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
Gamel Abdel NASSER. In 2005, Prime Minister Ahmed NAZIF's government
reduced personal and corporate tax rates, reduced energy subsidies,
and privatized several enterprises. The stock market boomed, and GDP
grew about 5% per year in 2005-06, and topped 7% in 2007. 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 sizeable budget deficit - roughly 7.5% of GDP in
2007 - and represent a significant drain on the economy. Foreign
direct investment has increased significantly in the past two years,
but the NAZIF government will need to continue its aggressive
pursuit of reforms in order to sustain the spike in investment and
growth and begin to improve economic conditions for the broader
population. 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 modest in recent
years. Robust growth in non-traditional exports have offset declines
in the maquila exports, while remittances and external aid offset
the trade deficit from high oil prices and strong import demand for
consumer and intermediate goods. El Salvador leads the region in
remittances per capita with inflows equivalent to nearly all export
income. Implementation in 2006 of the Central America-Dominican
Republic Free Trade Agreement (CAFTA), which El Salvador was the
first to ratify, has strengthened an already positive export trend.
With the adoption of the US dollar as its currency in 2001, El
Salvador lost control over monetary policy and must concentrate on
maintaining a disciplined fiscal policy. The current government has
pursued economic diversification, with some success in promoting
textile production, international port services, and tourism through
tax incentives. It is committed to opening the economy to trade and
investment, and has embarked on a wave of privatizations extending
to telecom, electricity distribution, banking, and pension funds. In
late 2006, the government and the Millennium Challenge Corporation
signed a five-year, $461 million compact to stimulate economic
growth and reduce poverty in the country's northern region through
investments in education, public services, enterprise development,
and transportation infrastructure.
Equatorial Guinea
The discovery and exploitation of large oil
reserves have contributed to dramatic economic growth in recent
years. Forestry, farming, and fishing are also major components of
GDP. Subsistence farming predominates. Although pre-independence
Equatorial Guinea counted on cocoa production for hard currency
earnings, the neglect of the rural economy under successive regimes
has diminished potential for agriculture-led growth (the government
has stated its intention to reinvest some oil revenue into
agriculture). A number of aid programs sponsored by the World Bank
and the IMF have been cut off since 1993, because of corruption and
mismanagement. No longer eligible for concessional financing because
of large oil revenues, the government has been trying to agree on a
"shadow" fiscal management program with the World Bank and IMF.
Government officials and their family members own most businesses.
Undeveloped natural resources include titanium, iron ore, manganese,
uranium, and alluvial gold. Growth remained strong in 2007, led by
oil.
Eritrea
Since independence from Ethiopia in 1993, Eritrea has faced
the economic problems of a small, desperately poor country,
accentuated by the recent implementation of restrictive economic
policies. Eritrea has a command economy under the control of the
sole political party, the People's Front for Democracy and Justice
(PFDJ). Like the economies of many African nations, the economy is
largely based on subsistence agriculture, with 80% of the population
involved in farming and herding. The Ethiopian-Eritrea war in
1998-2000 severely hurt Eritrea's economy. GDP growth fell to zero
in 1999 and to -12.1% in 2000. The May 2000 Ethiopian offensive into
northern Eritrea caused some $600 million in property damage and
loss, including losses of $225 million in livestock and 55,000
homes. The attack prevented planting of crops in Eritrea's most
productive region, causing food production to drop by 62%. Even
during the war, Eritrea developed its transportation infrastructure,
asphalting new roads, improving its ports, and repairing war-damaged
roads and bridges. Since the war ended, the government has
maintained a firm grip on the economy, expanding the use of the
military and party-owned businesses to complete Eritrea's
development agenda. The government strictly controls the use of
foreign currency, limiting access and availability. Few private
enterprises remain in Eritrea. Eritrea's economy is heavily
dependent on taxes paid by members of the diaspora. Erratic rainfall
and the delayed demobilization of agriculturalists from the military
continue to interfere with agricultural production, and Eritrea's
recent harvests have not been able to meet the food needs of the
country. The government continues to place its hope for additional
revenue on the development of several international mining projects.
Despite difficulties for international companies in working with the
Eritrean government, a Canadian mining company signed a contract
with the GSE in 2007 and plans to begin mineral extraction in 2010.
Eritrea also anticipates opening a free trade zone at the port of
Massawa in 2008. Eritrea's economic future depends upon its ability
to master social problems such as illiteracy, unemployment, and low
skills, and more importantly, on the government's willingness to
support a true market economy.
Estonia
Estonia, a 2004 European Union entrant, has a modern
market-based economy and one of the highest per capita income levels
in Central Europe. The economy benefits from strong electronics and
telecommunications sectors and strong trade ties with Finland,
Sweden, and Germany. The current government has pursued relatively
sound fiscal policies, resulting in balanced budgets and low public
debt. In 2007, however, a large current account deficit and rising
inflation put pressure on Estonia's currency, which is pegged to the
euro, highlighting the need for growth in export-generating
industries.
Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, accounting for almost half of GDP, 60% of exports, and
80% of total employment. The agricultural sector suffers from
frequent drought and poor cultivation practices. Coffee is critical
to the Ethiopian economy with exports of some $350 million in 2006,
but historically low prices have seen many farmers switching to qat
to supplement income. The war with Eritrea in 1998-2000 and
recurrent drought have buffeted the economy, in particular coffee
production. In November 2001, Ethiopia qualified for debt relief
from the Highly Indebted Poor Countries (HIPC) initiative, and in
December 2005 the IMF voted to forgive Ethiopia's debt to the body.
Under Ethiopia's constitution, the state owns all land and provides
long-term leases to the tenants; the system continues to hamper
growth in the industrial sector as entrepreneurs are unable to use
land as collateral for loans. Drought struck again late in 2002,
leading to a 3.3% decline in GDP in 2003. Normal weather patterns
helped agricultural and GDP growth recover during 2004-07.
European Union
Internally, the EU is attempting to lower trade
barriers, adopt a common currency, and move toward convergence of
living standards. Internationally, the EU aims to bolster Europe's
trade position and its political and economic power. Because of the
great differences in per capita income among member states (from
$7,000 to $69,000) and historic national animosities, the EU faces
difficulties in devising and enforcing common policies. For example,
since 2003 Germany and France have flouted the member states' treaty
obligation to prevent their national budgets from running more than
a 3% deficit. In 2004 and 2007, the EU admitted 10 and two
countries, respectively, that are, in general, less advanced
technologically and economically than the other 15. Eleven
established EU member states introduced the euro as their common
currency on 1 January 1999 (Greece did so two years later), but the
UK, Sweden, and Denmark chose not to participate. Of the 12 most
recent member states, only Slovenia (1 January 2007) and Cyprus and
Malta (1 January 2008) have adopted the euro; the remaining nine are
legally required to adopt the currency upon meeting EU's fiscal and
monetary convergence criteria.
Falkland Islands (Islas Malvinas) The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987, the government began selling fishing licenses to foreign trawlers operating within the Falkland Islands' exclusive fishing zone. These license fees total more than $40 million per year, which help support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defense. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date, no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.
Faroe Islands
The Faroese economy is dependent on fishing, which
makes the economy vulnerable to price swings. Since 2003 the Faroese
economy has picked up as a result of higher prices for fish and for
housing. Unemployment is minimal and government finances are
relatively sound. Oil finds close to the Islands give hope for
economically recoverable deposits, which could eventually lay the
basis for a more diversified economy and lessen dependence on Danish
economic assistance. Aided by a substantial annual subsidy (about
15% of GDP) from Denmark, the Faroese have a standard of living not
far below the Danes and other Scandinavians.
Fiji
Fiji, endowed with forest, mineral, and fish resources, is one
of the most developed of the Pacific island economies, though still
with a large subsistence sector. Sugar exports, remittances from
Fijians working abroad, and a growing tourist industry - with
400,000 to 500,000 tourists annually - are the major sources of
foreign exchange. Fiji's sugar has special access to European Union
markets, but will be harmed by the EU's decision to cut sugar
subsidies. Sugar processing makes up one-third of industrial
activity but is not efficient. Fiji's tourism industry was damaged
by the December 2006 coup and is facing an uncertain recovery time.
The coup has created a difficult business climate. Tourist arrivals
for 2007 are estimated to be down almost 6%, with substantial job
losses in the service sector. In July 2007 the Reserve Bank of Fiji
announced the economy was expected to contract by 3.1% in 2007.
Fiji's current account deficit reached 23% of GDP in 2006. The EU
has suspended all aid until the interim government takes steps
toward new elections. Long-term problems include low investment,
uncertain land ownership rights, and the government's inability to
manage its budget. Overseas remittances from Fijians working in
Kuwait and Iraq have decreased significantly.