Cuba
The government continues to balance the need for economic
loosening against a desire for firm political control. It has
undertaken limited reforms to increase enterprise efficiency and
alleviate serious shortages of food, consumer goods, and services. A
major feature of the economy is the dichotomy between relatively
efficient export enclaves and inefficient domestic sectors. The
average Cuban's standard of living remains at a lower level than
before the depression of the 1990s, which was caused by the loss of
Soviet aid and domestic inefficiencies. The government reluctantly
allows a large dollar market sector, fueled by tourism and
remittances from Cubans abroad.
Cyprus
The Greek Cypriot economy is prosperous but highly
susceptible to external shocks. Erratic growth rates over the past
decade reflect the economy's vulnerability to swings in tourist
arrivals, caused by political instability in the region and
fluctuations in economic conditions in Western Europe. Economic
policy is focused on meeting the criteria for admission to the EU.
EU-driven tax reforms in 2003 have introduced fiscal imbalances,
which, coupled with a sluggish tourism sector, have resulted in
growing fiscal deficits. As in the Turkish sector, water shortages
are a perennial problem; a few desalination plants are now on-line.
After 10 years of drought, the country received substantial rainfall
from 2001-03, alleviating immediate concerns. The Turkish Cypriot
economy has roughly one-third of the per capita GDP of the south.
Because it is recognized only by Turkey, it has had much difficulty
arranging foreign financing and investment. It remains heavily
dependent on agriculture and government service, which together
employ about half of the work force. To compensate for the economy's
weakness, Turkey provides grants and loans to support economic
development. Ankara provided $200 million in 2002 and pledged $450
million for the 2003-05 period. Future events throughout the island
will be highly influenced by the outcome of negotiations on the
UN-sponsored agreement to unite the Greek and Turkish areas.
Czech Republic
One of the most stable and prosperous of the
post-Communist states, the Czech Republic has been recovering from
recession since mid-1999. Growth in 2000-03 was supported by exports
to the EU, primarily to Germany, and a near doubling of foreign
direct investment. Domestic demand is playing an ever more important
role in underpinning growth as interest rates drop and the
availability of credit cards and mortgages increases. High current
account deficits - averaging around 5% of GDP in the last several
years - could be a persistent problem. Inflation is under control.
The EU put the Czech Republic just behind Poland and Hungary in
preparations for accession, which will give further impetus and
direction to structural reform. Moves to complete banking,
telecommunications, and energy privatization will encourage
additional foreign investment, while intensified restructuring among
large enterprises and banks, and improvements in the financial
sector, should strengthen output growth. Nonetheless, revival in the
European economies remains essential to stepped-up growth.
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,
a stable currency, and high dependence on foreign trade. Denmark is
a net exporter of food and energy and enjoys a comfortable balance
of payments surplus. Government objectives include streamlining the
bureaucracy and further privatization of state assets. The
government has been successful in meeting, and even exceeding, the
economic convergence criteria for participating in the third phase
(a common European currency) of the European Economic and Monetary
Union (EMU), but Denmark has decided not to join 12 other EU members
in the euro; even so, the Danish Krone remains pegged to the euro.
Given the sluggish state of the European economy, growth in 2003 was
a mere 0.3%.
Dhekelia
Economic activity is limited to providing services to the
military and their families located in Dhekelia. All food and
manufactured goods must be imported.
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 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). 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 Dominican economy depends on agriculture, primarily
bananas, and remains highly vulnerable to climatic conditions and
international economic developments. Production of bananas dropped
precipitously in 2003, a major reason for the 1% decline in GDP.
Tourism increased in 2003 as the government sought to promote
Dominica as an "ecotourism" destination. Development of the tourism
industry remains difficult, however, because of the rugged
coastline, lack of beaches, and the absence of an international
airport. The government began a comprehensive restructuring of the
economy in 2003 - including elimination of price controls,
privatization of the state banana company, and tax increases - to
address Dominica's economic crisis and to meet IMF targets. In order
to diversify the island's production base the government is
attempting to develop an offshore financial sector and is planning
to construct an oil refinery on the eastern part of the island.
Dominican Republic
The Dominican Republic is a Caribbean
representative democracy which enjoyed GDP growth of more than 7% in
1998-2000. Growth subsequently plummeted as part of the global
economic slowdown. Although the country has long been viewed
primarily as an exporter of sugar, coffee, and tobacco, in recent
years the service sector has overtaken agriculture as the economy's
largest employer, due to growth in tourism and free trade zones. The
country suffers from marked income inequality; the poorest half of
the population receives less than one-fifth of GNP, while the
richest 10% enjoys nearly 40% of national income. Growth turned
negative in 2003 with reduced tourism, a major bank fraud, and
limited growth in the US economy, the source of 87% of export
revenues. Resumption of a badly needed IMF loan was slowed due to
government repurchase of electrical power plants.
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. Growth
was held back in 2003 by extensive drought and the gradual winding
down of the international presence. The country faces great
challenges in continuing the rebuilding of infrastructure,
strengthening the infant civil administration, and generating jobs
for young people entering the workforce. One promising long-term
project is the planned development of oil and gas resources in
nearby waters, but the government faces a substantial financing gap
over the next several years before these revenues start flowing into
state coffers.
Ecuador
Ecuador has substantial petroleum resources, which have
accounted for 40% of the country's export earnings and one-fourth of
public sector revenues in recent years. Consequently, fluctuations
in world market prices can have a substantial domestic impact. In
the late 1990s, Ecuador suffered its worst economic crisis, with
natural disasters and sharp declines in world petroleum prices
driving Ecuador's economy into free fall in 1999. Real GDP
contracted by more than 6%, with poverty worsening significantly.
The banking system also collapsed, and Ecuador defaulted on its
external debt later that year. The currency depreciated by some 70%
in 1999, and, on the brink of hyperinflation, the MAHAUD government
announced it would dollarize the economy. A coup, however, ousted
MAHAUD from office in January 2000, and after a short-lived junta
failed to garner military support, Vice President Gustavo NOBOA took
over the presidency. In March 2000, Congress approved a series of
structural reforms that also provided the framework for the adoption
of the US dollar as legal tender. Dollarization stabilized the
economy, and growth returned to its pre-crisis levels in the years
that followed. Under the administration of Lucio GUTIERREZ, who took
office in January 2003, Ecuador benefited from higher world
petroleum prices, but the government has made little progress on
fiscal reforms and reforms of state-owned enterprises necessary to
reduce Ecuador's vulnerability to petroleum price swings and
financial crises.