France
France is in the midst of transition from a well-to-do modern
economy that has featured extensive government ownership and
intervention to one that relies more on market mechanisms. The
government has partially or fully privatized many large companies,
banks, and insurers. It retains controlling stakes in several
leading firms, including Air France, France Telecom, Renault, and
Thales, and is dominant in some sectors, particularly power, public
transport, and defense industries. The telecommunications sector is
gradually being opened to competition. France's leaders remain
committed to a capitalism in which they maintain social equity by
means of laws, tax policies, and social spending that reduce income
disparity and the impact of free markets on public health and
welfare. The government has lowered income taxes and introduced
measures to boost employment and reform the pension system. In
addition, it is focusing on the problems of the high cost of labor
and labor market inflexibility resulting from the 35-hour workweek
and restrictions on lay-offs. The tax burden remains one of the
highest in Europe (nearly 50% of GDP in 2005). The lingering
economic slowdown and inflexible budget items have pushed the budget
deficit above the eurozone's 3%-of-GDP limit; unemployment stands at
10%.
French Guiana
The economy is tied closely to the much larger French
economy through subsidies and imports. Besides the French space
center at Kourou (which accounts for 25% of GDP), fishing and
forestry are the most important economic activities. Forest and
woodland cover 90% of the country. The large reserves of tropical
hardwoods, not fully exploited, support an expanding sawmill
industry that provides sawn logs for export. Cultivation of crops is
limited to the coastal area, where the population is largely
concentrated; rice and manioc are the major crops. French Guiana is
heavily dependent on imports of food and energy. Unemployment is a
serious problem, particularly among younger workers.
French Polynesia
Since 1962, when France stationed military
personnel in the region, French Polynesia has changed from a
subsistence agricultural economy to one in which a high proportion
of the work force is either employed by the military or supports the
tourist industry. With the halt of French nuclear testing in 1996,
the military contribution to the economy fell sharply. Tourism
accounts for about one-fourth of GDP and is a primary source of hard
currency earnings. Other sources of income are pearl farming and
deep-sea commercial fishing. The small manufacturing sector
primarily processes agricultural products. The territory benefits
substantially from development agreements with France aimed
principally at creating new businesses and strengthening social
services.
French Southern and Antarctic Lands
Economic activity is limited to
servicing meteorological and geophysical research stations and
French and other fishing fleets. The fish catches landed on Iles
Kerguelen by foreign ships are exported to France and Reunion.
Gabon
Gabon enjoys a per capita income four times that of most of
sub-Saharan African nations. This has supported a sharp decline in
extreme poverty; yet, because of high income inequality, a large
proportion of the population remains poor. Gabon depended on timber
and manganese until oil was discovered offshore in the early 1970s.
The oil sector now accounts for 50% of GDP. Gabon continues to face
fluctuating prices for its oil, timber, and manganese exports.
Despite the abundance of natural wealth, poor fiscal management
hobbles the economy. Devaluation of its currency by 50% in January
1994 sparked a one-time inflationary surge, to 35%; the rate dropped
to 6% in 1996. The IMF provided a one-year standby arrangement in
1994-95, a three-year Enhanced Financing Facility (EFF) at near
commercial rates beginning in late 1995, and stand-by credit of $119
million in October 2000. Those agreements mandated progress in
privatization and fiscal discipline. France provided additional
financial support in January 1997 after Gabon met IMF targets for
mid-1996. In 1997, an IMF mission to Gabon criticized the government
for overspending on off-budget items, overborrowing from the central
bank, and slipping on its schedule for privatization and
administrative reform. The rebound of oil prices in 1999-2000 helped
growth, but drops in production hampered Gabon from fully realizing
potential gains. In December 2000, Gabon signed a new agreement with
the Paris Club to reschedule its official debt. A follow-up
bilateral repayment agreement with the US was signed in December
2001. Gabon signed a 14-month Stand-By Arrangement with the IMF in
May 2004, and received Paris Club debt rescheduling later that year.
Short-term progress depends on an upbeat world economy and fiscal
and other adjustments in line with IMF policies.
Gambia, The
The Gambia has no significant mineral or natural
resource deposits and has a limited agricultural base. About 75% of
the population depends on crops and livestock for its livelihood.
Small-scale manufacturing activity features the processing of
peanuts, fish, and hides. Reexport trade normally constitutes a
major segment of economic activity, but a 1999 government-imposed
preshipment inspection plan, and instability of the Gambian dalasi
(currency) have drawn some of the reexport trade away from The
Gambia. The government's 1998 seizure of the private peanut firm
Alimenta eliminated the largest purchaser of Gambian groundnuts.
Despite an announced program to begin privatizing key parastatals,
no plans have been made public that would indicate that the
government intends to follow through on its promises. Unemployment
and underemployment rates remain extremely high; short-run economic
progress depends on sustained bilateral and multilateral aid, on
responsible government economic management, on continued technical
assistance from the IMF and bilateral donors, and on expected growth
in the construction sector.
Gaza Strip
High population density, limited land access, and strict
internal and external controls have kept economic conditions in the
Gaza Strip - the smaller of the two areas under the Palestinian
Authority (PA)- even more degraded than in the West Bank. The
beginning of the second intifadah in September 2000 sparked an
economic downturn, largely the result of Israeli closure policies;
these policies, which were imposed in response to security interests
in Israel, disrupted labor and commodity relationships with the Gaza
Strip. In 2001, and even more severely in 2003, Israeli military
measures in PA areas resulted in the destruction of much capital
plant, the disruption of administrative structure, and widespread
business closures. Including the West Bank, the UN estimates that
more than 100,000 Palestinians out of the 125,000 who used to work
in Israel or in joint industrial zones have lost their jobs. Half
the labor force is unemployed. Israeli withdrawal from the Gaza
Strip in September 2005 offers some medium-term opportunities for
economic growth, especially given the removal of restrictions on
internal movement. In addition, recent agreements and continuing
negotiations on the administration of Gaza's border crossings
increase the prospects for trade.
Georgia
Georgia's main economic activities include the cultivation
of agricultural products such as grapes, citrus fruits, and
hazelnuts; mining of manganese and copper; and output of a small
industrial sector producing alcoholic and nonalcoholic beverages,
metals, machinery, and chemicals. The country imports the bulk of
its energy needs, including natural gas and oil products. It has
sizeable but underdeveloped hydropower capacity. Despite the severe
damage the economy has suffered due to civil strife, Georgia, with
the help of the IMF and World Bank, has made substantial economic
gains since 2000, achieving positive GDP growth and curtailing
inflation. Georgia had suffered from a chronic failure to collect
tax revenues; however, the new government is making progress and has
reformed the tax code, improved tax administration, increased tax
enforcement, and cracked down on corruption. In addition, the
reinvigorated privatization process has met with success,
supplementing government expenditures on infrastructure, defense,
and poverty reduction. Despite customs and financial (tax)
enforcement improvements, smuggling is a drain on the economy.
Georgia also suffers from energy shortages due to aging and badly
maintained infrastructure, as well as poor management. Due to
concerted reform efforts, collection rates have improved
considerably to roughly 60%, both in T'bilisi and throughout the
regions. Continued reform in the management of state-owned power
entities is essential to successful privatization and onward
sustainability in this sector. The country is pinning its hopes for
long-term growth on its role as a transit state for pipelines and
trade. The construction on the Baku-T'bilisi-Ceyhan oil pipeline and
the Baku-T'bilisi-Erzerum gas pipeline have brought much-needed
investment and job opportunities. Nevertheless, high energy prices
in 2006 will compound the pressure on the country's inefficient
energy sector. Restructuring the sector and finding energy supply
alternatives to Russia remain major challenges.
Germany
Germany's affluent and technologically powerful economy -
the fifth largest in the world - has become one of the slowest
growing economies in the euro zone. A quick turnaround is not in the
offing in the foreseeable future. Growth in 2001-03 fell short of
1%, rising to 1.7% in 2004 before falling back to 0.9% in 2005. The
modernization and integration of the eastern German economy
continues to be a costly long-term process, with annual transfers
from west to east amounting to roughly $70 billion. Germany's aging
population, combined with high unemployment, has pushed social
security outlays to a level exceeding contributions from workers.
Structural rigidities in the labor market - including strict
regulations on laying off workers and the setting of wages on a
national basis - have made unemployment a chronic problem. Corporate
restructuring and growing capital markets are setting the
foundations that could allow Germany to meet the long-term
challenges of European economic integration and globalization,
particularly if labor market rigidities are further addressed. In
the short run, however, the fall in government revenues and the rise
in expenditures have raised the deficit above the EU's 3% debt limit.
Ghana
Well endowed with natural resources, Ghana has roughly twice
the per capita output of the poorer countries in West Africa. Even
so, Ghana remains heavily dependent on international financial and
technical assistance. Gold, timber, and cocoa production are major
sources of foreign exchange. The domestic economy continues to
revolve around subsistence agriculture, which accounts for 34% of
GDP and employs 60% of the work force, mainly small landholders.
Ghana opted for debt relief under the Heavily Indebted Poor Country
(HIPC) program in 2002, but was included in a G-8 debt relief
program decided upon at the Gleneagles Summit in July 2005.
Priorities under its current $38 million Poverty Reduction and
Growth Facility (PRGF) include tighter monetary and fiscal policies,
accelerated privatization, and improvement of social services.
Receipts from the gold sector helped sustain GDP growth in 2005
along with record high prices for Ghana's largest cocoa crop to
date. Inflation should ease but remains a major internal problem.
Ghana also remains a candidate country to benefit from Millennium
Challenge Corporation (MCC) funding that could assist in
transforming Ghana's agricultural export sector. A final decision on
its MCC bid is expected in spring 2006.