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 2000-05 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. The current account deficit
has declined to around 3% of GDP as demand for Czech products in the
European Union has increased. 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 took 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. Nonetheless, the Danish krone remains pegged to the
euro. Economic growth gained momentum in 2004 and the upturn
accelerated through 2005. 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.
Dominican Republic
The Dominican Republic is a Caribbean
representative democracy that enjoyed strong GDP growth until 2003.
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. Growth turned negative in
2003 with reduced tourism, a major bank fraud, and limited growth in
the US economy (the source of about 80% of export revenues), but
recovered in 2004 and 2005. With the help of strict fiscal targets
agreed in the 2004 renegotiation of an IMF standby loan, President
FERNANDEZ has stabilized the country's financial situation. Although
the economy continues to grow at a respectable rate, unemployment
remains an important challenge. 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. The Dominican Republic's development prospects
improved with the ratification of the Central America-Dominican
Republic Free Trade Agreement (CAFTA-DR) in September 2005.
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 the end
of 2005, all refugees either returned or resettled in Indonesia.
Non-petroleum GDP growth was held back in 2003 by extensive drought
and the gradual winding down of the international presence but
recovered somewhat in 2004. The country faces great challenges in
continuing the rebuilding of infrastructure, strengthening the
infant civil administration, and generating jobs for young people
entering the work force. The development of oil and gas resources in
nearby waters has begun to supplement government revenues ahead of
schedule and above expectations - the result of high petroleum
prices - but the technology-intensive industry does little to create
jobs for the unemployed, because there are no production facilities
in Timor and the gas is piped to Australia. The parliament in June
2005 unanimously approved the creation of a Petroleum Fund to serve
as a repository for all petroleum revenues and preserve the value of
East Timor's petroleum wealth for future generations.
Ecuador
Ecuador has substantial petroleum resources, which have
accounted for 40% of the country's export earnings and one-third 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. However, the government under Alfredo PALACIO has reversed
economic reforms that reduced Ecuador's vulnerability to petroleum
price swings and financial crises, allowing the central government
greater access to oil windfalls and disbursing surplus retirement
funds.
Egypt
Occupying the northeast corner of the African continent, Egypt
is bisected by the highly fertile Nile valley, where most economic
activity takes place. In the last 30 years, the government has
reformed the highly centralized economy it inherited from President
NASSER. In 2005, Prime Minister Ahmed NAZIF reduced personal and
corporate tax rates, reduced energy subsidies, and privatized
several enterprises. The stock market boomed, and GDP grew nearly
5%. Despite these achievements, the government has failed to raise
living standards for the average Egyptian, and has had to continue
providing subsidies for basic necessities. The subsidies have
contributed to a growing budget deficit - more than 8% of GDP in
2005 - and represent a significant drain on the economy. Foreign
direct investment remains low. To achieve higher GDP growth the
NAZIF government will need to continue its aggressive pursuit of
reform, especially in the energy sector. Egypt's export sectors -
particularly natural gas - have bright prospects.
El Salvador
The smallest country in Central America, El Salvador has
the third largest economy, but growth has been minimal in recent
years. Hoping to stimulate the sluggish economy, the government is
striving to open new export markets, encourage foreign investment,
and modernize the tax and healthcare systems. Implementation in 2006
of the Central America-Dominican Republic Free Trade Agreement,
which El Salvador was the first to ratify, is viewed as a key policy
to help achieve these objectives. The trade deficit has been offset
by annual remittances from Salvadorans living abroad - 16.6% of GDP
in 2005 - and external aid. With the adoption of the US dollar as
its currency in 2001, El Salvador has lost control over monetary
policy and must concentrate on maintaining a disciplined fiscal
policy.