Tourism, Maldives' largest economic activity, 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. The Maldivian Government implemented economic reforms,
beginning in 1989 that initially lifted import quotas, opened some
exports to the private sector, and liberalized regulations to allow
more foreign investment. Real GDP growth averaged over 7.5% per year
for more than a decade, and registered 18% in 2006, due to a rebound
in tourism and reconstruction following the tsunami of December
2004. GDP slowed in 2007-08, then contracted in 2009 due to the
global recession. Falling tourist arrivals and fish exports,
combined with high government spending on social needs, subsidies,
and civil servant salaries contributed to a balance of payments
crisis, which was eased with a December 2009, $79.3 million dollar
IMF standby agreement. Diversifying the economy beyond tourism and
fishing, reforming public finance, and increasing employment
opportunities are 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
Among the 25 poorest countries in the world, Mali is a
landlocked country highly dependent on gold mining and agricultural
exports for revenue. The country's fiscal status fluctuates with
gold and agricultural commodity prices and the harvest. Mali remains
dependent on foreign aid. Economic activity is largely confined to
the riverine area irrigated by the Niger River and about 65% of its
land area is desert or semidesert. 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. The government has continued an IMF-recommended
structural adjustment program that has helped the economy grow,
diversify, and attract foreign investment. Mali is developing its
cotton and iron ore extraction industries to diversify its revenue
sources because gold production has started to fall. Mali has
invested in tourism but security issues are hurting the industry.
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 1996-2010. 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. In 2010, Mali experienced a regional
drought that hurt livestock and livelihoods.
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 target for
illegal immigration, which has strained Malta's political and
economic resources. Malta adopted the euro on 1 January 2008.
Malta's financial services industry has grown in recent years and in
2008-09 it escaped significant damage from the international
financial crisis, largely because the sector is centered on the
indigenous real estate market and is not highly leveraged. Locally,
the restricted damage from the financial crisis has been attributed
to the stability of the Maltese banking system and to its prudent
risk-management practices. The global economic downturn and high
electricity and water prices hurt Malta's real economy, which is
dependent on foreign trade, manufacturing - especially electronics
and pharmaceuticals - and tourism, but growth bounced back as the
global economy recovered in 2010. Following a 1.2% contraction in
2009, GDP grew 2% in 2010.
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. 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. Mauritania made satisfactory progress,
but the IMF, World Bank, and other international actors suspended
assistance and investment in Mauritania after the August 2008 coup.
Since the presidential election in July 2009, donors have resumed
assistance. Oil prospects, while initially promising, have largely
failed to materialize, and the government has placed a priority on
attracting private investment to spur economic growth. The
Government also emphasizes 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). Mauritius' sound economic policies and
prudent banking practices helped to mitigate negative effects from
the global financial crisis in 2008-09. GDP grew 3.6% in 2010 and
the country continues to expand its trade and investment outreach
around the globe.
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. Since
the implementation of the North American Free Trade Agreement
(NAFTA) in 1994, Mexico's share of US imports has increased from 7%
to 12%, and its share of Canadian imports has doubled to 5%. Mexico
has free trade agreements with over 50 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 pension and fiscal reforms. The administration
passed an energy reform measure in 2008, and another fiscal reform
in 2009. Mexico's GDP plunged 6.5% in 2009 as world demand for
exports dropped and asset prices tumbled, but GDP posted positive
growth of 5% in 2010, with export growth leading the way. The
administration continues to face many economic challenges, including
improving the public education system, upgrading infrastructure,
modernizing labor laws, and fostering 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. In January 2009, gas supplies were cut during
a dispute between Russia and Ukraine. Russia's decision to ban
Moldovan wine and agricultural products, coupled with its decision
to double the price Moldova paid for Russian natural gas, have hurt
growth. The onset of the global financial crisis and poor economic
conditions in Moldova's main foreign markets, caused GDP to fall
6.5% in 2009. Unemployment almost doubled and inflation disappeared
- at -0.1%, a record low. Moldova's IMF agreement expired in May
2009. In fall 2009, the IMF allocated $186 million to Moldova to
cover its immediate budgetary needs, and the government signed an
new agreement with the IMF in January 2010 for a program worth $574
million. In 2010, an upturn in the world economy boosted GDP growth
to 3.1% and inflation to 7.3%. 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
has made a modest recovery, but remains vulnerable to political
uncertainty, weak administrative capacity, vested bureaucratic
interests, higher fuel prices, poor agricultural weather, and the
skepticism of foreign investors as well as the presence of an
illegal separatist regime in Moldova's Transnistria region.
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. Monaco, however, is not a
tax-free shelter; it charges nearly 20% value-added tax, collects
stamp duties, and companies face a 33% tax on profits unless they
can show that three-quarters of profits are generated within the
principality. Monaco was formally removed from the OECD's "grey
list" of uncooperative tax jurisdictions in late 2009, but continues
to face international pressure to abandon its banking secrecy laws
and help combat tax evasion. 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's extensive mineral deposits,
however, have attracted foreign investors. The country holds copper,
gold, coal, molybdenum, fluorspar, uranium, tin, and tungsten
deposits, which account for a large part of foreign direct
investment and government revenues. 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. In 2008
Mongolia experienced a soaring inflation rate with year-to-year
inflation reaching nearly 30% - the highest inflation rate in over a
decade. By late 2008, as the country began to feel the effects of
the global financial crisis, falling commodity prices helped lower
inflation, but also reduced government revenues and forced cuts in
spending. In early 2009, the International Monetary Fund reached a
$236 million Stand-by Arrangement with Mongolia, and the country has
started to move out of the crisis. Although the banking sector
remains unstable, the government is now enforcing stricter
supervision regulations. In October 2009, the government passed
long-awaited legislation on an investment agreement to develop
Mongolia's Oyu Tolgoi mine, considered to be one of the world's
largest untapped copper deposits. The economy grew an estimated 7%
in 2010, largely on the strength of exports to nearby countries, and
international reserves reached $1.6 billion in September, an all
time high for Mongolia. 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 two-thirds of Mongolia's exports. Remittances from
Mongolians working abroad are sizable, but have fallen due to the
economic crisis; money laundering is a growing concern. Mongolia
joined the World Trade Organization in 1997 and seeks to expand its
participation in 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. In 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. The European Council granted candidate
country status to Montenegro at the December 2010 session.
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 has had a
significant negative impact on the economy, due to the ongoing
credit crunch, a decline in the real estate sector, and a fall in
aluminum exports.
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
Morocco's market economy benefits from the country's
relatively low labor costs and proximity to Europe, which aid key
areas of the economy such as agriculture, light manufacturing,
tourism, and remittances. Morocco is also the world's largest
exporter of phosphate, which has long provided a source of export
earnings and economic stability. Economic policies pursued since
2003 by King MOHAMMED VI have brought macroeconomic stability to the
country with generally low inflation, improved financial
performance, and steady progress in developing the service and
industrial sectors. In 2006, Morocco entered a Free Trade Agreement
(FTA) with the US, and in 2008 entered into an advanced status in
its 2000 Association Agreement with the EU. However, poverty,
illiteracy, and unemployment rates remain high. In response to these
challenges, King MOHAMMED in 2005 launched a National Initiative for
Human Development, a $2 billion program aimed at alleviating poverty
and underdevelopment by expanding electricity to rural areas and
replacing urban slums with public and subsidized housing, among
other policies. Morocco's trade and budget deficits widened in 2010,
and reducing govenment spending and adapting to sluggish economic
growth in Europe will be challenges in 2011. Morocco's long-term
challenges include improving education and job prospects for young
Moroccans, closing the disparity in wealth between the rich and the
poor, confronting corruption, and expanding and diversifying exports
beyond phosphates and low-value-added products.
Mozambique
At independence in 1975, Mozambique was one of the
world's poorest countries. Socialist mismanagement and a brutal
civil war from 1977-92 exacerbated the situation. In 1987, the
government embarked on a series of macroeconomic reforms designed to
stabilize the economy. These steps, combined with donor assistance
and with political stability since the multi-party elections in
1994, have led to dramatic improvements in the country's growth
rate. Fiscal reforms, including the introduction of a value-added
tax and reform of the customs service, have improved the
government's revenue collection abilities. In spite of these gains,
Mozambique remains dependent upon foreign assistance for more than
half of its annual budget, and the majority of the population
remains below the poverty line. Subsistence agriculture continues to
employ the vast majority of the country's work force and smallholder
agricultural productivity and productivity growth is weak. A
substantial trade imbalance persists although the opening of the
Mozal aluminum smelter, the country's largest foreign investment
project to date, has increased export earnings. At the end of 2007,
and after years of negotiations, the government took over Portugal's
majority share of the Cahora Bassa Hydroelectricity (HCB) company, a
dam that was not transferred to Mozambique at independence because
of the ensuing civil war and unpaid debts. More power is needed for
additional investment projects in titanium extraction and processing
and garment manufacturing that could further close the import/export
gap. Mozambique's once substantial foreign debt has been reduced
through forgiveness and rescheduling under the IMF's Heavily
Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is
now at a manageable level. In July 2007 the Millennium Challenge
Corporation (MCC) signed a Compact with Mozambique; the Compact
entered into force in September 2008 and will continue for five
years. Compact projects will focus on improving sanitation, roads,
agriculture, and the business regulation environment in an effort to
spur economic growth in the four northern provinces of the country.
Mozambique grew at an average annual rate of 9% in the decade up to
2007, one of Africa's strongest performances. However, heavy
reliance on aluminum, which accounts for about one-third of exports,
subjects the economy to volatile international prices. The sharp
decline in aluminum prices during the global economic crisis lowered
GDP growth by several percentage points. Despite 8.3% GDP growth in
2010, the increasing cost of living prompted citizens to riot in
September 2010, after bread price increases were announced. In an
attempt to contain the cost of living, the government implemented
subsidies, decreased taxes and tariffs, and instituted other fiscal
measures.