Guide Regional Economic Outlook, October 2009: Western Hemisphere - Crisis Averted - What’s Next?

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They must now consider the consequences of what they have done, or not done. At some point it will become necessary to stop the presses from printing more money before another bubble forms. The Bank of Israel in August became the first major central bank to raise interest rates since the global economic crisis intensified in the wake of the fall of Lehman Brothers in September Apart from making this tricky transition, central bankers need to be actively involved in the debate over how to avoid future crises involving systemic risk.

To date, the financial system has not been noticeably reformed. The business of banking is slowly returning to usual. Incentives for performance remain focused on the short term. Financial engineers are designing new products, taking into account a slight toughening of regulations and a modest increase in capital requirements. The financial system is in much better shape than it was a year ago, as central bankers around the world did whatever it took, or whatever they could, to limit the damage.

Much work remains to be done to ensure safe banking and economic prosperity. The Redrado-Boudou team traveled to London to attend the Group of 20 ministerial meetings to discuss joint strategies for tackling the global financial crisis. This is not to say Redrado has gone rogue, as the administration maintains a firm grip over central bank policy. But he has recently introduced initiatives that respond more to sound financial strategy than to political expediency. These include steps to promote local credit markets in order to create a peso yield curve and boost domestic liquidity.

Unfortunately, his boss is not likely to loosen his reins anytime soon. In the financial chaos that is the current administration, analysts are giving Redrado credit for bringing some common sense to the table. Inflation fell from Meirelles is more optimistic and predicts a modest 0.

Polls show consumer confidence growing steadily, so domestic demand should fuel more robust growth next year. No Canadian bank sought a government bailout or declared bankruptcy during the global financial crisis. Firmer commodity prices and a rebound in business and consumer confidence are encouraging domestic demand growth at a time when inflation is under control.

No Chilean bank has succumbed to the global financial crisis, as the country already had a strong regulatory framework and high banking standards. While some countries are worried over soaring inflation and weakened currencies, De Gregorio is faced with the opposite, though no less worrisome, situation.

On the price front, Chile now faces a deflation trend on falling consumer demand, with the month inflation figure standing at a meager 0. Guillermo Ortiz has responded by rethinking fiscal and monetary policies. He has his work cut out. However, Ortiz has stepped up to the plate, most importantly by taking a realistic stance and managing expectations for the government, investors and the general populace. The central bank halted interest rate cuts in August amid, albeit meager, signs of gradual economic recovery for next year. Ortiz, convinced that the worst may be over, is now advocating for the government to reconsider its economic model in order to avoid its traditional international contagion.

United States. Ben Bernanke is taking credit for saving the world from an economic disaster that he helped to create and failed to see coming. Bernanke and the US Treasury, with whom the Federal Reserve consorted, may have brought the economy and the financial system back from the brink, but they also must share the blame for planting the seeds of the next crisis. As a result of its massive debt, the United States is more at the mercy of foreign central banks than ever before. Foreign investors must be enticed to keep buying treasuries, or long-term US interest rates will shoot higher and dump the economy back in the drink.

Financial markets and the economy seem to be in better shape than they were a year ago, and this may be due in large part to the raft of expensive stimulus programs floated by the Fed. It is impossible to know, however, what would have happened if Lehman Brothers had been saved, or if American International Group had been forced to sort out its own problems. The Fed and other central banks around the world pumped huge amounts of money into the markets to take care of short-term problems without regard to long-term consequences.

It is true that the Fed responded quickly and aggressively to the worst crisis in generations. It remains to be seen, however, if it did the right thing. US president Barack Obama seems to think so. He reappointed Bernanke, a Republican, to a second term. The bank has scrapped its earlier forecast of moderate economic growth for and now says GDP will shrink by a painful 6. Even so, it is keeping interest rates moderately high with a promise to ease if inflation expectations decline. When everything was going smoothly for Norway, its central banker, Svein Gjedrem, appeared to have a confident and skilled grip on the levers of monetary control.

As the waves of global turmoil have buffeted Norway in the past two years, though, Gjedrem has begun to look increasingly clumsy and flat-footed. The central bank correctly predicted that inflation was poised to surge last year but bumped up interest rates too late to prevent it happening. In October it performed an abrupt volte-face in response to the growing threat of economic contraction. By June this year the bank had slashed interest rates from 5.

Long admired for its openness and clarity, the central bank is suddenly sounding much less self-assured while Gjedrem himself all but admitted in August that the bank really does not have a clue which direction monetary policy will take next. Slawomir Skrzypek was criticized across the board before the global financial crisis hit for failing to hike interest rates fast enough to contain inflation.

With inflation edging lower, in fall last year the bank embarked on a long series of interest rate cuts aimed at stimulating the stumbling Polish economy. Despite the concerns about inflation, the central bank has made it clear that it does not expect any significant changes for the rest of this year in the record-low 3. Given his record, his critics are likely to give him the benefit of the doubt this time around. The bank has certainly been active, if not necessarily proactive.

As it became clear that Russia would not escape the fallout of the credit crunch and that its somewhat fragile banking system could be at risk of collapse, the bank opened the liquidity floodgates. But, like many central bankers, Ignatiev found himself caught between the need to loosen monetary policy to prevent a banking system collapse and the incipient threat of inflation.

He was saved, to an extent, by slumping oil prices, which helped ease inflation pressure. Unfortunately, slumping oil prices also contributed to a run on the ruble that had been triggered by a flood of hot money leaving the country in search of less-risky investments. The bank drew heavily on its ample foreign exchange reserves in a vain attempt to shore up the ruble before it accepted the inevitable and allowed the currency to slide. Czech Republic. Unlike many of his counterparts, though, Tuma did respond to the imminent economic slowdown and began trimming interest rates in August last year.

With inflation at a lofty 6. However, with interest rates already at a low of 1. With inflation close to zero and showing no signs of leaping higher, despite the low interest rates, Tuma is confidently predicting that he will not have to raise rates until at least the second half of The darkest cloud on the horizon is the continued strength of the Czech crown, which remains one of the strongest currencies in the region.

European Union. Always prone to plowing his own furrow, European Union central banker Jean-Claude Trichet has really shown his mettle in the past year. By taking a measured approach and avoiding sharp, reactive changes in policy, the bank helps smooth out rather than amplify the peaks and troughs of economic activity in the region.

Wary of stunting the recovery before it is fully established, Trichet promises to keep monetary policy loose for some time to come. He has also made a point of reminding policymakers around the world that the financial system is still in need of significant reform—something that many might be forgetting as the recent fears of a global financial meltdown fade.

Then the credit crunch hit, and after years of steady growth and low inflation, the country has found itself with a shrinking economy, unpredictable inflation and a decidedly volatile exchange rate. By mid-July it had halved rates twice more to leave them at just 0. By March this year the bank had slashed interest rates to near zero, was pumping liquidity into the system and had risked global opprobrium by intervening in the forex markets to bring down the soaring franc—but the outlook was as gloomy as ever.

Until the global flight to safety truly abates and investors start selling their francs as they seek higher-yielding investments elsewhere, Roth will be saddled with an overvalued currency and an underperforming economy. This past year, though, Yilmaz appears to have hit his stride. Confident that the global slowdown would squeeze Turkish inflation down sharply, Yilmaz embarked on a dramatic round of interest rate cuts in November last year. By February he had slashed rates from By the end of , Yilmaz is predicting inflation will be down to 5.

Yilmaz deserves credit for his outspoken efforts to persuade the Turkish government to exercise fiscal restraint. United Kingdom. A year ago it was touch and go whether Mervyn King would remain as the governor of the Bank of England. In the end he managed to swing another five-year term but not before he was hauled over the coals for failing to save the United Kingdom from recession, failing to keep inflation below target and failing to prevent Northern Rock from failing.

Perhaps chastened by allegations that King tended to do too little, too late, the bank then lurched ahead of the curve, joining the vanguard of central banks driving interest rates down to near zero and indulging in so-called quantitative easing. This year, however, it appears to be slowly starting to turn the screws. The PBOC has made it clear it needs to keep a watchful eye on the spate of new lending activity by banks, which in the first few months of this year was almost three times the level.

However, there are concerns that the economy may overheat and non-performing loans NPLs will increase. It is questionable whether the bank can forestall a credit bubble at the same time as maintaining its relatively loose monetary policy stance. India expects to turn in a chunky 6. These measures appeared to have worked, increasing the availability of credit but not to excessive levels. Australia was comparatively unaffected by the global financial crisis as the banking system has remained strong and inflation is under control.

Australia has benefited from a dramatic surge in its terms of trade in recent years, stemming from rising global commodity prices. Australia is a significant exporter of natural resources, energy, and food. Australia's abundant and diverse natural resources attract high levels of foreign investment and include extensive reserves of coal, iron, copper, gold, natural gas, uranium, and renewable energy sources. Australia is an open market with minimal restrictions on imports of goods and services.

The process of opening up has increased productivity, stimulated growth, and made the economy more flexible and dynamic. Austria Austria, with its well-developed market economy, skilled labor force, and high standard of living, is closely tied to other EU economies, especially Germany's. Its economy features a large service sector, a sound industrial sector, and a small, but highly developed agricultural sector. Following several years of solid foreign demand for Austrian exports and record employment growth, the international financial crisis of and subsequent global economic downturn led to a sharp but brief recession.

Austrian GDP contracted 3. Growth fell to 0. Unemployment did not rise as steeply in Austria as elsewhere in Europe, partly because the government subsidized reduced working hour schemes to allow companies to retain employees. The unemployment rate of 4. Stabilization measures, stimulus spending, and an income tax reform pushed the budget deficit to 4.

The international financial crisis of caused difficulties for Austria's largest banks whose extensive operations in central, eastern, and southeastern Europe faced large losses. The government provided bank support - including in some instances, nationalization - to support aggregate demand and stabilize the banking system. Austria's fiscal position compares favorably with other euro-zone countries, but it faces external risks, such as Austrian banks' continued exposure to Central and Eastern Europe as well as political and economic uncertainties caused by the European sovereign debt crisis.

In March , the Austrian parliament approved an austerity package consisting of a mix of expenditure cuts and new revenues that will bring public finances into balance by In , the budget deficit rose to 3. Azerbaijan Azerbaijan's high economic growth during was attributable to large and growing oil and gas exports, but some non-export sectors also featured double-digit growth, including construction, banking, and real estate. In , economic growth picked up to 3. Continued production declines in the oil sector were offset by strong growth in the non-oil sector. However, the non-oil sector growth may be driven primarily by government investment, which may not be sustainable if oil production continues to decline.

Oil exports through the Baku-Tbilisi-Ceyhan Pipeline, the Baku-Novorossiysk, and the Baku-Supsa pipelines remain the main economic driver, but efforts to boost Azerbaijan's gas production are underway. The eventual completion of the geopolitically important Southern Gas Corridor between Azerbaijan and Europe will open up another, albeit, smaller source of revenue from gas exports. Azerbaijan has made only limited progress on instituting market-based economic reforms. Pervasive public and private sector corruption and structural economic inefficiencies remain a drag on long-term growth, particularly in non-energy sectors.

Several other obstacles impede Azerbaijan's economic progress, including the need for stepped up foreign investment in the non-energy sector and the continuing conflict with Armenia over the Nagorno-Karabakh region. Trade with Russia and the other former Soviet republics is declining in importance, while trade is building with Turkey and the nations of Europe.

Long-term prospects depend on world oil prices, Azerbaijan's ability to negotiate export routes for its growing gas production, and its ability to use its energy wealth to promote growth and spur employment in non-energy sectors of the economy. Bahrain Bahrain has taken great strides in diversifying its economy and its highly developed communication and transport facilities make Bahrain home to numerous multinational firms with business in the Gulf. Bahrain's economy, however, continues to depend heavily on oil.

Other major economic activities are production of aluminum - Bahrain's second biggest export after oil - finance, and construction. Bahrain competes with Malaysia as a worldwide center for Islamic banking and continues to seek new natural gas supplies as feedstock to support its expanding petrochemical and aluminum industries. In and , Bahrain experienced economic setbacks as a result of domestic unrest, however, several factors indicate that the economy is beginning to recover, such as the return of the formula one race and tourist cruise ships to Bahrain.

Economic policies aimed at restoring confidence in Bahrain's economy, such as the suspension of an expatriate labor tax and frequent bailouts of Gulf Air, will make Bahrain's foremost long-term economic challenges - youth unemployment and the growth of government debt - more difficult to address. Baker Island no economic activity Bangladesh In real terms Bangladesh's economy has grown 5. Bangladesh remains a poor, overpopulated, and inefficiently-governed nation. Bangladesh's growth was resilient during the global financial crisis and recession.

Barbados Barbados is the wealthiest and most developed country in the Eastern Caribbean and enjoys one of the highest per capita incomes in Latin America. Historically, the Barbadian economy was dependent on sugarcane cultivation and related activities. However, in recent years the economy has diversified into light industry and tourism with about four-fifths of GDP and of exports being attributed to services.

Offshore finance and information services are important foreign exchange earners and thrive from having the same time zone as eastern US financial centers and a relatively highly educated workforce. Bassas da India no economic activity Belarus As part of the former Soviet Union, Belarus had a relatively well-developed industrial base; it retained this industrial base - which is now outdated, energy inefficient, and dependent on subsidized Russian energy and preferential access to Russian markets - following the breakup of the USSR.

The country also has a broad agricultural base which is inefficient and dependent on government subsidies. After an initial burst of capitalist reform from , including privatization of state enterprises, creation of institutions of private property, and development of entrepreneurship, Belarus' economic development greatly slowed. A few banks, which had been privatized after independence, were renationalized. Economic output, which had declined for several years following the collapse of the Soviet Union, revived in the mids thanks to the boom in oil prices.

Belarus has only small reserves of crude oil, though it imports most of its crude oil and natural gas from Russia at prices substantially below the world market. Belarus exported refined oil products at market prices produced from Russian crude oil purchased at a steep discount. In late , Russia began a process of rolling back its subsidies on oil and gas to Belarus. Tensions over Russian energy reached a peak in , when Russia stopped the export of all subsidized oil to Belarus save for domestic needs.

In December , Russia and Belarus reached a deal to restart the export of discounted oil to Belarus. Little new foreign investment has occurred in recent years. In , a financial crisis began, triggered by government directed salary hikes unsupported by commensurate productivity increases.

The crisis was compounded by an increased cost in Russian energy inputs and an overvalued Belarusian ruble, and eventually led to a near three-fold devaluation of the Belarusian ruble in In November , Belarus agreed to sell to Russia its remaining shares in Beltransgaz, the Belarusian natural gas pipeline operator, in exchange for reduced prices for Russian natural gas. Belgium This modern, open, and private-enterprise-based economy has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base.

Industry is concentrated mainly in the more heavily-populated region of Flanders in the north. With few natural resources, Belgium imports substantial quantities of raw materials and exports a large volume of manufactures, making its economy vulnerable to volatility in world markets. Roughly three-quarters of Belgium's trade is with other EU countries, and Belgium has benefited most from its proximity to Germany. In Belgian GDP grew by 1.

Fourth quarter GDP growth in was at This brought economic growth for the whole of to negative 0. It also left Belgium on the brink of a possible recession at the end of Belgian banks were severely affected by the international financial crisis in with three major banks receiving capital injections from the government, and the nationalization of the Belgian retail arm of a Franco-Belgian bank.

Belize Tourism is the number one foreign exchange earner in this small economy, followed by exports of marine products, citrus, cane sugar, bananas, and garments. Oil discoveries in bolstered this growth. Exploration efforts have continued and production has increased a small amount. With weak economic growth and a large public debt burden, fiscal spending is likely to be tight. A key government objective remains the reduction of poverty and inequality with the help of international donors. Although Belize has the second highest per capita income in Central America, the average income figure masks a huge income disparity between rich and poor.

The Poverty Assessment shows that more than 4 out of 10 people live in poverty. The sizable trade deficit and heavy foreign debt burden continue to be major concerns. Benin The economy of Benin remains underdeveloped and dependent on subsistence agriculture, cotton production, and regional trade.

Inflation has subsided over the past several years. In order to raise growth, Benin plans to attract more foreign investment, place more emphasis on tourism, facilitate the development of new food processing systems and agricultural products, and encourage new information and communication technology.

The privatization policy continues in telecommunications, water, electricity, and agriculture. The Paris Club and bilateral creditors have eased the external debt situation with Benin benefiting from a G-8 debt reduction announced in July , while pressing for more rapid structural reforms. An insufficient electrical supply continues to adversely affect Benin's economic growth though the government recently has taken steps to increase domestic power production.

Private foreign direct investment is small, and foreign aid accounts for the majority of investment in infrastructure projects. Cotton, a key export, suffered from flooding in , but high prices supported export earnings. Benin has appealed for international assistance to mitigate piracy against commercial shipping in its territory. Its economy is primarily based on international business and the provision of financial services to that sector, and to a lesser extent tourism. A number of reinsurance companies relocated to the island following the 11 September attacks on the US and again after Hurricanes Katrina, Rita, and Wilma in , contributing to the expansion of an already robust international business sector.

Bermuda must import almost everything. Agriculture is limited due to the small size of the island and Bermuda's industrial sector is small. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links and is dependent on India's financial assistance.

The industrial sector is technologically backward with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Model education, social, and environment programs are underway with support from multilateral development organizations. Each economic program takes into account the government''s desire to protect the country's environment and cultural traditions. For example, the government, in its cautious expansion of the tourist sector, encourages visits by upscale, environmentally conscientious tourists.

Complicated controls and uncertain policies in areas such as industrial licensing, trade, labor, and finance continue to hamper foreign investment. The import of equipment and fuel to build hydropower plants is leading to large trade and current account deficits, though new hydropower projects and electricity exports to India are creating employment and will probably sustain growth in the coming years.

GDP has rebounded strongly since the global recession began in Bolivia Bolivia is one of the poorest and least developed countries in Latin America. Following a disastrous economic crisis during the early s, reforms spurred private investment, stimulated economic growth, and cut poverty rates in the s. The period was characterized by political instability, racial tensions, and violent protests against plans - subsequently abandoned - to export Bolivia's newly discovered natural gas reserves to large Northern Hemisphere markets.

In , the government passed a controversial hydrocarbons law that imposed significantly higher royalties and required foreign firms then operating under risk-sharing contracts to surrender all production to the state energy company in exchange for a predetermined service fee. The global recession slowed growth, but Bolivia recorded the highest growth rate in South America during During high world commodity prices sustained rapid growth and large trade surpluses.

However, a lack of foreign investment in the key sectors of mining and hydrocarbons, along with growing conflict among social groups pose challenges for the Bolivian economy. Bosnia and Herzegovina Bosnia has a transitional economy with limited market reforms. The economy relies heavily on the export of metals as well as on remittances and foreign aid. A highly decentralized government hampers economic policy coordination and reform, while excessive bureaucracy and a segmented market discourage foreign investment.

GDP has stagnated since then. Foreign banks, primarily from Austria and Italy, now control most of the banking sector. The konvertibilna marka convertible mark or BAM - the national currency introduced in - is pegged to the euro, and confidence in the currency and the banking sector has increased. Bosnia's private sector is growing, but foreign investment has dropped off sharply since Privatization of state enterprises has been slow, particularly in the Federation, where political division between ethnically-based political parties makes agreement on economic policy more difficult.

High unemployment remains the most serious macroeconomic problem. Successful implementation of a value-added tax in provided a predictable source of revenue for the government and helped rein in gray-market activity. National-level statistics have also improved over time but a large share of economic activity remains unofficial and unrecorded. Bosnia and Herzegovina's top economic priorities are: acceleration of integration into the EU; strengthening the fiscal system; public administration reform; World Trade Organization WTO membership; and securing economic growth by fostering a dynamic, competitive private sector.

In , Bosnia and Herzegovina was granted an International Monetary Fund IMF stand-by arrangement, necessitated by sharply increased social spending and a fiscal crisis exacerbated by the global economic downturn. Disbursement of IMF aid was suspended in after a parliamentary deadlock left Bosnia without a state-level government for over a year. Botswana Botswana has maintained one of the world's highest economic growth rates since independence in Although the economy recovered in , GDP growth has again slowed.

Two major investment services rank Botswana as the best credit risk in Africa. Botswana's heavy reliance on a single luxury export was a critical factor in the sharp economic contraction of Tourism, financial services, subsistence farming, and cattle raising are other key sectors.

According to official government statistics, unemployment reached An expected leveling off in diamond production within the next two decades overshadows long-term prospects. A major international diamond company signed a year deal with Botswana in to move its rough stone sorting and trading division from London to Gaborone by the end of The move may support Botswana's downstream diamond industry. Bouvet Island no economic activity; declared a nature reserve Brazil Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries, and Brazil is expanding its presence in world markets.

Since , Brazil has steadily improved its macroeconomic stability, building up foreign reserves, and reducing its debt profile by shifting its debt burden toward real denominated and domestically held instruments. In , Brazil became a net external creditor and two ratings agencies awarded investment grade status to its debt. After strong growth in and , the onset of the global financial crisis hit Brazil in Brazil experienced two quarters of recession, as global demand for Brazil's commodity-based exports dwindled and external credit dried up.

However, Brazil was one of the first emerging markets to begin a recovery. In , consumer and investor confidence revived and GDP growth reached 7. Rising inflation led the authorities to take measures to cool the economy; these actions and the deteriorating international economic situation slowed growth to 2.

Unemployment is at historic lows and Brazil's traditionally high level of income inequality has declined for each of the last 14 years. Brazil's historically high interest rates have made it an attractive destination for foreign investors. Large capital inflows over the past several years have contributed to the appreciation of the currency, hurting the competitiveness of Brazilian manufacturing and leading the government to intervene in foreign exchange markets and raise taxes on some foreign capital inflows. President Dilma ROUSSEFF has retained the previous administration's commitment to inflation targeting by the central bank, a floating exchange rate, and fiscal restraint.

In an effort to boost growth, in the administration implemented a somewhat more expansionary monetary policy that has failed to stimulate much growth.

Press Briefing: IMF Western Hemisphere Department

Construction projects and various services needed to support the military installation are performed by military and contract employees from the UK, Mauritius, the Philippines, and the US. Some of the natural resources found in this territory include coconuts, fish, and sugarcane. Sugarcane is still a major export for this territory. There are no industrial or agricultural activities on the islands. The territory earns foreign exchange by selling fishing licenses and postage stamps. More than , tourists, mainly from the US, visited the islands in In the mids, the government began offering offshore registration to companies wishing to incorporate in the islands, and incorporation fees now generate substantial revenues.

Roughly , companies were on the offshore registry by yearend The adoption of a comprehensive insurance law in late , which provides a blanket of confidentiality with regulated statutory gateways for investigation of criminal offenses, made the British Virgin Islands even more attractive to international business.

Livestock raising is the most important agricultural activity; poor soils limit the islands' ability to meet domestic food requirements. Brunei Brunei has a small well-to-do economy that depends on revenue from natural resource extraction but encompasses a mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village tradition. Per capita GDP is among the highest in Asia, and substantial income from overseas investment supplements income from domestic production.

For Bruneian citizens the government provides for all medical services and free education through the university level. The government of Brunei has been emphasizing through policy and resource investments it strong desire to diversity its economy both within the oil and gas sector and to new sectors.

Successive governments have demonstrated a commitment to economic reforms and responsible fiscal planning, but the global downturn sharply reduced domestic demand, exports, capital inflows, and industrial production. GDP contracted by 5. Despite having a favorable investment regime, including low, flat corporate income taxes, significant challenges remain. Corruption in public administration, a weak judiciary, and the presence of organized crime continue to hamper the country's investment climate and economic prospects.

Burkina Faso Burkina Faso is a poor, landlocked country that relies heavily on cotton and gold exports for revenue. The country has few natural resources and a weak industrial base. Cotton is the main cash crop. Since , Burkina Faso has embarked upon a gradual privatization of state-owned enterprises and in revised its investment code to attract foreign investment. As a result of this new code and other legislation favoring the mining sector, the country has seen an upswing in gold exploration and production.

By , gold had become the main source of export revenue. Gold mining production doubled between and Two new mining projects were launched in the third quarter of Local community conflict persists in the mining and cotton sectors, but the Prime Minister has made efforts to defuse some of the economic cause of public discontent, including announcing income tax reductions, reparations for looting victims, and subsidies for basic food items and fertilizer.

The risk of a mass exodus of the 3 to 4 million Burinabe who live and work in Cote d'Ivoire has dissipated, and trade, power, and transport links are being restored. Burkina Faso experienced a severe drought in , which decimated grazing land and decreased harvests, creating food insecurity and damaging the country's agricultural base.

Burma Burma is a resource-rich country but still suffers from pervasive government controls, inefficient economic policies, corruption, and rural poverty. Corruption is prevalent and significant resources in the extractive industries are concentrated in a few hands. The Burmese government has initiated notable economic reforms. In October , 11 private banks were allowed to trade foreign currency. On April 2, , Burma's multiple exchange rates were abolished and the Central Bank of Myanmar established a managed float of the Burmese kyat. Despite these reforms, the Burmese government has not yet embarked on broad-based macro-economic reforms or addressed key impediments to economic development such as Burma's opaque revenue collection system.

Key benchmarks of economic progress would include steps to ensure the independence of the Central Bank, provide budget allocation for social services, and enact laws to protect intellectual and real property. In recent years, foreign investors have shied away from nearly every sector except for natural gas, power generation, timber, and mining. The exploitation of natural resources does not benefit the population at large. The most productive sectors will continue to be in extractive industries - especially oil and gas, mining, and timber - with the latter two causing significant environmental degradation.

Other areas, such as manufacturing, tourism, and services, struggle in the face of poor infrastructure, unpredictable trade policies, undeveloped human resources the result of neglected health and education systems , endemic corruption, and inadequate access to capital for investment. In , the US moved from broad-based to more targeted sanctions.

Although the Burmese government has good economic relations with its neighbors, significant improvements in economic governance, the business climate, and the political situation are needed to promote serious foreign investment. Burundi Burundi is a landlocked, resource-poor country with an underdeveloped manufacturing sector. Burundi's export earnings - and its ability to pay for imports - rests primarily on weather conditions and international coffee and tea prices.

An ethnic-based war that lasted for over a decade resulted in more than , deaths, forced more than 48, refugees into Tanzania, and displaced , others internally. Food, medicine, and electricity remain in short supply. Political stability and the end of the civil war have improved aid flows and economic activity has increased, but underlying weaknesses - a high poverty rate, poor education rates, a weak legal system, a poor transportation network, overburdened utilities, and low administrative capacity - risk undermining planned economic reforms. The purchasing power of most Burundians has decreased as wage increases have not kept up with inflation.

Government corruption is hindering the development of a healthy private sector as companies seek to navigate an environment with ever changing rules. Cambodia Since , garments, construction, agriculture, and tourism have driven Cambodia's growth. In , exploitable oil deposits were found beneath Cambodia's territorial waters, representing a potential revenue stream for the government, if commercial extraction becomes feasible. Mining also is attracting some investor interest and the government has touted opportunities for mining bauxite, gold, iron and gems.

The tourism industry has continued to grow rapidly with foreign arrivals exceeding 2 million per year since and reaching over 3 million visitors in Cambodia, nevertheless, remains one of the poorest countries in Asia and long-term economic development remains a daunting challenge, inhibited by endemic corruption, limited educational opportunities, high income inequality, and poor job prospects.

The population lacks education and productive skills, particularly in the impoverished countryside, which also lacks basic infrastructure. The major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia's demographic imbalance. Cameroon Because of its modest oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa.

Still, it faces many of the serious problems confronting other underdeveloped countries, such as stagnant per capita income, a relatively inequitable distribution of income, a top-heavy civil service, endemic corruption, and a generally unfavorable climate for business enterprise. Since , the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalize the nation's banks. The IMF is pressing for more reforms, including increased budget transparency, privatization, and poverty reduction programs.

Subsidies for electricity, food, and fuel have strained the budget. Cameroon recently began several large infrastructure projects, including a deep sea port in Kribi, a natural gas powered electricity generating plant, and several hydroelectric dams. Cameroon must attract more investment to improve its inadequate infrastructure, but its business environment is a deterrent to foreign investment.

Canada As a high-tech industrial society in the trillion-dollar class, Canada resembles the US in its market-oriented economic system, pattern of production, and affluent living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban.

Canada enjoys a substantial trade surplus with the US, which absorbs about three-fourths of Canadian exports each year. Canada is the US's largest foreign supplier of energy, including oil, gas, uranium, and electric power. Given its great natural resources, highly skilled labor force, and modern capital plant, Canada enjoyed solid economic growth from through Buffeted by the global economic crisis, the economy dropped into a sharp recession in the final months of , and Ottawa posted its first fiscal deficit in after 12 years of surplus.

Canada's major banks, however, emerged from the financial crisis of among the strongest in the world, owing to the financial sector's tradition of conservative lending practices and strong capitalization. Canada achieved marginal growth in and plans to balance the budget by In addition, the country's petroleum sector is rapidly becoming an even larger economic driver with Alberta's oil sands significantly boosting Canada's proven oil reserves, ranking the country third in the world behind Saudi Arabia and Venezuela.

Cape Verde The economy is service-oriented with commerce, transport, tourism, and public services accounting for about three-fourths of GDP. This island economy suffers from a poor natural resource base, including serious water shortages exacerbated by cycles of long-term drought and poor soil for agriculture on several of the islands. The fishing potential, mostly lobster and tuna, is not fully exploited. Despite the lack of resources, sound economic management has produced steadily improving incomes.

Continued economic reforms are aimed at developing the private sector and attracting foreign investment to diversify the economy and mitigate high unemployment. Future prospects depend heavily on the maintenance of aid flows, the encouragement of tourism, remittances, and the momentum of the government's development program. Cayman Islands With no direct taxation, the islands are a thriving offshore financial center.

More than 93, companies were registered in the Cayman Islands as of , including almost banks, insurers, and 10, mutual funds. A stock exchange was opened in The tourist industry is aimed at the luxury market and caters mainly to visitors from North America. Total tourist arrivals exceeded 1. The Caymanians enjoy a standard of living comparable to that of Switzerland. The agricultural sector generates more than half of GDP.

Timber and diamonds account for most export earnings, followed by cotton. 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. Since the IMF has worked closely with the government to institute reforms that have resulted in some improvement in budget transparency, but other problems remain. The government's additional spending in the run-up to the election in worsened CAR's fiscal situation. Distribution of income is extraordinarily unequal. Grants from France and the international community can only partially meet humanitarian needs. After a two year lag in donor support, the IMF's first review of CAR's extended credit facility for praised improvements in revenue collection but warned of weak management of spending.

Chad Chad's primarily agricultural economy will continue to be boosted by major foreign direct investment projects in the oil sector that began in However, Chad's investment climate remains challenging due to limited infrastructure, a lack of trained workers, extensive government bureaucracy, and corruption. The government of Chad is determined to improve agricultural production through modernization and mechanization over the next three years, and hosted a national Rural Development Forum in to promote investment in agriculture.

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. Remittances are also an important source of income.

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The Libyan conflict disrupted inflows of remittances to Chad's impoverished western region that relies on income from Chadians living in Libya. Chinese companies are also expanding exploration efforts and have completed a km pipeline and the country's first refinery. The nation's total oil reserves are estimated at 1. Oil production came on stream in late Chad began to export oil in 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 and a reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America. Exports account for approximately one-third of GDP, with commodities making up some three-quarters of total exports. 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 Chile has joined the United States and nine other countries in negotiating the Trans-Pacific-Partnership trade agreement.

The Chilean Government has generally followed a countercyclical fiscal policy, accumulating surpluses in sovereign wealth funds during periods of high copper prices and economic growth, and generally allowing deficit spending only during periods of low copper prices and growth. Chile used these funds to finance fiscal stimulus packages during the economic downturn.

China Since the late s China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role - in China became the world's largest exporter. Reforms began with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, creation of a diversified banking system, development of stock markets, rapid growth of the private sector, and opening to foreign trade and investment. China has implemented reforms in a gradualist fashion.

In recent years, China has renewed its support for state-owned enterprises in sectors it considers important to "economic security," explicitly looking to foster globally competitive national champions. After keeping its currency tightly linked to the US dollar for years, in July China revalued its currency by 2. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since Measured on a purchasing power parity PPP basis that adjusts for price differences, China in stood as the second-largest economy in the world after the US, having surpassed Japan in The dollar values of China's agricultural and industrial output each exceed those of the US; China is second to the US in the value of services it produces.

Still, per capita income is below the world average. The Chinese government faces numerous economic challenges, including: a reducing its high domestic savings rate and correspondingly low domestic demand; b sustaining adequate job growth for tens of millions of migrants and new entrants to the work force; c reducing corruption and other economic crimes; and d containing environmental damage and social strife related to the economy's rapid transformation. Economic development has progressed further in coastal provinces than in the interior, and by more than million migrant workers and their dependents had relocated to urban areas to find work.

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One consequence of population control policy is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the North - is another long-term problem.

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China continues to lose arable land because of erosion and economic development. The Chinese government is seeking to add energy production capacity from sources other than coal and oil, focusing on nuclear and alternative energy development. In , China faced high inflation resulting largely from its credit-fueled stimulus program. An economic slowdown in Europe contributed to China's, and is expected to further drag Chinese growth in Debt overhang from the stimulus program, particularly among local governments, and a property price bubble challenge policy makers currently.

The government's 12th Five-Year Plan, adopted in March , emphasizes continued economic reforms and the need to increase domestic consumption in order to make the economy less dependent on exports in the future. However, China has made only marginal progress toward these rebalancing goals. Christmas Island The main economic activities on Christmas Island are the mining of low grade phosphate, limited tourism, the provision of government services and more recently the construction and operation of the Immigration Detention Center.

The government sector includes administration, health, education, policing, customs, quarantine and defense. Clipperton Island Although species of fish have been identified in the territorial waters of Clipperton Island, the only economic activity is tuna fishing. Cocos Keeling Islands Coconuts, grown throughout the islands, 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 consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to face external shocks.

All three major ratings agencies have upgraded Colombia's government debt to investment grade. Nevertheless, Colombia depends heavily on oil exports, making it vulnerable to a drop in oil prices. Economic development is stymied by inadequate infrastructure, weakened further by recent flooding.

Moreover, the unemployment rate of Colombia is the third largest Latin American exporter of oil to the United States, and the United States' largest source of imported coal. Inequality, underemployment, and narcotrafficking remain significant challenges, and Colombia's infrastructure requires major improvements to sustain economic expansion.

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.

Export income is heavily reliant on the three main crops of vanilla, cloves, and ylang-ylang; and Comoros' export earnings are easily disrupted by disasters such as fires. 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 - lacks a comprehensive strategy to attract foreign investment and 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.

Remittances from , Comorans abroad help supplement GDP. Congo, Republic of the The economy is a mixture of subsistence hunting and agriculture, an industrial sector based largely on oil and support services, and government spending. Oil has supplanted forestry as the mainstay of the economy, providing a major share of government revenues and exports. Natural gas is increasingly being converted to electricity rather than being flared, greatly improving energy prospects.

Economic reform efforts have been undertaken with the support of international organizations, notably the World Bank and the IMF, including recently concluded Article IV consultations. Denis SASSOU-Nguesso, who returned to power when the war ended in October , publicly expressed interest in moving forward on economic reforms and privatization and in renewing cooperation with international financial institutions.

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Economic progress was badly hurt by slumping oil prices and the resumption of armed conflict in December , which worsened the republic's budget deficit. The current administration faces difficult economic challenges of stimulating recovery and reducing poverty. Contracts with China have increased Congo's publicly held debt. 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.

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Agriculture, employing more than one-quarter of the working population, provides the economic base with major exports of copra and citrus fruit. Black pearls are the Cook Islands' 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 s and s, 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. The economy contracted 1. While the traditional agricultural exports of bananas, coffee, sugar, and beef are still the backbone of commodity export trade, a variety of industrial and specialized agricultural products have broadened export trade in recent years.

High value-added goods and services, including microchips, have further bolstered exports.

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Tourism continues to bring in foreign exchange, as Costa Rica's impressive biodiversity makes it a key destination for ecotourism. Foreign investors remain attracted by the country's political stability and relatively high education levels, as well as the incentives offered in the free-trade zones; and Costa Rica has attracted one of the highest levels of foreign direct investment per capita in Latin America.

However, many business impediments remain, such as high levels of bureaucracy, legal uncertainty due to overlapping and at times conflicting responsibilities between agencies, difficulty of enforcing contracts, and weak investor protection. Immigration from Nicaragua has increasingly become a concern for the government. The estimated ,, Nicaraguans in Costa Rica legally and illegally are an important source of mostly unskilled labor but also place heavy demands on the social welfare system.

CAFTA-DR has increased foreign direct investment in key sectors of the economy, including the insurance and telecommunications sectors recently opened to private investors. Cote d'Ivoire is the world's largest producer and exporter of cocoa beans and a significant producer and exporter of coffee and palm oil.

Consequently, the economy is highly sensitive to fluctuations in international prices for these products, and, to a lesser extent, in climatic conditions. Cocoa, oil, and coffee are the country's top export revenue earners, but the country is also producing gold. Since the end of the civil war in , political turmoil has continued to damage the economy, resulting in the loss of foreign investment and slow economic growth. In late , Cote d'Ivoire's economy began to recover from a severe downturn of the first quarter of the year that was caused by widespread post-election fighting.

Cote d'Ivoire's long-term challenges include political instability and degrading infrastructure. Croatia Though still one of the wealthiest of the former Yugoslav republics, Croatia's economy suffered badly during the war. The country's output during that time collapsed and Croatia missed the early waves of investment in Central and Eastern Europe that followed the fall of the Berlin Wall. Inflation over the same period remained tame and the currency, the kuna, stable. Croatia experienced an abrupt slowdown in the economy in and has yet to recover. Difficult problems still remain, including a stubbornly high unemployment rate, uneven regional development, and a challenging investment climate.

The new government has announced a more flexible approach to privatization, including the sale in the coming years of state-owned businesses that are not of strategic importance. While macroeconomic stabilization has largely been achieved, structural reforms lag. Croatia will face significant pressure as a result of the global financial crisis, due to reduced exports and capital inflows.

Croatia reentered a recession in , and Zagreb cut spending. The government also raised additional revenues through more stringent tax collection and by raising the Value Added Tax in February On 1 July Croatia joined the EU, following a decade long application process. Croatia will be a member of the European Exchange Rate Mechanism until it meets the criteria for joining the Economic and Monetary Union and adopts the euro as its currency.

Croatia's high foreign debt, strained state budget, and over-reliance on tourism revenue could hinder economic progress over the medium-term. Cuba The government continues to balance the need for loosening its socialist economic system against a desire for firm political control. The government in April held the first Cuban Communist Party Congress in almost 13 years, during which leaders approved a plan for wide-ranging economic changes.

The government has expanded opportunities for self-employment and has introduced limited reforms, some initially implemented in the s, to increase enterprise efficiency and alleviate serious shortages of food, consumer goods, services, and housing. The average Cuban's standard of living remains at a lower level than before the downturn of the s, which was caused by the loss of Soviet aid and domestic inefficiencies. Since late , Venezuela has been providing oil on preferential terms, and it currently supplies over , barrels per day of petroleum products. Cuba has been paying for the oil, in part, with the services of Cuban personnel in Venezuela including some 30, medical professionals.

Cyprus The area of the Republic of Cyprus under government control has a market economy dominated by the service sector, which accounts for four-fifths of GDP. Tourism, financial services, and real estate are the most important sectors. Erratic growth rates over the past decade reflect the economy's reliance on tourism, the profitability of which can fluctuate with political instability in the region and economic conditions in Western Europe. Nevertheless, the economy in the area under government control has grown at a rate well above the EU average since An aggressive austerity program in the preceding years, aimed at paving the way for the euro, helped turn a soaring fiscal deficit 6.

This prosperity came under pressure in , as construction and tourism slowed in the face of reduced foreign demand triggered by the ongoing global financial crisis. Although Cyprus lagged behind its EU peers in showing signs of stress from the global crisis, the economy tipped into recession in , contracting by 1.

Serious problems surfaced in the Cypriot financial sector in early as the Greek fiscal crisis and euro zone debt crisis deepened. Cyprus's borrowing costs have risen steadily because of its exposure to Greek debt. Two of Cyprus's biggest banks are among the largest holders of Greek bonds in Europe and have a substantial presence in Greece through bank branches and subsidiaries. Cyprus experienced numerous downgrades of its credit rating in and has been cut off from international money markets. The Cypriot economy contracted in following the writedown of Greek bonds.

A liquidity squeeze is choking the financial sector and the real economy as many global investors are uncertain the Cypriot economy can weather the EU crisis. The budget deficit rose to 7.

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In response to the country's deteriorating finances and serious risk of contagion from the Greek debt crisis, Nicosia implemented measures to cut the cost of the state payroll, curb tax evasion, and revamp social benefits, and trimmed the deficit to 4. In July, Nicosia became the fifth euro zone government to request an economic bailout program from the European Commission, the European Central Bank, and the International Monetary Fund - known collectively as the "Troika".

Negotiations over the final details of the plan are ongoing. Czech Republic The Czech Republic is a stable and prosperous market economy closely integrated with the EU, especially since the country's EU accession in While the conservative, inward-looking Czech financial system has remained relatively healthy, the small, open, export-driven Czech economy remains sensitive to changes in the economic performance of its main export markets, especially Germany.