Landlocked Malawi ranks among the world's most densely
populated and least developed countries. The economy is
predominately agricultural with about 85% of the population living
in rural areas. Agriculture accounts for more than one-third of GDP
and 90% of export revenues. The performance of the tobacco sector is
key to short-term growth as tobacco accounts for more than half of
exports. The economy depends on substantial inflows of economic
assistance from the IMF, the World Bank, and individual donor
nations. In December 2007, the US granted Malawi eligibility status
to receive financial support within the Millennium Challenge
Corporation (MCC) initiative. Malawi will now begin a consultative
process to develop a five-year program before funding can begin. In
2006, Malawi was approved for relief under the Heavily Indebted Poor
Countries (HIPC) program. The government faces many challenges
including developing a market economy, improving educational
facilities, facing up to environmental problems, dealing with the
rapidly growing problem of HIV/AIDS, and satisfying foreign donors
that fiscal discipline is being tightened. In 2005, President
MUTHARIKA championed an anticorruption campaign. Since 2005
President MUTHARIKA'S government has exhibited improved financial
discipline under the guidance of Finance Minister Goodall GONDWE and
signed a three year Poverty Reduction and Growth Facility worth $56
million with the IMF. Improved relations with the IMF lead other
international donors to resume aid as well.
Malaysia
Malaysia, a middle-income country, has transformed itself
since the 1970s from a producer of raw materials into an emerging
multi-sector economy. After coming to office in 2003, former Prime
Minister ABDULLAH tried to move the economy farther up the
value-added production chain by attracting investments in high
technology industries, medical technology, and pharmaceuticals. The
Government of Malaysia is continuing efforts to boost domestic
demand to wean the economy off of its dependence on exports.
Nevertheless, exports - particularly of electronics - remain a
significant driver of the economy. As an oil and gas exporter,
Malaysia has profited from higher world energy prices, although the
rising cost of domestic gasoline and diesel fuel forced Kuala Lumpur
to reduce government subsidies. Malaysia "unpegged" the ringgit from
the US dollar in 2005 and the currency appreciated 6% per year
against the dollar in 2006-08. Although this has helped to hold down
the price of imports, inflationary pressures began to build in 2007
- in 2008 inflation stood at nearly 6%, year-over-year. The
government presented its five-year national development agenda in
April 2006 through the Ninth Malaysia Plan, a comprehensive
blueprint for the allocation of the national budget from 2006-10.
ABDULLAH unveiled a series of ambitious development schemes for
several regions that have had trouble attracting business
investment. Real GDP growth averaged about 6% per year under
ABDULLAH, but regions outside of Kuala Lumpur and the manufacturing
hub Penang did not fare as well. The central bank maintains healthy
foreign exchange reserves and the regulatory regime has limited
Malaysia's exposure to riskier financial instruments and the global
financial crisis. Decreasing worldwide demand for consumer goods is
expected to hurt economic growth in 2009 and beyond, however.
Maldives
Tourism, Maldives' largest industry, accounts for 28% of
GDP and more than 60% of foreign exchange receipts. Over 90% of
government tax revenue comes from import duties and tourism-related
taxes. Fishing is the second leading sector. Agriculture and
manufacturing continue to play a lesser role in the economy,
constrained by the limited availability of cultivable land and the
shortage of domestic labor. Most staple foods must be imported.
Industry, which consists mainly of garment production, boat
building, and handicrafts, accounts for about 7% of GDP. The
Maldivian Government began an economic reform program in 1989
initially by lifting import quotas and opening some exports to the
private sector. Subsequently, it has liberalized regulations to
allow more foreign investment. Real GDP growth averaged over 7.5%
per year for more than a decade. In late December 2004, a major
tsunami left more than 100 dead, 12,000 displaced, and property
damage exceeding $300 million. As a result of the tsunami, the GDP
contracted by about 4.6% in 2005. A rebound in tourism, post-tsunami
reconstruction, and development of new resorts helped the economy
recover quickly, with GDP growth registering 18% in 2006. Growth
slowed in 2007-08, but remained above 5% per year. The trade deficit
expanded sharply as a result of high oil prices and imports of
construction material. Government spending on social needs,
subsidies, and civil servant salaries have created a large budget
deficit and inflation has picked up sharply, reaching nearly 13% in
October 2008 due to high oil and food prices. Diversifying beyond
tourism and fishing, reforming public finance, and increasing
employment are the major challenges facing the government. Over the
longer term Maldivian authorities worry about the impact of erosion
and possible global warming on their low-lying country; 80% of the
area is 1 meter or less above sea level.
Mali
Mali is among the 25 poorest countries in the world, with 65%
of its land area desert or semidesert and with a highly unequal
distribution of income. Economic activity is largely confined to the
riverine area irrigated by the Niger. About 10% of the population is
nomadic and some 80% of the labor force is engaged in farming and
fishing. Industrial activity is concentrated on processing farm
commodities. Mali is heavily dependent on foreign aid and vulnerable
to fluctuations in world prices for gold and cotton, its main
exports. The government has continued its successful implementation
of an IMF-recommended structural adjustment program that is helping
the economy grow, diversify, and attract foreign investment. Mali
has invested in tourism and a tractor assembly factory. Mali's
adherence to economic reform and the 50% devaluation of the CFA
franc in January 1994 have pushed up economic growth to a 5% average
in 1996-2008. Worker remittances and external trade routes for the
landlocked country have been jeopardized by continued unrest in
neighboring Cote d'Ivoire, however, Mali is building a road network
that will connect it to all adjacent countries and it has a railway
line to Senegal.
Malta
Malta produces only about 20% of its food needs, has limited
fresh water supplies, and has few domestic energy sources. Malta's
geographic position between the EU and Africa makes it a recipient
of illegal immigration, which has strained Malta's political and
economic resources. The financial services industry has grown in
recent years, but is not fully modernized. Malta's economy is
dependent on foreign trade, manufacturing - especially electronics
and pharmaceuticals - and tourism all of which have been negatively
affected by the global economic downturn. Malta adopted the euro on
1 January 2008. The Maltese government in 2009 will be challenged to
contain the budget deficit, which ballooned in 2008 to about 4.1% of
GDP, placing it above the euro zone's 3% maximum.
Marshall Islands
US Government assistance is the mainstay of this
tiny island economy. The Marshall Islands received more than $1
billion in aid from the US from 1986-2002. Agricultural production,
primarily subsistence, is concentrated on small farms; the most
important commercial crops are coconuts and breadfruit. Small-scale
industry is limited to handicrafts, tuna processing, and copra. The
tourist industry, now a small source of foreign exchange employing
less than 10% of the labor force, remains the best hope for future
added income. The islands have few natural resources, and imports
far exceed exports. Under the terms of the Amended Compact of Free
Association, the US will provide millions of dollars per year to the
Marshall Islands (RMI) through 2023, at which time a Trust Fund made
up of US and RMI contributions will begin perpetual annual payouts.
Government downsizing, drought, a drop in construction, the decline
in tourism, and less income from the renewal of fishing vessel
licenses have held GDP growth to an average of 1% over the past
decade.
Mauritania
Half the population still depends on agriculture and
livestock for a livelihood, even though many of the nomads and
subsistence farmers were forced into the cities by recurrent
droughts in the 1970s and 1980s. Mauritania has extensive deposits
of iron ore, which account for nearly 40% of total exports. The
nation's coastal waters are among the richest fishing areas in the
world, but overexploitation by foreigners threatens this key source
of revenue. The country's first deepwater port opened near
Nouakchott in 1986. Before 2000, drought and economic mismanagement
resulted in a buildup of foreign debt. In February 2000, Mauritania
qualified for debt relief under the Heavily Indebted Poor Countries
(HIPC) initiative and nearly all of its foreign debt has since been
forgiven. In December 2007 donors pledged $2.1 billion at a
triennial Consultative Group review. A new investment code approved
in December 2001 improved the opportunities for direct foreign
investment. Mauritania and the IMF agreed to a three-year Poverty
Reduction and Growth Facility (PRGF) arrangement in 2006 and
Mauritania made satisfactory progress, but IMF and World Bank
suspended their programs in Mauritania following the August 2008
coup; following the July 2009 Presidential elections, the IMF and
World Bank agreed to meet with the Goverment to discuss a
resumption. Oil prospects, while initially promising, have largely
failed to materialize. The Government continues to emphasize
reduction of poverty, improvement of health and education, and
privatization of the economy.
Mauritius
Since independence in 1968, Mauritius has developed from a
low-income, agriculturally based economy to a middle-income
diversified economy with growing industrial, financial, and tourist
sectors. For most of the period, annual growth has been in the order
of 5% to 6%. This remarkable achievement has been reflected in more
equitable income distribution, increased life expectancy, lowered
infant mortality, and a much-improved infrastructure. The economy
rests on sugar, tourism, textiles and apparel, and financial
services, and is expanding into fish processing, information and
communications technology, and hospitality and property development.
Sugarcane is grown on about 90% of the cultivated land area and
accounts for 15% of export earnings. The government's development
strategy centers on creating vertical and horizontal clusters of
development in these sectors. Mauritius has attracted more than
32,000 offshore entities, many aimed at commerce in India, South
Africa, and China. Investment in the banking sector alone has
reached over $1 billion. Mauritius, with its strong textile sector,
has been well poised to take advantage of the Africa Growth and
Opportunity Act (AGOA).
Mayotte
Economic activity is based primarily on the agricultural
sector, including fishing and livestock raising. Mayotte is not
self-sufficient and must import a large portion of its food
requirements, mainly from France. The economy and future development
of the island are heavily dependent on French financial assistance,
an important supplement to GDP. Mayotte's remote location is an
obstacle to the development of tourism.
Mexico
Mexico has a free market economy in the trillion dollar
class. It contains a mixture of modern and outmoded industry and
agriculture, increasingly dominated by the private sector. Recent
administrations have expanded competition in seaports, railroads,
telecommunications, electricity generation, natural gas
distribution, and airports. Per capita income is roughly one-third
that of the US; income distribution remains highly unequal. Trade
with the US and Canada has nearly tripled since the implementation
of NAFTA in 1994. Mexico has 12 free trade agreements with over 40
countries including, Guatemala, Honduras, El Salvador, the European
Free Trade Area, and Japan, putting more than 90% of trade under
free trade agreements. In 2007, during its first year in office, the
Felipe CALDERON administration was able to garner support from the
opposition to successfully pass a pension and a fiscal reform. The
administration continues to face many economic challenges including
the need to upgrade infrastructure, modernize labor laws, and allow
private investment in the energy sector. CALDERON has stated that
his top economic priorities remain reducing poverty and creating
jobs.
Micronesia, Federated States of
Economic activity consists primarily
of subsistence farming and fishing. The islands have few mineral
deposits worth exploiting, except for high-grade phosphate. The
potential for a tourist industry exists, but the remote location, a
lack of adequate facilities, and limited air connections hinder
development. Under the original terms of the Compact of Free
Association, the US provided $1.3 billion in grant aid during the
period 1986-2001; the level of aid has been subsequently reduced.
The Amended Compact of Free Association with the US guarantees the
Federated States of Micronesia (FSM) millions of dollars in annual
aid through 2023, and establishes a Trust Fund into which the US and
the FSM make annual contributions in order to provide annual payouts
to the FSM in perpetuity after 2023. The country's medium-term
economic outlook appears fragile due not only to the reduction in US
assistance but also to the current slow growth of the private sector.
Moldova
Moldova remains one of the poorest countries in Europe
despite recent progress from its small economic base. It enjoys a
favorable climate and good farmland but has no major mineral
deposits. As a result, the economy depends heavily on agriculture,
featuring fruits, vegetables, wine, and tobacco. Moldova must import
almost all of its energy supplies. Moldova's dependence on Russian
energy was underscored at the end of 2005, when a Russian-owned
electrical station in Moldova's separatist Transnistria region cut
off power to Moldova and Russia's Gazprom cut off natural gas in
disputes over pricing, and again in January 2009, during a similar
dispute. Russia's decision to ban Moldovan wine and agricultural
products, coupled with its decision to double the price Moldova paid
for Russian natural gas, slowed GDP growth in 2006-07. However, in
2008 growth exceeded the 6% level Moldova had achieved in 2000-05,
boosted by Russia's partial removal of the bans, solid fixed capital
investment, and strong domestic demand driven by remittances from
abroad. Economic reforms have been slow because of corruption and
strong political forces backing government controls. Nevertheless,
the government's primary goal of EU integration has resulted in some
market-oriented progress. The granting of EU trade preferences and
increased exports to Russia will encourage higher growth rates, but
the agreements are unlikely to serve as a panacea, given the extent
to which export success depends on higher quality standards and
other factors. The economy remains vulnerable to higher fuel prices,
poor agricultural weather, and the skepticism of foreign investors.
Also, the presence of an illegal separatist regime in Moldova's
Transnistria region continues to be a drag on the Moldovan economy.
The deteriorating global economic crisis did not seriously effect
the Moldovan economy in 2008 due to its low exposure to the
international financial system, but a global economic slowdown,
particularly in the EU and Russia, could hurt the economy in 2009 as
Moldova relies heavily on remittances from Moldovans abroad.
Monaco
Monaco, bordering France on the Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. The principality also is a major banking center and has
successfully sought to diversify into services and small,
high-value-added, nonpolluting industries. The state has no income
tax and low business taxes and thrives as a tax haven both for
individuals who have established residence and for foreign companies
that have set up businesses and offices. The state retains
monopolies in a number of sectors, including tobacco, the telephone
network, and the postal service. Living standards are high, roughly
comparable to those in prosperous French metropolitan areas.
Mongolia
Economic activity in Mongolia has traditionally been based
on herding and agriculture. Mongolia has extensive mineral deposits.
Copper, coal, gold, molybdenum, fluorspar, uranium, tin, and
tungsten account for a large part of industrial production and
foreign direct investment. Soviet assistance, at its height
one-third of GDP, disappeared almost overnight in 1990 and 1991 at
the time of the dismantlement of the USSR. The following decade saw
Mongolia endure both deep recession because of political inaction
and natural disasters, as well as economic growth because of
reform-embracing, free-market economics and extensive privatization
of the formerly state-run economy. Severe winters and summer
droughts in 2000-02 resulted in massive livestock die-off and zero
or negative GDP growth. This was compounded by falling prices for
Mongolia's primary sector exports and widespread opposition to
privatization. Growth averaged nearly 9% per year in 2004-08 largely
because of high copper prices and new gold production. Until late
2008 Mongolia experienced a soaring inflation rate with year-to-year
inflation reaching nearly 40% - the highest inflation rate in over a
decade. In late 2008 falling commodity prices in this import-reliant
country helped lower inflation but by that time, the country had
begun to feel the effects of the global financial crisis. Falling
prices for copper and other mineral exports have reduced government
revenues and are forcing cuts in spending. The global credit crisis
has stalled growth in key sectors, especially those that had been
fueled by foreign investment. Mongolia's economy continues to be
heavily influenced by its neighbors. Mongolia purchases 95% of its
petroleum products and a substantial amount of electric power from
Russia, leaving it vulnerable to price increases. Trade with China
represents more than half of Mongolia's total external trade - China
receives about 70% of Mongolia's exports. Remittances from
Mongolians working abroad both legally and illegally are sizable but
have fallen due to the economic crisis; money laundering is a
growing concern. Mongolia settled its $11 billion debt with Russia
at the end of 2003 on favorable terms. Mongolia, which joined the
World Trade Organization in 1997, seeks to expand its participation
and integration into Asian regional economic and trade regimes.
Montenegro
Montenegro severed its economy from federal control and
from Serbia during the MILOSEVIC era and maintained its own central
bank, adopted the Deutchmark, then the euro - rather than the
Yugoslav dinar - as official currency, collected customs tariffs,
and managed its own budget. The dissolution of the loose political
union between Serbia and Montenegro in 2006 led to separate
membership in several international financial institutions, such as
the European Bank for Reconstruction and Development. On 18 January
2007, Montenegro joined the World Bank and IMF. Montenegro is
pursuing its own membership in the World Trade Organization and
signed a Stabilization and Association agreement with the European
Union in October 2007. On December 15, 2008, Montenegro submitted an
EU membership application. Unemployment and regional disparities in
development are key political and economic problems. Montenegro has
privatized its large aluminum complex - the dominant industry - as
well as most of its financial sector, and has begun to attract
foreign direct investment in the tourism sector. The global
financial crisis is likely to have a significant negative impact on
the economy.
Montserrat
Severe volcanic activity, which began in July 1995, has
put a damper on this small, open economy. A catastrophic eruption in
June 1997 closed the airports and seaports, causing further economic
and social dislocation. Two-thirds of the 12,000 inhabitants fled
the island. Some began to return in 1998 but lack of housing limited
the number. The agriculture sector continued to be affected by the
lack of suitable land for farming and the destruction of crops.
Prospects for the economy depend largely on developments in relation
to the volcanic activity and on public sector construction activity.
The UK has launched a three-year $122.8 million aid program to help
reconstruct the economy. Half of the island is expected to remain
uninhabitable for another decade.
Morocco
Moroccan economic policies brought macroeconomic stability
to the country in the early 1990s but have not spurred growth
sufficient to reduce unemployment - nearing 20% in urban areas -
despite the Moroccan Government's ongoing efforts to diversify the
economy. Morocco's GDP growth rose to 5.9% in 2008, with the economy
recovering from a drought in 2007 that severely reduced agricultural
output and necessitated wheat imports at rising world prices.
Moroccan authorities understand that reducing poverty and providing
jobs are key to domestic security and development. In 2005, Morocco
launched the National Initiative for Human Development (INDH), a $2
billion social development plan to address poverty and unemployment
and to improve the living conditions of the country's urban slums.
Moroccan authorities are implementing reform efforts to open the
economy to international investors. Despite structural adjustment
programs supported by the IMF, the World Bank, and the Paris Club,
the dirham is only fully convertible for current account
transactions. In 2000, Morocco entered an Association Agreement with
the EU and, in 2006, entered a Free Trade Agreement (FTA) with the
US. Long-term challenges include improving education and job
prospects for Morocco's youth, and closing the income gap between
the rich and the poor, which the government hopes to achieve by
increasing tourist arrivals and boosting competitiveness in textiles.