Part 347

Faroe Islands The Faroese economy is dependent on fishing, which makes the economy vulnerable to price swings. The sector accounts for about 95% of exports and nearly half of GDP. In early 2008 the Faroese economy began to slow as a result of smaller catches and historically high oil prices that continue to trouble the economy. Though oil prices have come down, reduced catches, especially of cod and haddock, have continued to strain the Faroese economy. GDP grew 0.5% in 2008-09. The slowdown in the Faroese economy followed a strong performance since the mid-1990s with annual growth rates averaging close to 6%, mostly a result of increased fish landings and salmon farming, and high export prices. Unemployment reached its lowest level in the first half of 2008, but increased to 3.9% in 2009 and is rising. The Faroese Home Rule Government produced increasing budget surpluses that helped to reduce the large public debt, most of it to Denmark. However, total dependence on fishing and salmon farming make the Faroese economy very vulnerable to fluctuations in world demand. In addition, budget surpluses turned to deficits in 2008-09, and the economy at both the country and local level is running large deficits. Initial discoveries of oil in the Faroese area give hope for eventual oil production, which may provide a foundation for a more diversified economy and less dependence on Danish economic assistance. Aided by an annual subsidy from Denmark amounting to about 6% of Faroese GDP, the Faroese have a standard of living almost equal to that of Denmark and Greenland.

Fiji Fiji, endowed with forest, mineral, and fish resources, is one of the most developed of the Pacific island economies though still with a large subsistence sector. Sugar exports, remittances from Fijians working abroad, and a growing tourist industry - with 400,000 to 500,000 tourists annually - are the major sources of foreign exchange. Fiji's sugar has special access to European Union markets but will be harmed by the EU's decision to cut sugar subsidies. Sugar processing makes up one-third of industrial activity but is not efficient. Fiji's tourism industry was damaged by the December 2006 coup and is facing an uncertain recovery time. In 2007 tourist arrivals were down almost 6%, with substantial job losses in the service sector, and GDP dipped. The coup has created a difficult business climate. The EU has suspended all aid until the interim government takes steps toward new elections. Long-term problems include low investment, uncertain land ownership rights, and the government's inability to manage its budget. Overseas remittances from Fijians working in Kuwait and Iraq have decreased significantly. Fiji's current account deficit reached 23% of GDP in 2006.

Finland Finland has a highly industrialized, largely free-market economy with per capita output roughly that of Austria, Belgium, the Netherlands, and Sweden. Trade is important with exports accounting for over one third of GDP in recent years. Finland is strongly competitive in manufacturing - principally the wood, metals, engineering, telecommunications, and electronics industries. Finland excels in high-tech exports such as 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. Finland had been one of the best performing economies within the EU in recent years and its banks and financial markets avoided the worst of global financial crisis. However, the world slowdown hit exports and domestic demand hard in 2009, with Finland experiencing one of the deepest contractions in the euro zone. A recovery of exports stimulated economic growth in 2010, and led to a lowering of unemployment. The recession left a deep mark on general government finances and the debt ratio, turning previously strong budget surpluses into deficits. In the next few years, the great challenge of economic policy will be to implement a post-recession exit strategy in which measures supporting growth will be combined with general government adjustment measures. Longer-term, Finland must address a rapidly aging population and decreasing productivity that threaten competitiveness, fiscal sustainability, and economic growth.

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, and has ceded stakes in such leading firms as Air France, France Telecom, Renault, and Thales. It maintains a strong presence in some sectors, particularly power, public transport, and defense industries. With at least 75 million foreign tourists per year, France is the most visited country in the world and maintains the third largest income in the world from tourism. 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. France has weathered the global economic crisis better than most other big EU economies because of the relative resilience of domestic consumer spending, a large public sector, and less exposure to the downturn in global demand than in some other countries. Nonetheless, France's real GDP contracted 2.5% in 2009, but recovered somewhat in 2010, while the unemployment rate increased from 7.4% in 2008 to 9.5% in 2010. The government pursuit of aggressive stimulus and investment measures in response to the economic crisis, however, are contributing to a deterioration of France's public finances. The government budget deficit rose sharply from 3.4% of GDP in 2008 to 7.8% of GDP in 2010, while France's public debt rose from 68% of GDP to 84% over the same period. Paris is terminating stimulus measures, eliminating tax credits, and freezing most government spending to bring the budget deficit under the 3% euro-zone ceiling by 2013, and to highlight France's commitment to fiscal discipline at a time of intense financial market scrutiny of euro zone debt levels. President SARKOZY - who secured passage of pension reform in 2010 - is expected to seek passage of some tax reforms in 2011, but he may delay additional, more costly, reforms until after the 2012 election.

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, military bases, 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 sub-Saharan African nations, but 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 more than 50% of GDP although the industry is in decline as fields pass their peak production. Gabon continues to face fluctuating prices for its oil, timber, and manganese exports and the global recession led to a GDP contraction of 1.4% in 2009. Despite the abundance of natural wealth, poor fiscal management hobbles the economy. 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 from 1999 to 2008 helped growth, but drops in production have hampered Gabon from fully realizing potential gains. Gabon signed a 14-month Stand-By Arrangement with the IMF in May 2007, and later that year issued a $1 billion sovereign bond to buy back a sizable portion of its Paris Club debt.

Gambia, The The Gambia has sparse natural resource deposits and a limited agricultural base, and relies in part on remittances from workers overseas and tourist receipts. About three-quarters of the population depends on the agricultural sector for its livelihood. Small-scale manufacturing activity features the processing of peanuts, fish, and hides. The Gambia's natural beauty and proximity to Europe has made it one of the larger markets for tourism in West Africa, boosted by government and private sector investments in eco-tourism and upscale facilities. In the past few years, The Gambia's re-export trade - traditionally a major segment of economic activity - has declined, but its banking sector has grown rapidly. Unemployment and underemployment rates remain high; economic progress depends on sustained bilateral and multilateral aid, on responsible government economic management, and on continued technical assistance from multilateral and bilateral donors. The quality of fiscal management, however, is weak. The government has promised to raise civil service wages over the next two years and the deficit is projected to worsen.

Gaza Strip High population density, limited land and sea access, continuing isolation, and strict internal and external security controls have degraded economic conditions in the Gaza Strip - the smaller of the two areas in the Palestinian Territories. Israeli-imposed crossings closures, which became more restrictive after HAMAS violently took over the territory in June 2007, and fighting between HAMAS and Israel during December 2008-January 2009, resulted in the near collapse of most of the private sector, extremely high unemployment, and high poverty rates. Shortages of goods are met through large-scale humanitarian assistance - led by UNRWA - and the HAMAS-regulated black market tunnel trade that flourishes under the Gaza Strip's border with Egypt. However, chnages to the blockade in 2010 included moving from a white list - in which only approved items were allowed into Gaza through the crossings - to a black list, where all but non-approved items were allowed into Gaza through the crossings. Israeli authorities have recently signaled that exports from the territory might be possible in the future, but currently regular exports from Gaza are not permitted.

Georgia Georgia's economy sustained GDP growth of more than 10% in 2006-07, based on strong inflows of foreign investment and robust government spending. However, GDP growth slowed in 2008 following the August 2008 conflict with Russia, and turned negative in 2009 as foreign direct investment and workers' remittances declined in the wake of the global financial crisis, but rebounded in 2010. 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 and gas supply interruptions of the past by renovating hydropower plants and by increasingly relying on natural gas imports from Azerbaijan instead of 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, since coming to power in 2004, has simplified the tax code, improved tax administration, increased tax enforcement, and cracked down on petty corruption. However, the economic downturn of 2008-09 eroded the tax base and led to a decline in the budget surplus and an increase in public borrowing needs. The country is pinning its hopes for renewed growth on a determined effort to continue to liberalize the economy by reducing 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 - is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force. Like its western European neighbors, Germany faces significant demographic challenges to sustained long-term growth. Low fertility rates and declining net immigration are increasing pressure on the country's social welfare system and necessitate structural reforms. The modernization and integration of the eastern German economy - where unemployment can exceed 20% in some municipalities - continues to be a costly long-term process, with annual transfers from west to east amounting in 2008 alone to roughly $12 billion. Reforms launched by the government of Chancellor Gerhard SCHROEDER (1998-2005), deemed necessary to address chronically high unemployment and low average growth, contributed to strong growth in 2006 and 2007 and falling unemployment, which in 2008 reached a new post-reunification low of 7.8%. These advances, as well as a government subsidized, reduced working hour scheme, help explain the relatively modest increase in unemployment during the 2008-09 recession - the deepest since World War II - and its healthy decrease in 2010. GDP contracted nearly 5% in 2009 but grew by 3.3% in 2010. Germany crept out of recession thanks largely to rebounding manufacturing orders and exports - primarily outside the Euro Zone - and relatively steady consumer demand. Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts introduced in Chancellor Angela MERKEL's second term increased Germany's budget deficit to 3.3% in 2009 and to 3.6% in 2010. The EU has given Germany until 2013 to get its consolidated budget deficit below 3% of GDP. A new constitutional amendment likewise limits the federal government to structural deficits of no more than 0.35% of GDP per annum as of 2016.

Ghana Ghana is well endowed with natural resources and agriculture accounts for roughly one-third of GDP and employs more than half of the workforce, mainly small landholders. The services sector accounts for 50% of GDP. Gold and cocoa production and individual remittances are major sources of foreign exchange. Oil production at Ghana's offshore Jubilee field began in mid-December and is expected to boost economic growth. 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. In 2009 Ghana signed a three-year Poverty Reduction and Growth Facility with the IMF to improve 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 2008-10. In early 2010 President John Atta MILLS targeted recovery from high inflation and current account and budget deficits as his priorities.

Gibraltar Self-sufficient Gibraltar benefits from an extensive shipping trade, offshore banking, and its position as an international conference center. Tax rates are low to attract foreign investment. 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), gaming revenues, shipping services fees, and duties on consumer goods also generate revenue. The financial sector, tourism, and the shipping sector contribute 30%, 30%, and 25%, respectively, of GDP. Telecommunications, e-commerce, and e-gaming account for the remaining 15%. 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 the economy went into recession in 2009 as a result of the world financial crisis, tightening credit conditions, and Athens' failure to address a growing budget deficit, which was triggered by falling state revenues, and increased government expenditures. The economy contracted by 2% in 2009, and 4.8% in 2010. Greece violated the EU's Growth and Stability Pact budget deficit criterion of no more than 3% of GDP from 2001 to 2006, but finally met that criterion in 2007-08, before exceeding it again in 2009, with the deficit reaching 15.4% of GDP. Austerity measures reduced the deficit to 9.4% of GDP in 2010. Public debt, inflation, and unemployment are above the euro-zone average while per capita income is below; unemployment rose to 12% in 2010. Eroding public finances, a credibility gap stemming from inaccurate and misreported statistics, and consistent underperformance on following through with reforms prompted major credit rating agencies in late 2009 to downgrade Greece's international debt rating, and has led the country into a financial crisis. Under intense pressure by the EU and international market participants, the government has adopted a medium-term austerity program that includes cutting government spending, reducing the size of the public sector, decreasing tax evasion, reforming the health care and pension systems, and improving competitiveness through structural reforms to the labor and product markets. Athens, however, faces long-term challenges to push through unpopular reforms in the face of often vocal opposition from the country's powerful labor unions and the general public. Greek labor unions are striking over new austerity measures, but the strikes so far have had a limited impact on the government's will to adopt reforms. An uptick in widespread unrest, however, could challenge the government's ability to implement reforms and meet budget targets, and could also lead to rioting or violence. In April 2010 a leading credit agency assigned Greek debt its lowest possible credit rating; in May, the International Monetary Fund and Eurozone governments provided Greece emergency short- and medium-term loans worth $147 billion so that the country could make debt repayments to creditors. In exchange for the largest bailout ever assembled, the government announced combined spending cuts and tax increases totaling $40 billion over three years, on top of the tough austerity measures already taken. Greece, however, struggled to boost revenues and cut spending to meet 2010 targets set by the EU and the IMF, especially after Eurostat - the EU's statistical office - revised upward Greece's deficit and debt numbers for 2009 and 2010. Greece's lenders are calling on Athens to step up efforts in 2011 to increase tax collection, shore up public enterprises, and rein in health spending, and are planning to give Greece more time to repay its EU-IMF loan. Greece responded by introducing major structural reforms, but investors still question whether Greece can sustain fiscal efforts in the face of a bleak economic outlook and public discontent.

Greenland The economy remains critically dependent on exports of shrimp and fish and on a substantial subsidy - about $650 million in 2009 - from the Danish Government, which supplies nearly 60% of government revenues. The public sector, including publicly owned enterprises and the municipalities, plays the dominant role in Greenland's economy. Greenland's GDP contracted about 2% in 2009 as a result of the global economic slowdown. Budget surpluses turned to deficits beginning in 2007 and unemployment has risen. During the last decade the Greenland Home Rule Government (GHRG) pursued conservative fiscal and monetary policies, but public pressure has increased for better schools, health care and retirement systems. The Greenlandic economy has benefited from increasing catches and exports of shrimp, Greenland halibut and, more recently, crabs. Due to Greenland's continued dependence on exports of fish - which account for 82% of exports - the economy remains very sensitive to foreign developments. International consortia are increasingly active in exploring for hydrocarbon resources off Greenland's western coast, and international studies indicate the potential for oil and gas fields in northern and northeastern Greenland. In May 2007 a US aluminum producer concluded a memorandum of understanding with the Greenland Home Rule Government to build an aluminum smelter and a power generation facility, which takes advantage of Greenland's abundant hydropower potential. Within the area of mining, olivine sand continues to be produced and gold production has resumed in south Greenland. Tourism also offers another avenue of economic growth for Greenland, with increasing numbers of cruise lines now operating in Greenland's western and southern waters during the peak summer tourism season.