Cape Verde This island economy suffers from a poor natural resource base, including serious water shortages exacerbated by cycles of long-term drought. The economy is service-oriented, with commerce, transport, tourism, and public services accounting for 66% of GDP. Although nearly 70% of the population lives in rural areas, the share of food production in GDP in 2004 was only 12%, of which fishing accounted for 1.5%. About 82% of food must be imported. The fishing potential, mostly lobster and tuna, is not fully exploited. Cape Verde annually runs a high trade deficit, financed by foreign aid and remittances from emigrants; remittances supplement GDP by more than 20%. Economic reforms are aimed at developing the private sector and attracting foreign investment to diversify the economy. Future prospects depend heavily on the maintenance of aid flows, the encouragement of tourism, remittances, and the momentum of the government's development program. Cape Verde has been exploring European Union membership in recent years.

Cayman Islands With no direct taxation, the islands are a thriving offshore financial center. More than 68,000 companies were registered in the Cayman Islands as of 2003, including almost 500 banks, 800 insurers, and 5000 mutual funds. A stock exchange was opened in 1997. Tourism is also a mainstay, accounting for about 70% of GDP and 75% of foreign currency earnings. The tourist industry is aimed at the luxury market and caters mainly to visitors from North America. Total tourist arrivals exceeded 2.1 million in 2003, with about half from the US. About 90% of the islands' food and consumer goods must be imported. The Caymanians enjoy one of the highest outputs per capita and one of the highest standards of living in the world.

Central African Republic Subsistence agriculture, together with forestry, remains the backbone of the economy of the Central African Republic (CAR), with more than 70% of the population living in outlying areas. The agricultural sector generates more than half of GDP. Timber has accounted for about 16% of export earnings and the diamond industry, for 40%. Important constraints to economic development include the CAR's landlocked position, a poor transportation system, a largely unskilled work force, and a legacy of misdirected macroeconomic policies. Factional fighting between the government and its opponents remains a drag on economic revitalization. Distribution of income is extraordinarily unequal. Grants from France and the international community can only partially meet humanitarian needs.

Chad Chad's primarily agricultural economy will continue to be boosted by major foreign direct investment projects in the oil sector that began in 2000. Over 80% of Chad's population relies on subsistence farming and livestock raising for its livelihood. Chad's economy has long been handicapped by its landlocked position, high energy costs, and a history of instability. Chad relies on foreign assistance and foreign capital for most public and private sector investment projects. A consortium led by two US companies has been investing $3.7 billion to develop oil reserves - estimated at 1 billion barrels - in southern Chad. The nation's total oil reserves has been estimated to be 2 billion barrels. Oil production came on stream in late 2003. Chad began to export oil in 2004. Cotton, cattle, and gum arabic provide the bulk of Chad's non-oil export earnings.

Chile Chile has a market-oriented economy characterized by a high level of foreign trade. During the early 1990s, Chile's reputation as a role model for economic reform was strengthened when the democratic government of Patricio AYLWIN - which took over from the military in 1990 - deepened the economic reform initiated by the military government. Growth in real GDP averaged 8% during 1991-97, but fell to half that level in 1998 because of tight monetary policies implemented to keep the current account deficit in check and because of lower export earnings - the latter a product of the global financial crisis. A severe drought exacerbated the recession in 1999, reducing crop yields and causing hydroelectric shortfalls and electricity rationing, and Chile experienced negative economic growth for the first time in more than 15 years. Despite the effects of the recession, Chile maintained its reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. By the end of 1999, exports and economic activity had begun to recover, and growth rebounded to 4.2% in 2000. Growth fell back to 3.1% in 2001 and 2.1% in 2002, largely due to lackluster global growth and the devaluation of the Argentine peso. Chile's economy began a slow recovery in 2003, growing 3.2%, and accelerated to about 5% per year in 2004-06, while Chile maintained a low rate of inflation. GDP growth benefited from high copper prices, solid export earnings (particularly forestry, fishing, and mining), and stepped-up foreign direct investment. Unemployment has exhibited a downward trend over the past year, but remains fairly high. Chile deepened its longstanding commitment to trade liberalization with the signing of a free trade agreement with the US, which took effect on 1 January 2004. Chile signed a free trade agreement with China in November 2005, and it already has several trade deals signed with other nations and blocs, including the European Union, Mercosur, South Korea, and Mexico. Record-high copper prices helped to strengthen the peso to a 6 1/2-year high, as of December 2006, and added investment in the mining sector will boost GDP in 2007.

China China's economy during the last quarter century has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy. Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment. China has generally implemented reforms in a gradualist or piecemeal fashion, including the sale of equity in China's largest state banks to foreign investors and refinements in foreign exchange and bond markets in 2005. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis, China in 2006 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income and 130 million Chinese fall below international poverty lines. Economic development has generally been more rapid in coastal provinces than in the interior, and there are large disparities in per capita income between regions. The government has struggled to: (a) sustain adequate job growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force; (b) reduce corruption and other economic crimes; and (c) contain environmental damage and social strife related to the economy's rapid transformation. From 100 to 150 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time, low-paying jobs. One demographic consequence of the "one child" policy is that China is now one of the most rapidly aging countries in the world. Another long-term threat to growth is the deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the north. China continues to lose arable land because of erosion and economic development. China has benefited from a huge expansion in computer Internet use, with more than 100 million users at the end of 2005. Foreign investment remains a strong element in China's remarkable expansion in world trade and has been an important factor in the growth of urban jobs. In July 2005, China revalued its currency by 2.1% against the US dollar and moved to an exchange rate system that references a basket of currencies. In 2006 China had the largest current account surplus - nearly $180 billion - in the world. More power generating capacity came on line in 2006 as large scale investments were completed. Thirteen years in construction at a cost of $24 billion, the immense Three Gorges Dam across the Yangtze River was essentially completed in 2006 and will revolutionize electrification and flood control in the area. The 11th Five-Year Program (2006-10), approved by the National People's Congress in March 2006, calls for a 20% reduction in energy consumption per unit of GDP by 2010 and an estimated 45% increase in GDP by 2010. The plan states that conserving resources and protecting the environment are basic goals, but it lacks details on the policies and reforms necessary to achieve these goals.

Christmas Island Phosphate mining had been the only significant economic activity, but in December 1987 the Australian Government closed the mine. In 1991, the mine was reopened. With the support of the government, a $34 million casino opened in 1993. The casino closed in 1998. The Australian Government in 2001 agreed to support the creation of a commercial space-launching site on the island, projected to begin operations in the near future.

Clipperton Island Although 115 species of fish have been identified in the territorial waters of Clipperton Island, the only economic activity is tuna fishing.

Cocos (Keeling) Islands Grown throughout the islands, coconuts are the sole cash crop. Small local gardens and fishing contribute to the food supply, but additional food and most other necessities must be imported from Australia. There is a small tourist industry.

Colombia Colombia's economy has experienced positive growth over the past three years despite a serious armed conflict. The economy continues to improve in part because of austere government budgets, focused efforts to reduce public debt levels, an export-oriented growth strategy, an improved security situation in the country, and high commodity prices. Ongoing economic problems facing President URIBE range from reforming the pension system to reducing high unemployment, and to achieving congressional passage of a fiscal transfers reform. New exploration is needed to offset declining oil production. International and domestic financial analysts note with concern the growing central government deficit, which hovers at 5% of GDP. However, the government's economic policy and democratic security strategy have engendered a growing sense of confidence in the economy, particularly within the business sector.

Comoros One of the world's poorest countries, Comoros is made up of three islands that have inadequate transportation links, a young and rapidly increasing population, and few natural resources. The low educational level of the labor force contributes to a subsistence level of economic activity, high unemployment, and a heavy dependence on foreign grants and technical assistance. Agriculture, including fishing, hunting, and forestry, contributes 40% to GDP, employs 80% of the labor force, and provides most of the exports. The country is not self-sufficient in food production; rice, the main staple, accounts for the bulk of imports. The government - which is hampered by internal political disputes - is struggling to upgrade education and technical training, privatize commercial and industrial enterprises, improve health services, diversify exports, promote tourism, and reduce the high population growth rate. Increased foreign support is essential if the goal of 4% annual GDP growth is to be met. Remittances from 150,000 Comorans abroad help supplement GDP.

Congo, Democratic Republic of the The economy of the Democratic Republic of the Congo - a nation endowed with vast potential wealth - has declined drastically since the mid-1980s. The war, which began in August 1998, dramatically reduced national output and government revenue, increased external debt, and resulted in the deaths of perhaps 3.5 million people from violence, famine, and disease. Foreign businesses curtailed operations due to uncertainty about the outcome of the conflict, lack of infrastructure, and the difficult operating environment. Conditions improved in late 2002 with the withdrawal of a large portion of the invading foreign troops. The transitional government has reopened relations with international financial institutions and international donors, and President KABILA has begun implementing reforms. Much economic activity lies outside the GDP data. Economic stability improved in 2003-06, although an uncertain legal framework, corruption, and a lack of openness in government policy continues to hamper growth. In 2005-06, renewed activity in the mining sector, the source of most exports, boosted Kinshasa's fiscal position and GDP growth. Business and economic prospects are expected to improve once a new government is installed after elections.

Congo, Republic of the The economy is a mixture of village agriculture and handicrafts, an industrial sector based largely on oil, support services, and a government characterized by budget problems and overstaffing. Oil has supplanted forestry as the mainstay of the economy, providing a major share of government revenues and exports. In the early 1980s, rapidly rising oil revenues enabled the government to finance large-scale development projects with GDP growth averaging 5% annually, one of the highest rates in Africa. The government has mortgaged a substantial portion of its oil earnings through oil-backed loans that have contributed to a growing debt burden and chronic revenue shortfalls. Economic reform efforts have been undertaken with the support of international organizations, notably the World Bank and the IMF. However, the reform program came to a halt in June 1997 when civil war erupted. Denis SASSOU-NGUESSO, who returned to power when the war ended in October 1997, publicly expressed interest in moving forward on economic reforms and privatization and in renewing cooperation with international financial institutions. Economic progress was badly hurt by slumping oil prices and the resumption of armed conflict in December 1998, which worsened the republic's budget deficit. The current administration presides over an uneasy internal peace and faces difficult economic challenges of stimulating recovery and reducing poverty. Recovery of oil prices has boosted the economy's GDP and near-term prospects. In March 2006, the World Bank and the International Monetary Fund (IMF) approved Heavily Indebted Poor Countries (HIPC) treatment for Congo.

Cook Islands Like many other South Pacific island nations, the Cook Islands' economic development is hindered by the isolation of the country from foreign markets, the limited size of domestic markets, lack of natural resources, periodic devastation from natural disasters, and inadequate infrastructure. Agriculture, employing about 70% of the working population, provides the economic base with major exports made up of copra and citrus fruit. Black pearls are the Cook Island's leading export. Manufacturing activities are limited to fruit processing, clothing, and handicrafts. Trade deficits are offset by remittances from emigrants and by foreign aid, overwhelmingly from New Zealand. In the 1980s and 1990s, the country lived beyond its means, maintaining a bloated public service and accumulating a large foreign debt. Subsequent reforms, including the sale of state assets, the strengthening of economic management, the encouragement of tourism, and a debt restructuring agreement, have rekindled investment and growth.

Coral Sea Islands no economic activity

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.

Dominican Republic The Dominican Republic is a Caribbean representative democracy that enjoyed strong GDP growth until 2003. Although the country has long been viewed primarily as an exporter of sugar, coffee, and tobacco, in recent years the service sector has overtaken agriculture as the economy's largest employer due to growth in tourism and free trade zones. Growth turned negative in 2003 with reduced tourism, a major bank fraud, and limited growth in the US economy (the source of about 80% of export revenues), but recovered in 2004-06. With the help of strict fiscal targets agreed in the 2004 renegotiation of an IMF standby loan, President FERNANDEZ has stabilized the country's financial situation. Although the economy continues to grow at a respectable rate, high unemployment and inflation remain important challenges. The country suffers from marked income inequality; the poorest half of the population receives less than one-fifth of GNP, while the richest 10% enjoys nearly 40% of national income. The Dominican Republic's development prospects improved with the ratification of the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) in September 2005.

East Timor In late 1999, about 70% of the economic infrastructure of East Timor was laid waste by Indonesian troops and anti-independence militias, and 300,000 people fled westward. Over the next three years, however, a massive international program, manned by 5,000 peacekeepers (8,000 at peak) and 1,300 police officers, led to substantial reconstruction in both urban and rural areas. By the end of 2005, all refugees either returned or resettled in Indonesia. The country faces great challenges in continuing the rebuilding of infrastructure, strengthening the infant civil administration, and generating jobs for young people entering the work force. The development of oil and gas resources in nearby waters has begun to supplement government revenues ahead of schedule and above expectations - the result of high petroleum prices - but the technology-intensive industry does little to create jobs for the unemployed, because there are no production facilities in Timor and the gas is piped to Australia. The parliament in June 2005 unanimously approved the creation of a Petroleum Fund to serve as a repository for all petroleum revenues and preserve the value of East Timor's petroleum wealth for future generations.

Ecuador Ecuador has substantial petroleum resources, which have accounted for 40% of the country's export earnings and one-third of central government budget revenues in recent years. Consequently, fluctuations in world market prices can have a substantial domestic impact. In the late 1990s, Ecuador suffered its worst economic crisis, with natural disasters and sharp declines in world petroleum prices driving Ecuador's economy into free fall in 1999. Real GDP contracted by more than 6%, with poverty worsening significantly. The banking system also collapsed, and Ecuador defaulted on its external debt later that year. The currency depreciated by some 70% in 1999, and, on the brink of hyperinflation, the MAHAUD government announced it would dollarize the economy. A coup, however, ousted MAHAUD from office in January 2000, and after a short-lived junta failed to garner military support, Vice President Gustavo NOBOA took over the presidency. In March 2000, Congress approved a series of structural reforms that also provided the framework for the adoption of the US dollar as legal tender. Dollarization stabilized the economy, and growth returned to its pre-crisis levels in the years that followed. Under the administration of Lucio GUTIERREZ - January 2003 to April 2005 - Ecuador benefited from higher world petroleum prices. However, the government under Alfredo PALACIO has reversed economic reforms that reduced Ecuador's vulnerability to petroleum price swings and financial crises, allowing the central government greater access to oil windfalls and disbursing surplus retirement funds.

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 NASSER. In 2005, Prime Minister Ahmed NAZIF 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. 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 growing budget deficit - more than 10% of GDP each year - and represent a significant drain on the economy. Foreign direct investment remains low. To achieve higher GDP growth the NAZIF government will need to continue its aggressive pursuit of reform, especially in the energy sector. 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 minimal in recent years. Hoping to stimulate the sluggish economy, the government is striving to open new export markets, encourage foreign investment, and modernize the tax and healthcare systems. Implementation in 2006 of the Central America-Dominican Republic Free Trade Agreement, which El Salvador was the first to ratify, has strenthened an already positive export trend. The trade deficit has been offset by annual remittances from Salvadorans living abroad - equivalent to more than 15% of GDP - and external aid. With the adoption of the US dollar as its currency in 2001, El Salvador has 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. 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.

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. Businesses, for the most part, are owned by government officials and their family members. Undeveloped natural resources include titanium, iron ore, manganese, uranium, and alluvial gold. Growth remained strong in 2006, led by oil. Equatorial Guinea now has the third highest per capita income in the world, after Luxembourg and Bermuda.

Eritrea Since independence from Ethiopia in 1993, Eritrea has faced the economic problems of a small, desperately poor country. 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. Erratic rainfall and the delayed demobilization of agriculturalists from the military kept cereal production well below normal, holding down growth in 2002-06. Eritrea's economic future depends upon its ability to master social problems such as illiteracy, unemployment, and low skills, as well as the willingness to open its economy to private enterprise so that the diaspora's money and expertise can foster economic growth.

Estonia Estonia, as a new member of the World Trade Organization and the European Union, has transitioned effectively to a modern market economy with strong ties to the West, including the pegging of its currency to the euro. The economy benefits from strong electronics and telecommunications sectors and is greatly influenced by developments in Finland, Sweden, and Germany, three major trading partners. The current account deficit remains high; however, the state budget is essentially in balance, and public debt is low.

Ethiopia Ethiopia's poverty-stricken economy is based on agriculture, accounting for 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 $156 million in 2002, 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 International Monetary Fund voted to forgive Ethiopia's debt to the body. Under Ethiopia's land tenure system, the government 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 2% decline in GDP in 2003. Normal weather patterns helped agricultural and GDP growth recover in 2004-06.

Europa Island no economic activity

European Union Internally, the European Union attempts 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 $8,000 to $61,000) and historic national animosities, the European Union 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. Twelve established EU member states introduced the euro as their common currency on 1 January 1999, but the UK, Sweden, and Denmark chose not to participate. Of the 12 most recent member states, only Slovenia has adopted the euro (1 January 2007); the remaining eleven 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 goes to 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 has had a strong performance since 1994, mostly as a result of increasing fish landings and high and stable export prices. Unemployment is minimal and there are signs of labor shortages in several sectors. The positive economic development has helped the Faroese Home Rule Government produce increasing budget surpluses, which in turn have helped reduce the large public debt, most of it owed to Denmark. However, the total dependence on fishing makes the Faroese economy extremely vulnerable, and the present fishing efforts appear in excess of what is a sustainable level of fishing in the long term. Oil finds close to the Faroese area give hope for deposits in the immediate Faroese area, which may eventually lay the basis for a more diversified economy and thus 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 300,000 to 400,000 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 2006 coup and is facing an uncertain recovery time. Long-term problems include low investment, uncertain land ownership rights, and the government's ability to manage its budget. Overseas remittances from Fijians working in Kuwait and Iraq have increased significantly.

Finland Finland has a highly industrialized, largely free-market economy with per capita output roughly that of the UK, France, Germany, and Italy. Its key economic sector is manufacturing - principally the wood, metals, engineering, telecommunications, and electronics industries. Trade is important; exports equal two-fifths of GDP. Finland excels in high-tech exports, e.g., mobile phones. Except for timber and several minerals, Finland depends on imports of raw materials, energy, and some components for manufactured goods. Because of the climate, agricultural development is limited to maintaining self-sufficiency in basic products. Forestry, an important export earner, provides a secondary occupation for the rural population. High unemployment remains a persistent problem.

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 in 2006 focused on introducing measures that attempt to boost employment through increased labor market flexibility; however, the population has remained opposed to labor reforms, hampering the government's ability to revitalize the economy. The tax burden remains one of the highest in Europe (nearly 50% of GDP in 2005). The lingering economic slowdown and inflexible budget items probably pushed the budget deficit above the eurozone's 3%-of-GDP limit in 2006; unemployment hovers near 9%.

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 confirmed 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 Gambia's natural beauty and proximity to Europe has made it one of the larger markets for tourism in West Africa. 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 security 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 to address security concerns in Israel, disrupted labor and trade access to and from the Gaza Strip. In 2001, and even more severely in 2003, Israeli military measures in PA areas resulted in the destruction of capital, the disruption of administrative structures, and widespread business closures. The Israeli withdrawal from the Gaza Strip in September 2005 offered some medium-term opportunities for economic growth, which have not yet been realized due to Israeli military activities in the Gaza Strip in 2006, continued crossings closures, and the international community's financial embargo of the PA after HAMAS took office in March 2006.

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 have compounded 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; however, stronger growth this year has improved employment considerably. Growth in 2001-03 fell short of 1%, rising to 1.7% in 2004, falling back to 0.9% in 2005, and increasing to 2.2% in 2006. Unemployment fell to 7.1% in October 2006, based on the Internation Labor Organization's measurement. 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 chronic 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 - and a lack of competition in the sevice sectors have made slow growth a chronic problem. Corporate restructuring and growing capital markets are setting the foundations that could help Germany meet the long-term challenges of European economic integration and globalization; however, the current government has failed to pass meaningful economic reform that would improve growth prospects. Higher government revenues from the cyclical upturn in 2006 reduced Germany's budget deficit to within the EU's 3% debt limit.

Ghana Well endowed with natural resources, Ghana has roughly twice the per capita output of the poorest 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 2006 along with record high prices for Ghana's largest cocoa crop to date. Ghana received a Millennium Challenge Corporation (MCC) grant in 2006, which aims to assist in transforming Ghana's agricultural export sector.

Gibraltar Self-sufficient Gibraltar benefits from an extensive shipping trade, offshore banking, and its position as an international conference center. The British military presence has been sharply reduced and now contributes about 7% to the local economy, compared with 60% in 1984. The financial sector, tourism (almost 5 million visitors in 1998), shipping services fees, and duties on consumer goods also generate revenue. The financial sector, the shipping sector, and tourism each contribute 25%-30% of GDP. Telecommunications accounts for another 10%. In recent years, Gibraltar has seen major structural change from a public to a private sector economy, but changes in government spending still have a major impact on the level of employment.

Glorioso Islands no economic activity

Greece Greece has a capitalist economy with the public sector accounting for about 40% of GDP and with per capita GDP at least 75% of the leading euro-zone economies. Tourism provides 15% of GDP. Immigrants make up nearly one-fifth of the work force, mainly in menial jobs. Greece is a major beneficiary of EU aid, equal to about 3.3% of annual GDP. The Greek economy grew by nearly 4.0% per year between 2003 and 2006, largely because of an investment boom and infrastructure upgrades for the 2004 Athens Olympic Games. Greece has not met the EU's Growth and Stability Pact budget deficit criteria of 3% of GDP since 2000. Public debt, inflation, and unemployment are above the euro-zone average. To overcome these challenges, the Greek Government is expected to continue cutting government spending, reducing the size of the public sector, and reforming the labor and pension systems, despite vocal opposition from the country's powerful labor unions and the general public.

Greenland The economy remains critically dependent on exports of fish and substantial support from the Danish Government, which supplies about half of government revenues. The public sector, including publicly-owned enterprises and the municipalities, plays the dominant role in the economy. Despite several interesting hydrocarbon and mineral exploration activities, it will take a number of years before production can materialize. Tourism is the only sector offering any near-term potential, and even this is limited due to a short season and high costs.

Grenada Grenada relies on tourism as its main source of foreign exchange, especially since the construction of an international airport in 1985. Strong performances in construction and manufacturing, together with the development of an offshore financial industry, have also contributed to growth in national output.

Guam The economy depends largely on US military spending and tourism. Total US grants, wage payments, and procurement outlays amounted to $1.3 billion in 2004. Over the past 30 years, the tourist industry has grown to become the largest income source following national defense. The Guam economy continues to experience expansion in both its tourism and military sectors.

Guatemala Guatemala is the largest and most populous of the Central American countries with a GDP per capita roughly one-half that of Brazil, Argentina, and Chile. The agricultural sector accounts for about one-fourth of GDP, two-fifths of exports, and half of the labor force. Coffee, sugar, and bananas are the main products. The 1996 signing of peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment, and Guatemala since then has pursued important reforms and macroeconomic stabilization. The distribution of income remains highly unequal with about 75% of the population below the poverty line. Other ongoing challenges include increasing government revenues, negotiating further assistance from international donors, upgrading both government and private financial operations, curtailing drug trafficking, and narrowing the trade deficit. Remittances from a large expatriate community that moved to the United States during the war have become an important source of foreign exchange.

Guernsey Financial services - banking, fund management, insurance - account for about 23% of employment and 32% of total income in this tiny, prosperous Channel Island economy. Tourism, manufacturing, and horticulture, mainly tomatoes and cut flowers, have been declining. Financial services, construction, retail, and the public sector have been growing. Light tax and death duties make Guernsey a popular tax haven. The evolving economic integration of the EU nations is changing the environment under which Guernsey operates.

Guinea Guinea possesses major mineral, hydropower, and agricultural resources, yet remains an underdeveloped nation. The country possesses almost half of the world's bauxite reserves and is the second-largest bauxite producer. The mining sector accounts for over 70% of exports. Long-run improvements in government fiscal arrangements, literacy, and the legal framework are needed if the country is to move out of poverty. Fighting along the Sierra Leonean and Liberian borders, as well as refugee movements, have caused major economic disruptions, aggravating a loss in investor confidence. Panic buying has created food shortages and inflation and caused riots in local markets. Guinea is trying to reengage with the IMF and World Bank, which cut off most assistance in 2003. Growth rose slightly in 2006, primarily due to increases in global demand and commodity prices on world markets, but the standard of living fell. The Guinea franc depreciated sharply as the prices for basic necessities like food and fuel rose beyond the reach of most Guineans. Dissatisfaction with economic conditions prompted nationwide strikes in February and June 2006.

Guinea-Bissau One of the 10 poorest countries in the world, Guinea-Bissau depends mainly on farming and fishing. Cashew crops have increased remarkably in recent years, and the country now ranks sixth in cashew production. Guinea-Bissau exports fish and seafood along with small amounts of peanuts, palm kernels, and timber. Rice is the major crop and staple food. However, intermittent fighting between Senegalese-backed government troops and a military junta destroyed much of the country's infrastructure and caused widespread damage to the economy in 1998; the civil war led to a 28% drop in GDP that year, with partial recovery in 1999-2002. Before the war, trade reform and price liberalization were the most successful part of the country's structural adjustment program under IMF sponsorship. The tightening of monetary policy and the development of the private sector had also begun to reinvigorate the economy. Because of high costs, the development of petroleum, phosphate, and other mineral resources is not a near-term prospect. However, offshore oil prospecting has begun and could lead to much-needed revenue in the long run. The inequality of income distribution is one of the most extreme in the world. The government and international donors continue to work out plans to forward economic development from a lamentably low base. In December 2003, the World Bank, IMF, and UNDP were forced to step in to provide emergency budgetary support in the amount of $107 million for 2004, representing over 80% of the total national budget. Government drift and indecision, however, have resulted in continued low growth in 2002-06.

Guyana The Guyanese economy exhibited moderate economic growth in 2001-02, based on expansion in the agricultural and mining sectors, a more favorable atmosphere for business initiatives, a more realistic exchange rate, fairly low inflation, and the continued support of international organizations. Chronic problems include a shortage of skilled labor and a deficient infrastructure. The government is juggling a sizable external debt against the urgent need for expanded public investment. The InterAmerican Development Bank in November 2006 canceled Guyana's nearly $400 million debt with the Bank. The bauxite mining sector should benefit in the near term from restructuring and partial privatization. Export earnings from agriculture and mining have fallen sharply, while the import bill has risen, driven by higher energy prices. Guyana's entrance into the Caricom Single Market and Economy (CSME) in January 2006 will broaden the country's export market, primarily in the raw materials sector.

Haiti Haiti is the poorest country in the Western Hemisphere, with 80% of the population living under the poverty line and 54% in abject poverty. Two-thirds of all Haitians depend on the agriculture sector, mainly small-scale subsistence farming, and remain vulnerable to damage from frequent natural disasters, exacerbated by the country's widespread deforestation. A macroeconomic program developed in 2005 with the help of the International Monetary Fund helped the economy grow 1.8% in 2006, the highest growth rate since 1999. Haiti suffers from higher inflation than similar low-income countries, a lack of investment, and a severe trade deficit. In 2005, Haiti paid its arrears to the World Bank, paving the way for reengagement with the Bank. The government relies on formal international economic assistance for fiscal sustainability. In 2006, Haiti held a successful donors conference in which the total aid pledged exceeded Haiti's request. Remittances are the primary source of foreign exchange, equaling nearly a quarter of GDP.

Heard Island and McDonald Islands No indigenous economic activity, but the Australian Government allows limited fishing around the islands.

Holy See (Vatican City) This unique, noncommercial economy is supported financially by an annual contribution from Roman Catholic dioceses throughout the world (known as Peter's Pence); by the sale of postage stamps, coins, medals, and tourist mementos; by fees for admission to museums; and by the sale of publications. Investments and real estate income also account for a sizable portion of revenue. The incomes and living standards of lay workers are comparable to those of counterparts who work in the city of Rome.

Honduras Honduras, the second poorest country in Central America and one of the poorest countries in the Western Hemisphere, with an extraordinarily unequal distribution of income and massive unemployment, is banking on expanded trade under the US-Central America Free Trade Agreement (CAFTA) and on debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. The country has met most of its macroeconomic targets, and began a three-year IMF Poverty Reduction and Growth Facility (PGRF) program in February 2004. The economy relies heavily on a narrow range of exports, notably bananas and coffee, making it vulnerable to natural disasters and shifts in commodity prices, but in recent years has experienced a rapid rise in exports of light manufacturers. Growth remains dependent on the economy of the US, its largest trading partner, and on reduction of the high crime rate, as a means of attracting and maintaining investment.

Hong Kong Hong Kong has a free market economy highly dependent on international trade. The territory has become more closely linked to mainland China over the past few years. Even before Hong Kong reverted to Chinese administration on 1 July 1997, it had extensive trade and investment ties with China. Hong Kong's service industry over the past decade has grown rapidly as its manufacturing industry has moved to the mainland. Hong Kong also has stepped up its efforts to gain approval to offer more mainland financial services in a bid to remain competitive with China's growing financial centers. Hong Kong's natural resources are limited, and food and raw materials must be imported. Gross imports and exports (i.e., including reexports to and from third countries) each exceed GDP in dollar value. Per capita GDP exceeds that of the four big economies of Western Europe. GDP growth averaged a strong 5% from 1989 to 2006, but Hong Kong suffered two recessions in the past eight years because of the Asian financial crisis in 1997-1998 and the global downturn in 2001-2002. Although the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 also battered Hong Kong's economy, a solid rise in exports, a boom in tourism from the mainland because of China's easing of travel restrictions, and a return of consumer confidence resulted in the resumption of strong growth from late 2003 through 2006. Moreover, several large initial public offerings of Chinese companies on the Hong Kong stock exchange since late 2005 have helped to boost Hong Kong's status as a financial hub and have contributed to the improved performance of the market in late 2006.

Howland Island no economic activity

Hungary Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25 average. Hungary continues to demonstrate strong economic growth and acceded to the EU in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $60 billion since 1989. Hungarian sovereign debt was upgraded in 2000 - together with the Czech Republic, Hungary holds the highest rating among the Central European transition economies. Rating agencies, however, have expressed concerns over Hungary's fiscal and current account deficits. Inflation has declined from 14% in 1998 to 3.7% in 2006. Unemployment has persisted above 6%. Hungary's labor force participation rate of 57% is one of the lowest in the Organization for Economic Cooperation and Development (OECD). Germany is by far Hungary's largest economic partner. Policy challenges include cutting the public sector deficit to 3% of GDP by 2008, from about 6.5% in 2006, and orchestrating an orderly interest rate reduction without sparking capital outflows.

Iceland Iceland's Scandinavian-type economy is basically capitalistic, yet with an extensive welfare system (including generous housing subsidies), low unemployment, and remarkably even distribution of income. In the absence of other natural resources (except for abundant geothermal power), the economy depends heavily on the fishing industry, which provides nearly 60% of export earnings and employs 6% of the work force. The economy remains sensitive to declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon. Government policies include reducing the current account deficit, limiting foreign borrowing, containing inflation, revising agricultural and fishing policies, and diversifying the economy. The government remains opposed to EU membership, primarily because of Icelanders' concern about losing control over their fishing resources. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, and new developments in software production, biotechnology, and financial services are taking place. The tourism sector is also expanding, with the recent trends in ecotourism and whale watching. Since 2000 growth has varied from a -1% in 2002 to 8% in 2004.

Iles Eparses no economic activity

India India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India's output with less than one quarter of its labor force. About three-fifths of the work force is in agriculture, leading the UPA government to articulate an economic reform program that includes developing basic infrastructure to improve the lives of the rural poor and boost economic performance. The government has reduced controls on foreign trade and investment. Tariffs averaged 12.5% on non-agricultural items in 2006. Higher limits on foreign direct investment were permitted in a few key sectors, such as telecommunications. However, tariff spikes in sensitive categories, including agriculture, and incremental progress on economic reforms still hinder foreign access to India's vast and growing market. Privatization of government-owned industries remained stalled in 2006, and continues to generate political debate; populist pressure from within the UPA government and from its Left Front allies continues to restrain needed initiatives. The economy has posted an average growth rate of more than 7% in the decade since 1996, reducing poverty by about 10 percentage points. India achieved 8.5% GDP growth in 2006, significantly expanding manufacturing. India is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers. Economic expansion has helped New Delhi continue to make progress in reducing its federal fiscal deficit. However, strong growth - more than 8 percent growth in each of the last three years - combined with easy consumer credit and a real estate boom is fueling inflation concerns. The huge and growing population is the fundamental social, economic, and environmental problem.

Indian Ocean The Indian Ocean provides major sea routes connecting the Middle East, Africa, and East Asia with Europe and the Americas. It carries a particularly heavy traffic of petroleum and petroleum products from the oilfields of the Persian Gulf and Indonesia. Its fish are of great and growing importance to the bordering countries for domestic consumption and export. Fishing fleets from Russia, Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainly for shrimp and tuna. Large reserves of hydrocarbons are being tapped in the offshore areas of Saudi Arabia, Iran, India, and western Australia. An estimated 40% of the world's offshore oil production comes from the Indian Ocean. Beach sands rich in heavy minerals and offshore placer deposits are actively exploited by bordering countries, particularly India, South Africa, Indonesia, Sri Lanka, and Thailand.

Indonesia Indonesia, a vast polyglot nation, has struggled to overcome the Asian financial crisis, and still grapples with high poverty and unemployment, inadequate infrastructure, endemic corruption, a fragile banking sector, a poor investment climate, and unequal resource distribution among regions. The country continues the slow work of rebuilding from the devastating December 2004 tsunami and from an earthquake in central Java in May 2006 that caused over $3 billion in damage and losses. Declining oil production and lack of new exploration investment turned Indonesia into a net oil importer in 2004. The cost of subsidizing domestic fuel placed increasing strain on the budget in 2005, and combined with indecisive monetary policy, contributed to a run on the currency in August, prompting the government to enact a 126% average fuel price hike in October. The resulting inflation and interest rate hikes dampened growth through mid-2006, while large increases in rice prices pushed millions more people under the national poverty line. Economic reformers introduced three policy packages in 2006 to improve the investment climate, infrastructure, and the financial sector, but translating them into reality has not been easy. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth.

Iran Iran's economy is marked by a bloated, inefficient state sector, over reliance on the oil sector, and statist policies that create major distortions throughout. Most economic activity is controlled by the state. Private sector activity is typically small-scale - workshops, farming, and services. President Mahmud AHMADI-NEJAD has continued to follow the market reform plans of former President RAFSANJANI, with limited progress. Relatively high oil prices in recent years have enabled Iran to amass nearly $60 billion in foreign exchange reserves, but have not eased economic hardships such as high unemployment and inflation. The proportion of the economy devoted to the development of weapons of mass destruction remains a contentious issue with leading Western nations.

Iraq Iraq's economy is dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings. Iraq's seizure of Kuwait in August 1990, subsequent international economic sanctions, and damage from military action by an international coalition beginning in January 1991 drastically reduced economic activity. Although government policies supporting large military and internal security forces and allocating resources to key supporters of the regime hurt the economy, implementation of the UN's oil-for-food program, which began in December 1996, helped improve conditions for the average Iraqi citizen. Iraq was allowed to export limited amounts of oil in exchange for food, medicine, and some infrastructure spare parts. In December 1999, the UN Security Council authorized Iraq to export under the program as much oil as required to meet humanitarian needs. The military victory of the US-led coalition in March-April 2003 resulted in the shutdown of much of the central economic administrative structure. Although a comparatively small amount of capital plant was damaged during the hostilities, looting, insurgent attacks, and sabotage have undermined efforts to rebuild the economy. Attacks on key economic facilities - especially oil pipelines and infrastructure - have prevented Iraq from reaching projected export volumes, but total government revenues have been higher than anticipated due to high oil prices. Despite political uncertainty, Iraq is making some progress in building the institutions needed to implement economic policy and has concluded a debt reduction agreement with the Paris Club and a Standby Arrangement with the IMF. Iraq's economic prospects will depend on the government's ability to control inflation, to implement structural reforms such as bank restructuring, and to develop the private sector.

Ireland Ireland is a small, modern, trade-dependent economy with growth averaging 6% in 1995-2006. Agriculture, once the most important sector, is now dwarfed by industry and services. Industry accounts for 46% of GDP, about 80% of exports, and 29% of the labor force. Although exports remain the primary engine for Ireland's growth, the economy has also benefited from a rise in consumer spending, construction, and business investment. Per capita GDP is 10% above that of the four big European economies and the second highest in the EU behind Luxembourg. Over the past decade, the Irish Government has implemented a series of national economic programs designed to curb price and wage inflation, reduce government spending, increase labor force skills, and promote foreign investment. Ireland joined in circulating the euro on 1 January 2002 along with 11 other EU nations.

Isle of Man Offshore banking, manufacturing, and tourism are key sectors of the economy. The government offers incentives to high-technology companies and financial institutions to locate on the island; this has paid off in expanding employment opportunities in high-income industries. As a result, agriculture and fishing, once the mainstays of the economy, have declined in their shares of GDP. The Isle of Man also attracts online gambling sites and the film industry. Trade is mostly with the UK. The Isle of Man enjoys free access to EU markets.

Israel Israel has a technologically advanced market economy with substantial, though diminishing, government participation. It depends on imports of crude oil, grains, raw materials, and military equipment. Despite limited natural resources, Israel has intensively developed its agricultural and industrial sectors over the past 20 years. Israel imports substantial quantities of grain, but is largely self-sufficient in other agricultural products. Cut diamonds, high-technology equipment, and agricultural products (fruits and vegetables) are the leading exports. Israel usually posts sizable trade deficits, which are covered by large transfer payments from abroad and by foreign loans. Roughly half of the government's external debt is owed to the US, which is its major source of economic and military aid. The bitter Israeli-Palestinian conflict; difficulties in the high-technology, construction, and tourist sectors; and fiscal austerity in the face of growing inflation led to small declines in GDP in 2001 and 2002. The economy rebounded in 2003-05, growing at a 4% rate each year, as the government tightened fiscal policy and implemented structural reforms to boost competition and efficiency in the markets. The conflict with Lebanon in summer 2006 dampened slightly GDP growth estimates for the year, but continuing strong foreign investment, tax revenue, and private consumption levels helped the economy recover quickly.

Italy Italy has a diversified industrial economy with roughly the same total and per capita output as France and the UK. This capitalistic economy remains divided into a developed industrial north, dominated by private companies, and a less-developed, welfare-dependent, agricultural south, with 20% unemployment. Most raw materials needed by industry and more than 75% of energy requirements are imported. Over the past decade, Italy has pursued a tight fiscal policy in order to meet the requirements of the Economic and Monetary Unions and has benefited from lower interest and inflation rates. The current government has enacted numerous short-term reforms aimed at improving competitiveness and long-term growth. Italy has moved slowly, however, on implementing needed structural reforms, such as lightening the high tax burden and overhauling Italy's rigid labor market and over-generous pension system, because of the current economic slowdown and opposition from labor unions. But the leadership faces a severe economic constraint: the budget deficit has breached the 3% EU ceiling. The economy experienced low growth in 2006, and unemployment remained at a high level.

Jamaica The Jamaican economy is heavily dependent on services, which now account for 60% of GDP. The country continues to derive most of its foreign exchange from remittances, tourism, and bauxite/alumina. Jamaica's economy, already saddled with a record of relatively low growth, was hit hard by Hurricane Ivan in late 2004, and is making a gradual recovery. But the economy faces serious long-term problems: high interest rates, increased foreign competition, exchange rate instability, a sizable merchandise trade deficit, large-scale unemployment and underemployment, and a high debt burden - the result of government bailouts to ailing sectors of the economy, most notably the financial sector in the mid-1990s. Following a strategy begun in 2004, Jamaica has reduced its public debt to 130% of GDP. Inflation has declined to 9%. Uncertain economic conditions have led to increased civil unrest, including gang violence fueled by the drug trade. The government faces the difficult prospect of having to achieve fiscal discipline in order to maintain debt payments while simultaneously attacking a serious and growing crime problem that is hampering economic growth.

Jan Mayen Jan Mayen is a volcanic island with no exploitable natural resources. Economic activity is limited to providing services for employees of Norway's radio and meteorological stations on the island.

Japan Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan advance with extraordinary rapidity to the rank of second most technologically powerful economy in the world after the US and the third-largest economy in the world after the US and China, measured on a purchasing power parity (PPP) basis. One notable characteristic of the economy is how manufacturers, suppliers, and distributors work together in closely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Japan's industrial sector is heavily dependent on imported raw materials and fuels. The tiny agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self sufficient in rice, Japan must import about 60% of its food on a caloric basis. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades, overall real economic growth had been spectacular - a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of overinvestment during the late 1980s and contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets and to force a restructuring of the economy. From 2000 to 2003, government efforts to revive economic growth met with little success and were further hampered by the slowing of the US, European, and Asian economies. In 2004-06, growth improved and the lingering fears of deflation in prices and economic activity lessened. Japan's huge government debt, which totals 175% of GDP, and the aging of the population are two major long-run problems. Some fear that a rise in taxes could endanger the current economic recovery. Internal conflict over the proper way to reform the financial system will continue as Japan Post's banking, insurance, and delivery services undergo privatization between 2007 and 2017.