Landlocked Paraguay has a market economy distinguished by a
large informal sector, featuring re-export of imported consumer
goods to neighboring countries, as well as the activities of
thousands of microenterprises and urban street vendors. A large
percentage of the population, especially in rural areas, derives its
living from agricultural activity, often on a subsistence basis.
Because of the importance of the informal sector, accurate economic
measures are difficult to obtain. On a per capita basis, real income
has stagnated at 1980 levels. The economy grew rapidly between 2003
and 2008 as growing world demand for commodities combined with high
prices and favorable weather to support Paraguay's commodity-based
export expansion. Paraguay is the sixth largest soy producer in the
world. Drought hit in 2008, reducing agricultural exports and
slowing the economy even before the onset of the global recession.
The economy fell 3.8% in 2009, as lower world demand and commodity
prices caused exports to contract. The government reacted by
introducing fiscal and monetary stimulus packages. Growth resumed at
a 6.5% level in 2010. Political uncertainty, corruption, limited
progress on structural reform, and deficient infrastructure are the
main obstacles to growth.
Peru
Peru's economy reflects its varied geography - an arid coastal
region, the Andes further inland, and tropical lands bordering
Colombia and Brazil. Abundant mineral resources are found in the
mountainous areas, and Peru's coastal waters provide excellent
fishing grounds. The Peruvian economy grew by more than 4% per year
during the period 2002-06, with a stable exchange rate and low
inflation. Growth jumped to 9% per year in 2007 and 2008, driven by
higher world prices for minerals and metals and the government's
aggressive trade liberalization strategies, but then fell to less
than 1% in 2009 in the face of the world recession and lower
commodity export prices. Growth resumed in 2010 at nearly 8%, due
partly to increased exports. Peru's rapid expansion has helped to
reduce the national poverty rate by about 15% since 2002, though
underemployment remains high; inflation has trended downward in
2009, to below the Central Bank's 1-3% target. Despite Peru's strong
macroeconomic performance, overdependence on minerals and metals
subjects the economy to fluctuations in world prices, and poor
infrastructure precludes the spread of growth to Peru's non-coastal
areas. Not all Peruvians therefore have shared in the benefits of
growth and despite President GARCIA's pursuit of sound trade and
macroeconomic policies, persistent inequality has cost him political
support. Nevertheless, he remains committed to Peru's free-trade
path. Since 2006, Peru has signed trade deals with the United
States, Canada, Singapore, and China, concluded negotiations with
the European Union, and begun trade talks with Korea, Japan, and
others. The US-Peru Trade Promotion Agreement (PTPA) entered into
force 1 February 2009, opening the way to greater trade and
investment between the two economies.
Philippines
Philippine GDP grew nearly 7% in 2010. The economy
weathered the 2008-09 global recession better than its regional
peers due to minimal exposure to securities issued by troubled
global financial institutions; lower dependence on exports;
relatively resilient domestic consumption, supported by large
remittances from four-to five-million overseas Filipino workers; and
a growing business process outsourcing industry. Economic growth in
the Philippines has averaged 4.5% per year since 2001, when former
President MACAPAGAL-ARROYO took office. Despite this growth, poverty
worsened during the term of MACAPAGAL-ARROYO, because of a high
population growth rate and inequitable distribution of income.
MACAPAGAL-ARROYO averted a fiscal crisis by pushing for new revenue
measures and, until recently, tightening expenditures to address the
government's yawning budget deficit and to reduce high debt and debt
service ratios. But the government abandoned its 2008
balanced-budget goal in order to help the economy weather the global
financial and economic storm. The economy under AQUINO faces budget
shortfalls in the near term, but has had little difficulty issuing
debt both locally and internationally to finance the deficits.
AQUINO's first budget emphasizes education and other social spending
programs, relying on the private sector to finance important
infrastructure projects. Weak tax collection in recent years limits
the government's ability to address major challenges.
Pitcairn Islands
The inhabitants of this tiny isolated economy exist
on fishing, subsistence farming, handicrafts, and postage stamps.
The fertile soil of the valleys produces a wide variety of fruits
and vegetables, including citrus, sugarcane, watermelons, bananas,
yams, and beans. Bartering is an important part of the economy. The
major sources of revenue are the sale of postage stamps to
collectors and the sale of handicrafts to passing ships. In October
2004, more than one-quarter of Pitcairn's small labor force was
arrested, putting the economy in a bind, since their services were
required as lighter crew to load or unload passing ships.
Poland
Poland has pursued a policy of economic liberalization since
1990 and today stands out as a success story among transition
economies. Before 2009, GDP had grown about 5% annually, based on
rising private consumption, a jump in corporate investment, and EU
funds inflows. GDP per capita is still much below the EU average,
but is similar to that of the three Baltic states. Since 2004, EU
membership and access to EU structural funds have provided a major
boost to the economy. Unemployment fell rapidly to 6.4% in October
2008, but climbed back to 11.8% for the year 2010, exceeding the EU
average by more than 2%. In 2008 inflation reached 4.2%, more than
the upper limit of the National Bank of Poland's target range, but
fell to 2.4% in 2010 due to global economic slowdown. Poland's
economic performance could improve over the longer term if the
country addresses some of the remaining deficiencies in its road and
rail infrastructure and its business environment. An inefficient
commercial court system, a rigid labor code, bureaucratic red tape,
burdensome tax system, and persistent low-level corruption keep the
private sector from performing up to its full potential. Rising
demands to fund health care, education, and the state pension system
caused the public sector budget deficit to rise to 7.9% of GDP in
2010. The PO/PSL coalition government, which came to power in
November 2007, plans to reduce the budget deficit in 2011 and has
also announced its intention to enact business-friendly reforms,
increase workforce participation, reduce public sector spending
growth, lower taxes, and accelerate privatization. The government,
however, has moved slowly on major reforms. The legislature passed a
law significantly limiting early retirement benefits. A health-care
bill also passed through the legislature, but the legislature failed
to overturn a presidential veto.
Portugal
Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past two decades, successive governments have privatized
many state-controlled firms and liberalized key areas of the
economy, including the financial and telecommunications sectors. The
country qualified for the European Monetary Union (EMU) in 1998 and
began circulating the euro on 1 January 2002 along with 11 other EU
member economies. Economic growth had been above the EU average for
much of the 1990s, but fell back in 2001-08, shrank 2.6% in 2009,
before growing 1% in 2010. GDP per capita stands at roughly
two-thirds of the EU-27 average. A poor educational system and a
rigid labor market have been obstacles to greater productivity and
growth. Portugal also has been increasingly overshadowed by
lower-cost producers in Central Europe and Asia as a target for
foreign direct investment. Portugal's competitiveness problems, low
growth prospects, and high levels of public debt have made it
vulnerable to bond market turbulence. Lisbon is implementing
austerity measures to reduce the budget deficit from 9.4% of GDP in
2009 to 4.6% of GDP in 2011, but some investors have expressed
concern about Portugal's ability to achieve these targets and cover
its sovereign debt. Without the option for stimulus measures, the
government is focusing instead on boosting exports and implementing
labor market reforms to try to raise GDP growth and tackle
Portugal's competitiveness problems, which may help mitigate
investor concerns over time.
Puerto Rico
Puerto Rico has one of the most dynamic economies in the
Caribbean region. A diverse industrial sector has far surpassed
agriculture as the primary locus of economic activity and income.
Encouraged by duty-free access to the US and by tax incentives, US
firms have invested heavily in Puerto Rico since the 1950s. US
minimum wage laws apply. Sugar production has lost out to dairy
production and other livestock products as the main source of income
in the agricultural sector. Tourism has traditionally been an
important source of income with estimated arrivals of more than 3.6
million tourists in 2008.
Qatar
Despite the global financial crisis, Qatar has prospered in
the last several years - in 2010 Qatar had the world's highest
growth rate. Qatari authorities throughout the crisis sought to
protect the local banking sector with direct investments into
domestic banks. GDP rebounded in 2010 largely due to the increase in
oil prices. Economic policy is focused on developing Qatar's
nonassociated natural gas reserves and increasing private and
foreign investment in non-energy sectors, but oil and gas still
account for more than 50% of GDP, roughly 85% of export earnings,
and 70% of government revenues. Oil and gas have made Qatar the
second highest per-capita income country - following Liechtenstein -
and likely the country with the lowest unemployment. Proved oil
reserves of 15 billion barrels should enable continued output at
current levels for 37 years. Qatar's proved reserves of natural gas
exceed 25 trillion cubic meters, about 14% of the world total and
third largest in the world. Qatar's successful 2022 world cup bid
will likely accelerate large-scale infrastructure projects such as
Qatar's metro system and the Qatar-Bahrain causeway.
Romania
Romania, which joined the European Union on 1 January 2007,
began the transition from Communism in 1989 with a largely obsolete
industrial base and a pattern of output unsuited to the country's
needs. The country emerged in 2000 from a punishing three-year
recession thanks to strong demand in EU export markets. Domestic
consumption and investment have fueled strong GDP growth in recent
years, but have led to large current account imbalances. Romania's
macroeconomic gains have only recently started to spur creation of a
middle class and address Romania's widespread poverty. Corruption
and red tape continue to handicap its business environment.
Inflation rose in 2007-08, driven in part by strong consumer demand
and high wage growth, rising energy costs, a nation-wide drought
affecting food prices, and a relaxation of fiscal discipline.
Romania's GDP contracted markedly in the last quarter of 2008 as the
country began to feel the effects of a global downturn in financial
markets and trade, and GDP fell more than 7% in 2009, prompting
Bucharest to seek a $26 billion emergency assistance package from
the IMF, the EU, and other international lenders. Drastic austerity
measures, as part of Romania's IMF-led agreement led to a further
1.9% GDP contraction in 2010. The economy is expected to return to
positive growth in 2011.
Russia
Russia has undergone significant changes since the collapse
of the Soviet Union, moving from a globally-isolated,
centrally-planned economy to a more market-based and
globally-integrated economy. Economic reforms in the 1990s
privatized most industry, with notable exceptions in the energy and
defense-related sectors. The protection of property rights is still
weak and the private sector remains subject to heavy state
interference. Russian industry is primarily split between
globally-competitive commodity producers - in 2009 Russia was the
world's largest exporter of natural gas, the second largest exporter
of oil, and the third largest exporter of steel and primary aluminum
- and other less competitive heavy industries that remain dependent
on the Russian domestic market. This reliance on commodity exports
makes Russia vulnerable to boom and bust cycles that follow the
highly volatile swings in global commodity prices. The government
since 2007 has embarked on an ambitious program to reduce this
dependency and build up the country's high technology sectors, but
with few results so far. The economy had averaged 7% growth since
the 1998 Russian financial crisis, resulting in a doubling of real
disposable incomes and the emergence of a middle class. The Russian
economy, however, was one of the hardest hit by the 2008-09 global
economic crisis as oil prices plummeted and the foreign credits that
Russian banks and firms relied on dried up. The Central Bank of
Russia spent one-third of its $600 billion international reserves,
the world's third largest, in late 2008 to slow the devaluation of
the ruble. The government also devoted $200 billion in a rescue plan
to increase liquidity in the banking sector and aid Russian firms
unable to roll over large foreign debts coming due. The economic
decline bottomed out in mid-2009 and the economy began to grow in
the first quarter of 2010. However, a severe drought and fires in
central Russia reduced agricultural output, prompting a ban on grain
exports for part of the year, and slowed growth in other sectors
such as manufacturing and retail trade. Russia's long-term
challenges include a shrinking workforce, a high level of
corruption, difficulty in accessing capital for smaller, non-energy
companies, and poor infrastructure in need of large investments.
Rwanda
Rwanda is a poor rural country with about 90% of the
population engaged in (mainly subsistence) agriculture and some
mineral and agro-processing. In 2008, minerals overtook coffee and
tea as Rwanda's primary foreign exchange earner. The 1994 genocide
decimated Rwanda's fragile economic base, severely impoverished the
population, particularly women, and temporarily stalled the
country's ability to attract private and external investment.
However, Rwanda has made substantial progress in stabilizing and
rehabilitating its economy to pre-1994 levels. GDP has rebounded and
inflation has been curbed. Nonetheless, a majority still live below
the poverty line of 250 Rwandan francs per day (about US$0.43).
Despite Rwanda's fertile ecosystem, food production often does not
keep pace with demand, requiring food imports. Rwanda continues to
receive substantial aid money and obtained IMF-World Bank Heavily
Indebted Poor Country (HIPC) initiative debt relief in 2005-06.
Rwanda also received a Millennium Challenge Account Compact in 2008.
Africa's most densely populated country is trying to overcome the
limitations of its small, landlocked economy by leveraging regional
trade. Rwanda joined the East African Community and is aligning its
budget, trade, and immigration policies with its regional partners.
The government has embraced an expansionary fiscal policy to reduce
poverty by improving education, infrastructure, and foreign and
domestic investment and pursuing market-oriented reforms, although
energy shortages, instability in neighboring states, and lack of
adequate transportation linkages to other countries continue to
handicap growth. The global downturn hurt export demand and tourism,
but economic growth is recovering, driven in large part by the
services sector, and inflation has been contained. On the back of
this growth, government is gradually ending its fiscal stimulus
policy while protecting aid to the poor.
Saint Barthelemy
The economy of Saint Barthelemy is based upon
high-end tourism and duty-free luxury commerce, serving visitors
primarily from North America. The luxury hotels and villas host
70,000 visitors each year with another 130,000 arriving by boat. The
relative isolation and high cost of living inhibits mass tourism.
The construction and public sectors also enjoy significant
investment in support of tourism. With limited fresh water
resources, all food must be imported, as must all energy resources
and most manufactured goods. Employment is strong and attracts labor
from Brazil and Portugal.
Saint Helena, Ascension, and Tristan da Cunha
The economy depends
largely on financial assistance from the UK, which amounted to about
$27 million in FY06/07 or more than twice the level of annual
budgetary revenues. The local population earns income from fishing,
raising livestock, and sales of handicrafts. Because there are few
jobs, 25% of the work force has left to seek employment on Ascension
Island, on the Falklands, and in the UK.
Saint Kitts and Nevis
The economy of Saint Kitts and Nevis is
heavily dependent upon tourism revenues, which has replaced sugar,
the traditional mainstay of the economy until the 1970s. Following
the 2005 harvest, the government closed the sugar industry after
decades of losses of 3-4% of GDP annually. To compensate for
employment losses, the government has embarked on a program to
diversify the agricultural sector and to stimulate other sectors of
the economy, such as tourism, export-oriented manufacturing, and
offshore banking. More than 200,000 tourists visited the islands in
2009. Like other tourist destinations in the Caribbean, St. Kitts
and Nevis is vulnerable to damage from natural disasters and shifts
in tourism demand. The current government is constrained by one of
the world's highest public debt burdens equivalent to roughly 185%
of GDP, largely attributable to public enterprise losses.
Saint Lucia
The island nation has been able to attract foreign
business and investment, especially in its offshore banking and
tourism industries, with a surge in foreign direct investment in
2006, attributed to the construction of several tourism projects.
Although crops such as bananas, mangos, and avocados continue to be
grown for export, tourism provides Saint Lucia's main source of
income and the industry is the island's biggest employer. Tourism is
the main source of foreign exchange, although tourism sector
revenues declined with the global economic downturn as US and
European travel dropped in 2009. The manufacturing sector is the
most diverse in the Eastern Caribbean area, and the government is
trying to revitalize the banana industry, although recent hurricanes
have caused exports to contract. Saint Lucia is vulnerable to a
variety of external shocks including volatile tourism receipts,
natural disasters, and dependence on foreign oil. The public
debt-to-GDP ratio is about 77% and high debt servicing obligations
constrain the KING administration's ability to respond to adverse
external shocks. Economic fundamentals remain solid, even though
unemployment needs to be reduced.
Saint Martin
The economy of Saint Martin centers around tourism with
85% of the labor force engaged in this sector. Over one million
visitors come to the island each year with most arriving through the
Princess Juliana International Airport in Sint Maarten. No
significant agriculture and limited local fishing means that almost
all food must be imported. Energy resources and manufactured goods
are also imported, primarily from Mexico and the United States.
Saint Martin is reported to have the highest per capita income in
the Caribbean.
Saint Pierre and Miquelon
The inhabitants have traditionally earned
their livelihood by fishing and by servicing fishing fleets
operating off the coast of Newfoundland. The economy has been
declining, however, because of disputes with Canada over fishing
quotas and a steady decline in the number of ships stopping at Saint
Pierre. In 1992, an arbitration panel awarded the islands an
exclusive economic zone of 12,348 sq km to settle a longstanding
territorial dispute with Canada, although it represents only 25% of
what France had sought. France heavily subsidizes the islands to the
great betterment of living standards. The government hopes an
expansion of tourism will boost economic prospects. Fish farming,
crab fishing, and agriculture are being developed to diversify the
local economy. Recent test drilling for oil may pave the way for
development of the energy sector.
Saint Vincent and the Grenadines
Success of the economy hinges upon
seasonal variations in agriculture, tourism, and construction
activity as well as remittance inflows. Much of the workforce is
employed in banana production and tourism, but persistent high
unemployment has prompted many to leave the islands. This
lower-middle-income country is vulnerable to natural disasters -
tropical storms wiped out substantial portions of crops in 1994,
1995, and 2002. In 2008, the islands had more than 200,000 tourist
arrivals, mostly to the Grenadines, a drop of nearly 20% from 2007.
Saint Vincent is home to a small offshore banking sector and has
moved to adopt international regulatory standards. The government's
ability to invest in social programs and respond to external shocks
is constrained by its high public debt burden, which was over 90% of
GDP at the end of 2010. Following the global downturn, St. Vincent
and the Grenadines saw an economic decline in 2009, after slowing
since 2006, when GDP growth reached a 10-year high of nearly 7%. The
GONSALVES administration is directing government resources to
infrastructure projects, including a new international airport that
is expected to be completed in 2011.
Samoa
The economy of Samoa has traditionally been dependent on
development aid, family remittances from overseas, agriculture, and
fishing. The country is vulnerable to devastating storms.
Agriculture employs two-thirds of the labor force and furnishes 90%
of exports, featuring coconut cream, coconut oil, and copra. The
manufacturing sector mainly processes agricultural products. One
factory in the Foreign Trade Zone employs 3,000 people to make
automobile electrical harnesses for an assembly plant in Australia.
Tourism is an expanding sector accounting for 25% of GDP; 122,000
tourists visited the islands in 2007. In late September 2009, an
earthquake and the resulting tsunami severely damaged Samoa, and
nearby American Samoa, disrupting transportation and power
generation, and resulting in about 200 deaths. The Samoan Government
has called for deregulation of the financial sector, encouragement
of investment, and continued fiscal discipline, while at the same
time protecting the environment. Observers point to the flexibility
of the labor market as a basic strength for future economic
advances. Foreign reserves are in a relatively healthy state, the
external debt is stable, and inflation is low.