Israel has a technologically advanced market economy. It
depends on imports of crude oil, grains, raw materials, and military
equipment. Despite limited natural resources, Israel has intensively
developed its agricultural and industrial sectors over the past 20
years. Cut diamonds, high-technology equipment, and agricultural
products (fruits and vegetables) are the leading exports. Israel
usually posts sizable trade deficits, which are covered by large
transfer payments from abroad and by foreign loans. Roughly half of
the government's external debt is owed to the US, its major source
of economic and military aid. Israel's GDP, after contracting
slightly in 2001 and 2002 due to the Palestinian conflict and
troubles in the high-technology sector, grew about 5% per year from
2004-07. The global financial crisis of 2008-09 spurred a brief
recession in Israel, but the country entered the crisis with solid
fundamentals - following years of prudent fiscal policy and a series
of liberalizing reforms - and a resilient banking sector, and the
economy has shown signs of an early recovery. Following GDP growth
of 4% in 2008, Israel's GDP slipped to 0.2% in 2009, but reached
3.4% in 2010, as exports rebounded. The global economic downturn
affected Israel's economy primarily through reduced demand for
Israel's exports in the United States and EU, Israel's top trading
partners. Exports account for about 25% of the country's GDP. The
Israeli Government responded to the recession by implementing a
modest fiscal stimulus package and an aggressive expansionary
monetary policy - including cutting interest rates to record lows,
purchasing government bonds, and intervening in the foreign currency
market. The Bank of Israel began raising interest rates in the
summer of 2009 when inflation rose above the upper end of the Bank's
target and the economy began to show signs of recovery.
Italy
Italy has a diversified industrial economy, which is divided
into a developed industrial north, dominated by private companies,
and a less-developed, welfare-dependent, agricultural south, with
high unemployment. The Italian economy is driven in large part by
the manufacture of high-quality consumer goods produced by small and
medium-sized enterprises, many of them family owned. Italy also has
a sizable underground economy, which by some estimates accounts for
as much as 15% of GDP. These activities are most common within the
agriculture, construction, and service sectors. Italy has moved
slowly on implementing needed structural reforms, such as reducing
graft, overhauling costly entitlement programs, and increasing
employment opportunities for young workers, particularly women. The
international financial crisis worsened conditions in Italy's labor
market, with unemployment rising from 6.2% in 2007 to 8.4% in 2010,
but in the longer-term Italy's low fertility rate and quota-driven
immigration policies will increasingly strain its economy. A rise in
exports and investment driven by the global economic recovery
nevertheless helped the economy grow by about 1% in 2010 following a
5% contraction in 2009. The Italian government has struggled to
limit government spending, but Italy's exceedingly high public debt
remains above 115% of GDP, and its fiscal deficit - just 1.5% of GDP
in 2007 - exceeded 5% in 2009 and 2010, as the costs of servicing
the country's debt rose.
Jamaica
The Jamaican economy is heavily dependent on services, which
now account for more than 60% of GDP. The country continues to
derive most of its foreign exchange from tourism, remittances, and
bauxite/alumina. Remittances account for nearly 15% of GDP and
exports of bauxite and alumina make up about 10%. Tourism revenues
account for roughly 10% of GDP, and both arrivals and revenues grew
in 2010, up 4% and 6% respectively. The Economic growth faces many
challenges: high crime and corruption, large-scale unemployment and
underemployment, and a debt-to-GDP ratio of more than 120%.
Jamaica's onerous debt burden - the fourth highest per capita - is
the result of government bailouts to ailing sectors of the economy,
most notably to the financial sector in the mid-to-late 1990s. The
Government of Jamaica signed a $1.27 billion, 27-month Standby
Agreement with the International Monetary Fund for balance of
payment support in February 2010. Other multilaterals have also
provided millions of dollars in loans and grants. The government's
difficult fiscal position hinders spending on infrastructure and
social programs, particularly as job losses rise in a shrinking
economy. The GOLDING administration faces the difficult prospect of
having to achieve fiscal discipline in order to maintain debt
payments, while simultaneously attacking a serious and growing crime
problem that is hampering economic growth. High unemployment
exacerbates the crime problem, including gang violence that is
fueled by the drug trade.
Jan Mayen
Jan Mayen is a volcanic island with no exploitable natural
resources, although surrounding waters contain substantial fish
stocks and potential untapped petroleum resources. Economic activity
is limited to providing services for employees of Norway's radio and
meteorological stations on the island.
Japan
In the years following World War II, government-industry
cooperation, a strong work ethic, mastery of high technology, and a
comparatively small defense allocation (1% of GDP) helped Japan
develop a technologically advanced economy. Two notable
characteristics of the post-war economy were the close interlocking
structures of manufacturers, suppliers, and distributors, known as
keiretsu, and the guarantee of lifetime employment for a substantial
portion of the urban labor force. Both features are now eroding
under the dual pressures of global competition and domestic
demographic change. Japan's industrial sector is heavily dependent
on imported raw materials and fuels. A tiny agricultural sector is
highly subsidized and protected, with crop yields among the highest
in the world. Usually self sufficient in rice, Japan imports about
60% of its food on a caloric basis. Japan maintains one of the
world's largest fishing fleets and accounts for nearly 15% of the
global catch. For three decades, overall real economic growth had
been spectacular - a 10% average in the 1960s, a 5% average in the
1970s, and a 4% average in the 1980s. Growth slowed markedly in the
1990s, averaging just 1.7%, largely because of the after effects of
inefficient investment and an asset price bubble in the late 1980s
that required a protracted period of time for firms to reduce excess
debt, capital, and labor. The Japanese financial sector was not
heavily exposed to sub-prime mortgages or their derivative
instruments and weathered the initial effect of the recent global
credit crunch, but a sharp downturn in business investment and
global demand for Japan's exports in late 2008 pushed Japan further
into recession. Government stimulus spending helped the economy
recover in late 2009 and 2010, but Tokyo is warning that GDP growth
will slow in 2011. Prime Minister Kan's government has proposed
opening the agricultural and services sectors to greater foreign
competition and boosting exports through free-trade agreements, but
debate continues on restructuring the economy and funding new
stimulus programs in the face of a tight fiscal situation. Japan's
huge government debt, which is approaching 200 percent of GDP,
persistent deflation, and an aging and shrinking population are
major complications for the economy.
Jersey
Jersey's economy is based on international financial
services, agriculture, and tourism. In 2005 the finance sector
accounted for about 50% of the island's output. Potatoes,
cauliflower, tomatoes, and especially flowers are important export
crops, shipped mostly to the UK. The Jersey breed of dairy cattle is
known worldwide and represents an important export income earner.
Milk products go to the UK and other EU countries. Tourism accounts
for one-quarter of GDP. In recent years, the government has
encouraged light industry to locate in Jersey with the result that
an electronics industry has developed, displacing more traditional
industries. All raw material and energy requirements are imported as
well as a large share of Jersey's food needs. Light taxes and death
duties make the island a popular tax haven. Living standards come
close to those of the UK.
Jordan
Jordan's economy is among the smallest in the Middle East,
with insufficient supplies of water, oil, and other natural
resources, underlying the government's heavy reliance on foreign
assistance. Other economic challenges for the government include
chronic high rates of poverty, unemployment, inflation, and a large
budget deficit. Since assuming the throne in 1999, King ABDALLAH has
implemented significant economic reforms, such as opening the trade
regime, privatizing state-owned companies, and eliminating most fuel
subsidies, which in the past few years have spurred economic growth
by attracting foreign investment and creating some jobs. The global
economic slowdown, however, has depressed Jordan's GDP growth.
Export-oriented sectors such as manufacturing, mining, and the
transport of re-exports have been hit the hardest. The Government
approved two supplementary budgets in 2010, but sweeping tax cuts
planned for 2010 did not materialize because of Amman's need for
additional revenue to cover excess spending. The budget deficit is
likely to remain high, at 5-6% of GDP, and Amman likely will
continue to depend heavily on foreign assistance to finance the
deficit in 2011. Jordan's financial sector has been relatively
isolated from the international financial crisis because of its
limited exposure to overseas capital markets. Jordan is currently
exploring nuclear power generation to forestall energy shortfalls.
Kazakhstan
Kazakhstan, geographically the largest of the former
Soviet republics, excluding Russia, possesses enormous fossil fuel
reserves and plentiful supplies of other minerals and metals, such
as uranium, copper, and zinc. It also has a large agricultural
sector featuring livestock and grain. Kazakhstan's industrial sector
is primarily focused on the extraction and processing of these
natural resources. Kazakhstan enjoyed double-digit growth in 2000-01
and 8% or more per year in 2002-07 - thanks largely to its booming
energy sector but also to economic reform, good harvests, and
increased foreign investment; GDP growth slowed dramatically
following the near-collapse of the banking sector in late 2007 and
the declines in oil and metals prices associated with the global
economic downturn in 2008-09. Kazakhstan has embarked upon an
industrial policy designed to diversify the economy away from
overdependence on the oil sector as well expanding export markets
away from its historical reliance on Russia. Nevertheless, growth is
still driven by oil. The government has engaged in several disputes
with Western oil companies over the terms of production agreements,
most recently, with regard to the Kashagan project in 2007-08 and
the Karachaganak project in 2009.
Kenya
Although the regional hub for trade and finance in East
Africa, Kenya has been hampered by corruption and by reliance upon
several primary goods whose prices have remained low. In 1997, the
IMF suspended Kenya's Enhanced Structural Adjustment Program due to
the government's failure to maintain reforms and curb corruption.
The IMF, which had resumed loans in 2000 to help Kenya through a
drought, again halted lending in 2001 when the government failed to
institute several anticorruption measures. In the key December 2002
elections, Daniel Arap MOI's 24-year-old reign ended, and a new
opposition government took on the formidable economic problems
facing the nation. After some early progress in rooting out
corruption and encouraging donor support, the KIBAKI government was
rocked by high-level graft scandals in 2005 and 2006. In 2006, the
World Bank and IMF delayed loans pending action by the government on
corruption. The international financial institutions and donors have
since resumed lending, despite little action on the government's
part to deal with corruption. Post-election violence in early 2008,
coupled with the effects of the global financial crisis on
remittance and exports, reduced GDP growth to 1.7 in 2008, but the
economy rebounded in 2009-10.
Kiribati
A remote country of 33 scattered coral atolls, Kiribati has
few natural resources and is one of the least developed Pacific
Islands. Commercially viable phosphate deposits were exhausted at
the time of independence from the UK in 1979. Copra and fish now
represent the bulk of production and exports. The economy has
fluctuated widely in recent years. Economic development is
constrained by a shortage of skilled workers, weak infrastructure,
and remoteness from international markets. Tourism provides more
than one-fifth of GDP. Private sector initiatives and a financial
sector are in the early stages of development. Foreign financial aid
from the EU, UK, US, Japan, Australia, New Zealand, Canada, UN
agencies, and Taiwan accounts for 20-25% of GDP. Remittances from
seamen on merchant ships abroad account for more than $5 million
each year. Kiribati receives around $15 million annually for the
government budget from an Australian trust fund.
Korea, North
North Korea, one of the world's most centrally directed
and least open economies, faces chronic economic problems.
Industrial capital stock is nearly beyond repair as a result of
years of underinvestment and shortages of spare parts. Large-scale
military spending draws off resources needed for investment and
civilian consumption. Industrial and power output have declined in
parallel from pre-1990 levels. Severe flooding in the summer of 2007
aggravated chronic food shortages caused by on-going systemic
problems, including a lack of arable land, collective farming
practices, and persistent shortages of tractors and fuel.
Large-scale international food aid deliveries have allowed the
people of North Korea to escape widespread starvation since famine
threatened in 1995, but the population continues to suffer from
prolonged malnutrition and poor living conditions. Since 2002, the
government has allowed private "farmers' markets" to begin selling a
wider range of goods. It also permitted some private farming - on an
experimental basis - in an effort to boost agricultural output. In
October 2005, the government tried to reverse some of these policies
by forbidding private sales of grains and reinstituting a
centralized food rationing system. By December 2005, the government
terminated most international humanitarian assistance operations in
North Korea (calling instead for developmental assistance only) and
restricted the activities of remaining international and
non-governmental aid organizations. In mid-2008, North Korea began
receiving food aid under a US program to deliver 500,000 metric tons
of food via the World Food Program and US nongovernmental
organizations; but Pyongyang stopped accepting the aid in March
2009. In December 2009, North Korea carried out a redenomination of
its currency, capping the amount of North Korean won that could be
exchanged for the new notes, and limiting the exchange to a one-week
window. A concurrent crackdown on markets and foreign currency use
yielded severe shortages and inflation, forcing Pyongyang to ease
the restrictions by February 2010. Nevertheless, firm political
control remains the Communist government's overriding concern, which
likely will inhibit changes to North Korea's current economic system.
Korea, South
Since the 1960s, South Korea has achieved an incredible
record of growth and global integration to become a high-tech
industrialized economy. Four decades ago, GDP per capita was
comparable with levels in the poorer countries of Africa and Asia.
In 2004, South Korea joined the trillion dollar club of world
economies, and currently is among the world's 20 largest economies.
Initially, a system of close government and business ties, including
directed credit and import restrictions, made this success possible.
The government promoted the import of raw materials and technology
at the expense of consumer goods, and encouraged savings and
investment over consumption. The Asian financial crisis of 1997-98
exposed longstanding weaknesses in South Korea's development model
including high debt/equity ratios and massive short-term foreign
borrowing. GDP plunged by 6.9% in 1998, and then recovered by 9% in
1999-2000. Korea adopted numerous economic reforms following the
crisis, including greater openness to foreign investment and
imports. Growth moderated to about 4-5% annually between 2003 and
2007. With the global economic downturn in late 2008, South Korean
GDP growth slowed to 0.2% in 2009. In the third quarter of 2009, the
economy began to recover, in large part due to export growth, low
interest rates, and an expansionary fiscal policy, and growth
exceeded 6% in 2010. The South Korean economy's long term challenges
include a rapidly aging population, inflexible labor market, and
overdependence on manufacturing exports to drive economic growth.
Kosovo
Over the past few years Kosovo's economy has shown
significant progress in transitioning to a market-based system and
maintaining macroeconomic stability, but it is still highly
dependent on the international community and the diaspora for
financial and technical assistance. Remittances from the diaspora -
located mainly in Germany and Switzerland - are estimated to account
for about 14% of GDP, and donor-financed activities and aid for
another 7.5%. Kosovo's citizens are the poorest in Europe with an
average annual per capita income of only $2,500. Unemployment,
around 40% of the population, is a significant problem that
encourages outward migration and black market activity. Most of
Kosovo's population lives in rural towns outside of the capital,
Pristina. Inefficient, near-subsistence farming is common - the
result of small plots, limited mechanization, and lack of technical
expertise. With international assistance, Kosovo has been able to
privatize 50% of its state-owned enterprises (SOEs) by number, and
over 90% of SOEs by value. Minerals and metals - including lignite,
lead, zinc, nickel, chrome, aluminum, magnesium, and a wide variety
of construction materials - once formed the backbone of industry,
but output has declined because of ageing equipment and insufficient
investment. A limited and unreliable electricity supply due to
technical and financial problems is a major impediment to economic
development. Kosovo's Ministry of Energy and Mining has solicited
expressions of interest from private investors to develop a new
power plant in order to address Kosovo and the region's unmet and
growing demands for power. The official currency of Kosovo is the
euro, but the Serbian dinar is also used in Serb enclaves. Kosovo's
tie to the euro has helped keep core inflation low. Kosovo has one
of the most open economies in the region, and continues to work with
the international community on measures to improve the business
environment and attract foreign investment. Kosovo has kept the
government budget in balance as a result of efficient value added
tax (VAT) collection at the borders and inefficient budget
execution. In order to help integrate Kosovo into regional economic
structures, UNMIK signed (on behalf of Kosovo) its accession to the
Central Europe Free Trade Area (CEFTA) in 2006. However, Serbia and
Bosnia have refused to recognize Kosovo's customs stamp or extend
reduced tariff privileges for Kosovo products under CEFTA. In July
2008, Kosovo received pledges of $1.9 billion from 37 countries in
support of its reform priorities. In June 2009, Kosovo joined the
World Bank and International Monetary Fund, and Kosovo began
servicing its share of the former Yugoslavia's debt.
Kuwait
Kuwait has a geographically small, but wealthy, relatively
open economy with self-reported crude oil reserves of about 102
billion barrels - about 9% of world reserves. Petroleum accounts for
nearly half of GDP, 95% of export revenues, and 95% of government
income. Kuwaiti officials have committed to increasing oil
production to 4 million barrels per day by 2020. The rise in global
oil prices throughout 2010 is reviving government consumption and
economic growth as Kuwait experiences a 20% increase in government
budget revenue. Kuwait has done little to diversify its economy, in
part, because of this positive fiscal situation, and, in part, due
to the poor business climate and the acrimonious relationship
between the National Assembly and the executive branch, which has
stymied most movement on economic reforms. Nonetheless, the
government in May 2010 passed a privatization bill that allows the
government to sell assets to private investors, and in January
passed an economic development plan that pledges to spend up to $130
billion in five years to diversify the economy away from oil,
attract more investment, and boost private sector participation in
the economy. Increasing government expenditures by so large an
amount during the planned time frame may be difficult to accomplish.
Kyrgyzstan
Kyrgyzstan is a poor, mountainous country with a dominant
agricultural sector. Cotton, tobacco, wool, and meat are the main
agricultural products, although only tobacco and cotton are exported
in any quantity. Industrial exports include gold, mercury, uranium,
natural gas, and electricity. The economy depends heavily on gold
exports - mainly from output at the Kumtor gold mine. Following
independence, Kyrgyzstan was progressive in carrying out market
reforms, such as an improved regulatory system and land reform.
Kyrgyzstan was the first Commonwealth of Independent States (CIS)
country to be accepted into the World Trade Organization. Much of
the government's stock in enterprises has been sold. Drops in
production had been severe after the breakup of the Soviet Union in
December 1991, but by mid-1995, production began to recover and
exports began to increase. In 2005, the BAKIEV government and
international financial institutions initiated a comprehensive
medium-term poverty reduction and economic growth strategy. Bishkek
agreed to pursue much needed tax reform and, in 2006, became
eligible for the heavily indebted poor countries (HIPC) initiative.
The government made steady strides in controlling its substantial
fiscal deficit, nearly closing the gap between revenues and
expenditures in 2006, before boosting expenditures more than 20% in
2007-08. GDP grew about 8% annually in 2007-08, partly due to higher
gold prices internationally, but slowed to 2.3% in 2009. The
overthrow of President BAKIEV in April, 2010 and subsequent ethnic
clashes left hundreds dead and damaged infrastructure. Shrinking
trade and agricultural production, as well as political instability,
caused GDP to contract about 3.5% in 2010. The fiscal deficit
widened to 12% of GDP, reflecting significant increases in
crisis-related spending, including both rehabilitation of damaged
infrastructure and bank recapitalization. Progress in
reconstruction, fighting corruption, restructuring domestic
industry, and attracting foreign aid and investment are key to
future growth.