Costa Rica
Costa Rica's basically stable economy depends on tourism,
agriculture, and electronics exports. Poverty has been substantially
reduced over the past 15 years, and a strong social safety net has
been put into place. Foreign investors remain attracted by the
country's political stability and high education levels, and tourism
continues to bring in foreign exchange. The government continues to
grapple with its large internal and external deficits and sizable
internal debt. The reduction of inflation remains a difficult
problem because of rising import prices, labor market rigidities,
and fiscal deficits. The country also needs to reform its tax system
and its pattern of public expenditure. The current administration
has made it a priority to pass the necessary reforms to implement
the US-Central American Free Trade Agreement (CAFTA). CAFTA
implementation would result in an improved investment climate.
Cote d'Ivoire
Cote d'Ivoire is among the world's largest producers
and exporters of coffee, cocoa beans, and palm oil. Consequently,
the economy is highly sensitive to fluctuations in international
prices for these products and weather conditions. Despite government
attempts to diversify the economy, it is still heavily dependent on
agriculture and related activities, engaging roughly 68% of the
population. Growth was negative in 2000-03 because of the difficulty
of meeting the conditions of international donors, continued low
prices of key exports, foreign divestment and civil war. Political
turmoil has continued to damage the economy since 2004, with a
rising risk premium associated with doing business in the country,
foreign investment shriveling, transportation costs increasing,
French businesses fleeing, and criminal elements that traffic in
weapons and diamonds gaining ground. The government will continue to
survive financially off of the sale of cocoa, which represents 90%
of foreign exchange earnings, but the government will probably lose
between 10% and 20% of its cocoa harvest to northern rebels who
smuggle the cocoa they control to neighboring countries where cocoa
prices are higher. The government remains hopeful that ongoing
exploration of Cote d'Ivoire's offshore oil reserves will result in
significant production that could boost daily crude output from
roughly 33,000 barrels per day (b/d) to more than 200,000 b/d by the
end of the decade.
Croatia
Before the dissolution of Yugoslavia, the Republic of
Croatia, after Slovenia, was the most prosperous and industrialized
area with a per capita output perhaps one-third above the Yugoslav
average. The economy emerged from a mild recession in 2000 with
tourism, banking, and public investments leading the way.
Unemployment remains high, at about 17%, with structural factors
slowing its decline. While macroeconomic stabilization has largely
been achieved, structural reforms lag because of deep resistance on
the part of the public and lack of strong support from politicians.
Growth, while impressive at about 3% to 4% for the last several
years, has been stimulated, in part, through high fiscal deficits
and rapid credit growth. The EU accession process should accelerate
fiscal and structural reform.
Cuba
The government continues to balance the need for economic
loosening against a desire for firm political control. It has rolled
back limited reforms undertaken in the 1990s to increase enterprise
efficiency and alleviate serious shortages of food, consumer goods,
and services. The average Cuban's standard of living remains at a
lower level than before the downturn of the 1990s, which was caused
by the loss of Soviet aid and domestic inefficiencies. In 2006, high
metals prices continued to boost Cuban earnings from nickel and
cobalt production. Havana continued to invest in the country's
energy sector to mitigate electrical blackouts that have plagued the
country since 2004.
Cyprus
The Republic of Cyprus has a market economy dominated by the
service sector, which accounts for 76% of GDP. Tourism and financial
services are the most important sectors; erratic growth rates over
the past decade reflect the economy's reliance on tourism, which
often fluctuates with political instability in the region and
economic conditions in Western Europe. Nevertheless, the economy
grew a healthy 3.7% per year in 2004 and 2005, well above the EU
average. Cyprus joined the European Exchange Rate Mechanism (ERM2)
in May 2005. The government has initiated an aggressive austerity
program, which has cut the budget deficit to below 3% but continued
fiscal discipline is necessary if Cyprus is to meet its goal of
adopting the euro on 1 January 2008. As in the area administered by
Turkish Cypriots, water shortages are a perennial problem; a few
desalination plants are now on line. After 10 years of drought, the
country received substantial rainfall from 2001-03 alleviating
immediate concerns. The Turkish Cypriot economy has roughly
one-third of the per capita GDP of the south, and economic growth
tends to be volatile, given north Cyprus's relative isolation,
bloated public sector, reliance on the Turkish lira, and small
market size. The Turkish Cypriot economy grew 15.4% in 2004, fueled
by growth in the construction and education sectors, as well as
increased employment of Turkish Cypriots in the Republic of Cyprus.
The Turkish Cypriots are heavily dependent on transfers from the
Turkish Government. Under the 2003-06 economic protocol, Ankara
planned to provide around $700 million to the "TRNC." Agriculture
and services, together, employ more than half of the work force.
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
The Danish economy is undergoing strong expansion fueled by
private consumption growth, low unemployment, rising real wages, and
a strong increase in house prices. 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 continued through 2006. 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. Tourism has increased as the
government seeks 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.