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 70% 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). Djibouti has
experienced relatively minimal impact from the global economic
downturn, but its reliance on diesel-generated electricity and
imported food leave average consumers vulnerable to global price
shocks.
Dominica
The Dominican economy has been dependent on agriculture -
primarily bananas - in years past, but increasingly has been driven
by tourism as the government seeks to promote Dominica as an
"ecotourism" destination. In order to diversify the island's
production base, the government also is attempting to develop an
offshore financial sector and has signed an agreement with the EU to
develop geothermal energy resources. 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 an economic and financial crisis and to
meet IMF requirements. This restructuring paved the way for an
economic recovery - real growth for 2006 reached a two-decade high -
and helped to reduce the debt burden, which remains at about 85% of
GDP. Hurricane Dean struck the island in August 2007 causing damages
equivalent to 20% of GDP. In 2009, growth slowed as a result of the
global recession; it picked up only slightly in 2010.
Dominican Republic
The Dominican Republic 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. The economy is highly dependent upon the US, the destination
for nearly 60% 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 suffers from marked
income inequality; the poorest half of the population receives less
than one-fifth of GDP, while the richest 10% enjoys nearly 40% of
GDP. High unemployment and underemployment remains an important
long-term challenge. The Central America-Dominican Republic Free
Trade Agreement (CAFTA-DR) came into force in March 2007, boosting
investment and exports and reducing losses to the Asian garment
industry. The growth of the Dominican Republic's economy slowed in
2008-09 because of the global recession, but still remained one of
the fastest growing in the region.
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, the 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. After moderate growth in 2007, the economy reached a growth
rate of 7.2% in 2008, in large part due to high global petroleum
prices. President Rafael CORREA, who took office in January 2007,
defaulted on Ecuador's sovereign debt in December 2008, refusing to
make payment on $3.2 billion in international bonds, representing
over 80% of Ecuador's private external debt. Economic policies under
the CORREA administration - including an announcement in late 2009
terminating 13 bilateral investment treaties - have generated
economic uncertainty and discouraged private investment. The
Ecuadorian economy slowed to 0.4% growth in 2009 due to the global
financial crisis, and the sharp decline in world oil prices and
remittance flows, but picked up to a 2.4% growth rate in 2010.
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 from 2004 to 2008
aggressively pursued economic reforms to attract foreign investment
and facilitate GDP growth. The global financial crisis has slowed
the reform efforts. The budget deficit climbed to over 8% of GDP and
Egypt's GDP growth slowed to 4.6% in 2009, predominately due to
reduced growth in export-oriented sectors, including manufacturing
and tourism, and Suez Canal revenues. In 2010, the government spent
more on infrastructure and public projects, and exports drove GDP
growth to more than 5%, but GDP growth in 2011 is unlikely to bounce
back to pre-global financial recession levels, when it stood at 7%.
Despite the relatively high levels of economic growth over the past
few years, living conditions for the average Egyptian remain poor.
El Salvador
Despite being the smallest country geographically in
Central America, El Salvador has the third largest economy in the
region. The economy took a hit from the global recession and real
GDP contracted by 3.5% in 2009. The economy began a slow recovery in
2010 on the back of improved export and remittances figures.
Remittances accounted for 16% of GDP in 2009, and about a third of
all households receive these transfers. In 2006 El Salvador was the
first country to ratify the Dominican Republic-Central American Free
Trade Agreement (CAFTA-DR), which has bolstered the export of
processed foods, sugar, and ethanol, and supported investment in the
apparel sector amid increased Asian competition and the expiration
of the Multi-Fiber Agreement in 2005. 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, the primary conflict zone during the
civil war, 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. Any counter-cyclical policy response
to the downturn must be through fiscal policy, which is constrained
by legislative requirements for a two-thirds majority to approve any
international financing.
Equatorial Guinea
The discovery and exploitation of large oil
reserves have contributed to dramatic economic growth but
fluctuating oil prices have produced huge swings in GDP growth in
recent years. Forestry, farming, and fishing are also major
components of GDP. Subsistence farming is the dominate form of
livelihood. 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. Government
officials and their family members own most businesses, but
corruption is rampant. Undeveloped natural resources include
titanium, iron ore, manganese, uranium, and alluvial gold. Growth
remained strong in 2008, led by oil, but dropped in 2009-10, as the
price of oil fell.
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, a large share of
the population - nearly 80% - is engaged in subsistence agriculture,
but they produce only a small share of total output. Since the
conclusion of the Ethiopian-Eritrea war in 2000, 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 began mineral extraction in 2010.
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 higher per capita income levels
in Central Europe and the Baltic region. Estonia's successive
governments have pursued a free market, pro-business economic agenda
and have wavered little in their commitment to pro-market reforms.
The current government has pursued relatively sound fiscal policies
that have resulted in balanced budgets and very low public debt. The
economy benefits from strong electronics and telecommunications
sectors and strong trade ties with Finland, Sweden, and Germany.
Tallinn's priority has been to sustain high growth rates - on
average 8% per year from 2003 to 2007. 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. GDP dropped nearly 15% in 2009,
among the world's highest rates of contraction. A modest recovery
began in 2010, but unemployment stands above 13%. Estonia adopted
the euro in January 2011.
Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, accounting for almost 45% of GDP, and 85% 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. 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. 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. The global economic downturn led to balance of payments
pressures, partially alleviated by recent emergency funding from the
IMF. While GDP growth has remained high, per capita inome is among
the lowest in the world.
European Union
Internally, the EU has abolished trade barriers,
adopted a common currency, and is striving 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 $78,000) and in national attitudes toward issues like
inflation, debt, and foreign trade, the EU faces difficulties in
devising and enforcing common policies. In the wake of the global
economic crisis, the European Commission projected that the EU's
economy would shrink by 4% in 2009 and 0.1% in 2010. The EU has
recovered from the crisis faster than expected, however, and the
Commission estimates 2010 growth at 1.8%. Significant risks to
growth nevertheless remain, including, high official debts and
deficits, aging populations, over-regulation of non-financial
businesses, and doubts about the sustainability of European Economic
and Monetary Union (EMU). In June 2010, prompted by the Greek
financial crisis, the EU and the IMF set up a $1 trillion bailout
fund to rescue any EMU member in danger of default, but it has not
calmed market jitters that have diminished the value of the euro.
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 and Denmark have 'opt-outs' that allow them to keep their
national currencies, and Sweden has not taken the steps needed to
participate. Between 2004 and 2007, the EU admitted 12 countries
that are, in general, less advanced economically than the other 15.
Of the 12 most recent member states, only Slovenia (1 January 2007),
Cyprus and Malta (1 January 2008), Slovakia (1 January 2009), and
Estonia (1 January 2011) have adopted the euro; the remaining states
other than the UK and Denmark 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. Foreign exchange earnings come from 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. Political tensions between the UK and Argentina rose
in early 2010 after a UK company began oil drilling activities in
the waters around the Falkland Islands but abated somewhat when the
drilling operation failed to discover commercially exploitable 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 about 95% of exports and nearly half of GDP. In early 2008 the
Faroese economy began to slow as a result of smaller catches and
historically high oil prices that continue to trouble the economy.
Though oil prices have come down, reduced catches, especially of cod
and haddock, have continued to strain the Faroese economy. GDP grew
0.5% in 2008-09. The slowdown in the Faroese economy followed a
strong performance since the mid-1990s with annual growth rates
averaging close to 6%, mostly a result of increased fish landings
and salmon farming, and high export prices. Unemployment reached its
lowest level in the first half of 2008, but increased to 3.9% in
2009 and is rising. The Faroese Home Rule Government produced
increasing budget surpluses that helped to reduce the large public
debt, most of it to Denmark. However, total dependence on fishing
and salmon farming make the Faroese economy very vulnerable to
fluctuations in world demand. In addition, budget surpluses turned
to deficits in 2008-09, and the economy at both the country and
local level is running large deficits. Initial discoveries of oil in
the Faroese area give hope for eventual oil production, which may
provide a foundation for a more diversified economy and less
dependence on Danish economic assistance. Aided by an annual subsidy
from Denmark amounting to about 6% of Faroese GDP, the Faroese have
a standard of living almost equal to that of Denmark and Greenland.
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. 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 Austria, Belgium, the
Netherlands, and Sweden. Trade is important with exports accounting
for over one third of GDP in recent years. Finland is strongly
competitive in manufacturing - principally the wood, metals,
engineering, telecommunications, and electronics industries. 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.
Finland had been one of the best performing economies within the EU
in recent years and its banks and financial markets avoided the
worst of global financial crisis. However, the world slowdown hit
exports and domestic demand hard in 2009, with Finland experiencing
one of the deepest contractions in the euro zone. A recovery of
exports stimulated economic growth in 2010, and led to a lowering of
unemployment. The recession left a deep mark on general government
finances and the debt ratio, turning previously strong budget
surpluses into deficits. In the next few years, the great challenge
of economic policy will be to implement a post-recession exit
strategy in which measures supporting growth will be combined with
general government adjustment measures. Longer-term, Finland must
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. 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.
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. France has weathered the global
economic crisis better than most other big EU economies because of
the relative resilience of domestic consumer spending, a large
public sector, and less exposure to the downturn in global demand
than in some other countries. Nonetheless, France's real GDP
contracted 2.5% in 2009, but recovered somewhat in 2010, while the
unemployment rate increased from 7.4% in 2008 to 9.5% in 2010. The
government pursuit of aggressive stimulus and investment measures in
response to the economic crisis, however, are contributing to a
deterioration of France's public finances. The government budget
deficit rose sharply from 3.4% of GDP in 2008 to 7.8% of GDP in
2010, while France's public debt rose from 68% of GDP to 84% over
the same period. Paris is terminating stimulus measures, eliminating
tax credits, and freezing most government spending to bring the
budget deficit under the 3% euro-zone ceiling by 2013, and to
highlight France's commitment to fiscal discipline at a time of
intense financial market scrutiny of euro zone debt levels.
President SARKOZY - who secured passage of pension reform in 2010 -
is expected to seek passage of some tax reforms in 2011, but he may
delay additional, more costly, reforms until after the 2012 election.
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.