Romania
Romania began the transition from Communism in 1989 with a
largely obsolete industrial base and a pattern of output unsuited to
the country's needs. The country emerged in 2000 from a punishing
three-year recession thanks to strong demand in EU export markets.
Despite the global slowdown in 2001-02, strong domestic activity in
construction, agriculture, and consumption have kept GDP growth
above 4%. An IMF standby agreement, signed in 2001, has been
accompanied by slow but palpable gains in privatization, deficit
reduction, and the curbing of inflation. The IMF Board approved
Romania's completion of the standby agreement in October 2003, the
first time Romania has successfully concluded an IMF agreement since
the 1989 revolution. In July 2004, the executive board of the IMF
approved a 24-month standby agreement for $367 million. IMF concerns
about Romania's tax policy and budget deficit led to a breakdown of
this agreement in 2005. In the past, the IMF has criticized the
government's fiscal, wage, and monetary policies. Meanwhile,
macroeconomic gains have only recently started to spur creation of a
middle class and address Romania's widespread poverty, while
corruption and red tape continue to handicap the business
environment. Romanian government confidence in continuing
disinflation was underscored by its currency revaluation in 2005,
making 10,000 "old" lei equal 1 "new" leu.
Russia
Russia ended 2005 with its seventh straight year of growth,
averaging 6.4% annually since the financial crisis of 1998. Although
high oil prices and a relatively cheap ruble are important drivers
of this economic rebound, since 2000 investment and consumer-driven
demand have played a noticeably increasing role. Real fixed capital
investments have averaged gains greater than 10% over the last five
years, and real personal incomes have realized average increases
over 12%. During this time, poverty has declined steadily and the
middle class has continued to expand. Russia has also improved its
international financial position since the 1998 financial crisis,
with its foreign debt declining from 90% of GDP to around 31%.
Strong oil export earnings have allowed Russia to increase its
foreign reserves from only $12 billion to some $180 billion at
yearend 2005. These achievements, along with a renewed government
effort to advance structural reforms, have raised business and
investor confidence in Russia's economic prospects. Nevertheless,
serious problems persist. Economic growth slowed to 5.9% for 2005
while inflation remains high. Oil, natural gas, metals, and timber
account for more than 80% of exports, leaving the country vulnerable
to swings in world prices. Russia's manufacturing base is
dilapidated and must be replaced or modernized if the country is to
achieve broad-based economic growth. Other problems include a weak
banking system, a poor business climate that discourages both
domestic and foreign investors, corruption, and widespread lack of
trust in institutions. In addition, a string of investigations
launched against a major Russian oil company, culminating with the
arrest of its CEO in the fall of 2003 and the acquisition of the
company by a state owned firm, have raised concerns by some
observers that President PUTIN is granting more influence to forces
within his government that desire to reassert state control over the
economy. State control has increased in the past year with a number
of large acquisitions. Most fundamentally, Russia has made little
progress in building the rule of law, the bedrock of a modern market
economy.
Rwanda
Rwanda is a poor rural country with about 90% of the
population engaged in (mainly subsistence) agriculture. It is the
most densely populated country in Africa and is landlocked with few
natural resources and minimal industry. Primary foreign exchange
earners are coffee and tea. The 1994 genocide decimated Rwanda's
fragile economic base, severely impoverished the population,
particularly women, and eroded the country's ability to attract
private and external investment. However, Rwanda has made
substantial progress in stabilizing and rehabilitating its economy
to pre-1994 levels, although poverty levels are higher now. GDP has
rebounded and inflation has been curbed. Despite Rwanda's fertile
ecosystem, food production often does not keep pace with population
growth, requiring food imports. Rwanda continues to receive
substantial aid money and obtained IMF-World Bank Heavily Indebted
Poor Country (HIPC) initiative debt relief in 2005. Kigali's high
defense expenditures have caused tension between the government and
international donors and lending agencies. An energy shortage and
instability in neighboring states may slow growth in 2006, while the
lack of adequate transportation linkages to other countries
continues to handicap export growth.
Saint Helena
The economy depends largely on financial assistance
from the UK, which amounted to about $5 million in 1997 or almost
one-half of annual budgetary revenues. The local population earns
income from fishing, raising livestock, and sales of handicrafts.
Because there are few jobs, 25% of the work force has left to seek
employment on Ascension Island, on the Falklands, and in the UK.
Saint Kitts and Nevis
Sugar was the traditional mainstay of the
Saint Kitts economy until the 1970s. Although the crop still
dominates the agricultural sector, activities such as tourism,
export-oriented manufacturing, and offshore banking have assumed
larger roles in the economy. Tourism revenues are now the chief
source of the islands' foreign exchange; about 40,000 tourist
visited Nevis during the 2003-2004 season. Additional tourist
facilities, including a second cruise ship pier, hotels, and golf
courses are under construction.
Saint Lucia
Changes in the EU import preference regime and the
increased competition from Latin American bananas have made economic
diversification increasingly important in Saint Lucia. The island
nation has been able to attract foreign business and investment,
especially in its offshore banking and tourism industries. The
manufacturing sector is the most diverse in the Eastern Caribbean
area, and the government is trying to revitalize the banana
industry. Economic fundamentals remain solid, even though
unemployment needs to be cut.
Saint Pierre and Miquelon
The inhabitants have traditionally earned
their livelihood by fishing and by servicing fishing fleets
operating off the coast of Newfoundland. The economy has been
declining, however, because of disputes with Canada over fishing
quotas and a steady decline in the number of ships stopping at Saint
Pierre. In 1992, an arbitration panel awarded the islands an
exclusive economic zone of 12,348 sq km to settle a longstanding
territorial dispute with Canada, although it represents only 25% of
what France had sought. The islands are heavily subsidized by France
to the great betterment of living standards. The government hopes an
expansion of tourism will boost economic prospects. Recent test
drilling for oil may pave the way for development of the energy
sector.
Saint Vincent and the Grenadines
Economic growth in this
lower-middle-income country hinges upon seasonal variations in the
agricultural and tourism sectors. Tropical storms wiped out
substantial portions of crops in 1994, 1995, and 2002, and tourism
in the Eastern Caribbean has suffered low arrivals following 11
September 2001. Saint Vincent is home to a small offshore banking
sector and has moved to adopt international regulatory standards.
Saint Vincent is also a producer of marijuana and is being used as a
transshipment point for illegal narcotics from South America.
Samoa
The economy of Samoa has traditionally been dependent on
development aid, family remittances from overseas, agriculture, and
fishing. The country is vulnerable to devastating storms.
Agriculture employs two-thirds of the labor force, and furnishes 90%
of exports, featuring coconut cream, coconut oil, and copra. The
manufacturing sector mainly processes agricultural products. The
decline of fish stocks in the area is a continuing problem. Tourism
is an expanding sector, accounting for 25% of GDP; about 88,000
tourists visited the islands in 2001. One factory in the Foreign
Trade Zone employs 3,000 people to make automobile electrical
harnesses for an assembly plant in Australia. The Samoan Government
has called for deregulation of the financial sector, encouragement
of investment, and continued fiscal discipline, while at the same
time protecting the environment. Observers point to the flexibility
of the labor market as a basic strength for future economic
advances. Foreign reserves are in a relatively healthy state, the
external debt is stable, and inflation is low.
San Marino
The tourist sector contributes over 50% of GDP. In 2000
more than 3 million tourists visited San Marino. The key industries
are banking, wearing apparel, electronics, and ceramics. Main
agricultural products are wine and cheeses. The per capita level of
output and standard of living are comparable to those of the most
prosperous regions of Italy, which supplies much of its food.