Egypt

Occupying the northeast corner of the African continent, Egypt

is bisected by the highly fertile Nile valley, where most economic

activity takes place. Egypt's economy was highly centralized during

the rule of former President Gamal Abdel NASSER but has opened up

considerably under former President Anwar EL-SADAT and current

President Mohamed Hosni MUBARAK. Cairo has aggressively pursued

economic reforms to encourage inflows of foreign investment and

facilitate GDP growth. In 2005, Prime Minister Ahmed NAZIF's

government reduced personal and corporate tax rates, reduced energy

subsidies, and privatized several enterprises. The stock market

boomed, and GDP grew about 7% each year since 2006. Despite these

achievements, the government has failed to raise living standards

for the average Egyptian, and has had to continue providing

subsidies for basic necessities. The subsidies have contributed to a

sizeable budget deficit - roughly 7% of GDP in 2007-08 - and

represent a significant drain on the economy. Foreign direct

investment has increased significantly in the past two years, but

the NAZIF government will need to continue its aggressive pursuit of

reforms in order to sustain the spike in investment and growth and

begin to improve economic conditions for the broader population.

Egypt's export sectors - particularly natural gas - have bright

prospects.

El Salvador

The smallest country in Central America, El Salvador has

the third largest economy, but growth has been modest in recent

years. Economic growth will decelerate in 2009 due to the global

slowdown and to El Salvador's dependence on exports to the US and

remittances from the US. El Salvador leads the region in remittances

per capita with inflows equivalent to nearly all export income. In

2006 El Salvador was the first country to ratify the Central

America-Dominican Republic Free Trade Agreement (CAFTA). CAFTA has

bolstered the export of processed foods, sugar, and ethanol, and

supported investment in the maquila sector. The SACA administration

has sought to diversify the economy, focusing on regional

transportation and tourism. El Salvador has promoted an open trade

and investment environment, and has embarked on a wave of

privatizations extending to telecom, electricity distribution,

banking, and pension funds. In late 2006, the government and the

Millennium Challenge Corporation signed a five-year, $461 million

compact to stimulate economic growth and reduce poverty in the

country's northern region through investments in education, public

services, enterprise development, and transportation infrastructure.

With the adoption of the US dollar as its currency in 2001, El

Salvador lost control over monetary policy and must concentrate on

maintaining a disciplined fiscal policy.

Equatorial Guinea

The discovery and exploitation of large oil

reserves have contributed to dramatic economic growth in recent

years. Forestry, farming, and fishing are also major components of

GDP. Subsistence farming predominates. Although pre-independence

Equatorial Guinea counted on cocoa production for hard currency

earnings, the neglect of the rural economy under successive regimes

has diminished potential for agriculture-led growth (the government

has stated its intention to reinvest some oil revenue into

agriculture). A number of aid programs sponsored by the World Bank

and the IMF have been cut off since 1993, because of corruption and

mismanagement. No longer eligible for concessional financing because

of large oil revenues, the government has been trying to agree on a

"shadow" fiscal management program with the World Bank and IMF.

Government officials and their family members own most businesses.

Undeveloped natural resources include titanium, iron ore, manganese,

uranium, and alluvial gold. Growth remained strong in 2008, led by

oil.

Eritrea

Since independence from Ethiopia in 1993, Eritrea has faced

the economic problems of a small, desperately poor country,

accentuated by the recent implementation of restrictive economic

policies. Eritrea has a command economy under the control of the

sole political party, the People's Front for Democracy and Justice

(PFDJ). Like the economies of many African nations, the economy is

largely based on subsistence agriculture, with 80% of the population

involved in farming and herding. The Ethiopian-Eritrea war in

1998-2000 severely hurt Eritrea's economy. GDP growth fell to zero

in 1999 and to -12.1% in 2000. The May 2000 Ethiopian offensive into

northern Eritrea caused some $600 million in property damage and

loss, including losses of $225 million in livestock and 55,000

homes. The attack prevented planting of crops in Eritrea's most

productive region, causing food production to drop by 62%. Despite

the fighting, Eritrea developed its transportation infrastructure,

asphalting new roads, improving its ports, and repairing war-damaged

roads and bridges. Since the war's conclusion, the government has

maintained a firm grip on the economy, expanding the use of the

military and party-owned businesses to complete Eritrea's

development agenda. The government strictly controls the use of

foreign currency by limiting access and availability. Few private

enterprises remain in Eritrea. Eritrea's economy depends heavily on

taxes paid by members of the diaspora. Erratic rainfall and the

delayed demobilization of agriculturalists from the military

continue to interfere with agricultural production, and Eritrea's

recent harvests have been unable to meet the food needs of the

country. The Government continues to place its hope for additional

revenue on the development of several international mining projects.

Despite difficulties for international companies in working with the

Eritrean Government, a Canadian mining company signed a contract

with the Government in 2007 and plans to begin mineral extraction in

2010. Eritrea also opened a free trade zone at the port of Massawa

in 2008. Eritrea's economic future depends upon its ability to

master social problems such as illiteracy, unemployment, and low

skills, and more importantly, on the government's willingness to

support a true market economy.

Estonia

Estonia, a 2004 European Union entrant, has a modern

market-based economy and one of the highest per capita income levels

in Central Europe. Estonia's successive governments have pursued a

free market, pro-business economic agenda and have wavered little in

their commitment to pro-market reforms. Tallinn's priority has been

to sustain high growth rates - on average 8% per year from 2003 to

2007. The economy benefits from strong electronics and

telecommunications sectors and strong trade ties with Finland,

Sweden, and Germany. The current government has pursued relatively

sound fiscal policies, resulting in balanced budgets and low public

debt. Rapid growth, however, has made it difficult to keep inflation

and large current-account deficits from soaring, putting downward

pressure on the country's currency. The government has not given up

on adopting the euro, but has repeatedly postponed its target date.

Estonia's economy slowed down markedly and fell sharply into

recession in mid-2008, primarily as a result of an investment and

consumption slump following the bursting of the real estate market

bubble.

Ethiopia

Ethiopia's poverty-stricken economy is based on

agriculture, accounting for almost half of GDP, 60% of exports, and

80% of total employment. The agricultural sector suffers from

frequent drought and poor cultivation practices. Coffee is critical

to the Ethiopian economy with exports of some $350 million in 2006,

but historically low prices have seen many farmers switching to qat

to supplement income. The war with Eritrea in 1998-2000 and

recurrent drought have buffeted the economy, in particular coffee

production. In November 2001, Ethiopia qualified for debt relief

from the Highly Indebted Poor Countries (HIPC) initiative, and in

December 2005 the IMF forgave Ethiopia's debt. Under Ethiopia's

constitution, the state owns all land and provides long-term leases

to the tenants; the system continues to hamper growth in the

industrial sector as entrepreneurs are unable to use land as

collateral for loans. Drought struck again late in 2002, leading to

a 3.3% decline in GDP in 2003. Normal weather patterns helped

agricultural and GDP growth recover during 2004-08.

European Union

Internally, the EU is attempting to lower trade

barriers, adopt a common currency, and move toward convergence of

living standards. Internationally, the EU aims to bolster Europe's

trade position and its political and economic power. Because of the

great differences in per capita income among member states (from

$7,000 to $69,000) and historic national animosities, the EU faces

difficulties in devising and enforcing common policies. For example,

since 2003 Germany and France have flouted the member states' treaty

obligation to prevent their national budgets from running more than

a 3% deficit. Between 2004 and 2007, the EU admitted 12 countries

that are, in general, less advanced technologically and economically

than the other 15. Eleven established EU member states introduced

the euro as their common currency on 1 January 1999 (Greece did so

two years later), but the UK, Sweden, and Denmark chose not to

participate. Of the 12 most recent member states, only Slovenia (1

January 2007) and Cyprus and Malta (1 January 2008) have adopted the

euro; the remaining nine are legally required to adopt the currency

upon meeting EU's fiscal and monetary convergence criteria.

Falkland Islands (Islas Malvinas)

The economy was formerly based on

agriculture, mainly sheep farming, but today fishing contributes the

bulk of economic activity. In 1987, the government began selling

fishing licenses to foreign trawlers operating within the Falkland

Islands' exclusive fishing zone. These license fees total more than

$40 million per year, which help support the island's health,

education, and welfare system. Squid accounts for 75% of the fish

taken. Dairy farming supports domestic consumption; crops furnish

winter fodder. Exports feature shipments of high-grade wool to the

UK and the sale of postage stamps and coins. The islands are now

self-financing except for defense. The British Geological Survey

announced a 200-mile oil exploration zone around the islands in

1993, and early seismic surveys suggest substantial reserves capable

of producing 500,000 barrels per day; to date, no exploitable site

has been identified. An agreement between Argentina and the UK in

1995 seeks to defuse licensing and sovereignty conflicts that would

dampen foreign interest in exploiting potential oil reserves.

Tourism, especially eco-tourism, is increasing rapidly, with about

30,000 visitors in 2001. Another large source of income is interest

paid on money the government has in the bank. The British military

presence also provides a sizeable economic boost.

Faroe Islands

The Faroese economy is dependent on fishing, which

makes the economy vulnerable to price swings. The sector accounts

for 95% of exports and nearly half of GDP. Since 2003 the Faroese

economy has picked up as a result of higher prices for fish and for

housing. Unemployment is minimal and government finances are

relatively sound. Oil finds close to the Islands give hope for

economically recoverable deposits, which could eventually lay the

basis for a more diversified economy and lessen dependence on Danish

economic assistance. Aided by a substantial annual subsidy (about

15% of GDP) from Denmark, the Faroese have a standard of living not

far below the Danes and other Scandinavians.

Fiji

Fiji, endowed with forest, mineral, and fish resources, is one

of the most developed of the Pacific island economies though still

with a large subsistence sector. Sugar exports, remittances from

Fijians working abroad, and a growing tourist industry - with

400,000 to 500,000 tourists annually - are the major sources of

foreign exchange. Fiji's sugar has special access to European Union

markets but will be harmed by the EU's decision to cut sugar

subsidies. Sugar processing makes up one-third of industrial

activity but is not efficient. Fiji's tourism industry was damaged

by the December 2006 coup and is facing an uncertain recovery time.

In 2007 tourist arrivals were down almost 6%, with substantial job

losses in the service sector, and GDP dipped nearly 7%. The coup has

created a difficult business climate. The EU has suspended all aid

until the interim government takes steps toward new elections.

Long-term problems include low investment, uncertain land ownership

rights, and the government's inability to manage its budget.

Overseas remittances from Fijians working in Kuwait and Iraq have

decreased significantly. Fiji's current account deficit reached 23%

of GDP in 2006.

Finland

Finland has a highly industrialized, largely free-market

economy with per capita output roughly that of the UK, France,

Germany, and Italy. Its key economic sector is manufacturing -

principally the wood, metals, engineering, telecommunications, and

electronics industries. Trade is important; Finland's ratio of

exports to GDP has risen from a quarter to 37% over the past 15

years. Finland excels in high-tech exports such as mobile phones.

Except for timber and several minerals, Finland depends on imports

of raw materials, energy, and some components for manufactured

goods. Because of the climate, agricultural development is limited

to maintaining self-sufficiency in basic products. Forestry, an

important export earner, provides a secondary occupation for the

rural population. Although Finland has been one of the best

performing economies within the EU in recent years and its banks and

financial markets have avoided the worst of global financial crisis,

the world slowdown has hit export growth and domestic demand and

will serve as a brake on economic growth in 2009 and 2010. The

slowdown of construction, other investment, and exports will cause

unemployment to rise. During 2009, unemployment will climb to over

8% of the labor force. Long-term challenges include the need to

address a rapidly aging population and decreasing productivity that

threaten competitiveness, fiscal sustainability, and economic growth.

France

France is in the midst of transition from a well-to-do modern

economy that has featured extensive government ownership and

intervention to one that relies more on market mechanisms. The

government has partially or fully privatized many large companies,

banks, and insurers, and has ceded stakes in such leading firms as

Air France, France Telecom, Renault, and Thales. It maintains a

strong presence in some sectors, particularly power, public

transport, and defense industries. The telecommunications sector is

gradually being opened to competition. France's leaders remain

committed to a capitalism in which they maintain social equity by

means of laws, tax policies, and social spending that reduce income

disparity and the impact of free markets on public health and

welfare. Widespread opposition to labor reform has in recent years

hampered the government's ability to revitalize the economy. During

2007-08, the government implemented several important labor reforms,

including a de facto extension of the 35-hour workweek by allowing

employees to work longer overtime hours. During 2009, the government

is expected to delay or even renounce other reform efforts due to

the on-going financial crisis. GDP growth dropped to 0.3% in 2008;

the French government plans to increase public investment and

continue injecting capital into the banking sector to alleviate the

negative effects of the crisis during 2009. As a result of lower

fiscal revenues and increased expenditures the general government

deficit is expected to exceed the euro-zone ceiling 3% of GDP.

France's tax burden remains one of the highest in Europe - at nearly

50% of GDP in 2005. With at least 75 million foreign tourists per

year, France is the most visited country in the world and maintains

the third largest income in the world from tourism.

French Polynesia

Since 1962, when France stationed military

personnel in the region, French Polynesia has changed from a

subsistence agricultural economy to one in which a high proportion

of the work force is either employed by the military or supports the

tourist industry. With the halt of French nuclear testing in 1996,

the military contribution to the economy fell sharply. Tourism

accounts for about one-fourth of GDP and is a primary source of hard

currency earnings. Other sources of income are pearl farming and

deep-sea commercial fishing. The small manufacturing sector

primarily processes agricultural products. The territory benefits

substantially from development agreements with France aimed

principally at creating new businesses and strengthening social

services.

French Southern and Antarctic Lands

Economic activity is limited to

servicing meteorological and geophysical research stations, military

bases, and French and other fishing fleets. The fish catches landed

on Iles Kerguelen by foreign ships are exported to France and

Reunion.

Gabon

Gabon enjoys a per capita income four times that of most

sub-Saharan African nations, but because of high income inequality,

a large proportion of the population remains poor. Gabon depended on

timber and manganese until oil was discovered offshore in the early

1970s. The oil sector now accounts for more than 50% of GDP. Gabon

continues to face fluctuating prices for its oil, timber, and

manganese exports. Despite the abundance of natural wealth, poor

fiscal management hobbles the economy. In 1997, an IMF mission to

Gabon criticized the government for overspending on off-budget

items, overborrowing from the central bank, and slipping on its

schedule for privatization and administrative reform. The rebound of

oil prices since 1999 have helped growth, but drops in production

have hampered Gabon from fully realizing potential gains, and will

continue to temper the gains for most of this decade. In December

2000, Gabon signed a new agreement with the Paris Club to reschedule

its official debt. A follow-up bilateral repayment agreement with

the US was signed in December 2001. Gabon signed a 14-month Stand-By

Arrangement with the IMF in May 2007, and received Paris Club debt

rescheduling later that year.

Gambia, The

The Gambia has no confirmed mineral or natural resource

deposits and has a limited agricultural base. About 75% of the

population depends on crops and livestock for its livelihood.

Small-scale manufacturing activity features the processing of

peanuts, fish, and hides. Reexport trade normally constitutes a

major segment of economic activity, but a 1999 government-imposed

preshipment inspection plan, and instability of the Gambian dalasi

(currency) have drawn some of the reexport trade away from The

Gambia. The Gambia's natural beauty and proximity to Europe has made

it one of the larger markets for tourism in West Africa. The

government's 1998 seizure of the private peanut firm Alimenta

eliminated the largest purchaser of Gambian groundnuts. Despite an

announced program to begin privatizing key parastatals, no plans

have been made public that would indicate that the government

intends to follow through on its promises. Unemployment and

underemployment rates remain extremely high; short-run economic

progress depends on sustained bilateral and multilateral aid, on

responsible government economic management, on continued technical

assistance from the IMF and bilateral donors, and on expected growth

in the construction sector.

Gaza Strip

High population density, limited land access, and strict

internal and external security controls have kept economic

conditions in the Gaza Strip - the smaller of the two areas under

the Palestinian Authority (PA) - even more degraded than in the West

Bank. The beginning of the second intifada in September 2000 sparked

an economic downturn, largely the result of Israeli closure

policies; these policies, which were imposed to address security

concerns in Israel, disrupted labor and trade access to and from the

Gaza Strip. In 2001, and even more severely in 2003, Israeli

military measures in PA areas resulted in the destruction of

capital, the disruption of administrative structures, and widespread

business closures. The Israeli withdrawal from the Gaza Strip in

September 2005 offered some medium-term opportunities for economic

growth, but Israeli-imposed crossings closures, which became more

restrictive after HAMAS violently took over the territory in June

2007, have resulted in widespread private sector layoffs and

shortages of most goods. The status of the crossings, which are

closed to all but the most basic goods, has not changed following

Israel's military offensive into the Gaza Strip in early 2009.

Georgia

Georgia's economy sustained GDP growth of close to 10% in

2006 and 12% in 2007, based on strong inflows of foreign investment

and robust government spending. However, growth slowed to less than

3% in 2008 and is expected to slow further in 2009. Georgia's main

economic activities include the cultivation of agricultural products

such as grapes, citrus fruits, and hazelnuts; mining of manganese

and copper; and output of a small industrial sector producing

alcoholic and nonalcoholic beverages, metals, machinery, aircraft

and chemicals. Areas of recent improvement include growth in the

construction, banking services, and mining sectors, but reduced

availability of external investment and the slowing regional economy

are emerging risks. The country imports nearly all its needed

supplies of natural gas and oil products. It has sizeable hydropower

capacity, a growing component of its energy supplies. Georgia has

overcome the chronic energy shortages of the past by renovating

hydropower plants and by bringing in newly available supplies from

Azerbaijan. It also has an increased ability to pay for more

expensive gas imports from Russia. The construction on the

Baku-T'bilisi-Ceyhan oil pipeline, the Baku-T'bilisi-Erzerum gas

pipeline, and the Kars-Akhalkalaki Railroad are part of a strategy

to capitalize on Georgia's strategic location between Europe and

Asia and develop its role as a transit point for gas, oil and other

goods. Georgia has historically suffered from a chronic failure to

collect tax revenues; however, the government has made great

progress and has reformed the tax code, improved tax administration,

increased tax enforcement, and cracked down on corruption since

coming to power in 2004. Government revenues have increased nearly

four fold since 2003. Due to improvements in customs and tax

enforcement, smuggling is a declining problem. The country is

pinning its hopes for long-term growth on a determined effort to

reduce regulation, taxes, and corruption in order to attract foreign

investment, but the economy faces a more difficult investment

climate both domestically and internationally.

Germany

The German economy - the fifth largest economy in the world

in PPP terms and Europe's largest - began to contract in the second

quarter of 2008 as the strong euro, high oil prices, tighter credit

markets, and slowing growth abroad took their toll on Germany's

export-dependent economy. At just 1% in 2008, GDP growth is expected

to be negative in 2009. Recent stimulus and lender relief efforts

will make demands on Germany's federal budget and undercut plans to

balance its budget by 2011. The reforms launched by the former

government of Chancellor Gerhard SCHOEDER, deemed necessary due to

chronically high unemployment and low average growth, led to strong

growth in 2007, while unemployment in 2008 fell below 8%, a new

post-reunification low. Germany's aging population, combined with

high chronic unemployment, has pushed social security outlays to a

level exceeding contributions, but higher government revenues from

the cyclical upturn in 2006-07 and a 3% rise in the value-added tax

cut Germany's budget deficit to within the EU's 3% debt limit in

2007. The current government of Chancellor Angela MERKEL has

initiated other reform measures, such as a gradual increase in the

mandatory retirement age from 65 to 67 and measures to increase

female participation in the labor market. The modernization and

integration of the eastern German economy - where unemployment still

exceeds 30% in some municipalities - continues to be a costly

long-term process, with annual transfers from west to east amounting

to roughly $80 billion. While corporate restructuring and growing

capital markets have set strong foundations to help Germany meet the

longer-term challenges of European economic integration and

globalization, Germany's export-oriented economy has proved a

disadvantage in the context of weak global demand.