Reducing inflation remains a
difficult problem because of rising commodity import prices and
labor market rigidities, though lower oil prices will decrease
upward pressures. The Central Bank is moving towards a more flexible
exchange rate system to focus on inflation targeting by 2010. The
US-Central American Free Trade Agreement (CAFTA) entered into force
on 1 January 2009, after significant delays within the Costa Rican
legislature. Nevertheless, economic growth has slowed in 2009 as the
global downturn reduced export demand and invesment inflows.
Cote d'Ivoire
Cote d'Ivoire is the world's largest producer and
exporter of cocoa beans and a significant producer and exporter of
coffee and palm oil. Consequently, the economy is highly sensitive
to fluctuations in international prices for these products, and, to
a lesser extent, in climatic conditions. Despite government attempts
to diversify the economy, it is still heavily dependent on
agriculture and related activities, engaging roughly 68% of the
population. Since 2006, oil and gas production have become more
important engines of economic activity than cocoa. According to IMF
statistics, earnings from oil and refined products were $1.3 billion
in 2006, while cocoa-related revenues were $1 billion during the
same period. Cote d'Ivoire's offshore oil and gas production has
resulted in substantial crude oil exports and provides sufficient
natural gas to fuel electricity exports to Ghana, Togo, Benin, Mali
and Burkina Faso. Oil exploration by a number of consortiums of
private companies continues offshore, and President GBAGBO has
expressed hope that daily crude output could reach 200,000 barrels
per day (b/d) by the end of the decade. Since the end of the civil
war in 2003, political turmoil has continued to damage the economy,
resulting in the loss of foreign investment and slow economic
growth. GDP grew by nearly 2% in 2007 and 3% in 2008. Per capita
income has declined by 15% since 1999.
Croatia
Once one of the wealthiest of the Yugoslav republics,
Croatia's economy suffered badly during the 1991-95 war as output
collapsed and the country missed the early waves of investment in
Central and Eastern Europe that followed the fall of the Berlin
Wall. Between 2000 and 2007, however, Croatia's economic fortunes
began to improve slowly, with moderate but steady GDP growth between
4% and 6% led by a rebound in tourism and credit-driven consumer
spending. Inflation over the same period has remained tame and the
currency, the kuna, stable. Nevertheless, difficult problems still
remain, including a stubbornly high unemployment rate, a growing
trade deficit and uneven regional development. The state retains a
large role in the economy, as privatization efforts often meet stiff
public and political resistance. While macroeconomic stabilization
has largely been achieved, structural reforms lag because of deep
resistance on the part of the public and lack of strong support from
politicians. The EU accession process should accelerate fiscal and
structural reform. While long term growth prospects for the economy
remain strong, Croatia will face significant pressure as a result of
the global financial crisis. Croatia's high foreign debt, anemic
export sector, strained state budget, and over-reliance on tourism
revenue will result in higher risk to economic stability over the
medium term.
Cuba
The government continues to balance the need for economic
loosening against a desire for firm political control. It has rolled
back limited reforms undertaken in the 1990s to increase enterprise
efficiency and alleviate serious shortages of food, consumer goods,
and services. The average Cuban's standard of living remains at a
lower level than before the downturn of the 1990s, which was caused
by the loss of Soviet aid and domestic inefficiencies. Since late
2000, Venezuela has been providing oil on preferential terms, and it
currently supplies about 100,000 barrels per day of petroleum
products. Cuba has been paying for the oil, in part, with the
services of Cuban personnel in Venezuela including some 30,000
medical professionals.
Cyprus
The area of the Republic of Cyprus under government control
has a market economy dominated by the service sector, which accounts
for 78% of GDP. Tourism, financial services, and real estate are the
most important sectors. Erratic growth rates over the past decade
reflect the economy's reliance on tourism, which often fluctuates
with political instability in the region and economic conditions in
Western Europe. Nevertheless, the economy in the area under
government control has grown at a rate well above the EU average
since 2000. Cyprus joined the European Exchange Rate Mechanism
(ERM2) in May 2005 and adopted the euro as its national currency on
1 January 2008. An aggressive austerity program in the preceding
years, aimed at paving the way for the euro, helped turn a soaring
fiscal deficit (6.3% in 2003) into a surplus of 1.2% in 2008, and
reduced inflation to 5.1%. This prosperity will come under pressure
in 2009, as construction and tourism slow in the face of reduced
foreign demand triggered by the ongoing global financial crisis.
Growth is expected to slow to less than 2%, which would be its
lowest level since 2003. As in the area administered by Turkish
Cypriots, water shortages are a perennial problem; a few
desalination plants have been added to existing plants over the last
year and are now on line. After 10 years of drought, the country
received substantial rainfall from 2001-04. Since then, rainfall has
been well below average, making water rationing a necessity.
Czech Republic
The Czech Republic is one of the most stable and
prosperous of the post-Communist states of Central and Eastern
Europe. Maintaining an open investment climate has been a key
element of the Czech Republic's transition from a communist,
centrally planned economy to a functioning market economy. As a
member of the European Union, with an advantageous location in the
center of Europe, a relatively low cost structure, and a
well-qualified labor force, the Czech Republic is an attractive
destination for foreign investment. Prior to its EU accession in
2004, the Czech government harmonized its laws and regulations with
those of the European Union. The government plans to meet the
criteria for joining the euro area around 2012. The small, open,
export-driven Czech economy grew by over 6% annually from 2005-2007
and strong growth continued throughout the first three quarters of
2008. Despite the global financial crisis, the conservative Czech
financial system has remained relatively healthy. The rate of Czech
economic growth, however, fell in the fourth quarter of 2008, mainly
due to a significant drop in demand for Czech exports in Western
Europe. This trend is expected to continue, with many analysts
predicting the Czech economy to contract slightly in 2009.
Denmark
This thoroughly modern market economy features high-tech
agriculture, up-to-date small-scale and corporate industry,
extensive government welfare measures, an equitable distribution of
income, comfortable living standards, a stable currency, a stable
political system, and high dependence on foreign trade. Unemployment
is low and capacity constraints limit growth potential. Denmark is a
net exporter of food and energy and enjoys a comfortable balance of
payments surplus. The government has been successful in meeting, and
even exceeding, the economic convergence criteria for participating
in the third phase (a common European currency) of the European
Economic and Monetary Union (EMU), but so far Denmark has decided
not to join 16 other EU members in the euro. Nonetheless, the Danish
krone remains pegged to the euro. Denmark's fiscal position is among
the strongest in the EU. Economic growth gained momentum in 2004 and
the upturn continued through 2006. After a long consumption-driven
upswing, Denmark's economy began slowing in early 2007 with the end
of a housing boom. This cyclical slowdown has been exacerbated by
the global financial crisis through increased borrowing costs and
lower export demand, consumer confidence, and investment. The
slowing global economy cut GDP by 1.2% in 2008. A major long-term
issue will be the sharp decline in the ratio of workers to retirees.
Dhekelia
Economic activity is limited to providing services to the
military and their families located in Dhekelia. All food and
manufactured goods must be imported.
Djibouti
The economy is based on service activities connected with
the country's strategic location and status as a free trade zone in
the Horn of Africa. Two-thirds of Djibouti's inhabitants live in the
capital city; the remainder are mostly nomadic herders. Scanty
rainfall limits crop production to fruits and vegetables, and most
food must be imported. Djibouti provides services as both a transit
port for the region and an international transshipment and refueling
center. Imports and exports from landlocked neighbor Ethiopia
represent 85% of port activity at Djibouti's container terminal.
Djibouti has few natural resources and little industry. The nation
is, therefore, heavily dependent on foreign assistance to help
support its balance of payments and to finance development projects.
An unemployment rate of nearly 60% in urban areas continues to be a
major problem. While inflation is not a concern, due to the fixed
tie of the Djiboutian franc to the US dollar, the artificially high
value of the Djiboutian franc adversely affects Djibouti's balance
of payments. Per capita consumption dropped an estimated 35% between
1999 and 2006 because of recession, civil war, and a high population
growth rate (including immigrants and refugees). Faced with a
multitude of economic difficulties, the government has fallen in
arrears on long-term external debt and has been struggling to meet
the stipulations of foreign aid donors.
Dominica
The Dominican economy depends on agriculture, primarily
bananas, and remains highly vulnerable to climatic conditions and
international economic developments. Tourism has increased as the
government seeks to promote Dominica as an "ecotourism" destination
and has developed a new tourism development plan with assistance
from the EU. Hurricane Dean struck the island in August 2007 causing
damages equivalent to 20% of GDP. In 2003, the government began a
comprehensive restructuring of the economy - including elimination
of price controls, privatization of the state banana company, and
tax increases - to address Dominica's economic and financial crisis
of 2001-02 and to meet IMF targets. This restructuring paved the way
for the current economic recovery - real growth for 2006 reached a
two-decade high - and will help to reduce the debt burden, which
remains at about 100% of GDP. In order to diversify the island's
production base, the government is attempting to develop an offshore
financial sector and has signed an agreement with the EU to develop
geothermal energy resources.
Dominican Republic
The Dominican Republic has enjoyed strong GDP
growth since 2005 and continued to post sound gains through
mid-2008. The global recession, however, had a significant impact on
GDP growth in the latter half of the year as tourism and
remittances, two of the Dominican Republic's most important economic
contributors, showed signs of slowing. The economy is highly
dependent upon the US, the destination for about two-thirds of
exports. Remittances from the US amount to about a tenth of GDP,
equivalent to almost half of exports and three-quarters of tourism
receipts. The country has long been viewed primarily as an exporter
of sugar, coffee, and tobacco but in recent years the service sector
has overtaken agriculture as the economy's largest employer due to
growth in tourism and free trade zones. Although 2007 saw inflation
around 6%, the rate grew to over 12% in 2008. High food prices,
driven by the effects of consecutive tropical storms on agricultural
products, and education prices were significant contributors to the
jump. The effects of the global financial crisis and the US
recession are projected to negatively affect GDP growth in 2009 with
a rebound expected in 2010. Although the economy is growing at a
respectable rate, high unemployment and underemployment remains an
important challenge. The country suffers from marked income
inequality; the poorest half of the population receives less than
one-fifth of GNP, while the richest 10% enjoys nearly 40% of
national income. The Central America-Dominican Republic Free Trade
Agreement (CAFTA-DR) came into force in March 2007, which should
boost investment and exports and reduce losses to the Asian garment
industry.
Ecuador
Ecuador is substantially dependent on its petroleum
resources, which have accounted for more than half of the country's
export earnings and one-fourth of public sector revenues in recent
years. In 1999/2000, Ecuador suffered a severe economic crisis, with
GDP contracting by more than 6%. Poverty increased significantly,
the banking system collapsed, and Ecuador defaulted on its external
debt later that year. In March 2000, Congress approved a series of
structural reforms that also provided for the adoption of the US
dollar as legal tender. Dollarization stabilized the economy, and
positive growth returned in the years that followed, helped by high
oil prices, remittances, and increased non-traditional exports. From
2002-06 the economy grew 5.5%, the highest five-year average in 25
years. The poverty rate declined but remained high at 38% in 2006.
In 2006 the government imposed a windfall revenue tax on foreign oil
companies, leading to the suspension of free trade negotiations with
the US. These measures led to a drop in petroleum production in
2007. President Rafael CORREA raised the specter of debt default and
followed through on those threats in December 2008 by defaulting on
some commercial bond obligations. He also decreed a higher windfall
revenue tax on private oil companies, then renegotiated their
contracts to overcome the debilitating effect of the tax. This
generated economic uncertainty; private investment has dropped and
economic growth has slowed.