Economy - overview (Country profile category: Economy)

Afghanistan:
Afghanistan is an extremely poor, landlocked country, highly dependent on farming and livestock raising (sheep and goats). Economic considerations have played second fiddle to political and military upheavals during two decades of war, including the nearly 10-year Soviet military occupation (which ended 15 February 1989). During that conflict one-third of the population fled the country, with Pakistan and Iran sheltering a combined peak of more than 6 million refugees. In early 1999, 1.2 million Afghan refugees remained in Pakistan and about 1.4 million in Iran. Gross domestic product has fallen substantially over the past 20 years because of the loss of labor and capital and the disruption of trade and transport. The majority of the population continues to suffer from insufficient food, clothing, housing, and medical care. Inflation remains a serious problem throughout the country. International aid can deal with only a fraction of the humanitarian problem, let alone promote economic development. The economic situation did not improve in 1998-99, as internal civil strife continued, hampering both domestic economic policies and international aid efforts. Numerical data are likely to be either unavailable or unreliable. Afghanistan was by far the largest producer of opium poppies in 1999, and narcotics trafficking is a major source of revenue.

Albania:
An extremely poor country by European standards, Albania is making the difficult transition to a more open-market economy. The economy rebounded in 1993-95 after a severe depression accompanying the collapse of the previous centrally planned system in 1990 and 1991. However, a weakening of government resolve to maintain stabilization policies in the election year of 1996 contributed to renewal of inflationary pressures, spurred by the budget deficit which exceeded 12%. The collapse of financial pyramid schemes in early 1997 - which had attracted deposits from a substantial portion of Albania's population - triggered severe social unrest which led to more than 1,500 deaths, widespread destruction of property, and an 8% drop in GDP. The new government, installed in July 1997, has taken strong measures to restore public order and to revive economic activity and trade. The economy continues to be bolstered by remittances of some 20% of the labor force that works abroad, mostly in Greece and Italy. These remittances supplement GDP and help offset the large foreign trade deficit. Most agricultural land was privatized in 1992, substantially improving peasant incomes. In 1998, Albania recovered the 8% drop in GDP of 1997 and pushed ahead by 7% in 1999. International aid has helped defray the high costs of receiving and returning refugees from the Kosovo conflict.

Algeria:
The hydrocarbons sector is the backbone of the economy, accounting for roughly 52% of budget revenues, 25% of GDP, and over 95% of export earnings. Algeria has the fifth-largest reserves of natural gas in the world and is the second largest gas exporter; it ranks fourteenth for oil reserves. Algiers' efforts to reform one of the most centrally planned economies in the Arab world stalled in 1992 as the country became embroiled in political turmoil. Burdened with a heavy foreign debt, Algiers concluded a one-year standby arrangement with the IMF in April 1994 and the following year signed onto a three-year extended fund facility which ended 30 April 1998. Some progress on economic reform, Paris Club debt reschedulings in 1995 and 1996, and oil and gas sector expansion contributed to a recovery in growth since 1995. Still, the economy remains heavily dependent on volatile oil and gas revenues. The government has continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector, but has had little success in reducing high unemployment and improving living standards.

American Samoa:
This is a traditional Polynesian economy in which more than 90% of the land is communally owned. Economic activity is strongly linked to the US, with which American Samoa conducts the great bulk of its foreign trade. Tuna fishing and tuna processing plants are the backbone of the private sector, with canned tuna the primary export. Transfers from the US Government add substantially to American Samoa's economic well-being. Attempts by the government to develop a larger and broader economy are restrained by Samoa's remote location, its limited transportation, and its devastating hurricanes. Tourism, a developing sector, may be held back by the current financial difficulties in East Asia.

Andorra:
Tourism, the mainstay of Andorra's tiny, well-to-do economy, accounts for roughly 80% of GDP. An estimated 9 million tourists visit annually, attracted by Andorra's duty-free status and by its summer and winter resorts. Andorra's comparative advantage has recently eroded as the economies of neighboring France and Spain have been opened up, providing broader availability of goods and lower tariffs. The banking sector, with its "tax haven" status, also contributes substantially to the economy. Agricultural production is limited by a scarcity of arable land, and most food has to be imported. The principal livestock activity is sheep raising. Manufacturing consists mainly of cigarettes, cigars, and furniture. Andorra is a member of the EU Customs Union and is treated as an EU member for trade in manufactured goods (no tariffs) and as a non-EU member for agricultural products.

Angola:
Angola is an economy in disarray because of a quarter century of nearly continuous warfare. Despite its abundant natural resources, output per capita is among the world's lowest. Subsistence agriculture provides the main livelihood for 85% of the population. Oil production and the supporting activities are vital to the economy, contributing about 45% to GDP and 90% of exports. Notwithstanding the signing of a peace accord in November 1994, violence continues, millions of land mines remain, and many farmers are reluctant to return to their fields. As a result, much of the country's food must still be imported. To take advantage of its rich resources - gold, diamonds, extensive forests, Atlantic fisheries, and large oil deposits - Angola will need to implement the peace agreement and reform government policies. Despite the increase in the pace of civil warfare in late 1998, the economy grew by an estimated 4% in 1999. The government introduced new currency denominations in 1999, including a 1 and 5 kwanza note. Expanded oil production brightens prospects for 2000, but internal strife discourages investment outside of the petroleum sector.

Anguilla:
Anguilla has few natural resources, and the economy depends heavily on luxury tourism, offshore banking, lobster fishing, and remittances from emigrants. The economy, and especially the tourism sector, suffered a setback in late 1995 due to the effects of Hurricane Luis in September but recovered in 1996. Increased activity in the tourism industry, which has spurred the growth of the construction sector, contributed to economic growth in 1997-98. Anguillan officials have put substantial effort into developing the offshore financing sector. A comprehensive package of financial services legislation was enacted in late 1994. In the medium term, prospects for the economy will depend on the tourism sector and, therefore, on continuing income growth in the industrialized nations as well as favorable weather conditions.

Antarctica:
No economic activity is conducted at present, except for fishing off the coast and small-scale tourism, both based abroad. Antarctic fisheries in 1998-99 (1 July-30 June) reported landing 119,898 metric tons. Unregulated fishing landed five to six times more than the regulated fishery, and allegedly illegal fishing in antarctic waters in 1998 resulted in the seizure (by France and Australia) of at least eight fishing ships. A total of 10,013 tourists visited in the 1998-99 summer, up from the 9,604 who visited the previous year. Nearly all of them were passengers on 16 commercial (nongovernmental) ships and several yachts that made 116 trips during the summer. Most tourist trips lasted approximately two weeks.

Antigua and Barbuda:
Tourism continues to be the dominant activity in the economy accounting directly or indirectly for more than half of GDP. In 1999 the budding offshore financial sector was seriously hurt by financial sanctions imposed by the US and UK as a result of the loosening of its money-laundering controls. The government has made efforts to comply with international demands in order to get the sanctions lifted. The dual island nation's agricultural production is mainly directed to the domestic market; the sector is constrained by the limited water supply and labor shortages that reflect the pull of higher wages in tourism and construction. Manufacturing comprises enclave-type assembly for export with major products being bedding, handicrafts, and electronic components. Prospects for economic growth in the medium term will continue to depend on income growth in the industrialized world, especially in the US, which accounts for about one-third of all tourist arrivals.

Arctic Ocean:
Economic activity is limited to the exploitation of natural resources, including petroleum, natural gas, fish, and seals.

Argentina:
Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. However, when President Carlos MENEM took office in 1989, the country had piled up huge external debts, inflation had reached 200% per month, and output was plummeting. To combat the economic crisis, the government embarked on a path of trade liberalization, deregulation, and privatization. In 1991, it implemented radical monetary reforms which pegged the peso to the US dollar and limited the growth in the monetary base by law to the growth in reserves. Inflation fell sharply in subsequent years. In 1995, the Mexican peso crisis produced capital flight, the loss of banking system deposits, and a severe, but short-lived, recession; a series of reforms to bolster the domestic banking system followed. Real GDP growth recovered strongly, reaching 8% in 1997. In 1998, international financial turmoil caused by Russia's problems and increasing investor anxiety over Brazil produced the highest domestic interest rates in more than three years, halving the growth rate of the economy. Conditions worsened in 1999 with GDP falling by 3%. President Fernando DE LA RUA, who took office in December 1999, sponsored tax increases and spending cuts to reduce the deficit, which had ballooned to 2.5% of GDP in 1999. The new government also arranged a new $7.4 billion stand-by facility with the IMF for contingency purposes - almost three times the size of the previous arrangement. Key challenges facing the new government include reforming the country's rigid labor code and addressing the precarious financial situation of several highly indebted provinces.

Armenia:
Under the old Soviet central planning system, Armenia had developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Since the implosion of the USSR in December 1991, Armenia has switched to small-scale agriculture away from the large agroindustrial complexes of the Soviet era. The agricultural sector has long-term needs for more investment and updated technology. The privatization of industry has been at a slower pace, but has been given renewed emphasis by the current administration. Armenia is a food importer, and its mineral deposits (gold, bauxite) are small. The ongoing conflict with Azerbaijan over the ethnic Armenian-dominated region of Nagorno-Karabakh and the breakup of the centrally directed economic system of the former Soviet Union contributed to a severe economic decline in the early 1990s. By 1994, however, the Armenian Government had launched an ambitious IMF-sponsored economic program that has resulted in positive growth rates in 1995-99. Armenia also managed to slash inflation and to privatize most small- and medium-sized enterprises. The chronic energy shortages Armenia suffered in recent years have been largely offset by the energy supplied by one of its nuclear power plants at Metsamor. Continued Russian financial difficulties have hurt the trade sector especially, but have been offset by international aid, domestic restructuring, and foreign direct investment.

Aruba:
Tourism is the mainstay of the Aruban economy, although offshore banking and oil refining and storage are also important. The rapid growth of the tourism sector over the last decade has resulted in a substantial expansion of other activities. Construction has boomed, with hotel capacity five times the 1985 level. In addition, the reopening of the country's oil refinery in 1993, a major source of employment and foreign exchange earnings, has further spurred growth. Aruba's small labor force and less than 1% unemployment rate have led to a large number of unfilled job vacancies, despite sharp rises in wage rates in recent years.

Ashmore and Cartier Islands:
no economic activity

Atlantic Ocean:
The Atlantic Ocean provides some of the world's most heavily trafficked sea routes, between and within the Eastern and Western Hemispheres. Other economic activity includes the exploitation of natural resources, e.g., fishing, the dredging of aragonite sands (The Bahamas), and production of crude oil and natural gas (Caribbean Sea, Gulf of Mexico, and North Sea).

Australia:
Australia has a prosperous Western-style capitalist economy, with a per capita GDP at the level of the four dominant West European economies. Rich in natural resources, Australia is a major exporter of agricultural products, minerals, metals, and fossil fuels. Commodities account for 57% of the value of total exports, so that a downturn in world commodity prices can have a big impact on the economy. The government is pushing for increased exports of manufactured goods, but competition in international markets continues to be severe. While Australia has suffered from the low growth and high unemployment characterizing the OECD countries in the early 1990s and during the recent financial problems in East Asia, the economy has expanded at a solid 4% annual growth pace in the last five years. Canberra's emphasis on reforms is a key factor behind the economy's resilience to the regional crisis and its stronger than expected growth rate. Growth in 2000 will depend on key international commodity prices, the extent of recovery in nearby Asian economies, and the strength of US and European markets.

Austria:
Austria with its well-developed market economy and high standard of living is closely tied to other EU economies, especially Germany's. Membership in the EU has drawn an influx of foreign investors attracted by Austria's access to the single European market. Through privatization efforts, the 1996-98 budget consolidation programs, and austerity measures, Austria has brought its total public sector deficit down to 2.1% of GDP in 1999 and public debt - at 63.1% of GDP in 1998 - more or less in line with the 60% of GDP required by the EMU's Maastricht criteria. Cuts mainly have affected the civil service and Austria's generous social benefit system, the two major causes of the government's deficit. To meet increased competition from both EU and Central European countries, Austria will need to emphasize knowledge-based sectors of the economy and deregulate the service sector. Growth, which slowed to 2.0% in 1999, probably will rebound to 2.8% in both 2000 and 2001.

Azerbaijan:
Azerbaijan is less developed industrially than either Armenia or Georgia, the other Caucasian states. It resembles the Central Asian states in its majority Muslim population, high structural unemployment, and low standard of living. The economy's most prominent products are oil, cotton, and natural gas. Production from the Caspian oil field declined through 1997 but registered an increase in 1998-99. Negotiation of 19 production-sharing arrangements (PSAs) with foreign firms, which have thus far committed $60 billion to oil field development, should generate the funds needed to spur future industrial development. Oil production under the first of these PSAs, with the Azerbaijan International Operating Company, began in November 1997. Azerbaijan shares all the formidable problems of the former Soviet republics in making the transition from a command to a market economy, but its considerable energy resources brighten its long-term prospects. Baku has only recently begun making progress on economic reform, and old economic ties and structures are slowly being replaced. An obstacle to economic progress, including stepped up foreign investment, is the continuing conflict with Armenia over the Nagorno-Karabakh region. Trade with Russia and the other former Soviet republics is declining in importance while trade is building up with Turkey, Iran, UAE, and the nations of Europe. Growth in 2000 should match growth in 1999. Long-term prospects will depend on world oil prices and the location of new pipelines in the region.

Bahamas, The:
The Bahamas is a stable, developing nation with an economy heavily dependent on tourism and offshore banking. Tourism alone accounts for more than 60% of GDP and directly or indirectly employs 40% of the archipelago's labor force. Moderate growth in tourism receipts and a boom in construction of new hotels, resorts, and residences led to an increase of the country's GDP by an estimated 3% in 1998. Manufacturing and agriculture together contribute less than 10% of GDP and show little growth, despite government incentives aimed at those sectors. Overall growth prospects in the short run will depend heavily on the fortunes of the tourism sector and continued income growth in the US, which accounts for the majority of tourist visitors.

Bahrain:
In Bahrain, petroleum production and processing account for about 60% of export receipts, 60% of government revenues, and 30% of GDP. Economic conditions have fluctuated with the changing fortunes of oil since 1985, for example, during and following the Gulf crisis of 1990-91. With its highly developed communication and transport facilities, Bahrain is home to numerous multinational firms with business in the Gulf. A large share of exports consists of petroleum products made from imported crude. Construction proceeds on several major industrial projects. Unemployment, especially among the young, and the depletion of both oil and underground water resources are major long-term economic problems.

Baker Island:
no economic activity

Bangladesh:
Despite sustained domestic and international efforts to improve economic and demographic prospects, Bangladesh remains one of the world's poorest, most densely populated, and least developed nations. The economy is largely agricultural, with the cultivation of rice the single most important activity in the economy. Major impediments to growth include frequent cyclones and floods, the inefficiency of state-owned enterprises, a rapidly growing labor force that cannot be absorbed by agriculture, delays in exploiting energy resources (natural gas), inadequate power supplies, and slow implementation of economic reforms. Prime Minister Sheikh HASINA Wajed's Awami League government has made some headway improving the climate for foreign investors and liberalizing the capital markets; for example, it has negotiated with foreign firms for oil and gas exploration, better countrywide distribution of cooking gas, and the construction of natural gas pipelines and power plants. Progress on other economic reforms has been halting because of opposition from the bureaucracy, public sector unions, and other vested interest groups. The especially severe floods of 1998 increased the country's reliance on large-scale international aid. So far the East Asian financial crisis has not had major impact on the economy.

Barbados:
Historically, the Barbadian economy had been dependent on sugarcane cultivation and related activities, but production in recent years has diversified into manufacturing and tourism. The start of the Port Charles Marina project in Speightstown helped the tourism industry continue to expand in 1996-99. Offshore finance and informatics are important foreign exchange earners, and there is also a light manufacturing sector. The government continues its efforts to reduce the unacceptably high unemployment rate, encourage direct foreign investment, and privatize remaining state-owned enterprises.

Bassas da India:
no economic activity

Belarus:
Belarus has seen little structural reform since 1995, when President LUKASHENKO launched the country on the path of "market socialism." In keeping with this policy, LUKASHENKO re-imposed administrative controls over prices and currency exchange rates and expanded the state's right to intervene in the management of private enterprise. In addition to the burdens imposed by high inflation, businesses have been subject to pressure on the part of central and local governments, e.g., arbitrary changes in regulations, numerous rigorous inspections, and retroactive application of new business regulations prohibiting practices that had been legal. Further economic problems are two consecutive bad harvests, 1998-99, and persistent trade deficits. Close relations with Russia, possibly leading to reunion, color the pattern of economic developments. For the time being, Belarus remains self-isolated from the West and its open-market economies.

Belgium:
This modern private enterprise economy has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base. Industry is concentrated mainly in the populous Flemish area in the north, although the government is encouraging investment in the southern region of Wallonia. With few natural resources, Belgium must import substantial quantities of raw materials and export a large volume of manufactures, making its economy unusually dependent on the state of world markets. About three-quarters of its trade is with other EU countries. Belgium's public debt fell from 127% of GDP in 1996 to 122% of GDP in 1998 and the government is trying to control its expenditures to bring the figure more into line with other industrialized countries. Belgium became a charter member of the European Monetary Union (EMU) in January 1999. The dioxin crisis - beginning in June 1999 with the discovery of a cancer-causing substance in animal feed - constituted a serious blow to the food-processing industry, both domestically and internationally. This crisis slowed down GDP growth with recovery expected in the year 2000.

Belize:
The small, essentially private enterprise economy is based primarily on agriculture, agro-based industry, and merchandising, with tourism and construction assuming greater importance. Sugar, the chief crop, accounts for nearly half of exports, while the banana industry is the country's largest employer. The government's tough austerity program in 1997 resulted in an economic slowdown that continued in 1998. The trade deficit has been growing, mostly as a result of low export prices for sugar and bananas. The new government faces important challenges to economic stability. Rapid action to improve tax collection has been promised, but a lack of progress in reining in spending could bring the exchange rate under pressure. The tourist and construction sectors strengthened in early 1999, leading to a preliminary estimate of revived growth at 4%.

Benin:
The economy of Benin remains underdeveloped and dependent on subsistence agriculture, cotton production, and regional trade. Growth in real output has averaged a sound 4% in 1990-95 and 5% in 1996-99. Rapid population growth has offset much of this growth in output. Inflation has subsided over the past three years. Commercial and transport activities, which make up a large part of GDP, are vulnerable to developments in Nigeria, particularly fuel shortages. The Paris Club and bilateral creditors have eased the external debt situation in recent years. The government, still burdened with money-losing state enterprises and a bloated civil service, has been gradually implementing a structural adjustment program since 1991.

Bermuda:
Bermuda enjoys one of the highest per capita incomes in the world, having successfully exploited its location by providing financial services for international firms and luxury tourist facilities for 360,000 visitors annually. The tourist industry, which accounts for an estimated 28% of GDP, attracts 84% of its business from North America. The industrial sector is small, and agriculture is severely limited by a lack of suitable land. About 80% of food needs are imported. International business contributes over 60% of Bermuda's economic output; a failed independence vote in late 1995 can be partially attributed to Bermudian fears of scaring away foreign firms. Government economic priorities are the further strengthening of the tourist and international financial sectors.

Bhutan:
The economy, one of the world's smallest and least developed, is based on agriculture and forestry, which provide the main livelihood for 90% of the population and account for about 40% of GDP. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links. The industrial sector is technologically backward, with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Bhutan's hydropower potential and its attraction for tourists are key resources. The Bhutanese Government has made some progress in expanding the nation's productive base and improving social welfare. Model education, social, and environment programs in Bhutan are underway with support from multilateral development organizations. Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. Detailed controls and uncertain policies in areas like industrial licensing, trade, labor, and finance continue to hamper foreign investment.

Bolivia:
Bolivia, long one of the poorest and least developed Latin American countries, has made considerable progress toward the development of a market-oriented economy. Successes under President SANCHEZ DE LOZADA (1993-1997) included the signing of a free trade agreement with Mexico and the Southern Cone Common Market (Mercosur) as well as the privatization of the state airline, telephone company, railroad, electric power company, and oil company. His successor, Hugo BANZER Suarez has tried to further improve the country's investment climate with an anticorruption campaign. Growth slowed in 1999, in part due to tight government budget policies, which limited needed appropriations for anti-poverty programs, and the fallout from the Asian financial crisis. Growth should rebound to perhaps 4% in 2000 given reasonably favorable world commodity prices.

Bosnia and Herzegovina:
Bosnia and Herzegovina ranked next to The Former Yugoslav Republic of Macedonia as the poorest republic in the old Yugoslav federation. Although agriculture has been almost all in private hands, farms have been small and inefficient, and the republic traditionally has been a net importer of food. Industry has been greatly overstaffed, one reflection of the socialist economic structure of Yugoslavia. TITO had pushed the development of military industries in the republic with the result that Bosnia hosted a large share of Yugoslavia's defense plants. The bitter interethnic warfare in Bosnia caused production to plummet by 80% from 1990 to 1995, unemployment to soar, and human misery to multiply. With an uneasy peace in place, output recovered in 1996-98 at high percentage rates on a low base; but output growth slowed appreciably in 1999, and GDP remains far below the 1990 level. Economic data are of limited use because, although both entities issue figures, national-level statistics are not available. Moreover, official data do not capture the large share of activity that occurs on the black market. In 1999, the convertible mark - the national currency introduced in 1998 - gained wider acceptance, and the Central Bank of Bosnia and Herzegovina dramatically increased its reserve holdings. Implementation of privatization, however, faltered in both areas. Banking reform is also lagging. The country receives substantial amounts of reconstruction assistance and humanitarian aid from the international community but will have to prepare for an era of declining assistance.

Botswana:
Agriculture still provides a livelihood for more than 80% of the population but supplies only about 50% of food needs and accounts for only 3% of GDP. Subsistence farming and cattle raising predominate. The sector is plagued by erratic rainfall and poor soils. Diamond mining and tourism also are important to the economy. Substantial mineral deposits were found in the 1970s and the mining sector grew from 25% of GDP in 1980 to 38% in 1998. Unemployment officially is 21% but unofficial estimates place it closer to 40%. The Orapa 2000 project, which will double the capacity of the country's main diamond mine, will be finished in early 2000. This will be the main force behind continued economic expansion.

Bouvet Island:
no economic activity; declared a nature reserve

Brazil:
Possessing large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries and is expanding its presence in world markets. In the late eighties and early nineties, high inflation hindered economic activity and investment. The Real Plan, instituted in the spring of 1994, sought to break inflationary expectations by pegging the real to the US dollar. Inflation was brought down to single digit annual figures, but not fast enough to avoid substantial real exchange rate appreciation during the transition phase of the Real Plan. This appreciation meant that Brazilian goods were now more expensive relative to goods from other countries, which contributed to large current account deficits. However, no shortage of foreign currency ensued because of the financial community's renewed interest in Brazilian markets as inflation rates stabilized and the debt crisis of the eighties faded from memory. The maintenance of large current account deficits via capital account surpluses became problematic as investors became more risk averse to emerging market exposure as a consequence of the Asian financial crisis in 1997 and the Russian bond default in August 1998. After crafting a fiscal adjustment program and pledging progress on structural reform, Brazil received a $41.5 billion IMF-led international support program in November 1998. In January 1999, the Brazilian Central Bank announced that the real would no longer be pegged to the US dollar. This devaluation helped moderate the downturn in economic growth in 1999 that investors had expressed concerns about over the summer of 1998. Brazil's debt to GDP ratio of 48% for 1999 beat the IMF target and helped reassure investors that Brazil will maintain tight fiscal and monetary policy even with a floating currency. The economy is expected to push growth up to 3% in 2000.

British Indian Ocean Territory:
All economic activity is concentrated on the largest island of Diego Garcia, where joint UK-US defense facilities are located. Construction projects and various services needed to support the military installations are done by military and contract employees from the UK, Mauritius, the Philippines, and the US. There are no industrial or agricultural activities on the islands.

British Virgin Islands:
The economy, one of the most prosperous in the Caribbean, is highly dependent on tourism, which generates an estimated 45% of the national income. An estimated 350,000 tourists, mainly from the US, visited the islands in 1997. In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate in the islands, and incorporation fees now generate substantial revenues. An estimated 250,000 companies were on the offshore registry by yearend 1997. The adoption of a comprehensive insurance law in late 1994, which provides a blanket of confidentiality with regulated statutory gateways for investigation of criminal offenses, is expected to make the British Virgin Islands even more attractive to international business. Livestock raising is the most important agricultural activity; poor soils limit the islands' ability to meet domestic food requirements. Because of traditionally close links with the US Virgin Islands, the British Virgin Islands has used the dollar as its currency since 1959.

Brunei:
This small, wealthy economy is a mixture of foreign and domestic entrepreneurship, government regulation and welfare measures, and village tradition. It is almost totally supported by exports of crude oil and natural gas, with revenues from the petroleum sector accounting for over half of GDP. Per capita GDP is far above most other Third World countries, and substantial income from overseas investment supplements income from domestic production. The government provides for all medical services and subsidizes food and housing. The government has shown progress in its basic policy of diversifying the economy away from oil and gas. Brunei's leaders are concerned that steadily increased integration in the world economy will undermine internal social cohesion although it has taken steps to become a more prominent player by serving as chairman for the 2000 APEC (Asian Pacific Economic Cooperation) forum. Growth in 1999 is estimated at 2.5% due to higher oil prices in the second half.

Bulgaria:
In April 1997, the current ruling Union of Democratic Forces (UDF) government won pre-term parliamentary elections and introduced an IMF currency board system which succeeded in stabilizing the economy. The triple digit inflation of 1996 and 1997 has given way to an official consumer price increase of 6.2% in 1999. Following declines in GDP in both 1996 and 1997, the economy grew an officially estimated 3.5% in 1998 and 2.5% in 1999. In September 1998, the IMF approved a three-year Extended Fund Facility, which provides credits worth approximately $900 million, designed to support Bulgaria's reform efforts. In 1999, an unfavorable international environment - primarily caused by the Kosovo conflict - and structural reforms slowed economic growth, but forecasters are predicting accelerated growth over the next several years. The government's structural reform program includes: (a) privatization and, where appropriate, liquidation of state-owned enterprises (SOEs); (b) liberalization of agricultural policies, including creating conditions for the development of a land market; (c) reform of the country's social insurance programs; and (d) reforms to strengthen contract enforcement and fight crime and corruption.

Burkina Faso:
One of the poorest countries in the world, landlocked Burkina Faso has a high population density, few natural resources, and a fragile soil. About 90% of the population is engaged in (mainly subsistence) agriculture which is highly vulnerable to variations in rainfall. Industry remains dominated by unprofitable government-controlled corporations. Following the African franc currency devaluation in January 1994 the government updated its development program in conjunction with international agencies, and exports and economic growth have increased. Maintenance of its macroeconomic progress in 2000-2001 depends on continued low inflation, reduction in the trade deficit, and reforms designed to encourage private investment.

Burma:
Burma has a mixed economy with private activity dominant in agriculture, light industry, and transport, and with substantial state-controlled activity, mainly in energy, heavy industry, and the rice trade. Government policy in the last 11 years, 1989-99, has aimed at revitalizing the economy after three decades of tight central planning. Thus, private activity has markedly increased; foreign investment has been encouraged, so far with moderate success. State enterprises remain highly inefficient and privatization efforts have stalled. Published estimates of Burma's foreign trade are greatly understated because of the volume of black-market trade. A major ongoing problem is the failure to achieve monetary and fiscal stability. Burma remains a poor Asian country and living standards for the majority have not improved over the past decade. The short-term outlook is for continued sluggish growth because of poor government planning, internal unrest, minimal foreign investment, and the large trade deficit.

Burundi:
Burundi is a landlocked, resource-poor country with an underdeveloped manufacturing sector. The economy is predominantely agricultural with roughly 90% of the population dependent on subsistence agriculture. Its economic health depends on the coffee crop, which accounts for 80% of foreign exchange earnings. The ability to pay for imports therefore rests largely on the vagaries of the climate and the international coffee market. Since October 1993 the nation has suffered from massive ethnic-based violence which has resulted in the death of perhaps 250,000 persons and the displacement of about 800,000 others. Foods, medicines, and electricity remain in short supply.

Cambodia:
After four years of solid macroeconomic performance, Cambodia's economy slowed dramatically in 1997-98 due to the regional economic crisis, civil violence, and political infighting. Foreign investment and tourism fell off. Also, in 1998 the main harvest was hit by drought. But in 1999, the first full year of peace in 30 years, progress was made on economic reforms and growth resumed at 4%. The long-term development of the economy after decades of war remains a daunting challenge. The population lacks education and productive skills, particularly in the poverty-ridden countryside, which suffers from an almost total lack of basic infrastructure. Recurring political instability and corruption within government discourage foreign investment and delay foreign aid. On the brighter side, the government is addressing these issues with assistance from bilateral and multilateral donors. So long as political stability lasts, the Cambodian economy is likely to grow at a respectable pace.

Cameroon:
Because of its oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa. Still, it faces many of the serious problems facing other underdeveloped countries, such as a top-heavy civil service and a generally unfavorable climate for business enterprise. Since 1990, the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalize the nation's banks. The government, however, has failed to press forward vigorously with these programs. The latest enhanced structural adjustment agreement was signed in October 1997; the parties hope this will prove more successful, yet government mismanagement and corruption remain problems. Inflation has been brought back under control. Progress toward privatization of remaining state industry should support continued economic growth in 2000.

Canada:
As an affluent, high-tech industrial society, Canada today closely resembles the US in its market-oriented economic system, pattern of production, and high living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban. Real rates of growth have averaged nearly 3.0% since 1993. Unemployment is falling and government budget surpluses are being partially devoted to reducing the large public sector debt. The 1989 US-Canada Free Trade Agreement (FTA) and 1994 North American Free Trade Agreement (NAFTA) (which included Mexico) have touched off a dramatic increase in trade and economic integration with the US. With its great natural resources, skilled labor force, and modern capital plant Canada enjoys solid economic prospects. Two shadows loom, the first being the continuing constitutional impasse between English- and French-speaking areas, which has been raising the possibility of a split in the federation. Another long-term concern is the flow south to the US of professional persons lured by higher pay, lower taxes, and the immense high-tech infrastructure.

Cape Verde:
Cape Verde's low per capita GDP reflects a poor natural resource base, including serious water shortages exacerbated by cycles of long-term drought. The economy is service-oriented, with commerce, transport, and public services accounting for almost 70% of GDP. Although nearly 70% of the population lives in rural areas, the share of agriculture in GDP in 1998 was only 13%, of which fishing accounts for 1.5%. About 90% of food must be imported. The fishing potential, mostly lobster and tuna, is not fully exploited. Cape Verde annually runs a high trade deficit, financed by foreign aid and remittances from emigrants; remittances constitute a supplement to GDP of more than 20%. Economic reforms, launched by the new democratic government in 1991, are aimed at developing the private sector and attracting foreign investment to diversify the economy. Prospects for 2000 depend heavily on the maintenance of aid flows, remittances, and the momentum of the government's development program.

Cayman Islands:
With no direct taxation, the islands are a thriving offshore financial center. More than 40,000 companies were registered in the Cayman Islands as of 1997, including almost 600 banks and trust companies; banking assets exceed $500 billion. A stock exchange was opened in 1997. Tourism is also a mainstay, accounting for about 70% of GDP and 75% of foreign currency earnings. The tourist industry is aimed at the luxury market and caters mainly to visitors from North America. Total tourist arrivals exceeded 1.2 million visitors in 1997. About 90% of the islands' food and consumer goods must be imported. The Caymanians enjoy one of the highest outputs per capita and one of the highest standards of living in the world.

Central African Republic:
Subsistence agriculture, together with forestry, remains the backbone of the economy of the Central African Republic (CAR), with more than 70% of the population living in outlying areas. The agricultural sector generates half of GDP. Timber has accounted for about 16% of export earnings and the diamond industry for nearly 54%. Important constraints to economic development include the CAR's landlocked position, a poor transportation system, a largely unskilled work force, and a legacy of misdirected macroeconomic policies. The 50% devaluation of the currencies of 14 Francophone African nations on 12 January 1994 had mixed effects on the CAR's economy. Diamond, timber, coffee, and cotton exports increased, leading an estimated rise of GDP of 7% in 1994 and nearly 5% in 1995. Military rebellions and social unrest in 1996 were accompanied by widespread destruction of property and a drop in GDP of 2%. Ongoing violence between the government and rebel military groups over pay issues, living conditions, and political representation has destroyed many businesses in the capital and reduced tax revenues for the government. The IMF approved an Extended Structure Adjustment Facility in 1998. The government has set targets of annual 5% growth and 2.5% inflation for 2000-2001.

Chad:
Landlocked Chad's economic development suffers from it's geographic remoteness, drought, lack of infrastructure, and political turmoil. About 85% of the population depends on agriculture, including the herding of livestock. Of Africa's Francophone countries, Chad benefited least from the 50% devaluation of their currencies in January 1994. Financial aid from the World Bank, the African Development Fund, and other sources is directed largely at the improvement of agriculture, especially livestock production. Due to lack of financing, the development of the Doba Basin oil fields, originally due to finish in 2000, has been substantially delayed.

Chile:
Chile has a market-oriented economy characterized by a high level of foreign trade. During the early 1990s, Chile's reputation as a role model for economic reform was strengthened when the democratic government of Patricio AYLWIN - which took over from the military in 1990 - deepened the economic reform initiated by the military government. Growth in real GDP averaged 8% during the period 1991-1997, but fell to half that level in 1998 because of tight monetary policies implemented to keep the current account deficit in check and lower export earnings - the latter a product of the global financial crisis. A severe drought exacerbated the recession in 1999, reducing crop yields and causing hydroelectric shortfalls and rationing, and Chile experienced negative economic growth for the first time in more than 15 years. Despite the effects of the recession, Chile maintained its reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. By the end of 1999, exports and economic activity had begun to recover, and a return to strong growth in 2000 is likely. The inauguration of Ricardo LAGOS in March 2000, succeeding Eduardo FREI, will keep the presidency in the hands of the center-left Concertacion coalition that has held office since the return of civilian rule in 1990.

China:
Beginning in late 1978 the Chinese leadership has been moving the economy from a sluggish Soviet-style centrally planned economy to a more market-oriented economy but still within a rigid political framework of Communist Party control. To this end the authorities have switched to a system of household responsibility in agriculture in place of the old collectivization, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprise in services and light manufacturing, and opened the economy to increased foreign trade and investment. The result has been a quadrupling of GDP since 1978. In 1999, with its 1.25 billion people but a GDP of just $3,800 per capita, China became the second largest economy in the world after the US. Agricultural output doubled in the 1980s, and industry also posted major gains, especially in coastal areas near Hong Kong and opposite Taiwan, where foreign investment helped spur output of both domestic and export goods. On the darker side, the leadership has often experienced in its hybrid system the worst results of socialism (bureaucracy, lassitude, corruption) and of capitalism (windfall gains and stepped-up inflation). Beijing thus has periodically backtracked, retightening central controls at intervals. In late 1993 China's leadership approved additional long-term reforms aimed at giving still more play to market-oriented institutions and at strengthening the center's control over the financial system; state enterprises would continue to dominate many key industries in what was now termed "a socialist market economy". In 1995-99 inflation dropped sharply, reflecting tighter monetary policies and stronger measures to control food prices. At the same time, the government struggled to (a) collect revenues due from provinces, businesses, and individuals; (b) reduce corruption and other economic crimes; and (c) keep afloat the large state-owned enterprises, most of which had not participated in the vigorous expansion of the economy and many of which had been losing the ability to pay full wages and pensions. From 50 to 100 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time low-paying jobs. Popular resistance, changes in central policy, and loss of authority by rural cadres have weakened China's population control program, which is essential to maintaining growth in living standards. Another long-term threat to continued rapid economic growth is the deterioration in the environment, notably air pollution, soil erosion, and the steady fall of the water table especially in the north. China continues to lose arable land because of erosion and economic development. The next few years will witness increasing tensions between a highly centralized political system and an increasingly decentralized economic system.

Christmas Island:
Phosphate mining had been the only significant economic activity, but in December 1987 the Australian Government closed the mine. In 1991, the mine was reopened by union workers. With the support of the government, Australian-based Casinos Austria International Ltd. built a $34 million casino on Christmas Island, which opened in 1993. As of yearend 1999, gaming facilities at the casino were temporarily closed but were expected to reopen in early 2000. Another economic prospect is the possible location of a space-launching site on the island.

Clipperton Island:
Although 115 species of fish have been identified in the territorial waters of Clipperton Island, the only economic activity is tuna fishing.

Cocos (Keeling) Islands:
Grown throughout the islands, coconuts are the sole cash crop. Copra and fresh coconuts are the major export earners. Small local gardens and fishing contribute to the food supply, but additional food and most other necessities must be imported from Australia.

Colombia:
Colombia is poised for moderate growth in the next several years, marking an end to the severe 1999 recession when GDP fell by about 5%. President PASTRANA's well-respected economic team is taking steps to keep the recovery on track, such as lowering interest rates and shoring up the financial system. In its loan agreement with the IMF, the administration has pledged to take additional steps to restore growth, reduce inflation, and improve the public sector's fiscal health. Many challenges to sustainable growth remain, however. Unemployment reached a record 20% in 1999 and may remain high, contributing to the extreme inequality in income distribution. Colombia's leading exports, oil and coffee, face an uncertain future: new exploration is needed to offset a pending decline in oil production, and the coffee harvest has dropped off because of aging plantations and natural disasters. The lack of public security is a key concern for investors, making progress in the government's peace negotiations with insurgent groups an important driver of economic performance. Colombia is looking for international financial assistance to boost economic recovery and peace prospects.

Comoros:
One of the world's poorest countries, Comoros is made up of three islands that have inadequate transportation links, a young and rapidly increasing population, and few natural resources. The low educational level of the labor force contributes to a subsistence level of economic activity, high unemployment, and a heavy dependence on foreign grants and technical assistance. Agriculture, including fishing, hunting, and forestry, is the leading sector of the economy. It contributes 40% to GDP, employs 80% of the labor force, and provides most of the exports. The country is not self-sufficient in food production; rice, the main staple, accounts for the bulk of imports. The government is struggling to upgrade education and technical training, to privatize commercial and industrial enterprises, to improve health services, to diversify exports, to promote tourism, and to reduce the high population growth rate. Continued foreign support is essential if the goal of 4% annual GDP growth is to be met.

Congo, Democratic Republic of the:
The economy of the Democratic Republic of the Congo - a nation endowed with vast potential wealth - has declined drastically since the mid-1980s. The new government instituted a tight fiscal policy that initially curbed inflation and currency depreciation, but these small gains were quickly reversed when the foreign-backed rebellion in the eastern part of the country began in August 1998. The war has dramatically reduced government revenue, and increased external debt. Foreign businesses have curtailed operations due to uncertainty about the outcome of the conflict and because of increased government harassment and restrictions. Poor infrastructure, an uncertain legal framework, corruption, and lack of openness in government economic policy and financial operations remain a brake on investment and growth. A number of IMF and World Bank missions have met with the new government to help it develop a coherent economic plan but associated reforms are on hold. Assuming moderate peace, annual growth is likely to increase to nearly 5% in 2000-01, but inflation will continue to be a problem.

Congo, Republic of the:
The economy is a mixture of village agriculture and handicrafts, an industrial sector based largely on oil, support services, and a government characterized by budget problems and overstaffing. Oil has supplanted forestry as the mainstay of the economy, providing a major share of government revenues and exports. In the early 1980s, rapidly rising oil revenues enabled the government to finance large-scale development projects with GDP growth averaging 5% annually, one of the highest rates in Africa. Moreover, the government has mortgaged a substantial portion of its oil earnings, contributing to the government's shortage of revenues. The 12 January 1994 devaluation of Franc Zone currencies by 50% resulted in inflation of 61% in 1994 but inflation has subsided since. Economic reform efforts continued with the support of international organizations, notably the World Bank and the IMF. The reform program came to a halt in June 1997 when civil war erupted. Denis SASSOU-NGUESSO, who returned to power when the war ended in October 1997, publicly expressed interest in moving forward on economic reforms and privatization and in renewing cooperation with international financial institutions. However, economic progress was badly hurt by slumping oil prices in 1998, which worsened the Republic of the Congo's budget deficit. A second blow was the resumption of armed conflict in December 1998. Even with high world oil prices, Congo is unlikely to realize growth of more than 5% in 2000-01.

Cook Islands:
Like many other South Pacific island nations, the Cook Islands' economic development is hindered by the isolation of the country from foreign markets, lack of natural resources, periodic devastation from natural disasters, and inadequate infrastructure. Agriculture provides the economic base with major exports made up of copra and citrus fruit. Manufacturing activities are limited to fruit-processing, clothing, and handicrafts. Trade deficits are made up for by remittances from emigrants and by foreign aid, overwhelmingly from New Zealand. Efforts to exploit tourism potential, encourage offshore banking, and expand the mining and fishing industries have been partially successful in stimulating investment and growth.

Coral Sea Islands:
no economic activity

Costa Rica:
Costa Rica's basically stable economy depends on tourism, agriculture, and electronics exports. Poverty has been substantially reduced over the past 15 years, and a strong social safety net has been put into place. Economic growth has rebounded from -0.9% in 1996 to 4% in 1997, 6% in 1998, and 7% in 1999. Inflation rose to 22.5% in 1995, dropped to 11.1% in 1997, 12% in 1998, and 11% in 1999. Large government deficits - fueled by interest payments on the massive internal debt - have undermined efforts to maintain the quality of social services. Curbing inflation, reducing the deficit, and improving public sector efficiency remain key challenges to the government. Political resistance to privatization has stalled liberalization efforts.

Cote d'Ivoire:
Cote d'Ivoire is among the world's largest producers and exporters of coffee, cocoa beans, and palm oil. Consequently, the economy is highly sensitive to fluctuations in international prices for these products and to weather conditions. Despite attempts by the government to diversify the economy, it is still largely dependent on agriculture and related activities, which engage roughly 68% of the population. After several years of lagging performance, the Ivorian economy began a comeback in 1994, due to the devaluation of the CFA franc and improved prices for cocoa and coffee, growth in nontraditional primary exports such as pineapples and rubber, limited trade and banking liberalization, offshore oil and gas discoveries, and generous external financing and debt rescheduling by multilateral lenders and France. The 50% devaluation of Franc Zone currencies on 12 January 1994 caused a one-time jump in the inflation rate to 26% in 1994, but the rate fell sharply in 1996-99. Moreover, government adherence to donor-mandated reforms led to a jump in growth to 5% annually in 1996-99. Growth may slow in 2000 because of the difficulty of meeting the conditions of international donors, continued low prices of key exports, and post-coup instability.

Croatia:
Before the dissolution of Yugoslavia, the Republic of Croatia, after Slovenia, was the most prosperous and industrialized area, with a per capita output perhaps one-third above the Yugoslav average. Croatia faces considerable economic problems stemming from: the legacy of longtime communist mismanagement of the economy; damage during the internecine fighting to bridges, factories, power lines, buildings, and houses; the large refugee and displaced population, both Croatian and Bosnian; and the disruption of economic ties. Western aid and investment, especially in the tourist and oil industries, would help restore the economy. The government has been successful in some reform efforts - partially macroeconomic stabilization policies - and it has normalized relations with its creditors. Yet it still is struggling with privatization of large state enterprises and with bank reform. The recession that began at the end of 1998 continued through most of 1999, and GDP growth for the year was flat. Inflation remained in check and the kuna was stable. The death of President TUDJMAN in December 1999, and the defeat of his ruling Coatian Democratic Union or HDZ party in parliamentary and presidential elections in January 2000 has ushered in a new government committed to economic reform but faced with the challenge of halting the economic decline.

Cuba:
The state under the durable dictatorship of Fidel CASTRO plays the primary role in the domestic economy and controls practically all foreign trade. The government has undertaken several reforms in recent years to stem excess liquidity, increase labor incentives, and alleviate serious shortages of food, consumer goods, and services. The liberalized agricultural markets introduced in October 1994, at which state and private farmers sell above-quota production at unrestricted prices, have broadened legal consumption alternatives and reduced black market prices. Government efforts to lower subsidies to unprofitable enterprises and to shrink the money supply caused the semi-official exchange rate for the Cuban peso to move from a peak of 120 to the dollar in the summer of 1994 to 21 to the dollar by yearend 1999. New taxes introduced in 1996 have helped drive down the number of self-employed workers from 208,000 in January 1996. Havana announced in 1995 that GDP declined by 35% during 1989-93, the result of lost Soviet aid and domestic inefficiencies. The drop in GDP apparently halted in 1994, when Cuba reported 0.7% growth, followed by increases of 2.5% in 1995 and 7.8% in 1996. Growth slowed again in 1997 and 1998 to 2.5% and 1.2% respectively. Growth recovered again in 1999 with a 6.2% increase in GDP, due to the continued growth of tourism. Central control is complicated by the existence of the informal economy, much of which is denominated in dollars. Living standards for the average (dollarless) Cuban remain at a depressed level compared with 1990. The continuation of gradual economic reforms and increase in tourism suggest growth of 4% to 5% in 2000.

Cyprus:
Economic affairs are dominated by the division of the country into the southern (Greek) area controlled by the Cyprus Government and the northern Turkish Cypriot-administered area. The Greek Cypriot economy is prosperous but highly susceptible to external shocks. Erratic growth rates in the 1990s reflect the economy's vulnerability to swings in tourist arrivals, caused by political instability on the island and fluctuations in economic conditions in Western Europe. Economic policy in the south is focused on meeting the criteria for admission to the EU. As in the Turkish sector, water shortage is a growing problem, and several desalination plants are planned. The Turkish Cypriot economy has about one-fifth the population and one-third the per capita GDP of the south. Because it is recognized only by Turkey, it has had much difficulty arranging foreign financing, and foreign firms have hesitated to invest there. The economy remains heavily dependent on agriculture and government service, which together employ about half of the work force. Moreover, the small, vulnerable economy has suffered because the Turkish lira is legal tender. To compensate for the economy's weakness, Turkey provides direct and indirect aid to tourism, education, industry, etc.

Czech Republic:
Political and financial crises in 1997 shattered the Czech Republic's image as one of the most stable and prosperous of post-Communist states. Delays in enterprise restructuring and failure to develop a well-functioning capital market played major roles in Czech economic troubles, which culminated in a currency crisis in May. The currency was forced out of its fluctuation band as investors worried that the current account deficit, which reached nearly 8% of GDP in 1996, would become unsustainable. After expending $3 billion in vain to support the currency, the central bank let it float. The growing current account imbalance reflected a surge in domestic demand and poor export performance, as wage increases outpaced productivity. The government was forced to introduce two austerity packages later in the spring which cut government spending by 2.5% of GDP. Growth dropped to 0.3% in 1997, -2.3% in 1998, and -0.5% in 1999. The basic transition problem continues to be too much direct and indirect government influence on the privatized economy. The government established a restructuring agency in 1999 and launched a revitalization program - to spur the sale of firms to foreign companies. Key priorities include accelerating legislative convergence with EU norms, restructuring enterprises, and privatizing banks and utilities. The economy, fueled by increased export growth and investment, is expected to recover in 2000.

Denmark:
This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, and high dependence on foreign trade. Denmark is a net exporter of food. The center-left coalition government is concentrating on reducing the unemployment rate and the budget deficit as well as following the previous government's policies of maintaining low inflation and a current account surplus. The coalition also vows to maintain a stable currency. The coalition has lowered marginal income tax rates while maintaining overall tax revenues; boosted industrial competitiveness through labor market and tax reforms; increased research and development funds; and improved welfare services for the neediest while cutting paperwork and delays. Denmark chose not to join the 11 other EU members who launched the euro on 1 January 1999.

Djibouti:
The economy is based on service activities connected with the country's strategic location and status as a free trade zone in northeast Africa. Two-thirds of the inhabitants live in the capital city, the remainder being 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. It 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 40% to 50% continues to be a major problem. Inflation is not a concern, however, because of the fixed tie of the franc to the US dollar. Per capita consumption dropped an estimated 35% over the last seven years because of recession, civil war, and a high population growth rate (including immigrants and refugees). Also, renewed fighting between Ethiopia and Eritrea has disturbed normal external channels of commerce. Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors.

Dominica:
The economy depends on agriculture and is highly vulnerable to climatic conditions, notably tropical storms. Agriculture, primarily bananas, accounts for 21% of GDP and employs 40% of the labor force. Development of the tourist industry remains difficult because of the rugged coastline, lack of beaches, and the lack of an international airport. Hurricane Luis devastated the country's banana crop in September 1995; tropical storms had wiped out one-quarter of the crop in 1994 as well. The economy's recovery continued in 1998, fueled by increases in construction, soap production, and tourist arrivals. The government is attempting to develop an offshore financial industry in order to diversify the island's production base.

Dominican Republic:
In December 1996, incoming President FERNANDEZ presented a bold reform package for this Caribbean economy - including the devaluation of the peso, income tax cuts, a 50% increase in sales taxes, reduced import tariffs, and increased gasoline prices - in an attempt to create a market-oriented economy that can compete internationally. Even though most reforms are stalled in the legislature - including the intellectual property rights bill, social security reform, and a new electricity law first submitted in 1993 - the economy has grown vigorously under FERNANDEZ's administration. Construction, tourism and telecommunications are leading the advance. The government is working to increase electric generating capacity, a key to continued economic growth; the state electricity company was finally privatized following numerous delays. The continuation of this vigorous growth in 2000 will depend on the policies adopted by the new administration.

Ecuador:
Ecuador has substantial oil resources and rich agricultural areas. Because the country exports primary products such as oil, bananas, and shrimp, fluctuations in world market prices can have a substantial domestic impact. Ecuador joined the World Trade Organization in 1996, but has failed to comply with many of its accession commitments. In recent years, growth has been uneven due to ill-conceived fiscal stabilization measures. The aftermath of El Nino and depressed oil market of 1997-98 drove Ecuador's economy into a free-fall in 1999. The beginning of 1999 saw the banking sector collapse, which helped precipitate an unprecedented default on external loans later that year. Continued economic instability drove a 70% depreciation of the currency throughout 1999, which eventually forced a desperate government to dollarize the currency regime in 2000. The move stabilized the currency, but did not stave off the ouster of the government. The new president, Gustavo NOBOA has yet to complete negotiations for a long sought IMF accord. He will find it difficult to push through the reforms necessary to make dollarization work in the long-run.

Egypt:
A series of IMF arrangements - coupled with massive external debt relief resulting from Egypt's participation in the Gulf war coalition - helped Egypt improve its macroeconomic performance during the 1990s. Through sound fiscal and monetary policies, Cairo tamed inflation, slashed budget deficits, and built up foreign reserves. Although the pace of structural reforms - such as privatization and new business legislation - has been slower than the IMF envisioned, Egypt's steps toward a more market-oriented economy have prompted increased foreign investment. Lower combined hard currency inflows - from tourism, worker remittances, oil revenues, and Suez Canal tolls - in 1998 and the first half of 1999 resulted in pressure on the Egyptian pound and sporadic dollar shortages, but external payments were not in crisis. Despite ample reserves, the Central Bank did not provide sufficient hard currency to commercial banks and Cairo restricted imports for a short period; these developments confirmed to some investors and currency traders that government financial operations lack sufficient coordination and openness. Monetary pressures have since eased, however, with the continued oil price recovery starting in mid-1999 and a moderate rebound in tourism. Increased gas exports are a major plus factor in future growth.

El Salvador:
El Salvador is a poor Central American economy which has been suffering from a weak tax collection system, factory closings, the aftermath of Hurricane Mitch, and weak world coffee prices. On the bright side, in recent years inflation has fallen to single digit levels, and total exports have grown substantially. The substantial trade deficit has been offset by remittances from the large number of Salvadorans living abroad and from external aid.

Equatorial Guinea:
The discovery and exploitation of large oil reserves have contributed to dramatic economic growth in recent years. Forestry, farming, and fishing are also major components of GDP. Subsistence farming predominates. Although pre-independence Equatorial Guinea counted on cocoa production for hard currency earnings, the deterioration of the rural economy under successive brutal regimes has diminished potential for agriculture-led growth. A number of aid programs sponsored by the World Bank and the IMF have been cut off since 1993 because of the government's gross corruption and mismanagement. Businesses, for the most part, are owned by government officials and their family members. Undeveloped natural resources include titanium, iron ore, manganese, uranium, and alluvial gold. The country responded favorably to the devaluation of the CFA franc in January 1994. Boosts in production, along with high world oil prices, should further stimulate growth in 2000-2001.

Eritrea:
With independence from Ethiopia on 24 May 1993, Eritrea faced the economic problems of a small, desperately poor country. The economy is largely based on subsistence agriculture, with 80% of the population involved in farming and herding. The small industrial sector consists mainly of light industries with outmoded technologies. Domestic output (GDP) is substantially augmented by worker remittances from abroad. Government revenues come from custom duties and taxes on income and sales. Road construction is a top domestic priority. In the long term, Eritrea may benefit from the development of offshore oil, offshore fishing, and tourism. Eritrea's economic future depends on its ability to master fundamental social and economic problems, e.g., by reducing illiteracy, promoting job creation, expanding technical training, attracting foreign investment, and streamlining the bureaucracy. The most immediate threat to the economy, however, is the possible expansion of the border conflict with Ethiopia, which broke out in May 1998. The hostilities have drained away substantial resources vital to Eritrea's economic development.

Estonia:
In 1999, Estonia experienced its worst year economically since it regained independence in 1991 largely because of the impact of the August 1998 Russian financial crisis. Estonia joined the WTO in November 1999 - the second Baltic state to join - and continued its EU accession talks. GDP is forecast to grow 4% in 2000. Privatization of energy, telecommunications, railways, and other state-owned companies will continue in 2000. Estonia expects to complete its preparations for EU membership by the end of 2002.

Ethiopia:
Ethiopia's economy is based on agriculture, which accounts for half of GDP, 90% of exports, and 80% of total employment. The agricultural sector suffers from frequent periods of drought and poor cultivation practices, and as many as 4.6 million people need food assistance annually. Coffee is critical to the Ethiopian economy, and Ethiopia earned $267 million in 1999 by exporting 105,000 metric tons. According to current estimates, coffee contributes 10% of Ethiopia's GDP. More than 15 million people (25% of the population) derive their livelihood from the coffee sector. Other exports include live animals, hides, gold, and qat. In December 1999, Ethiopia signed a $1.4 billion joint venture deal to develop a huge natural gas field in the Somali Regional State. The war with Eritrea has forced the government to spend scarce resources on the military and forced the government to scale back ambitious development plans. Foreign investment has declined significantly. Government taxes imposed in late 1999 to raise money for the war will depress an already weak economy. The war has forced the government to improve roads and other parts of the previously neglected infrastructure, but only certain regions of the nation have benefited.

Europa Island:
no economic activity

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 Falklands exclusive fishing zone. These license fees total more than $40 million per year, which goes to 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. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. To encourage tourism, the Falkland Islands Development Corporation has built three lodges for visitors attracted by the abundant wildlife and trout fishing. 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.

Faroe Islands:
After the severe economic troubles of the early 1990s, brought on by a drop in the vital fish catch, the Faroe Islands have come back in the last few years, with unemployment down to 5% in mid-1998. Nevertheless, the almost total dependence on fishing means the economy remains extremely vulnerable. The Faroese hope to broaden their economic base by building new fish-processing plants. Oil finds close to the Faroese area give hope for deposits in the immediate area, which may lay the basis to sustained economic prosperity. The Faroese are supported by a substantial annual subsidy from Denmark.

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 and a growing tourist industry are the major sources of foreign exchange. Sugar processing makes up one-third of industrial activity. Roughly 300,000 tourists visit each year, including thousands of Americans following the start of regularly scheduled non-stop air service from Los Angeles. Fiji's growth slowed in 1997 because the sugar industry suffered from low world prices and rent disputes between farmers and landowners. Drought in 1998 further damaged the sugar industry, but its recovery in 1999 contributed to robust GDP growth. Long-term problems include low investment and uncertain property rights.

Finland:
Finland has a highly industrialized, largely free-market economy, with per capita output roughly that of the UK, France, Germany, and Italy. Its key economic sector is manufacturing - principally the wood, metals, engineering, telecommunications, and electronics industries. Trade is important, with exports equaling more than one-third of GDP. 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. The economy has come back from the recession of 1990-92, which had been caused by economic overheating, depressed foreign markets, and the dismantling of the barter system between Finland and the former Soviet Union. Rapidly increasing integration with Western Europe - Finland was one of the 11 countries joining the euro monetary system (EMU) on 1 January 1999 - will dominate the economic picture over the next several years. Growth in 2000 will probably be at the same level as in 1999, enough to continue the decline in unemployment from its current high level.

France:
France's economy combines modern capitalistic methods with extensive, but declining, government intervention. The government retains considerable influence over key segments of each sector, with majority ownership of railway, electricity, aircraft, and telecommunication firms. It has been gradually relaxing its control over these sectors since the early 1990s. The government is slowly selling off holdings in France Telecom, in Air France, and in the insurance, banking, and defense industries. Meanwhile, large tracts of fertile land, the application of modern technology, and subsidies have combined to make France the leading agricultural producer in Western Europe. Persistently high unemployment will continue to pose a major problem for the government; a 35-hour work week is being introduced. France has shied away from cutting exceptionally generous social welfare benefits or the enormous state bureaucracy, preferring to pare defense spending and raise taxes to keep the deficit down. France joined 10 other EU members to launch the euro on 1 January 1999.

French Guiana:
The economy is tied closely to that of France through subsidies and imports. Besides the French space center at Kourou, fishing and forestry are the most important economic activities. The large reserves of tropical hardwoods, not fully exploited, support an expanding sawmill industry which provides sawn logs for export. Cultivation of crops is limited to the coastal area, where the population is largely concentrated; rice and manioc are the major crops. French Guiana is heavily dependent on imports of food and energy. Unemployment is a serious problem, particularly among younger workers.

French Polynesia:
Since 1962, when France stationed military personnel in the region, French Polynesia has changed from a subsistence economy to one in which a high proportion of the work force is either employed by the military or supports the tourist industry. Tourism accounts for about one-fourth of GDP and is a primary source of hard currency earnings. The small manufacturing sector primarily processes agricultural products. The territory benefited from a five-year (1994-98) development agreement with France aimed principally at creating new jobs.

French Southern and Antarctic Lands:
Economic activity is limited to servicing meteorological and geophysical research stations and French and other fishing fleets. The fish catches landed on Iles Kerguelen by foreign ships are exported to France and Reunion.

Gabon:
Gabon enjoys a per capita income four times that of most nations of sub-Saharan Africa. This has supported a sharp decline in extreme poverty; yet because of high income inequality a large proportion of the population remains poor. Gabon depended on timber and manganese until oil was discovered offshore in the early 1970s. The oil sector now accounts for 50% of GDP. Gabon continues to face fluctuating prices for its oil, timber, manganese, and uranium exports. Despite the abundance of natural wealth, the economy is hobbled by poor fiscal management. In 1992, the fiscal deficit widened to 2.4% of GDP, and Gabon failed to settle arrears on its bilateral debt, leading to a cancellation of rescheduling agreements with official and private creditors. Devaluation of its Francophone currency by 50% on 12 January 1994 sparked a one-time inflationary surge, to 35%; the rate dropped to 6% in 1996. The IMF provided a one-year standby arrangement in 1994-95 and a three-year Enhanced Financing Facility (EFF) at near commercial rates beginning in late 1995. Those agreements mandate progress in privatization and fiscal discipline. France provided additional financial support in January 1997 after Gabon had met IMF targets for mid-1996. In 1997, an IMF mission to Gabon criticized the government for overspending on off-budget items, overborrowing from the central bank, and slipping on its schedule for privatization and administrative reform. The rebound of oil prices in 1999 helped growth, but drops in production hampered Gabon from fully realizing potential gains. With support from higher oil prices, growth will move up in 2000-01.

Gambia, The:
The Gambia has no important mineral or other natural resources and has a limited agricultural base. About 75% of the population depends on crops and livestock for its livelihood. Small-scale manufacturing activity features the processing of peanuts, fish, and hides. Reexport trade normally constitutes a major segment of economic activity, but the 50% devaluation of the CFA franc in January 1994 made Senegalese goods more competitive and hurt the reexport trade. The Gambia has benefited from a rebound in tourism after its decline in response to the military's takeover in July 1994. Short-run economic progress remains highly dependent on sustained bilateral and multilateral aid and on responsible government economic management as forwarded by IMF technical help and advice. Annual GDP growth is expected to fall to less than 4% over 2000-01.

Gaza Strip:
Economic conditions in the Gaza Strip - under the responsibility of the Palestinian Authority since the Cairo Agreement of May 1994 - have deteriorated since the early 1990s. Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined 36% between 1992 and 1996 owing to the combined effect of falling aggregate incomes and robust population growth. The downturn in economic activity was largely the result of Israeli closure policies - the imposition of generalized border closures in response to security incidents in Israel - which disrupted previously established labor and commodity market relationships between Israel and the WBGS. The most serious negative social effect of this downturn has been the emergence of chronic unemployment; average unemployment rates in the WBGS during the 1980s were generally under 5%; by the mid-1990s this level had risen to over 20%. Since 1997 Israel's use of comprehensive closures has decreased and, in 1998, Israel implemented new policies to reduce the impact of closures and other security procedures on the movement of Palestinian goods and labor. In October 1999, Israel permitted the opening of a safe passage between the Gaza Strip and the West Bank in accordance with the 1995 Interim Agreement. These changes to the conduct of economic activity have fueled a moderate economic recovery in 1998-99.

Georgia:
Georgia's economy has traditionally revolved around Black Sea tourism; cultivation of citrus fruits, tea, and grapes; mining of manganese and copper; and output of a small industrial sector producing wine, metals, machinery, chemicals, and textiles. The country imports the bulk of its energy needs, including natural gas and oil products. Its only sizable internal energy resource is hydropower. Despite the severe damage the economy has suffered due to civil strife, Georgia, with the help of the IMF and World Bank, made substantial economic gains since 1995, increasing GDP growth and slashing inflation. The Georgian economy continues to experience large budget deficits due to a failure to collect tax revenues. Georgia also still suffers from energy shortages; it privatized the distribution network in 1998, and deliveries are steadily improving. Georgia is pinning its hopes for long-term recovery on the development of an international transportation corridor through the key Black Sea ports of P'ot'i and Bat'umi. The growing trade deficit, continuing problems with tax evasion and corruption, and political uncertainties cloud the short-term economic picture. However, revived investment could spur higher economic growth in 2000, perhaps up to 6%.

Germany:
Germany possesses the world's third most technologically powerful economy after the US and Japan, but its basic capitalistic economy has started to struggle under the burden of generous social benefits. Structural rigidities - like a high rate of social contributions on wages - have made unemployment a long-term, not just cyclical, problem, while Germany's aging population has pushed social security outlays to exceed contributions from workers. The integration and upgrading of the eastern German economy remains a costly long-term problem, with annual transfers from the west amounting to roughly $100 billion. Growth slowed to 1.5% in 1999, largely due to lower export demand and still-low business confidence. Recovering Asian demand, a push for fiscal consolidation, and newly proposed business and income tax cuts - if passed - are expected to boost growth back to trend rates around 2.5% in 2000 and beyond. The adoption of a common European currency and the general political and economic integration of Europe will bring major changes to the German economy in the early 21st century.

Ghana:
Well endowed with natural resources, Ghana has twice the per capita output of the poorer countries in West Africa. Even so, Ghana remains heavily dependent on international financial and technical assistance. Gold, timber, and cocoa production are major sources of foreign exchange. The domestic economy continues to revolve around subsistence agriculture, which accounts for 40% of GDP and employs 60% of the work force, mainly small landholders. In 1995-97, Ghana made mixed progress under a three-year structural adjustment program in cooperation with the IMF. On the minus side, public sector wage increases and regional peacekeeping commitments have led to continued inflationary deficit financing, depreciation of the cedi, and rising public discontent with Ghana's austerity measures. A rebound in gold prices is likely to push growth over 5% in 2000-01.

Gibraltar:
Gibraltar benefits from an extensive shipping trade, offshore banking, and its position as an international conference center. The British military presence has been sharply reduced and now contributes about 11% to the local economy. The financial sector accounts for 20% of GDP; tourism (almost 6 million visitors in 1998), shipping services fees, and duties on consumer goods also generate revenue. In recent years, Gibraltar has seen major structural change from a public to a private sector economy, but changes in government spending still have a major impact on the level of employment.

Glorioso Islands:
no economic activity

Greece:
Greece has a mixed capitalist economy with the public sector accounting for about half of GDP. The government plans to privatize some leading state enterprises. Tourism is a key industry, providing a large portion of GDP and foreign exchange earnings. Greece is a major beneficiary of EU aid, equal to about 4% of GDP. The economy has improved steadily over the last few years, as the government has tightened policy with the goal of qualifying Greece to join the EU's single currency (the euro) in 2001. In particular, Greece has cut its budget deficit below 2% of GDP and tightened monetary policy, with the result that inflation fell below 4% by the end of 1998 - the lowest rate in 26 years - and averaged only 2.6% in 1999. Further restructuring of the economy and the reduction of unemployment remain major challenges.

Greenland:
Greenland suffered negative economic growth in the early 1990s, but since 1993 the economy has improved. The Greenland Home Rule Government (GHRG) has pursued a tight fiscal policy since the late 1980s which has helped create surpluses in the public budget and low inflation. Since 1990, Greenland has registered a foreign trade deficit following the closure of the last remaining lead and zinc mine in 1990. Greenland today is critically dependent on fishing and fish exports; the shrimp fishery is by far the largest income earner. Despite resumption of several interesting hydrocarbon and minerals exploration activities, it will take several years before production can materialize. Tourism is the only sector offering any near-term potential and even this is limited due to a short season and high costs. The public sector, including publicly owned enterprises and the municipalities, plays the dominant role in Greenland's economy. About half the government revenues come from grants from the Danish Government, an important supplement of GDP.

Grenada:
In this island economy progress in fiscal reforms and prudent macroeconomic management have boosted annual growth to 5%-6% in 1998-99. The increase in economic activity has been led by construction and trade. Tourist facilities are being expanded; tourism is the leading foreign exchange earner. Major short-term concerns are the rising fiscal deficit and the deterioration in the external account balance. Grenada shares a common central bank and a common currency with seven other members of the Organization of Eastern Caribbean States (OECS).

Guadeloupe:
The economy depends on agriculture, tourism, light industry, and services. It also depends on France for large subsidies and imports. Tourism is a key industry, with most tourists from the US; an increasingly large number of cruise ships visit the islands. The traditional sugarcane crop is slowly being replaced by other crops, such as bananas (which now supply about 50% of export earnings), eggplant, and flowers. Other vegetables and root crops are cultivated for local consumption, although Guadeloupe is still dependent on imported food, mainly from France. Light industry features sugar and rum production. Most manufactured goods and fuel are imported. Unemployment is especially high among the young. Hurricanes periodically devastate the economy.

Guam:
The economy depends mainly on US military spending and on tourist revenue. Over the past 20 years, the tourist industry has grown rapidly, creating a construction boom for new hotels and the expansion of older ones. More than 1 million tourists visit Guam each year. The industry suffered a setback in 1998 because of the continuing Japanese recession; the Japanese normally make up almost 90% of the tourists. Most food and industrial goods are imported. Guam faces the problem of building up the civilian economic sector to offset the impact of military downsizing.

Guatemala:
The agricultural sector accounts for one-fourth of GDP, two-thirds of exports, and half of the labor force. Coffee, sugar, and bananas are the main products. Manufacturing and construction account for one-fifth of GDP. Since assuming office in January 1996, former President ARZU worked to implement a program of economic liberalization and political modernization. The signing of the peace accords in December 1996, which ended 36 years of civil war, removed a major obstacle to foreign investment. In 1998, Hurricane Mitch caused relatively little damage to Guatemala compared to its neighbors. Remaining challenges include beefing up government revenues, negotiating further assistance from international donors, and increasing the efficiency and openness of both government and private financial operations. Growth should remain at the same level in 2000 provided world agricultural prices do not plunge.

Guernsey:
Financial services - banking, fund management, insurance, etc. - account for about 55% of total income in this tiny Channel Island economy. Tourism, manufacturing, and horticulture, mainly tomatoes and cut flowers, have been declining. Light tax and death duties make Guernsey a popular tax haven. The evolving economic integration of the EU nations is changing the rules of the game under which Guernsey operates.

Guinea:
Guinea possesses major mineral, hydropower, and agricultural resources, yet remains a poor underdeveloped nation. The agricultural sector employs 80% of the work force. Guinea possesses over 25% of the world's bauxite reserves and is the second largest bauxite producer. The mining sector accounted for about 75% of exports in 1998. Long-run improvements in government fiscal arrangements, literacy, and the legal framework are needed if the country is to move out of poverty. The government made encouraging progress in budget management in 1997-99. Even with a recovery in prices for some of Guinea's main commodity exports, annual GDP is unlikely to increase by more than 5% in 2000-2001.

Guinea-Bissau:
One of the 20 poorest countries in the world, Guinea-Bissau depends mainly on farming and fishing. Cashew crops have increased remarkably in recent years, and the country now ranks sixth in cashew production. Guinea-Bissau exports fish and seafood along with small amounts of peanuts, palm kernels, and timber. Rice is the major crop and staple food. However, intermittent fighting between Senegalese-backed government troops and a military junta destroyed much of the country's infrastructure and caused widespread damage to the economy in 1998; the civil war led to a 28% drop in GDP that year, with partial recovery in 1999. Before the war, trade reform and price liberalization were the most successful part of the country's structural adjustment program under IMF sponsorship. The tightening of monetary policy and the development of the private sector had also begun to reinvigorate the economy. Because of high costs, the development of petroleum, phosphate, and other mineral resources is not a near-term prospect. However, unexploited off-shore oil reserves could provide much-needed revenue in the long run.

Guyana:
Severe drought and political turmoil contributed to Guyana's negative growth of -1.8% for 1998 following six straight years of growth of 5% or better. Growth came back to a positive 1.8% in 1999. Underlying growth factors have included expansion in the key agricultural and mining sectors, a more favorable atmosphere for business initiative, a more realistic exchange rate, a moderate inflation rate, and continued support by international organizations. President JAGDEO, the former finance minister, is taking steps to reform the economy, including drafting an investment code and restructuring the inefficient and unresponsive public sector. Problems include a shortage of skilled labor and an inadequate and poorly maintained transportation system. Also, electricity has been in short supply; the privatization of the sector in August 1999 is expected to improve prospects. The government must persist in efforts to manage its sizable external debt and extend its privatization program.