Honduras
Honduras, one of the poorest countries in the Western
Hemisphere with an extraordinarily unequal distribution of income
and massive unemployment, is banking on expanded trade under the
U.S.-Central America Free Trade Agreement (CAFTA) and on debt relief
under the Heavily Indebted Poor Countries (HIPC) initiative. The
country has met most of its macroeconomic targets, and began a
three-year IMF Poverty Reduction and Growth Facility (PGRF) program
in February 2004. Growth remains dependent on the economy of the US,
its largest trading partner, on commodity prices, particularly
coffee, and on reduction of the high crime rate.
Hong Kong
Hong Kong has a free market, entrepot economy, highly
dependent on international trade. Natural resources are limited, and
food and raw materials must be imported. Gross imports and exports
(i.e., including reexports to and from third countries) each exceed
GDP in dollar value. Even before Hong Kong reverted to Chinese
administration on 1 July 1997, it had extensive trade and investment
ties with China. Hong Kong has been further integrating its economy
with China because China's growing openness to the world economy has
made manufacturing in China much more cost effective. Hong Kong's
reexport business to and from China is a major driver of growth. Per
capita GDP is comparable to that of the four big economies of
Western Europe. GDP growth averaged a strong 5% from 1989 to 1997,
but Hong Kong suffered two recessions in the past six years because
of the Asian financial crisis in 1998 and the global downturn in
2001 and 2002. Although the Severe Acute Respiratory Syndrome (SARS)
outbreak also battered Hong Kong's economy, a boom in tourism from
the mainland because of China's easing of travel restrictions, a
return of consumer confidence, and a solid rise in exports resulted
in the resumption of strong growth in late 2003 and in 2004.
Howland Island
no economic activity
Hungary
Hungary has made the transition from a centrally planned to
a market economy, with a per capita income one-half that of the Big
Four European nations. Hungary continues to demonstrate strong
economic growth and acceded to the European Union in May 2004. The
private sector accounts for over 80% of GDP. Foreign ownership of
and investment in Hungarian firms are widespread, with cumulative
foreign direct investment totaling more than $23 billion since 1989.
Hungarian sovereign debt was upgraded in 2000 and together with the
Czech Republic holds the highest rating among the Central European
transition economies; however, ratings agencies have expressed
concerns over Hungary's unsustainable budget and current account
deficits. Inflation has declined from 14% in 1998 to 7% in 2004.
Unemployment has persisted around the 6% level, but Hungary's labor
force participation rate of 57% is one of the lowest in the OECD.
Germany is by far Hungary's largest economic partner. Policy
challenges include cutting the public sector deficit to 3% of GDP by
2008, from about 5% in 2004, and orchestrating an orderly interest
rate reduction without sparking capital outflows.
Iceland
Iceland's Scandinavian-type economy is basically
capitalistic, yet with an extensive welfare system (including
generous housing subsidies), low unemployment, and remarkably even
distribution of income. In the absence of other natural resources
(except for abundant geothermal power), the economy depends heavily
on the fishing industry, which provides 70% of export earnings and
employs 8% of the work force. The economy remains sensitive to
declining fish stocks as well as to fluctuations in world prices for
its main exports: fish and fish products, aluminum, and
ferrosilicon. Government policies include reducing the budget and
current account deficits, limiting foreign borrowing, containing
inflation, revising agricultural and fishing policies, diversifying
the economy, and privatizing state-owned industries. The government
remains opposed to EU membership, primarily because of Icelanders'
concern about losing control over their fishing resources. Iceland's
economy has been diversifying into manufacturing and service
industries in the last decade, and new developments in software
production, biotechnology, and financial services are taking place.
The tourism sector is also expanding, with the recent trends in
ecotourism and whale watching. Growth had been remarkably steady in
1996-2001 at 3%-5%, but could not be sustained in 2002 in an
environment of global recession. Growth resumed in 2003, and
estimates call for strong growth until 2007, slowly dropping until
the end of the decade.
India
India's diverse economy encompasses traditional village
farming, modern agriculture, handicrafts, a wide range of modern
industries, and a multitude of services. Services are the major
source of economic growth, though two-thirds of the workforce is in
agriculture. The UPA government has committed to furthering economic
reforms and developing basic infrastructure to improve the lives of
the rural poor and boost economic performance. Government controls
on foreign trade and investment have been reduced in some areas, but
high tariffs (averaging 20% in 2004) and limits on foreign direct
investment are still in place. The government has indicated it will
do more to liberalize investment in civil aviation, telecom, and
insurance sectors in the near term. Privatization of
government-owned industries has proceeded slowly, and continues to
generate political debate; continued social, political, and economic
rigidities hold back needed initiatives. The economy has posted an
excellent average growth rate of 6.8% since 1994, reducing poverty
by about 10 percentage points. India is capitalizing on its large
numbers of well-educated people skilled in the English language to
become a major exporter of software services and software workers.
Despite strong growth, the World Bank and others worry about the
combined state and federal budget deficit, running at approximately
9% of GDP. The huge and growing population is the fundamental
social, economic, and environmental problem. In late December 2004,
a major tsunami took nearly 11,000 lives, left almost 6,000 missing,
destroyed $1.2 billion worth of property, and severely damaged the
fishing fleet.
Indian Ocean
The Indian Ocean provides major sea routes connecting
the Middle East, Africa, and East Asia with Europe and the Americas.
It carries a particularly heavy traffic of petroleum and petroleum
products from the oilfields of the Persian Gulf and Indonesia. Its
fish are of great and growing importance to the bordering countries
for domestic consumption and export. Fishing fleets from Russia,
Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainly
for shrimp and tuna. Large reserves of hydrocarbons are being tapped
in the offshore areas of Saudi Arabia, Iran, India, and western
Australia. An estimated 40% of the world's offshore oil production
comes from the Indian Ocean. Beach sands rich in heavy minerals and
offshore placer deposits are actively exploited by bordering
countries, particularly India, South Africa, Indonesia, Sri Lanka,
and Thailand.
Indonesia
Indonesia, a vast polyglot nation, has restored financial
stability and pursued sober fiscal policies since the Asian
financial crisis, but many economic development problems remain,
including high unemployment, a fragile banking sector, endemic
corruption, inadequate infrastructure, a poor investment climate,
and unequal resource distribution among regions. Indonesia became a
net oil importer in 2004 due to declining production and lack of new
exploration investment. As a result, Jakarta is not reaping the
benefits of high world oil prices, and the cost of subsidizing
domestic fuel prices has placed an increasing strain on the budget.
Keys to future growth remain internal reform, building up the
confidence of international and domestic investors, and strong
global economic growth. In late December 2004, a major tsunami took
nearly 127,000 lives, left more than 93,000 missing and nearly
441,000 displaced, and destroyed $4.5 to $5.0 billion worth of
property.
Iran
Iran's economy is marked by a bloated, inefficient state
sector, over reliance on the oil sector, and statist policies that
create major distortions throughout. Most economic activity is
controlled by the state. Private sector activity is typically
small-scale - workshops, farming, and services. President KHATAMI
has continued to follow the market reform plans of former President
RAFSANJANI, with limited progress. Relatively high oil prices in
recent years have enabled Iran to amass some $30 billion in foreign
exchange reserves, but have not eased economic hardships such as
high unemployment and inflation. The proportion of the economy
devoted to the development of weapons of mass destruction remains a
contentious issue with leading Western nations.
Iraq
Iraq's economy is dominated by the oil sector, which has
traditionally provided about 95% of foreign exchange earnings.
Iraq's seizure of Kuwait in August 1990, subsequent international
economic sanctions, and damage from military action by an
international coalition beginning in January 1991 drastically
reduced economic activity. Although government policies supporting
large military and internal security forces and allocating resources
to key supporters of the regime hurt the economy, implementation of
the UN's oil-for-food program beginning in December 1996 helped
improve conditions for the average Iraqi citizen. Iraq was allowed
to export limited amounts of oil in exchange for food, medicine, and
some infrastructure spare parts. In December 1999, the UN Security
Council authorized Iraq to export under the program as much oil as
required to meet humanitarian needs. The drop in GDP in 2001-02 was
largely the result of the global economic slowdown and lower oil
prices. Per capita food imports increased significantly, while
medical supplies and health care services steadily improved. Per
capita output and living standards were still well below the
pre-1991 level, but any estimates have a wide range of error. The
military victory of the US-led coalition in March-April 2003
resulted in the shutdown of much of the central economic
administrative structure. Although a comparatively small amount of
capital plant was damaged during the hostilities, looting, insurgent
attacks, and sabotage have undermined efforts to rebuild the
economy. Despite continuing political uncertainty, the Iraqi Interim
Government (IG) has founded the institutions needed to implement
economic policy, and has successfully concluded a debt reduction
agreement with the Paris Club. The high percentage gain estimated
for GDP in 2004 is the result of starting from a low base.