China's economy since the late 1970s has changed from a
closed, centrally planned system to a more market-oriented one that
plays a major role in the global economy - in 2010 China became the
world's largest exporter. Reforms began with the phasing out of
collectivized agriculture, and expanded to include the gradual
liberalization of prices, fiscal decentralization, increased
autonomy for state enterprises, creation of a diversified banking
system, development of stock markets, rapid growth of the private
sector, and opening to foreign trade and investment. China generally
has implemented reforms in a gradualist fashion. In recent years,
China has renewed its support for state-owned enterprises in sectors
it considers important to "economic security," explicitly looking to
foster globally competitive national champions. After keeping its
currency tightly linked to the US dollar for years, in July 2005
China revalued its currency by 2.1% against the US dollar and moved
to an exchange rate system that references a basket of currencies.
From mid 2005 to late 2008 cumulative appreciation of the renminbi
against the US dollar was more than 20%, but the exchange rate
remained virtually pegged to the dollar from the onset of the global
financial crisis until June 2010, when Beijing allowed resumption of
a gradual appreciation. The restructuring of the economy and
resulting efficiency gains have contributed to a more than tenfold
increase in GDP since 1978. Measured on a purchasing power parity
(PPP) basis that adjusts for price differences, China in 2010 stood
as the second-largest economy in the world after the US, having
surpassed Japan in 2001. The dollar values of China's agricultural
and industrial output each exceeded those of the US, although China
was second to the US in the value of services it produced. Still,
per capita income is below the world average. The Chinese government
faces numerous economic development challenges, including: (a)
reducing its high domestic savings rate and correspondingly low
domestic demand; (b) sustaining adequate job growth for tens of
millions of migrants and new entrants to the work force; (c)
reducing corruption and other economic crimes; and (d) containing
environmental damage and social strife related to the economy's
rapid transformation. Economic development has progressed further in
coastal provinces than in the interior, and approximately 200
million rural laborers and their dependents have relocated to urban
areas to find work. One demographic consequence of the "one child"
policy is that China is now one of the most rapidly aging countries
in the world. Deterioration in the environment - notably air
pollution, soil erosion, and the steady fall of the water table,
especially in the north - is another long-term problem. China
continues to lose arable land because of erosion and economic
development. The Chinese government is seeking to add energy
production capacity from sources other than coal and oil, focusing
on nuclear and alternative energy development. In 2009, the global
economic downturn reduced foreign demand for Chinese exports for the
first time in many years, but China rebounded quickly, outperforming
all other major economies in 2010 with GDP growth around 10%. The
economy appears set to remain on a strong growth trajectory in 2011,
lending credibility to the stimulus policies the regime rolled out
during the global financial crisis. The government vows to continue
reforming the economy and emphasizes the need to increase domestic
consumption in order to make the economy less dependent on exports
for GDP growth in the future, but China likely will make only
marginal progress toward these rebalancing goals in 2011. Two
economic problems China currently faces are inflation - which, late
in 2010, surpassed the government's target of 3% - and local
government debt, which swelled as a result of stimulus policies, and
is largely off-the-books and potentially low-quality.
Christmas Island
Phosphate mining had been the only significant
economic activity, but in December 1987 the Australian government
closed the mine. In 1991, the mine was reopened. With the support of
the government, a $34 million casino opened in 1993, but closed in
1998.
Clipperton Island
Although 115 species of fish have been identified
in the territorial waters of Clipperton Island, the only economic
activity is tuna fishing.
Cocos (Keeling) Islands
Coconuts, grown throughout the islands, are
the sole cash crop. Small local gardens and fishing contribute to
the food supply, but additional food and most other necessities must
be imported from Australia. There is a small tourist industry.
Colombia
Colombia experienced accelerating growth between 2002 and
2007, chiefly due to improvements in domestic security, rising
commodity prices, and to President URIBE's promarket economic
policies. Foreign direct investment reached a record $10 billion in
2008, and continues to flow in, especially in the oil sector. A
series of policies enhanced Colombia's investment climate:
pro-business reforms in the oil and gas sectors and export-led
growth fueled mainly by the Andean Trade Promotion and Drug
Eradication Act. Inequality, underemployment, and narcotrafficking
remain significant challenges, and Colombia's infrastructure
requires major improvements to sustain economic expansion. Because
of the global financial crisis and weakening demand for Colombia's
exports, Colombia's economy grew only 2.7% in 2008, and 0.8% in 2009
but rebounded to around 4.5% in 2010. The government has encouraged
exporters to diversify their customer base beyond the United States
and Venezuela, traditionally Colombia's largest trading partners;
the SANTOS administration continues to pursue free trade agreements
with Asian and South American partners and awaits the approval of a
Canadian trade accord by Canada's and EU's parliaments. The business
sector remains concerned about Venezuela's trade restrictions on
Colombian exports, an appreciating domestic currency, and the
pending US Congressional approval of the US-Colombia Trade Promotion
Agreement.
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.
Export income is heavily reliant on the three main crops of vanilla,
cloves, and ylang-ylang and Comoros' export earnings are easily
disrupted by disasters such as fires. 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 - lacks a comprehensive strategy to
attract foreign investment and 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. Political
problems have inhibited growth, which has averaged only about 1% in
2006-09. Remittances from 150,000 Comorans abroad help supplement
GDP. In September 2009 the IMF approved Comoros for a three-year $21
million loan. The IMF gave generally positive reports of the
country's program performance as of October 2010. The African
Development Bank approved a $34.6 million debt-relief package loan
for Comoros in September 2010, and Comoros will attempt to qualifry
for debt relief in 2012 under the IMF and World Bank's Heavily
Indebted Poor Countries (HIPC) initiative.
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 decades of decline. Systemic corruption
since independence in 1960 and conflict that began in May 1997 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. 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, the government's review of mining
contracts that began in 2006, combined with a fall in world market
prices for the DRC's key mineral exports temporarily weakened output
in 2009, leading to a balance of payments crisis. The recovery in
mineral prices beginning in mid 2009 boosted mineral exports, and
emergency funds from the IMF boosted foreign reserves. An uncertain
legal framework, corruption, a lack of transparency in government
policy are long-term problems for the mining sector and the economy
as a whole. The global recession cut economic growth in 2009 to less
than half its 2008 level, but growth returned to 3% in 2010. The DRC
signed a Poverty Reduction and Growth Facility with the IMF in 2009
and received $12 billion in multilateral and bilateral debt relief
in 2010.
Congo, Republic of the
The economy is a mixture of subsistence
agriculture, an industrial sector based largely on oil and support
services, and government spending. 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. Characterized by budget problems and overstaffing,
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. The drop in oil prices during the global crisis
reduced oil revenue by about 30%, but the subsequent 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,
receiving $1.9 billion in debt relief under the program in 2010.
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
Prior to the global economic crisis, Costa Rica enjoyed
stable economic growth. The economy contracted 0.7% in 2009, but
resumed growth at more than 3% in 2010. While the traditional
agricultural exports of bananas, coffee, sugar, and beef are still
the backbone of commodity export trade, a variety of industrial and
specialized agricultural products have broadened export trade in
recent years. High value added goods and services, including
microchips, have further bolstered exports. 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; and Costa Rica has attracted one of the highest
levels of foreign direct investment per capita in Latin America.
However, many business impediments, such as high levels of
bureaucracy, difficulty of enforcing contracts, and weak investor
protection, remain. Poverty has remained around 15-20% 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. Unlike the rest of Central America,
Costa Rica is not highly dependent on remittances as they only
represent about 2% of GDP. 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. The US-Central
American-Dominican Republic Free Trade Agreement (CAFTA-DR) entered
into force on 1 January 2009, after significant delays within the
Costa Rican legislature. CAFTA-DR will likely lead to increased
foreign direct investment in key sectors of the economy, including
the insurance and telecommunications sectors recently opened to
private investors. President CHINCHILLA is likely to push for fiscal
reform in the coming year, seeking to boost revenue, possibly
through revised tax legislation, to fund an increase in security
services and education.
Cote d'Ivoire
Cote d'Ivoire is heavily dependent on agriculture and
related activities, which engage roughly 68% of the population. 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. Cocoa, oil, and coffee are the country's top
export revenue earners, but the country is also producing gold.
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 more than 2% in
2008 and around 4% per year in 2009-10. Per capita income has
declined by 15% since 1999, but registered a slight improvement in
2009-10. Power cuts caused by a turbine failure in early 2010 slowed
economic activity. Cote d'Ivoire in 2010 signed agreements to
restructure its Paris Club bilateral, other bilateral, and London
Club debt. Cote d'Ivoire's long term challenges include political
instability and degrading infrastructure.
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. The
government announced it would eliminate 500,000 state jobs by March
2011 and has expanded opportunities for self-employment. President
CASTRO said such changes were needed to update the economic model to
ensure the survival of socialism. 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.
Curacao
Tourism, petroleum refining, and offshore finance are the
mainstays of this small economy, which is closely tied to the
outside world. Although GDP grew slightly during the past decade,
the island enjoys a high per capita income and a well-developed
infrastructure compared with other countries in the region. Curacao
has an excellent natural harbor that can accommodate large oil
tankers. The Venezuelan state oil company leases the single refinery
on the island from the government; most of the oil for the refinery
is imported from Venezuela; most of the refined products are
exported to the US. Almost all consumer and capital goods are
imported, with the US, Brazil, Italy, and Mexico being the major
suppliers. The government is attempting to diversify its industry
and trade and has signed an Association Agreement with the EU to
expand business there. Poor soils and inadequate water supplies
hamper the development of agriculture. Budgetary problems complicate
reform of the health and pension systems for an aging population.
Cyprus
The area of the Republic of Cyprus under government control
has a market economy dominated by the service sector, which accounts
for nearly four-fifths 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 4.7%. This prosperity came under
pressure in 2009, as construction and tourism slowed in the face of
reduced foreign demand triggered by the ongoing global financial
crisis. Although Cyprus lagged its EU peers in showing signs of
stress from the global crisis, the economy tipped into recession in
mid 2009 and contracted 1.8% for the year. In addition, the budget
deficit is on the rise and reached 5.7% of GDP in 2010, a violation
of the EU's budget deficit criteria of no more than 3% of GDP. In
response to the country's deteriorating finances, Nicosia is
promising to implement measures to cut the cost of the state
payroll, curb tax evasion, and revamp social benefits. However, it
has been slow to act, lacking a consensus in parliament and among
the social partners for its proposed measures.
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 small, open, export-driven Czech
economy grew by over 6% annually from 2005-2007 and by 2.5% in 2008.
The conservative Czech financial system has remained relatively
healthy throughout 2009. Nevertheless, the real economy contracted
by 4.1% in 2009, mainly due to a significant drop in external demand
as the Czech Republic's main export markets fell into recession. GDP
is expected to grow by 2.4% in 2010, driven largely by a rebound in
external demand, particularly from Gremany.
Denmark
This thoroughly modern market economy features a high-tech
agricultural sector, state-of-the-art industry with world-leading
firms in pharmaceuticals, maritime shipping and renewable energy,
and a high dependence on foreign trade. The Danish economy is also
characterized by extensive government welfare measures, an equitable
distribution of income, and comfortable living standards. Denmark is
a net exporter of food and energy and enjoys a comfortable balance
of payments surplus. After a long consumption-driven upswing,
Denmark's economy began slowing in 2007 with the end of a housing
boom. Housing prices dropped markedly in 2008-09. The global
financial crisis has exacerbated this cyclical slowdown through
increased borrowing costs and lower export demand, consumer
confidence, and investment. The global financial crises cut Danish
GDP by 0.9% in 2008 and 4.7% in 2009. Historically low levels of
unemployment rose sharply with the recession but remain below 5%,
about half the level of the EU. Denmark made a modest recovery in
2010 in part because of increased government spending. An impending
decline in the ratio of workers to retirees will be a major
long-term issue. Denmark maintained a healthy budget surplus for
many years up to 2008, but the budget balance swung into deficit
during 2009-10. Nonetheless, Denmark's fiscal position remains among
the strongest in the EU. Despite previously meeting the criteria to
join the European Economic and Monetary Union (EMU), so far Denmark
has decided not to join, although the Danish krone remains pegged to
the euro.
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.