East Timor
In late 1999, about 70% of the economic infrastructure of
East Timor was laid waste by Indonesian troops and anti-independence
militias, and 260,000 people fled westward. Over the next three
years, however, a massive international program, manned by 5,000
peacekeepers (8,000 at peak) and 1,300 police officers, led to
substantial reconstruction in both urban and rural areas. By
mid-2002, all but about 50,000 of the refugees had returned. The
country faces great challenges in continuing the rebuilding of
infrastructure and the strengthening of the infant civil
administration. One promising long-term project is the planned
development of oil resources in nearby waters.
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 (WTrO) in 1996, but has failed to comply with many of
its accession commitments. 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 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.
Gustavo NOBOA, who assumed the presidency in January 2000, has
managed to pass substantial economic reforms and mend relations with
international financial institutions. Ecuador completed its first
standby agreement since 1986 when the IMF Board approved a 10
December 2001 disbursement of $96 million, the final installment of
a $300 million standby credit agreement. In February 2003, newly
installed president Lucio GUTIERREZ faced a budget gap and massive
foreign debt. He has pledged to use oil revenues to pay off debt and
is seeking additional IMF support.
Egypt
Egypt improved its macroeconomic performance throughout most
of the last decade by following IMF advice on fiscal, monetary, and
structural reform policies. As a result, Egypt managed to tame
inflation, slash budget deficits, and attract more foreign
investment. In the past four years, however, the pace of reform has
slackened, and excessive spending on national infrastructure
projects has widened budget deficits again. Lower foreign exchange
earnings since 1998 resulted in pressure on the Egyptian pound and
periodic dollar shortages. Monetary pressures have increased since
11 September 2001 because of declines in tourism and Suez Canal
tolls, and Egypt has devalued the pound several times in the past
year. The development of a gas export market is a major bright spot
for future growth prospects. In the short term, regional tensions
will continue to affect tourism and hold back prospects for economic
expansion.
El Salvador
In recent years, this Central American economy has been
suffering from a weak tax collection system, factory closings, the
aftermaths of Hurricane Mitch of 1998 and the devastating
earthquakes of early 2001, and weak world coffee prices. On the
bright side, inflation has fallen to single digit levels, and total
exports have grown substantially. The trade deficit has been offset
by annual remittances of almost $2 billion from Salvadorans living
abroad and by external aid. The US dollar is now the legal tender.
Because competitor countries have fluctuating exchange rates, El
Salvador must face the challenge of raising productivity and
lowering costs.
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 neglect of the rural economy under successive regimes
has diminished potential for agriculture-led growth (the government
has stated its intention to reinvest some oil revenue into
agriculture). A number of aid programs sponsored by the World Bank
and the IMF have been cut off since 1993 because of corruption and
mismanagement. No longer eligible for concessional financing because
of large oil revenues, the government has been unsuccessfully trying
to agree on a "shadow" fiscal management program with the World Bank
and IMF. 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.
Growth will remain strong in 2003, led by oil.
Eritrea
Since independence from Ethiopia on 24 May 1993, Eritrea has
faced the economic problems of a small, desperately poor country.
Like the economies of many African nations, the economy is largely
based on subsistence agriculture, with 80% of the population
involved in farming and herding. The Ethiopian-Eritrea war in
1998-2000 severely hurt Eritrea's economy. GDP growth fell to zero
in 1999 and to -1% in 2000. The May 2000 Ethiopian offensive into
northern Eritrea caused some $600 million in property damage and
loss, including losses of $225 million in livestock and 55,000
homes. The attack prevented planting of crops in Eritrea's most
productive region, causing food production to drop by 62%. Even
during the war, Eritrea developed its transportation infrastructure,
asphalting new roads, improving its ports, and repairing war damaged
roads and bridges. Since the war ended, the government has
maintained a firm grip on the economy, expanding the use of the
military and party-owned businesses to complete Eritrea's
development agenda. Erratic rainfall and the delayed demobilization
of agriculturalists from the military kept cereal production well
below normal, holding down growth in 2002. Eritrea's economic future
depends upon its ability to master social problems such as
illiteracy, unemployment, and low skills, and to open its economy to
private enterprise so the diaspora's money and expertise can foster
economic growth.
Estonia
Estonia, as a new member of the World Trade Organization, is
steadily moving toward a modern market economy with increasing ties
to the West, including the pegging of its currency to the euro. The
economy benefits from strong electronics and telecoms sectors. A
major goal is accession to the EU, possibly by 2004. The economy is
greatly influenced by developments in Finland, Sweden, and Germany,
three major trading partners. The high current account deficit
remains a concern.
Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, which accounts for half of GDP, 85% of exports, and 80%
of total employment. The agricultural sector suffers from frequent
drought and poor cultivation practices. Coffee is critical to the
Ethiopian economy with exports of some $270 million in 2000/01, but
historically low prices have seen many farmers switching to qat to
supplement their income. The war with Eritrea in 1999-2000 and
recurrent drought have buffeted the economy, in particular coffee
production. In November 2001 Ethiopia qualified for debt relief from
the Highly Indebted Poor Countries (HIPC) initiative. Under
Ethiopia's land tenure system, the government owns all land and
provides long-term leases to the tenants; the system continues to
hamper growth in the industrial sector as entrepreneurs are unable
to use land as collateral for loans. Strong growth in 2002 resulted
from good rainfall early in the year, the cessation of hostilities,
and renewed foreign aid and debt relief. But drought struck again
late in 2002, and the World Food Program (WFP) estimates 14 million
Ethiopians need food immediately to survive into 2003. The
government estimates than annual growth of 7% is needed to reduce
poverty, yet the maintenance of 5% in 2003 will be quite difficult
(one estimate is for 1.5% growth).
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. 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. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.