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 its 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 disease. 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 between 2003 and 2005, 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 more
than 4 percent per year during the period 2002-2005, 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 2005, and unemployment and poverty have stayed
persistently high. Economic growth will be driven by the Camisea
natural gas megaproject and by exports of minerals, textiles, and
agricultural products. Peru is expected to sign a free-trade
agreement with the United States in early 2006.
Philippines
The Philippines was less severely affected by the Asian
financial crisis of 1998 than its neighbors, aided in part by its
high level of annual remittances 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 about 5% between 2002
and 2005 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
the alleviation of poverty 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 this situation 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 have at times
expressed concern about the Philippines' ability to service the
debt, though central bank reserves appear adequate and large
remittance inflows appear stable. The implementation of the expanded
Value Added Tax (VAT) in November 2005 boosted confidence in the
government's fiscal capacity and helped to strengthen the peso,
which gained 5.7 percent year-on-year, making it East Asia's best
performing currency in 2005. Investors and credit rating
institutions will continue to look for effective implementation of
the new VAT and continued improvement in the government's overall
fiscal capacity in the coming year.
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 small 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 the unemployment rate -
currently the highest in the EU. 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 previous Socialist-led government
introduced a package of social and administrative spending cuts to
reduce public spending by about $17 billion through 2007, but full
implementation of the plan was trumped by election-year politics in
2005. The right-wing Law and Justice party won parliamentary
elections in September, and Lech KACZYNSKI won the presidential
election in October 2005, running on a state-interventionist fiscal
and monetary platform. 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 $23.2 billion in EU
funds, available through 2006. Farmers have already begun to reap
the rewards of membership via booming exports, 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 2001-05. 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.
Puerto Rico
Puerto Rico has one of the most dynamic economies in the
Caribbean region. A diverse industrial sector has far surpassed
agriculture as the primary locus of economic activity and income.
Encouraged by duty-free access to the US and by tax incentives, US
firms have invested heavily in Puerto Rico since the 1950s. US
minimum wage laws apply. Sugar production has lost out to dairy
production and other livestock products as the main source of income
in the agricultural sector. Tourism has traditionally been an
important source of income, with estimated arrivals of nearly 5
million tourists in 2004. Growth fell off in 2001-03, largely due to
the slowdown in the US economy, and has recovered in 2004-2005.
Qatar
Oil and gas account for more than 60% of GDP, roughly 85% of
export earnings, and 70% of government revenues. Oil and gas have
given Qatar a per capita GDP about 80% of that of the leading West
European industrial countries. Proved oil reserves of 16 billion
barrels should ensure continued output at current levels for 23
years. Qatar's proved reserves of natural gas exceed 25 trillion
cubic meters, more than 5% of the world total and third largest in
the world. Qatar has permitted substantial foreign investment in the
development of its gas fields during the last decade and is expected
to become the world's top liquefied natural gas (LNG) exporter by
2007. In recent years, Qatar has consistently posted trade surpluses
largely because of high oil prices and increased natural gas
exports, becoming one of the world's fastest growing and highest
per-capita income countries.
Reunion
The economy has traditionally been based on agriculture, but
services now dominate. Sugarcane has been the primary crop for more
than a century, and in some years it accounts for 85% of exports.
The government has been pushing the development of a tourist
industry to relieve high unemployment, which amounts to one-third of
the labor force. The gap in Reunion between the well-off and the
poor is extraordinary and accounts for the persistent social
tensions. The white and Indian communities are substantially better
off than other segments of the population, often approaching
European standards, whereas minority groups suffer the poverty and
unemployment typical of the poorer nations of the African continent.
The outbreak of severe rioting in February 1991 illustrated the
seriousness of socioeconomic tensions. The economic well-being of
Reunion depends heavily on continued financial assistance from
France.