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 about 85% of export
revenues), but recovered slightly in 2004. Resumption of a badly
needed IMF loan, slowed due to government repurchase of electrical
power plants, is basic to the restoration of social and economic
stability. Newly elected President FERNANDEZ in mid-2004 promised
belt-tightening reform. His administration has passed tax reform and
is working to meet preconditions for a $600 IMF standby arrangement
to ease the country's fiscal situation.
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 300,000 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 2003,
all but about 30,000 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, which
have begun to supplement government revenues ahead of schedule.
Ecuador
Ecuador has substantial petroleum resources, which have
accounted for 40% of the country's export earnings and one-fourth of
central government budget 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 - January
2003 to April 2005 - Ecuador benefited from higher world petroleum
prices, but the government has made little progress on economic
reforms necessary to reduce Ecuador's vulnerability to petroleum
price swings and financial crises.
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% in 2001-03. However, in 2004 Egypt
implemented several measures to boost foreign direct investment. In
September 2004, Egypt pushed through custom reforms, proposed income
and corporate tax reforms, reduced energy subsidies, and privatized
several enterprises. The budget deficit rose to an estimated 8% of
GDP in 2004 compared to 6.1% of GDP the previous year, in part as a
result of these 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. In 2004, the Central Bank implemented
measures to improve currency liquidity. Egypt reached record tourism
levels, despite the Taba and Nuweiba bombings in September 2004. 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
GDP per capita is roughly half that of Brazil,
Argentina, and Chile, and the distribution of income is highly
unequal. The government is striving to open new export markets,
encourage foreign investment, modernize the tax and healthcare
systems, and stimulate the sluggish economy. Implementation of the
Central America-Dominican Republic Free Trade Agreement, ratified by
El Salvador in 2004, is viewed as a key policy to help achieve these
objectives. The trade deficit has been offset by annual remittances
from Salvadorans living abroad - 16% of GDP in 2004 - and external
aid. 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.
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 presumably remained 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 2002-04. 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 and
the European Union, has transitioned effectively to a modern market
economy with strong ties to the West, including the pegging of its
currency to the euro. The economy benefits from strong electronics
and telecommunications sectors and is greatly influenced by
developments in Finland, Sweden, and Germany, three major trading
partners. The current account deficit remains high; however, the
state budget enjoyed a surplus of $130 million in 2003.
Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, accounting 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. Normal weather patterns late in 2003
helped agricultural and GDP growth recover in 2004.
Europa Island
no economic activity