Chapter M: Major infectious diseases (128)

Georgia
Georgia's economy sustained GDP growth of close to 10% in
2006 and 12% in 2007, based on strong inflows of foreign investment
and robust government spending. However, growth slowed to less than
3% in 2008 and is expected to slow further in 2009. 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, aircraft
and chemicals. Areas of recent improvement include growth in the
construction, banking services, and mining sectors, but reduced
availability of external investment and the slowing regional economy
are emerging risks. The country imports nearly all its needed
supplies of natural gas and oil products. It has sizeable hydropower
capacity, a growing component of its energy supplies. Georgia has
overcome the chronic energy shortages of the past by renovating
hydropower plants and by bringing in newly available supplies from
Azerbaijan. It also has an increased ability to pay for more
expensive gas imports from Russia. The construction on the
Baku-T'bilisi-Ceyhan oil pipeline, the Baku-T'bilisi-Erzerum gas
pipeline, and the Kars-Akhalkalaki Railroad are part of a strategy
to capitalize on Georgia's strategic location between Europe and
Asia and develop its role as a transit point for gas, oil and other
goods. Georgia has historically suffered from a chronic failure to
collect tax revenues; however, the government has made great
progress and has reformed the tax code, improved tax administration,
increased tax enforcement, and cracked down on corruption since
coming to power in 2004. Government revenues have increased nearly
four fold since 2003. Due to improvements in customs and tax
enforcement, smuggling is a declining problem. The country is
pinning its hopes for long-term growth on a determined effort to
reduce regulation, taxes, and corruption in order to attract foreign
investment, but the economy faces a more difficult investment
climate both domestically and internationally.

Germany
The German economy - the fifth largest economy in the world
in PPP terms and Europe's largest - began to contract in the second
quarter of 2008 as the strong euro, high oil prices, tighter credit
markets, and slowing growth abroad took their toll on Germany's
export-dependent economy. At just 1% in 2008, GDP growth is expected
to be negative in 2009. Recent stimulus and lender relief efforts
will make demands on Germany's federal budget and undercut plans to
balance its budget by 2011. The reforms launched by the former
government of Chancellor Gerhard SCHOEDER, deemed necessary due to
chronically high unemployment and low average growth, led to strong
growth in 2007, while unemployment in 2008 fell below 8%, a new
post-reunification low. Germany's aging population, combined with
high chronic unemployment, has pushed social security outlays to a
level exceeding contributions, but higher government revenues from
the cyclical upturn in 2006-07 and a 3% rise in the value-added tax
cut Germany's budget deficit to within the EU's 3% debt limit in
2007. The current government of Chancellor Angela MERKEL has
initiated other reform measures, such as a gradual increase in the
mandatory retirement age from 65 to 67 and measures to increase
female participation in the labor market. The modernization and
integration of the eastern German economy - where unemployment still
exceeds 30% in some municipalities - continues to be a costly
long-term process, with annual transfers from west to east amounting
to roughly $80 billion. While corporate restructuring and growing
capital markets have set strong foundations to help Germany meet the
longer-term challenges of European economic integration and
globalization, Germany's export-oriented economy has proved a
disadvantage in the context of weak global demand.

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 and cocoa production, and individual
remittances, are major sources of foreign exchange. The domestic
economy continues to revolve around agriculture, which accounts for
about 35% of GDP and employs about 55% of the work force, mainly
small landholders. Ghana signed a Millennium Challenge Corporation
(MCC) Compact in 2006, which aims to assist in transforming Ghana's
agricultural sector. Ghana opted for debt relief under the Heavily
Indebted Poor Country (HIPC) program in 2002, and is also benefiting
from the Multilateral Debt Relief Initiative that took effect in
2006. Thematic priorities under its current Growth and Poverty
Reduction Strategy, which also provides the framework for
development partner assistance, are: macroeconomic stability;
private sector competitiveness; human resource development; and good
governance and civic responsibility. Sound macro-economic management
along with high prices for gold and cocoa helped sustain GDP growth
in 2008.

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.

Greece
Greece has a capitalist economy with the public sector
accounting for about 40% of GDP and with per capita GDP about
two-thirds that of the leading euro-zone economies. Tourism provides
15% of GDP. Immigrants make up nearly one-fifth of the work force,
mainly in agricultural and unskilled 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 2007, due
partly to infrastructural spending related to the 2004 Athens
Olympic Games, and in part to an increased availability of credit,
which has sustained record levels of consumer spending. But growth
dropped to 2.9% in 2008, as a result of the world financial crisis
and tightening credit conditions. Greece violated the EU's Growth
and Stability Pact budget deficit criteria of no more than 3% of GDP
from 2001 to 2006, but finally met that criteria in 2007-08. Public
debt, inflation, and unemployment are above the euro-zone average,
but are falling. The Greek Government continues to grapple with
cutting government spending, reducing the size of the public sector,
and reforming the labor and pension systems, in the face of often
vocal opposition from the country's powerful labor unions and the
general public. The economy remains an important domestic political
issue in Greece and, while the ruling New Democracy government has
had some success in improving economic growth and reducing the
budget deficit, Athens faces long-term challenges in its effort to
continue its economic reforms, especially social security reform and
privatization.

Greenland
The economy remains critically dependent on exports of
shrimp and fish and on a substantial subsidy - about $700 million in
2008-09 - from the Danish Government, which supplies about 60% of
government revenues. The public sector, including publicly-owned
enterprises and the municipalities, plays the dominant role in the
economy. Several interesting hydrocarbon and mineral exploration
activities are ongoing and in 2007 a US firm signed an agreement
with the Greenland Home Rule government to study the feasibility of
building a multi-billion dollar aluminum smelter and hydropower
plant. Denmark plans to reduce its subsidies to Greenland as
revenues from oil exports come onstream.

Grenada
Grenada relies on tourism as its main source of foreign
exchange especially since the construction of an international
airport in 1985. Hurricanes Ivan (2004) and Emily (2005) severely
damaged the agricultural sector - particularly nutmeg and cocoa
cultivation - which had been a key driver of economic growth.
Grenada has rebounded from the devastating effects of the hurricanes
but is now saddled with the debt burden from the rebuilding process.
Public debt-to-GDP is nearly 110%, leaving the THOMAS administration
limited room to engage in public investments and social spending.
Strong performances in construction and manufacturing, together with
the development of tourism and an offshore financial industry, have
also contributed to growth in national output; however, economic
growth will likely slow in 2009 because of the global economic
slowdown's effects on tourism and remittances.

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 most populous of the Central American
countries with a GDP per capita roughly one-half that of Argentina,
Brazil, and Chile. The agricultural sector accounts for about
one-tenth of GDP, two-fifths of exports, and half of the labor
force. Coffee, sugar, and bananas are the main products, with sugar
exports benefiting from increased global demand for ethanol. 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 Central American Free Trade Agreement (CAFTA) entered into force
in July 2006 and has since spurred increased investment in the
export sector, but concerns over security, the lack of skilled
workers and poor infrastructure continued to hamper foreign
participation. The distribution of income remains highly unequal
with more than half of the population below the national poverty
line. Other ongoing challenges include increasing government
revenues, negotiating further assistance from international donors,
curtailing drug trafficking and rampant crime, and narrowing the
trade deficit. Given Guatemala's large expatriate community in the
United States, it is the top remittance recipient in Central
America, with inflows serving as a primary source of foreign income
equivalent to nearly two-thirds of exports. Economic growth will
slow in 2009 as export demand from US and other Central American
markets drop and foreign investment slows amid the global slowdown.

Guernsey
Financial services - banking, fund management, insurance -
account for about 23% of employment and about 55% 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 has
almost half of the world's bauxite reserves. The mining sector
accounts for more than 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. Investor
confidence has been sapped by rampant corruption, a lack of
electricity and other infrastructure, a lack of skilled workers, and
the political uncertainty because of the death of President Lansana
CONTE in December 2008. Guinea is trying to reengage with the IMF
and World Bank, which cut off most assistance in 2003, and is
working closely with technical advisors from the U.S. Treasury
Department, the World Bank and IMF, seeking to return to a fully
funded program. Growth rose slightly in 2006-08, 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 five 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
fifth 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. Offshore oil
prospecting is underway in several sectors but has not yet led to
commercially viable crude deposits. 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, resulted in continued low growth in
2002-06. Higher raw material prices boosted growth in 2007 and 2008.

Guyana
The Guyanese economy exhibited moderate economic growth in
recent years and is based largely on agriculture and extractive
industries. The economy is heavily dependent upon the export of six
commodities - sugar, gold, bauxite, shrimp, timber, and rice - which
represent nearly 60% of the country's GDP and are highly susceptible
to adverse weather conditions and fluctuations in commodity prices.
Economic recovery since the 2005 flood-related contraction has been
buoyed by increases in remittances and foreign direct investment in
the sugar and rice industries as well as the mining sector. The
bauxite mining sector should benefit in the near term from
restructuring and partial privatization, and the state-owned sugar
industry will conduct efficiency increasing modernizations. Export
earnings from agriculture and mining have remained flat as rising
commodity prices have offset declining production, while the import
bill has risen, driven by higher energy costs. 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. In March 2007, the
Inter-American Development Bank, Guyana's principal donor, canceled
Guyana's nearly $470 million debt, equivalent to nearly 48% of GDP,
which along with other Highly Indebted Poor Country (HIPC) debt
forgiveness brought the debt-to-GDP ratio down from 183% in 2006 to
120% in 2007. Guyana became heavily indebted as a result of the
inward-looking, state-led development model pursued in the 1970s and
1980s. Guyana's entrance into the Caricom Single Market and Economy
(CSME) in January 2006 has broadened 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
agricultural sector, mainly small-scale subsistence farming, and
remain vulnerable to damage from frequent natural disasters,
exacerbated by the country's widespread deforestation. While the
economy has recovered in recent years, registering positive growth
since 2005, four tropical storms in 2008 severely damaged the
transportation infrastructure and agricultural sector. US economic
engagement under the Haitian Hemispheric Opportunity through
Partnership Encouragement (HOPE) Act, passed in December 2006, has
boosted apparel exports and investment by providing tariff-free
access to the US. HOPE II, passed in October 2008, has further
improved the export environment for the apparel sector by extending
preferences to 2018; the apparel sector accounts for two-thirds of
Haitian exports and nearly one-tenth of GDP. Remittances are the
primary source of foreign exchange, equaling nearly a quarter of GDP
and more than twice the earnings from exports. Haiti suffers from
high inflation, a lack of investment because of insecurity and
limited infrastructure, and a severe trade deficit. In 2005, Haiti
paid its arrears to the World Bank, paving the way for reengagement
with the Bank. Haiti is expected to receive debt forgiveness for
about $525 million of its debt through the Highly-Indebted Poor
Country (HIPC) initiative by mid-2009. The government relies on
formal international economic assistance for fiscal sustainability.

Heard Island and McDonald Islands
The islands have no indigenous
economic activity, but the Australian Government allows limited
fishing in the surrounding waters.

Holy See (Vatican City)
The Holy See is supported financially by a
variety of sources, including investments, real estate income, and
donations from Catholic individuals, dioceses, and institutions;
these help fund the Roman Curia (Vatican bureaucracy), diplomatic
missions, and media outlets. The separate Vatican City State budget
includes the Vatican museums and post office and is supported
financially by the sale of stamps, coins, medals, and tourist
mementos; by fees for admission to museums; and by publications
sales. Moreover, an annual collection taken up in dioceses and
direct donations go to a non-budgetary fund known as Peter's Pence,
which is used directly by the Pope for charity, disaster relief, and
aid to churches in developing nations. 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,
has an extraordinarily unequal distribution of income and high
unemployment. 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; however, investments in
the maquila and non-traditional export sectors are slowly
diversifying the economy. Economic growth remains dependent on the
US economy its largest trading partner, and will decline in 2009 as
a result of reduction in export demand and tightening global credit
markets. Remittances represent over a quarter of GDP or nearly
three-quarters of exports. The US-Central America Free Trade
Agreement (CAFTA) came into force in 2006 and has helped foster
investment. Despite improvements in tax collections, the
government's fiscal deficit is growing due to increases in current
expenditures and financial losses from the state energy and
telephone companies.

Hong Kong
Hong Kong has a free market economy highly dependent on
international trade and finance, which has left it heavily exposed
to the global economic slowdown that began in 2008. The total value
of goods and services trade, including the sizable share of
reexports, was equivalent to 404% of GDP in 2007. The territory has
become increasingly integrated with mainland China over the past few
years through trade, tourism, and financial links. The mainland has
long been Hong Kong's largest trading partner, accounting for nearly
49% of Hong Kong's exports trade by value in 2008. As a result of
China's easing of travel restrictions, the number of mainland
tourists to the territory has surged from 4.5 million in 2001 to
16.9 million in 2008, when they outnumbered visitors from all other
countries combined. Hong Kong has also established itself as the
premier stock market for Chinese firms seeking to list abroad. More
than one-third of the firms listed on the Hong Kong Stock Exchange
are now mainland Chinese companies. They account for 60% of the
Exchange's market capitalization. During the past decade, as Hong
Kong's manufacturing industry moved to the mainland, its service
industry has grown rapidly and now accounts for more than 90% of the
territory's GDP. Hong Kong's natural resources are limited, and food
and raw materials must be imported. GDP growth averaged a strong 5%
from 1989 to 2007, but the global financial crisis caused a sharp
slowdown in the second half of 2008, pushing the territory into
recession. Hong Kong continues to link its currency closely to the
US dollar, maintaining an arrangement established in 1983.

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. The private sector accounts for more than 80% of
GDP. Foreign ownership of and investment in Hungarian firms is
widespread, with cumulative foreign direct investment totaling more
than $200 billion since 1989. The government's IMF-mandated
austerity measures, imposed since late 2006, have reduced the budget
deficit from over 9% of GDP in 2006 to 3.3% in 2008. Hungary's
impending inability to service its short-term debt - brought on by
the global credit crunch in late 2008 - led Budapest to seek and
receive an IMF-arranged financial assistance package worth over $25
billion. The global financial crisis, declining exports, and low
domestic consumption and fixed asset accumulation, dampened by
government austerity measures, will result in a negative growth rate
of about -1.5% to -2.5% in 2009.

Iceland
Iceland's Scandinavian-type social-market economy combines a
capitalist structure and free-market principles with an extensive
welfare system, including generous housing subsidies. Prior to the
2008 crisis, Iceland had achieved high growth, low unemployment, and
a remarkably even distribution of income. Government economic
priorities have included stabilizing the krona, reducing the current
account deficit, containing inflation, restructuring the financial
sector, and diversifying the economy. The economy depends heavily on
the fishing industry, which provides 40% of export earnings, more
than 12% of GDP, and employs 7% of the work force. It 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. Iceland's economy has been diversifying into
manufacturing and service industries in the last decade, with new
developments in software production, biotechnology, and tourism.
Abundant geothermal sources have attracted substantial foreign
investment in the aluminum and hydropower sectors and boosted
economic growth, although the financial crisis has put several
investment projects on hold. Much of Iceland's economic growth in
recent years came as the result of a boom in domestic demand
following the rapid expansion of the country's financial sector.
Domestic banks expanded aggressively in foreign markets, and
consumers and businesses borrowed heavily in foreign-currency loans,
following the privatization of the sector in the early 2000s.
Worsening global financial conditions throughout 2008 resulted in a
sharp depreciation of the krona vis-a-vis other major currencies.
The foreign exposure of Icelandic banks, whose loans and other
assets totaled more than 10 times the country's GDP, became
unsustainable. Iceland's three largest banks collapsed in late 2008.
The country negotiated over $10 billion in loans from the IMF and
other countries to stabilize its currency and financial sector, and
to guarantee foreign deposits in Icelandic banks. A protracted
recession is expected in 2009 and 2010 with GDP likely to contract
and unemployment likely to surpass 10%. The collapse of the
financial system has led to a major shift in opinion in favor of
joining the EU and adopting the euro. Previous opposition to this
move stemmed from Icelanders' concern about losing control of their
fishing resources. Iceland's coalition government collapsed in
January 2009 following protests over growing joblessness and losses
to personal savings.

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 third of its labor force. Slightly more
than half of the work force is in agriculture, leading the United
Progressive Alliance (UPA) government to articulate a rural economic
development program that includes creating basic infrastructure to
improve the lives of the rural poor and boost economic performance.
The government has reduced controls on foreign trade and investment.
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 remains stalled and continues to generate political
debate; populist pressure from within the UPA government had
restrained needed initiatives. The economy has posted an average
growth rate of more than 7% in the decade since 1997, reducing
poverty by about 10 percentage points. India achieved 9.6% GDP
growth in 2006, 9.0% in 2007, and 6.6% in 2008, significantly
expanding manufactures through late 2008. India also 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. Strong growth combined with easy consumer credit,
a real estate boom, and fast-rising commodity prices fueled
inflation concerns from mid-2006 to August 2008. Rising tax revenues
from better tax administration and economic expansion helped New
Delhi make progress in reducing its fiscal deficit for three
straight years before skyrocketing global commodity prices more than
doubled the cost of government energy and fertilizer subsidies. The
ballooning subsidies, amidst slowing growth, brought the return of a
large fiscal deficit in 2008. In the long run, 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 made significant
economic advances under the administration of President YUDHOYONO
but faces challenges stemming from the global financial crisis and
world economic downturn. Indonesia's debt-to-GDP ratio in recent
years has declined steadily because of increasingly robust GDP
growth and sound fiscal stewardship. The government has introduced
significant reforms in the financial sector, including in the areas
of tax and customs, the use of Treasury bills, and capital market
supervision. Indonesia's investment law, passed in March 2007, seeks
to address some of the concerns of foreign and domestic investors.
Indonesia still struggles with poverty and unemployment, inadequate
infrastructure, corruption, a complex regulatory environment, and
unequal resource distribution among regions. The non-bank financial
sector, including pension funds and insurance, remains weak. Despite
efforts to broaden and deepen capital markets, they remain
underdeveloped. Economic difficulties in early 2008 centered on high
global food and oil prices and their impact on Indonesia's poor and
on the budget. The onset of the global financial crisis dampened
inflationary pressures, but increased risk aversion for emerging
market assets resulted in large losses in the stock market,
significant depreciation of the rupiah, and a difficult environment
for bond issuance. As global demand has slowed and prices for
Indonesia's commodity exports have fallen, Indonesia faces the
prospect of growth significantly below the 6-plus percent recorded
in 2007 and 2008.

Iran
Iran's economy is marked by an inefficient state sector,
reliance on the oil sector, which provides the majority of
government revenues, and statist policies, which create major
distortions throughout the system. Most economic activity is
controlled by the state. Private sector activity is typically
limited to small-scale workshops, farming, and services. Price
controls, subsidies, and other rigidities weigh down the economy,
undermining the potential for private-sector-led growth. Significant
informal market activity flourishes. Corruption and shortages of
goods are widespread. President Mahmud AHMADI-NEJAD has proposed
reforms to Iran's system of price controls and subsidies,
particularly on food and energy. However, previous government-led
efforts at reform - such as fuel rationing in July 2007 and the
imposition of the Value-Added Tax (VAT) in October 2008 - were met
with stiff resistance and violent protests. High oil prices in
recent years allowed Iran to greatly increase its export earnings
and amass nearly $100 billion in foreign exchange reserves. But with
oil prices currently below $40 per barrel, the Iranian government is
facing difficulties. Tehran has formulated a 2009 budget that
anticipates lower oil prices. The government has drawn down the
country's Oil Stabilization Fund, and may be dipping into foreign
exchange reserves. Iran continues to suffer from double-digit
unemployment and inflation - inflation climbed to a 28% annual rate
in 2008. Underemployment among Iran's educated youth has convinced
many to seek jobs overseas, resulting in a significant "brain drain."

Iraq
Decreasing insurgent attacks and an improving security
environment in many parts of the country are helping to spur
economic activity. Iraq's economy is dominated by the oil sector,
which has traditionally provided over 90% of foreign exchange
earnings. Oil exports are around levels seen before Operation Iraqi
Freedom. Total government revenues have benefited from high oil
prices in recent years; however, revenues have declined
significantly since the oil price drop in fall 2008. Iraq is making
some progress in building the institutions needed to implement
economic policy. In March 2009 Iraq concluded a Stand-By Arrangement
(SBA) with the IMF that details economic reforms. The SBA allows an
80% reduction of the debt owed to Paris Club creditor nations. The
International Compact with Iraq was established in May 2007 to
integrate Iraq into the regional and global economy, and the Iraqi
government is seeking to pass laws to strengthen its economy. This
legislation includes a hydrocarbon law to establish a modern legal
framework to allow Iraq to develop its resources and a revenue
sharing law to equitably divide oil revenues within the nation,
although both are still under contentious political negotiation.
Some foreign entities have expressed interest in reinvigorating
Iraq's industrial sector. The government of Iraq is pursuing a
strategy to gain foreign participation in joint ventures with
State-owned enterprises. Provincial Councils are also using their
own budgets to promote and facilitate investment at the local level.
The Central Bank has been successful in controlling inflation
through appreciation of the dinar against the US dollar. However,
Iraq's challenge will be to use macroeconomic gains to improve the
lives of ordinary Iraqis. Reducing corruption and implementing
structural reforms, such as bank restructuring and developing the
private sector, will be key to Iraq's economic success.

Ireland
Ireland is a small, modern, trade-dependent economy. GDP
growth averaged 6% in 1995-2007, but economic activity dropped
sharply in 2008 and Ireland entered into a recession for the first
time in more than a decade with the onset of the world financial
crisis and subsequent severe slowdown in the property and
construction markets. Agriculture, once the most important sector,
is now dwarfed by industry and services. Although the export sector,
dominated by foreign multinationals, remains a key component of
Ireland's economy, construction most recently fueled economic growth
along with strong consumer spending and business investment.
Property prices rose more rapidly in Ireland in the decade up to
2006 than in any other developed world economy. Per capita GDP also
surged during Ireland's high-growth years, and in 2007 surpassed
that of the United States. The Irish Government has implemented a
series of national economic programs designed to curb price and wage
inflation, invest in infrastructure, increase labor force skills,
and promote foreign investment. In 2008 the COWEN government moved
to guarantee all bank deposits, recapitalize the banking system, and
establish partly-public venture capital funds in response to the
country's economic downturn. 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
contributions to 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, its major source of economic and
military aid. Israel's GDP, after contracting slightly in 2001 and
2002 due to the Palestinian conflict and troubles in the
high-technology sector, has grown by about 5% per year since 2003.
The economy grew an estimated 3.9% in 2008, slowed by the global
financial crisis. The government's prudent fiscal policy and
structural reforms over the past few years have helped to induce
strong foreign investment, tax revenues, and private consumption,
setting the economy on a solid growth path.

Italy
Italy has a diversified industrial economy, which is divided
into a developed industrial north, dominated by private companies,
and a less-developed, welfare-dependent, agricultural south, with
high unemployment. The Italian economy is driven in large part by
the manufacture of high-quality consumer goods produced by small and
medium-sized enterprises. Italy also has a sizable underground
economy, which by some estimates accounts for as much as 15% of GDP.
These activities are most common within the agriculture,
construction, and service sectors. Italy has moved slowly on
implementing needed structural reforms, such as lightening the high
tax burden and overhauling Italy's rigid labor market and
over-generous pension system and these conditions will be
exacerbated by the recent global financial crisis. The Italian
government is seeking to rein in government spending, but the
leadership faces a severe economic constraint: Italy's official debt
remains above 100% of GDP, and the fiscal deficit - 1.5% of GDP in
2007 - could approach 3% in 2009 as political pressure to stimulate
the economy and the costs of servicing Italy's debt rise. The
economy will continue to contract through 2009 as the global demand
for exports drop.

Jamaica
The Jamaican economy is heavily dependent on services, which
now account for more than 60% of GDP. The country continues to
derive most of its foreign exchange from tourism, remittances, and
bauxite/alumina. Remittances account for nearly 20% of GDP and are
equivalent to tourism revenues. Jamaica's economy, already saddled
with the lowest economic growth in Latin America, will face
increasing difficulties as the global economy slows. The economy
faces serious long-term problems: a sizable merchandise trade
deficit, large-scale unemployment and underemployment, and a
debt-to-GDP ratio of almost 130%. Jamaica's onerous debt burden -
the fourth highest per capita - is the result of government bailouts
to ailing sectors of the economy, most notably the financial sector
in the mid-to-late 1990s. It hinders government spending on
infrastructure and social programs as debt servicing accounts for
nearly half of government expenditures. Inflation rose sharply in
2008 as a result of high prices for imported food and oil and should
fall in 2009 with the decline in international oil prices. High
unemployment exacerbates the serious crime problem, including gang
violence that is fueled by the drug trade. The GOLDING
administration 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
In the years following World War II, 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 speed to the rank of second most
technologically powerful economy in the world after the US. Today,
measured on a purchasing power parity (PPP) basis, Japan is the
third-largest economy in the world after the US and China. Two
notable characteristic of the post-war economy were the close
interlocking structures of manufacturers, suppliers, and
distributors, known as keiretsu, and the guarantee of lifetime
employment for a substantial portion of the urban labor force. Both
features are now eroding under the dual pressures of global
competition and domestic demographic change. Japan's industrial
sector is heavily dependent on imported raw materials and fuels. A
tiny agricultural sector is highly subsidized and protected, with
crop yields among the highest in the world. Usually self sufficient
in rice, Japan imports 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 inefficient investment and an asset
price bubble in the late 1980s that required a protracted period of
time for firms to reduce excess debt, capital, and labor. In October
2007 Japan's longest post-war period of economic expansion ended
after 69 months and Japan entered into recession in 2008, with 2009
marking a return to near 0% interest rates. The 10-year
privatization of Japan Post, which has functioned not only as the
national postal delivery system but also, through its banking and
insurance facilities as Japan's largest financial institution, was
completed in October 2007, marking a major milestone in the process
of structural reform. The Japanese financial sector was not heavily
exposed to sub-prime mortgages or their derivative instruments and
weathered the initial effect of the global credit crunch, but a
sharp downturn in business investment and global demand for Japan's
exports in late 2008 pushed Japan further into a recession. Japan's
huge government debt, which totals 170% of GDP, and the aging of the
population are two major long-run problems. Debate continues on the
role of and effects of reform in restructuring the economy.

Jersey
Jersey's economy is based on international financial
services, agriculture, and tourism. In 2005 the finance sector
accounted for about 50% of the island's output. Potatoes,
cauliflower, tomatoes, and especially flowers are important export
crops, shipped mostly to the UK. The Jersey breed of dairy cattle is
known worldwide and represents an important export income earner.
Milk products go to the UK and other EU countries. Tourism accounts
for one-quarter of GDP. In recent years, the government has
encouraged light industry to locate in Jersey, with the result that
an electronics industry has developed, displacing more traditional
industries. All raw material and energy requirements are imported,
as well as a large share of Jersey's food needs. Light taxes and
death duties make the island a popular tax haven. Living standards
come close to those of the UK.

Jordan
Jordan is a small Arab country with insufficient supplies of
water, oil, and other natural resources. Poverty, unemployment, and
inflation are fundamental problems, but King ABDALLAH II, since
assuming the throne in 1999, has undertaken some broad economic
reforms in a long-term effort to improve living standards. Since
Jordan's graduation from its most recent IMF program in 2002, Amman
has continued to follow IMF guidelines, practicing careful monetary
policy, making substantial headway with privatization, and opening
the trade regime. Jordan's exports have significantly increased
under the free trade accord with the US and Jordanian Qualifying
Industrial Zones (QIZ), which allow Jordan to export goods with some
Israeli content duty free to the US. In 2006 and 2008, Jordan used
privatization proceeds to significantly reduce its debt-to-GDP
ratio. These measures have helped improve productivity and have made
Jordan more attractive for foreign investment. The government ended
subsidies for petroleum and other consumer goods in 2008 in an
effort to control the budget. The main challenges facing Jordan are
reducing dependence on foreign grants, reducing the growing budget
deficit, attracting investments, and creating jobs. Jordan is
currently exploring nuclear power generation to forestall energy
shortfalls. Jordan's conservative banking sector has been largely
protected from the worldwide financial crisis, but many businesses,
particularly in the tourism and real estate sector, are predicting a
slow-down in 2009.

Kazakhstan
Kazakhstan, the largest of the former Soviet republics in
territory, excluding Russia, possesses enormous fossil fuel reserves
and plentiful supplies of other minerals and metals. It also has a
large agricultural sector featuring livestock and grain.
Kazakhstan's industrial sector rests on the extraction and
processing of these natural resources. Kazakhstan enjoyed
double-digit growth in 2000-01 and 8% or more per year in 2002-07 -
thanks largely to its booming energy sector, but also to economic
reform, good harvests, and increased foreign investment; growth
slowed to 2.4% in 2008, however, as a result of declining oil prices
and a softening world economy. Inflation reached 10% in 2007 and 17%
in 2008. In the energy sector, the opening of the Caspian Pipeline
Consortium in 2001, from western Kazakhstan's Tengiz oilfield to the
Black Sea, substantially raised export capacity. In 2006, Kazakhstan
completed the Atasu-Alashankou portion of an oil pipeline to China
that is planned in future construction to extend from the country's
Caspian coast eastward to the Chinese border. The country has
embarked upon an industrial policy designed to diversify the economy
away from overdependence on the oil sector by developing its
manufacturing potential. The policy changed the corporate tax code
to favor domestic industry as a means to reduce the influence of
foreign investment and foreign personnel. The government has engaged
in several disputes with foreign oil companies over the terms of
production agreements, most recently, with regard to the Kashagan
project in 2007-08. Since 2007, Astana has provided financial
support to the banking sector which has been struggling with poor
asset quality and large foreign loans.

Kenya
The regional hub for trade and finance in East Africa, Kenya
has been hampered by corruption and by reliance upon several primary
goods whose prices have remained low. In 1997, the IMF suspended
Kenya's Enhanced Structural Adjustment Program due to the
government's failure to maintain reforms and curb corruption. A
severe drought from 1999 to 2000 compounded Kenya's problems,
causing water and energy rationing and reducing agricultural output.
As a result, GDP contracted by 0.2% in 2000. The IMF, which had
resumed loans in 2000 to help Kenya through the drought, again
halted lending in 2001 when the government failed to institute
several anticorruption measures. Despite the return of strong rains
in 2001, weak commodity prices, endemic corruption, and low
investment limited Kenya's economic growth to 1.2%. Growth lagged at
1.1% in 2002 because of erratic rains, low investor confidence,
meager donor support, and political infighting up to the elections.
In the key December 2002 elections, Daniel Arap MOI's 24-year-old
reign ended, and a new opposition government took on the formidable
economic problems facing the nation. After some early progress in
rooting out corruption and encouraging donor support, the KIBAKI
government was rocked by high-level graft scandals in 2005 and 2006.
In 2006, the World Bank and IMF delayed loans pending action by the
government on corruption. The international financial institutions
and donors have since resumed lending, despite little action on the
government's part to deal with corruption. Post-election violence in
early 2008, coupled with the effects of the global financial crisis
on remittance and exports, reduced GDP growth to 2.2% in 2008, down
from 7% the previous year.

Kiribati
A remote country of 33 scattered coral atolls, Kiribati has
few natural resources and is one of the least developed Pacific
Islands. Commercially viable phosphate deposits were exhausted at
the time of independence from the UK in 1979. Copra and fish now
represent the bulk of production and exports. The economy has
fluctuated widely in recent years. Economic development is
constrained by a shortage of skilled workers, weak infrastructure,
and remoteness from international markets. Tourism provides more
than one-fifth of GDP. Private sector initiatives and a financial
sector are in the early stages of development. Foreign financial aid
from the EU, UK, US, Japan, Australia, New Zealand, Canada, UN
agencies, and Taiwan accounts for 20-25% of GDP. Remittances from
seamen on merchant ships abroad account for more than $5 million
each year. Kiribati receives around $15 million annually for the
government budget from an Australian trust fund.

Korea, North
North Korea, one of the world's most centrally directed
and least open economies, faces chronic economic problems.
Industrial capital stock is nearly beyond repair as a result of
years of underinvestment and shortages of spare parts. Large-scale
military spending draws off resources needed for investment and
civilian consumption. Industrial and power output have declined in
parallel from pre-1990 levels. Severe flooding in the summer of 2007
aggravated chronic food shortages caused by on-going systemic
problems including a lack of arable land, collective farming
practices, and persistent shortages of tractors and fuel.
Large-scale international food aid deliveries have allowed the
people of North Korea to escape widespread starvation since famine
threatened in 1995, but the population continues to suffer from
prolonged malnutrition and poor living conditions. Since 2002, the
government has allowed private "farmers' markets" to begin selling a
wider range of goods. It also permitted some private farming - on an
experimental basis - in an effort to boost agricultural output. In
October 2005, the government tried to reverse some of these policies
by forbidding private sales of grains and reinstituting a
centralized food rationing system. By December 2005, the government
terminated most international humanitarian assistance operations in
North Korea (calling instead for developmental assistance only) and
restricted the activities of remaining international and
non-governmental aid organizations such as the World Food Program.
External food aid now comes primarily from China and South Korea in
the form of grants and long-term concessional loans. In May 2008,
the US agreed to give 500,000 metric tons of food to North Korea via
the World Food Program and US nongovernmental organizations;
Pyongyang began receiving these shipments in mid-2008. During the
October 2007 summit, South Korea also agreed to develop some of
North Korea's infrastructure, natural resources, and light industry,
but inter-Korean economic cooperation slowed in 2008 as Pyongyang
restricted tourism and manufacturing joint ventures in the North,
and food aid from South Korea was suspended. Firm political control
remains the Communist government's overriding concern, which will
likely inhibit the loosening of economic regulations.

Korea, South
Since the 1960s, South Korea has achieved an incredible
record of growth and integration into the high-tech modern world
economy. Four decades ago, GDP per capita was comparable with levels
in the poorer countries of Africa and Asia. In 2004, South Korea
joined the trillion dollar club of world economies. In 2008, its GDP
per capita was roughly the same as that of the Czech Republic and
New Zealand. Initially, this success was achieved by a system of
close government/business ties including directed credit, import
restrictions, sponsorship of specific industries, and a strong labor
effort. The government promoted the import of raw materials and
technology at the expense of consumer goods and encouraged savings
and investment over consumption. The Asian financial crisis of
1997-98 exposed longstanding weaknesses in South Korea's development
model including high debt/equity ratios, massive foreign borrowing,
and an undisciplined financial sector. GDP plunged by 6.9% in 1998,
then recovered by 9% in 1999-2000. Korea adopted numerous economic
reforms following the crisis, including greater openness to foreign
investment and imports. Growth fell back to 3.3% in 2001 because of
the slowing global economy, falling exports, and the perception that
much-needed corporate and financial reforms had stalled. Led by
consumer spending and exports, growth in 2002 was an impressive 7%
despite anemic global growth. Between 2003 and 2007, growth
moderated to about 4-5% annually. A downturn in consumer spending
was offset by rapid export growth. In 2008, inflation increased in
the face of rising oil and food prices before easing in the fourth
quarter. Korea was hit hard by the global financial turmoil that
began in September 2008. Stock prices fell by more than 40% for the
year and the value of the won fell by approximately 26%. Korean GDP
shrank in the fourth quarter and GDP growth for the year was just
2.2%. The Korean government adopted several measures to combat the
credit crunch and stimulate the economy.

Kosovo
Over the past few years Kosovo's economy has shown
significant progress in transitioning to a market-based system and
maintaining macroeconomic stability, but it is still highly
dependent on the international community and the diaspora for
financial and technical assistance. Remittances from the diaspora -
located mainly in Germany and Switzerland - are estimated to account
for about 15% of GDP, and donor-financed activities and aid for
another 15%. Kosovo's citizens are the poorest in Europe with an
average annual per capita income of only $2,300. Unemployment,
around 40% of the population, is a significant problem that
encourages outward migration and black market activity. Most of
Kosovo's population lives in rural towns outside of the capital,
Pristina. Inefficient, near-subsistence farming is common - the
result of small plots, limited mechanization, and lack of technical
expertise. With international assistance, Kosovo has been able to
privatize 50% of its state-owned enterprises (SOEs) by number, and
over 90% of SOEs by value. Minerals and metals - including lignite,
lead, zinc, nickel, chrome, aluminum, magnesium, and a wide variety
of construction materials - once formed the backbone of industry,
but output has declined because of ageing equipment and insufficient
investment. A limited and unreliable electricity supply due to
technical and financial problems is a major impediment to economic
development. Kosovo's Ministry of Energy and Mining has solicited
expressions of interest from private investors to develop a new
power plant in order to address Kosovo and the region's unmet and
growing demands for power. The official currency of Kosovo is the
euro, but the Serbian dinar is also used in Serb enclaves. Kosovo's
tie to the euro has helped keep core inflation low. Kosovo has one
of the most open economies in the region, and continues to work with
the international community on measures to improve the business
environment and attract foreign investment.

Kuwait
Kuwait is a small, rich, relatively open economy with
self-reported crude oil reserves of about 104 billion barrels - 8%
of world reserves. Petroleum accounts for nearly half of GDP, 95% of
export revenues, and 80% of government income. Kuwait experienced
rapid economic growth over the last several years on the back of
high oil prices and in 2008 posted its tenth consecutive budget
surplus. As a result of this positive fiscal situation, the need for
economic reforms was less urgent and the government did not push
through new initiatives. The drop in oil prices in late 2008 will
reduce Kuwait's fiscal surplus in 2009. The global financial crisis
may slow the pace of investment and development projects, but Kuwait
has vowed to use its considerable financial resources to stabilize
the economy if necessary.

Kyrgyzstan
Kyrgyzstan is a poor, mountainous country with a
predominantly agricultural economy. Cotton, tobacco, wool, and meat
are the main agricultural products, although only tobacco and cotton
are exported in any quantity. Industrial exports include gold,
mercury, uranium, natural gas, and electricity. Following
independence, Kyrgyzstan was progressive in carrying out market
reforms such as an improved regulatory system and land reform.
Kyrgyzstan was the first Commonwealth of Independent States (CIS)
country to be accepted into the World Trade Organization. Much of
the government's stock in enterprises has been sold. Drops in
production had been severe after the breakup of the Soviet Union in
December 1991, but by mid-1995, production began to recover and
exports began to increase. The economy is heavily weighted toward
gold export and a drop in output at the main Kumtor gold mine
sparked a 0.5% decline in GDP in 2002 and a 0.6% decline in 2005.
The government made steady strides in controlling its substantial
fiscal deficit, nearly closing the gap between revenues and
expenditures in 2006, before boosting expenditures more than 20% in
2007-08. The government and international financial institutions
have been engaged in a comprehensive medium-term poverty reduction
and economic growth strategy. In 2005, Bishkek agreed to pursue
much-needed tax reform and, in 2006, became eligible for the heavily
indebted poor countries (HIPC) initiative. Progress fighting
corruption, further restructuring of domestic industry, and success
in attracting foreign investment are keys to future growth. GDP grew
more than 6% annually in 2007-08, partly due to higher gold prices
internationally, but growth is likely to decline from that level in
2009, due to declining demand and lower commodity prices in the wake
of the international financial crisis.