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. Foreign investors remain attracted by the
country's political stability and high education levels, and tourism
continues to bring in foreign exchange. Low prices for coffee and
bananas have hurt the agricultural sector. The government continues
to grapple with its large deficit and massive internal debt. The
reduction of inflation remains a difficult problem because of rises
in the price of imports, labor market rigidities, and fiscal
deficits. The country also needs to reform its tax system and its
pattern of public expenditure. Costa Rica recently concluded
negotiations to participate in the US-Central American Free Trade
Agreement, which, if ratified by the Costa Rican Legislature, would
result in economic reforms and an improved investment climate.
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 weather conditions. Despite government
attempts to diversify the economy, it is still heavily dependent on
agriculture and related activities, engaging roughly 68% of the
population. After several years of lagging performance, the Ivorian
economy began a comeback in 1994, due to the 50% 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. Moreover, government adherence
to donor-mandated reforms led to a jump to 5% annual growth during
1996-99. Growth was negative in 2000-03 because of the difficulty of
meeting the conditions of international donors, continued low prices
of key exports, and severe civil war. In November 2004 the situation
deteriorated when President GBAGBO's troops attacked and killed nine
French peacekeeping forces, and the UN imposed an arms embargo.
Political uncertainty has clouded the economic outlook for 2005,
with fear among Ivorians spreading, foreign investment shriveling,
businessmen fleeing, travel within the country falling, and criminal
elements that traffic in weapons and diamonds gaining ground.
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. The economy emerged from a mild recession in 2000 with
tourism, banking, and public investments leading the way.
Unemployment remains high, at about 14 percent, with structural
factors slowing its decline. While macroeconomic stabilization has
largely been achieved, structural reforms lag because of deep
resistance on the part of the public and lack of strong support from
politicians. Growth, while impressively about 4% for the last
several years, has been achieved through high fiscal and current
account deficits. The government is gradually reducing a heavy back
log of civil cases, many involving land tenure. The EU accession
process should accelerate fiscal and structural reform.
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 in 2004
strengthened its controls over dollars coming into the economy from
tourism, remittances, and trade.
Cyprus
The Greek Cypriot economy is prosperous but highly
susceptible to external shocks. The service sector, mainly tourism
and financial services, dominates the economy; erratic growth rates
over the past decade reflect the economy's reliance on tourism,
which often fluctuates with political instability in the region and
economic conditions in Western Europe. Economic policy is focused on
meeting the criteria to join the European Exchange Rate Mechanism
(ERM2) within the next two years although sluggish tourism and poor
fiscal management have resulted in growing budget deficits since
2001. 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, and economic
growth tends to be volatile, given north Cyprus's relative
isolation, bloated public sector, reliance on the Turkish lira, and
small market size. The Turkish Cypriot economy grew 2.6% in 2004,
fueled by growth in the construction and education sectors as well
as increased employment of Turkish Cypriots in the Republic of
Cyprus. The Turkish Cypriots are heavily dependent on transfers from
the Turkish government. Ankara provides around $300 million a year
directly into the "TRNC" budget and regularly provides additional
financing for large infrastructure projects. Agriculture and
government service, together employ almost half of the work force,
and the potential for tourism is promising, especially with the
easing of border restrictions with the Greek Cypriots in April 2003.
Czech Republic
The Czech Republic is one of the most stable and
prosperous of the post-Communist states of Central and Eastern
Europe. Growth in 2000-04 was supported by exports to the EU,
primarily to Germany, and a strong recovery of foreign and domestic
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. Current account deficits of
around 5% of GDP are beginning to decline as demand for Czech
products in the European Union increases. Inflation is under
control. Recent accession to the EU gives further impetus and
direction to structural reform. In early 2004 the government passed
increases in the Value Added Tax (VAT) and tightened eligibility for
social benefits with the intention to bring the public finance gap
down to 4% of GDP by 2006, but more difficult pension and healthcare
reforms will have to wait until after the next elections.
Privatization of the state-owned telecommunications firm Cesky
Telecom is scheduled to take place in 2005. Intensified
restructuring among large enterprises, improvements in the financial
sector, and effective use of available EU funds should strengthen
output 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.
Growth in 2004 was sluggish, yet above the scanty 0.3% of 2003.
Because of high GDP per capita, welfare benefits, a low Gini index,
and political stability, the Danish people enjoy living standards
topped by no other nation. A major long-term issue will be the sharp
decline in the ratio of workers to retirees.
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 are 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.
Djibouti 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 at least 50% continues to be a major
problem. While inflation is not a concern, due to the fixed tie of
the Djiboutian franc to the US dollar, the artificially high value
of the Djiboutian franc adversely affects Djibouti's balance of
payments. 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.