Palmyra Atoll
no economic activity
Panama
Panama's dollarised economy rests primarily on a
well-developed services sector that accounts for four-fifths of GDP.
Services include operating the Panama Canal, banking, the Colon Free
Zone, insurance, container ports, flagship registry, and tourism. A
slump in Colon Free Zone and agricultural exports, the global
slowdown, and the withdrawal of US military forces held back
economic growth in 2000-03; growth picked up in 2004 led by
export-oriented services and a construction boom stimulated by tax
incentives. The government has been backing tax reforms, reform of
the social security program, new regional trade agreements, and
development of tourism. Unemployment remains high.
Papua New Guinea
Papua New Guinea is richly endowed with natural
resources, but exploitation has been hampered by rugged terrain and
the high cost of developing infrastructure. Agriculture provides a
subsistence livelihood for 85% of the population. Mineral deposits,
including oil, copper, and gold, account for 72% of export earnings.
The economy has improved over the past two years, following a
prolonged period of instability. Former Prime Minister Mekere
MORAUTA had tried to restore integrity to state institutions, to
stabilize the kina, restore stability to the national budget, to
privatize public enterprises where appropriate, and to ensure
ongoing peace on Bougainville. Australia annually supplies $240
million in aid, which accounts for 20% of the national budget.
Challenges face Prime Minister Michael SOMARE, including gaining
further investor confidence, continuing efforts to privatize
government assets, maintaining the support of members of Parliament,
and balancing relations with Australia, the former colonial ruler.
Paracel Islands
China announced plans in 1997 to open the islands
for tourism.
Paraguay
Landlocked Paraguay has a market economy marked by a large
informal sector. This sector features both reexport of imported
consumer goods to neighboring countries as well as the activities of
thousands of microenterprises and urban street vendors. Because of
the importance of the informal sector, accurate economic measures
are difficult to obtain. A large percentage of the population
derives their living from agricultural activity, often on a
subsistence basis. The formal economy grew by an average of about 3%
annually in 1995-97, but averaged near-zero growth in 1998-2001 and
contracted by 2.3 percent in 2002, in response to regional contagion
and an outbreak of hoof-and-mouth desease. On a per capita basis,
real income has stagnated at 1980 levels. Most observers attribute
Paraguay's poor economic performance to political uncertainty,
corruption, lack of progress on structural reform, substantial
internal and external debt, and deficient infrastructure. Aided by a
firmer exchange rate and perhaps a greater confidence in the
economic policy of the Duarte FRUTOS administration, the economy
rebounded in 2003 and 2004, posting modest growth each year.
Peru
Peru's economy reflects its varied geography - an arid coastal
region, the Andes further inland, and tropical lands bordering
Colombia and Brazil. Abundant mineral resources are found in the
mountainous areas, and Peru's coastal waters provide excellent
fishing grounds. However, overdependence on minerals and metals
subjects the economy to fluctuations in world prices, and a lack of
infrastructure deters trade and investment. After several years of
inconsistent economic performance, the Peruvian economy grew by an
average 4 percent per year during the period 2002-2004, with a
stable exchange rate and low inflation. Risk premiums on Peruvian
bonds on secondary markets reached historically low levels in late
2004, reflecting investor optimism regarding the government's
prudent fiscal policies and openness to trade and investment.
Despite the strong macroeconomic performance, the TOLEDO
administration remained unpopular in 2004, and unemployment and
poverty have stayed persistently high.
Philippines
The Philippines was less severely affected by the Asian
financial crisis of 1998 than its neighbors, aided in part by annual
remittances of $7-8 billion from overseas workers and no sustained
runup in asset prices or foreign borrowing prior to the crisis. From
a 0.6% decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in
2000, but slowed to 3.2% in 2001 in the context of a global economic
slowdown, an export slump, and political and security concerns. GDP
growth accelerated to 4.3% in 2002, 4.7% in 2003, and about 6% in
2004, reflecting the continued resilience of the service sector, and
improved exports and agricultural output. Nonetheless, it will take
a higher, sustained growth path to make appreciable progress in
poverty alleviation given the Philippines' high annual population
growth rate and unequal distribution of income. The Philippines also
faces higher oil prices, higher interest rates on its dollar
borrowings, and higher inflation. Fiscal constraints limit Manila's
ability to finance infrastructure and social spending. The
Philippines' consistently large budget deficit has produced a high
debt level and has forced Manila to spend a large portion of the
national government budget on debt service. Large, unprofitable
public enterprises, especially in the energy sector, contribute to
the government's debt because of slow progress on privatization.
Credit rating agencies are increasingly concerned about the
Philippines' ability to sustain the debt; legislative progress on
new revenue measures will weigh heavily on credit rating decisions.
Pitcairn Islands
The inhabitants of this tiny isolated economy exist
on fishing, subsistence farming, handicrafts, and postage stamps.
The fertile soil of the valleys produces a wide variety of fruits
and vegetables, including citrus, sugarcane, watermelons, bananas,
yams, and beans. Bartering is an important part of the economy. The
major sources of revenue are the sale of postage stamps to
collectors and the sale of handicrafts to passing ships. In October
2004, more than one-quarter of Pitcairn's labor force was arrested,
putting the economy in a bind, since their services were required as
lighter crew to load or unload passing ships.
Poland
Poland has steadfastly pursued a policy of economic
liberalization throughout the 1990s and today stands out as a
success story among transition economies. Even so, much remains to
be done, especially in bringing down unemployment. The privatization
of small and medium-sized state-owned companies and a liberal law on
establishing new firms has encouraged the development of the private
business sector, but legal and bureaucratic obstacles alongside
persistent corruption are hampering its further development.
Poland's agricultural sector remains handicapped by surplus labor,
inefficient small farms, and lack of investment. Restructuring and
privatization of "sensitive sectors" (e.g., coal, steel, railroads,
and energy), while recently initiated, have stalled. Reforms in
health care, education, the pension system, and state administration
have resulted in larger-than-expected fiscal pressures. Further
progress in public finance depends mainly on reducing losses in
Polish state enterprises, restraining entitlements, and overhauling
the tax code to incorporate the growing gray economy and farmers,
most of whom pay no tax. The government has introduced a package of
social and administrative spending cuts to reduce public spending by
about $17 billion through 2007. Additional reductions are under
discussion in the legislature but could be trumped by election-year
politics in 2005. Poland joined the EU in May 2004, and surging
exports to the EU contributed to Poland's strong growth in 2004,
though its competitiveness could be threatened by the zloty's
appreciation. GDP per capita roughly equals that of the three Baltic
states. Poland stands to benefit from nearly $13.5 billion in EU
funds, available through 2006. Farmers have already begun to reap
the rewards of membership via higher food prices and EU agricultural
subsidies.
Portugal
Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past decade, successive governments have privatized many
state-controlled firms and liberalized key areas of the economy,
including the financial and telecommunications sectors. The country
qualified for the European Monetary Union (EMU) in 1998 and began
circulating the euro on 1 January 2002 along with 11 other EU member
economies. Economic growth had been above the EU average for much of
the past decade, but fell back in 2001-04. GDP per capita stands at
two-thirds that of the Big Four EU economies. A poor educational
system, in particular, has been an obstacle to greater productivity
and growth. Portugal has been increasingly overshadowed by
lower-cost producers in Central Europe and Asia as a target for
foreign direct investment. The government faces tough choices in its
attempts to boost Portugal's economic competitiveness while keeping
the budget deficit within the eurozone's 3%-of-GDP ceiling.