Egypt
Lack of substantial progress on economic reform since the mid
1990s has limited foreign direct investment in Egypt and kept annual
GDP growth in the range of 2-3 percent in 2001-03. Egyptian
officials in late 2003 and early 2004 proposed new privatization and
customs reform measures, but the government is likely to pursue
these initiatives cautiously and gradually to avoid a public
backlash over potential inflation or layoffs associated with the
reforms. Monetary pressures on an overvalued Egyptian pound led the
government to float the currency in January 2003, leading to a sharp
drop in its value and consequent inflationary pressure. The
existence of a black market for hard currency is evidence that the
government continues to influence the official exchange rate offered
in banks. In September 2003, Egyptian officials increased subsidies
on basic foodstuffs, helping to calm a frustrated public but
widening an already deep budget deficit. Egypt's balance-of-payments
position was not hurt by the war in Iraq in 2003, as tourism and
Suez Canal revenues fared well. The development of an export market
for natural gas is a bright spot for future growth prospects, but
improvement in the capital-intensive hydrocarbons sector does little
to reduce Egypt's persistent unemployment.
El Salvador
With the adoption of the US dollar as its currency, El
Salvador has lost control over monetary policy and must concentrate
on maintaining a disciplined fiscal policy. GDP per capita is
roughly only half that of Brazil, Argentina, and Chile, and the
distribution of income is highly unequal. The trade deficit has been
offset by annual remittances of almost $2 billion from Salvadorans
living abroad and external aid. The government is striving to open
new export markets, encourage foreign investment, modernize the tax
and healthcare systems, and stimulate the sluggish economy.
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 2004, 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 -12.1% 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 telecommunications
sectors. Estonia has been invited to join the European Union and
will do so in May 2004. The economy is greatly influenced by
developments in Finland, Sweden, Russia, and Germany, four major
trading partners. The high current account deficit remains a
concern. However, the state budget enjoyed a surplus of $130 million
in 2003.
Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, which accounts for half of GDP, 60% 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 $156 million in 2002, but
historically low prices have seen many farmers switching to qat to
supplement income. The war with Eritrea in 1998-2000 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. Drought struck again late in 2002, leading to
a 2% decline in GDP in 2003. Return to normal weather patterns late
in 2003 should help agricultural and GDP growth recover in 2004. The
government estimates that annual growth of 7% is needed to reduce
poverty.
Europa Island
no economic activity
European Union
Domestically, the European Union attempts to lower
trade barriers, adopt a common currency, and move toward convergence
of living standards. Internationally, the EU aims to bolster
Europe's trade position and its political and economic power.
Because of the great differences in per capita income (from $10,000
to $28,000) and historic national animosities, the European
Community faces difficulties in devising and enforcing common
policies. For example, both Germany and France since 2003 have
flouted the member states' treaty obligation to prevent their
national budgets from running more than a 3% deficit. In 2004, the
EU admitted 10 central and eastern European countries that are, in
general, less advanced technologically and economically than the
existing 15. The Economic and Monetary Union (EMU), an associated
organization, introduced the euro as the common currency on 1
January 1999. The UK, Sweden, and Denmark do not now participate;
the 10 new countries may choose to join the EMU when they meet its
fiscal and monetary criteria and the member states so agree.
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.
Faroe Islands
The Faroese economy has had a strong performance since
1994, mostly as a result of increasing fish landings and high and
stable export prices. Unemployment is falling and there are signs of
labor shortages in several sectors. The positive economic
development has helped the Faroese Home Rule Government produce
increasing budget surpluses, which in turn help to reduce the large
public debt, most of it owed to Denmark. However, the total
dependence on fishing makes the Faroese economy extremely
vulnerable, and the present fishing efforts appear in excess of what
is a sustainable level of fishing in the long term. Oil finds close
to the Faroese area give hope for deposits in the immediate Faroese
area, which may eventually lay the basis for a more diversified
economy and thus lessen dependence on Danish economic assistance.
Aided by a substantial annual subsidy (15% of GDP) from Denmark, the
Faroese have a standard of living not far below the Danes and other
Scandinavians.