Economic overview In 36 editions of 36.

Real global output - gross world product (GWP) - rose roughly 2% in 1993, with results varying widely among regions and countries. Average growth of 1% in the GDP of industrialized countries (57% of GWP in 1993) and average growth of 6% in the GDP of less developed countries (37% of GWP) were partly offset by a further 10% drop in the GDP of the former USSR/Eastern Europe area (now only 6% of GWP). Within the industrialized world the US posted a 3% growth rate whereas both Japan and the 12-member European Union (formerly the European Community) had zero growth.

With the notable exception of Japan at 2.5%, unemployment was typically 6-11% in the industrial world. The US accounted for 22% of GWP in 1993; Western Europe accounted for 22.5%; and Japan accounted for 9%. These are the three "economic superpowers" which are presumably destined to compete for mastery in international markets on into the 21st century. As for the less developed countries, China, India, and the Four Dragons--South Korea, Taiwan, Hong Kong, and Singapore--once again posted good records; however, many other countries, especially in Africa, continued to suffer from drought, rapid population growth, inflation, and civil strife.

Central Europe, especially Poland, Hungary, and the Czech Republic, made considerable progress in moving toward "market-friendly" economies, whereas the 15 ex-Soviet countries typically experienced further declines in output of 10-15%. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government in a number of cases is losing control over resources as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in the successor states of the former Soviet Union, in former Yugoslavia, and in India.

In Western Europe, governments face the difficult political problem of channeling resources away from welfare programs in order to increase investment and strengthen incentives to seek employment. The addition of nearly 100 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. Because of their own internal problems, the industrialized countries have inadequate resources to deal effectively with the poorer areas of the world, which, at least from the economic point of view, are becoming further marginalized. (For the specific economic problems of each country, see the individual country entries in this volume.)

The hydrocarbons sector is the backbone of the economy, accounting for roughly 57% of government revenues, 25% of GDP, and almost all export earnings; Algeria has the fifth largest reserves of natural gas in the world and ranks fourteenth for oil. Algiers' efforts to reform one of the most centrally planned economies in the Arab world began after the 1986 collapse of world oil prices plunged the country into a severe recession.

In 1989, the government launched a comprehensive, IMF-supported program to achieve macroeconomic stabilization and to introduce market mechanisms into the economy. Despite substantial progress toward macroeconomic adjustment, in 1992 the reform drive stalled as Algiers became embroiled in political turmoil. In September 1993, a new government was formed, one of whose priorities was the resumption and acceleration of the structural adjustment process.

Buffeted by the slump in world oil prices and burdened with a heavy foreign debt, Algiers in 1993 resumed negotiations with the IMF and is on track to conclude a standby arrangement with the Fund in 1994.

Subsistence agriculture provides the main livelihood for 80-90% of the population but accounts for less than 15% of GDP. Oil production is vital to the economy, contributing about 60% to GDP. Bitter internal fighting continues to severely affect the economy, and food must be imported. In 1993, production fell by an estimated 22.6%, mainly because of the capture by insurgents of the oil town of Soyo and diamond-producing areas in northeastern Angola.

Angola has rich natural resources - notably gold, diamonds, and arable land, in addition to large oil depoaits - but will need to end the war and reform government policies if it is to achieve its potential.

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Benin is one of the least developed countries in the world because of limited natural resources and a poorly developed infrastructure. Agriculture accounts for about 35% of GDP, employs about 60% of the labor force, and generates a major share of foreign exchange earnings. The industrial sector contributes only about 10% to GDP and employs 2% of the work force. Low prices in recent years have kept down hard currency earnings from Benin's major exports of agricultural products, primarily cotton.

A World Bank supported structural adjustment program begun in 1989 has helped strengthen the economy through such measures as trimming the government payroll, reforming the tax system, and encouraging private investment, both domestic and foreign. Benin has experienced 3 consecutive years of moderate growth as a result.

The economy has historically been based on cattle raising and crops. Agriculture today provides a livelihood for more than 80% of the population, but produces only about 50% of food needs. The driving force behind the rapid economic growth of the 1970s and 1980s has been the mining industry. This sector, mostly on the strength of diamonds, has gone from generating 25% of GDP in 1980 to 50% in 1991. No other sector has experienced such growth, especially not agriculture, which is plagued by erratic rainfall and poor soils.

The unemployment rate remains a problem at 25%. Although diamond production was down slightly in 1992, substantial gains in coal output and manufacturing helped boost the economy. Recovery in sluggish diamond markets in second half 1993 helped Botswana achieve moderate growth of 3% for the year.

One of the poorest countries in the world, Burkina has a high population density, few natural resources, and relatively infertile soil. Economic development is hindered by a poor communications network within a landlocked country. Agriculture provides about 40% of GDP and is entirely of a subsistence nature. Industry, dominated by unprofitable government-controlled corporations, accounts for about 15% of GDP.

A landlocked, resource-poor country in an early stage of economic development, Burundi is predominately agricultural with only a few basic industries. Its economic health depends on the coffee crop, which accounts for 80% of foreign exchange earnings. The ability to pay for imports therefore continues to rest largely on the vagaries of the climate and the international coffee market. As part of its economic reform agenda, launched in February 1991 with IMF and World Bank support, Burundi is trying to diversify its agricultural exports and attract foreign investment in industry. Several state-owned coffee companies were privatized via public auction in September 1991.

Cape Verde's low per capita GDP reflects a poor natural resource base, a serious, long-term drought, and a high birthrate. The economy is service oriented, with commerce, transport, and public services accounting for 60% of GDP. Although nearly 70% of the population lives in rural areas, agriculture's share of GDP is only 20%; the fishing sector accounts for 4%. About 90% of food must be imported. The fishing potential, mostly lobster and tuna, is not fully exploited.

In 1988 fishing represented only 3.5% of GDP. Cape Verde annually runs a high trade deficit, financed by remittances from emigrants and foreign aid. Economic reforms launched by the new democratic government in February 1991 are aimed at developing the private sector and attracting foreign investment to diversify the economy.

Because of its offshore oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed, most diversified primary commodity economies in sub-Saharan Africa. Still, it faces many of the serious problems facing other underdeveloped countries, such as political instability, a top-heavy civil service, and a generally unfavorable climate for business enterprise. The development of the oil sector led rapid economic growth between 1970 and 1985. Growth came to an abrupt halt in 1986, precipitated by steep declines

in the prices of major exports:

coffee, cocoa, and petroleum. Export earnings were cut by almost one-third, and inefficiencies in fiscal management were exposed. In 1990-93, with support from the IMF and World Bank, the government began to introduce reforms designed to spur business investment, increase efficiency in agriculture, and recapitalize the nation's banks. Political instability following suspect elections in 1992 brought IMF/WB structural adjustment to a halt. Although the 50% devaluation of the currency in January 1994 improves the potential for export growth, mismanagement remains and is the main barrier to economic improvement.

Subsistence agriculture, including forestry, remains the backbone of the CAR economy, with more than 70% of the population living in the countryside. In 1990 the agricultural sector generated about 42% of GDP. Timber accounted for about 26% of export earnings and the diamond industry for 54%. Important constraints to economic development include the CAR's landlocked position, a poor transportation system, and a weak human resource base. Multilateral and bilateral development assistance, particularly from France, plays a major role in providing capital for new investment.

Climate, geographic remoteness, poor resource endowment, and lack of infrastructure make Chad one of the most underdeveloped countries in the world. Its economy is hobbled by political turmoil, conflict with Libya, drought, and food shortages. Consequently the economy has shown little progress in recent years in overcoming a severe setback brought on by civil war in the late 1980s. Over 80% of the work force is involved in subsistence farming and fishing.

Cotton is the major cash crop, accounting for at least half of exports. Chad is highly dependent on foreign aid, especially food credits, given chronic shortages in several regions. The government hopes that discovery of several oil deposits near Lake Chad will lead to economic revival and a windfall in government revenues by 2000.

One of the world's poorest countries, Comoros is made up of several islands that have poor transportation links, a young and rapidly increasing population, and few natural resources. The low educational level of the labor force contributes to a low level of economic activity, high unemployment, and a heavy dependence on foreign grants and technical assistance. Agriculture, including fishing, hunting, and forestry, is the leading sector of the economy.

It contributes 40% to GDP, employs 80% of the labor force, and provides most of the exports. The country is not self-sufficient in food production, and rice, the main staple, accounts for 90% of imports. During 1982-86 the industrial sector grew at an annual average rate of 5.3%, but its contribution to GDP is small. Despite major investment in the tourist industry, which accounts for about 25% of GDP, growth has stagnated since 1983.

A sluggish growth rate of 1.5% during 1985-90 has led to large budget deficits, declining incomes, and balance-of-payments difficulties. Estimates for 1992 show a moderate increase in the growth rate based on increased exports, tourism, and government investment outlays.

Zaire's economy has continued to disintegrate. While meaningful economic figures are difficult to come by, Zaire's hyperinflation, the largest government deficit ever, and plunging mineral production have made the country one of the world's poorest. Most formal transactions are conducted in hard currency as indigenous banknotes have lost almost all value, and a barter economy now flourishes in all but the largest cities.

Most individuals and families hang on grimly through subsistence farming and petty trade. The government has not been able to meet its financial obligations to the International Momentary Fund or put in place the financial measures advocated by the IMF. Although short-term prospects for improvement are dim, improved political stability would boost Zaire's long-term potential to effectively exploit its vast wealth of mineral and agricultural resources.

Congo's economy is a mixture of village agriculture and handicrafts, an industrial sector based largely on oil, support services, and a government characterized by budget problems and overstaffing. A reform program, supported by the IMF and World Bank, ran into difficulties in 1990-91 because of problems in changing to a democratic political regime and a heavy debt-servicing burden. Oil has supplanted forestry as the mainstay of the economy, providing about two-thirds of government revenues and exports.

In the early 1980s rapidly rising oil revenues enabled Congo to finance large-scale development projects with growth averaging 5% annually, one of the highest rates in Africa. Subsequently, growth has slowed to an average of roughly 1.5% annually, only half the population growth rate. Political turmoil and misguided government investment have derailed economic reform programs sponsored by the IMF and World Bank.

Cote d'Ivoire is among the world's largest producers and exporters of coffee, cocoa beans, and palm-kernel oil. Consequently, the economy is highly sensitive to fluctuations in international prices for coffee and cocoa and to weather conditions. Despite attempts by the government to diversify, the economy is still largely dependent on agriculture and related industries. The agricultural sector accounts for over one-third of GDP and about 80% of export earnings and employs about 85% of the labor force.

A collapse of world cocoa and coffee prices in 1986 threw the economy into a recession, from which the country has yet to fully recover. Continuing weak prices for commodity exports, a bloated public-sector wage bill, and a large foreign debt will continue to constrain economic development, this despite the 50% currency devaluation in January 1994 designed to restore international price competitiveness. A large, non-competitive import-substitution sector continues to thrive under steep tariff and import quota barriers.

The economy is based on service activities connected with the country's strategic location and status as a free trade zone in northeast Africa. Djibouti provides services as both a transit port for the region and an international transshipment and refueling center. It has few natural resources and little industry. The nation is, therefore, heavily dependent on foreign assistance (an important supplement to GDP) to help support its balance of payments and to finance development projects.

An unemployment rate of over 30% continues to be a major problem. Per capita consumption dropped an estimated 35% over the last five years because of recession, civil war, and a high population growth rate (including immigrants and refugees).

Egypt has one of the largest public sectors of all the Third World economies, most industrial plants being owned by the government. Overregulation holds back technical modernization and foreign investment. Even so, the economy grew rapidly during the late 1970s and early 1980s, but in 1986 the collapse of world oil prices and an increasingly heavy burden of debt servicing led Egypt to begin negotiations with the IMF for balance-of-payments support.

Egypt's first IMF standby arrangement concluded in mid-1987 was suspended in early 1988 because of the government's failure to adopt promised reforms. Egypt signed a follow-on program with the IMF and also negotiated a structural adjustment loan with the World Bank in 1991. In 1991-93 the government made solid progress on administrative reforms such as liberalizing exchange and interest rates but resisted implementing major structural reforms like streamlining the public sector.

As a result, the economy has not gained momentum and unemployment has become a growing problem. Egypt probably will continue making uneven progress in implementing the successor programs with the IMF and World Bank it signed onto in late 1993. In 1992-93 tourism plunged 20% or so because of sporadic attacks by Islamic extremists on tourist groups. President MUBARAK has cited population growth as the main cause of the country's economic troubles. The addition of about 1.4 million people a year to the already huge population of 60 million exerts enormous pressure on the 5% of the land area available for agriculture.

Agriculture, forestry, and fishing account for about half of GDP and nearly all exports. Subsistence farming predominates. Although pre-independence Equatorial Guinea counted on cocoa production for hard currency earnings, the deterioration of the rural economy under successive brutal regimes has diminished potential for agriculture-led growth. A number of AID programs sponsored by the World Bank and the international donor community have failed to revitalize export agriculture.

There is little industry; businesses for the most part are owned by government officials and their family members. Commerce accounts for about 8% of GDP and the construction, public works, and service sectors for about 38%. Undeveloped natural resources include titanium, iron ore, manganese, uranium, and alluvial gold. Oil exploration, taking place under concessions offered to US, French, and Spanish firms, has been moderately successful. Increased production from recently discovered natural gas fields will provide a greater share of exports by 1995.

With independence from Ethiopia on 27 April 1993, Eritrea faces the bitter economic problems of a small, desperately poor African country. Most of the population will continue to depend on subsistence farming. Domestic output is substantially augmented by worker remittances from abroad. Government revenues come from custom duties and income and sales taxes. Eritrea has inherited the entire coastline of Ethiopia and has long-term prospects for revenues from the development of offshore oil, offshore fishing and tourism. For the time being, Ethiopia will be largely dependent on Eritrean ports for its foreign trade.

The economy is based on subsistence agriculture, which occupies more than 60% of the population and contributes nearly 25% to GDP. Manufacturing, which includes a number of agroprocessing factories, accounts for another quarter of GDP. Mining has declined in importance in recent years; high-grade iron ore deposits were depleted in 1978, and health concerns cut world demand for asbestos. Exports of sugar and forestry products are the main earners of hard currency.

Surrounded by South Africa, except for a short border with Mozambique, Swaziland is heavily dependent on South Africa, from which it receives 90% of its imports and to which it sends about half of its exports.

With the independence of Eritrea on 27 April 1993, Ethiopia continues to face difficult economic problems as one of the poorest and least developed countries in Africa. (The accompanying analysis and figures predate the independence of Eritrea.) Its economy is based on subsistence agriculture, which accounts for about 45% of GDP, 90% of exports, and 80% of total employment; coffee generates 60% of export earnings. The manufacturing sector is heavily dependent on inputs from the agricultural sector.

Over 90% of large-scale industry, but less than 10% of agriculture, is state run; the government is considering selling off a portion of state-owned plants. Favorable agricultural weather largely explains the 4.5% growth in output in FY89, whereas drought and deteriorating internal security conditions prevented growth in FY90. In 1991 the lack of law and order, particularly in the south, interfered with economic development and growth. In 1992, because of some easing of civil strife and aid from the outside world, the economy substantially improved.

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Notwithstanding its serious ongoing economic problems, Gabon enjoys a per capita income more than twice that of most nations of sub-Saharan Africa. Gabon depended on timber and manganese until oil was discovered offshore in the early 1970s. The oil sector now accounts for 50% of GNP. Real growth was feeble in 1992 and Gabon continues to face weak prices for its timber, manganese, and uranium exports. Despite an abundance of natural wealth, and a manageable rate of population growth, the economy is hobbled by poor fiscal management.

In 1992, the fiscal deficit widened to 2.4% of GDP, and Gabon failed to settled arrears on its bilateral debt, leading to a cancellation of rescheduling agreements with official and private creditors. Devaluation of the local currency by 50% in January 1994 could set off an inflationary spiral if the government fails to reign in spending and grants large wage increases to an already overpaid public sector workforce.

The Gambia has no important mineral or other natural resources and has a limited agricultural base. It is one of the world's poorest countries with a per capita income of roughly $800. About 75% of the population is engaged in crop production and livestock raising, which contribute 30% to GDP. Small-scale manufacturing activity - processing peanuts, fish, and hides - accounts for less than 10% of GDP. A sustained structural adjustment program, including a liberalized trade policy, has fostered a respectable 4% rate of growth in recent years.

Re-export trade constitutes one-third of economic activity; however, border closures associated with Senegal's monetary crisis in late 1993 led to a 50% decline in re-export trade, reducing government revenues in turn. Devaluation of the CFA franc in January 1994 has made Senegalese goods more competitive, and is likely to prompt a relaxation of Senegalese controls, paving the way for a comeback in re-exports.

Supported by substantial international assistance, Ghana has been implementing a steady economic rebuilding program since 1983, including moves toward privatization and relaxation of government controls. The agriculture sector consists largely of small traditional farm holdings, rain-fed for the most part. Heavily dependent on cocoa, gold, and timber exports, economic growth so far has not spread substantially to other areas of the economy.

The costs of sending peacekeeping forces to Liberia and preparing for the transition to a democratic government have boosted government expenditures and undercut structural adjustment reforms. Ghana opened a stock exchange in 1990 and plans to float 5% of its stake in Ashanti Goldfields Corporation, which would make the exchange the largest in sub-Saharan Africa outside of South Africa.

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Although possessing major mineral and hydropower resources and considerable potential for agricultural development, Guinea remains one of the poorest countries in the world. The agricultural sector contributes about 40% to GDP and employs more than 80% of the work force, while industry accounts for 27% of GDP. Guinea possesses over 25% of the world's bauxite reserves. The mining sector accounted for 85% of exports in 1991. Long-run improvements in literacy, financial institutions, and the legal framework are needed if the country is to move out of poverty. Except in the bauxite industry, foreign investment remains minimal.

Guinea-Bissau ranks among the poorest countries in the world, with a per capita GDP of roughly $800. Agriculture and fishing are the main economic activities. Cashew nuts, peanuts, and palm kernels are the primary exports. Exploitation of known mineral deposits is unlikely at present because of a weak infrastructure and the high cost of development.

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Kenya's 3.1% annual population growth rate - one of the highest in the world - has led to a decline in per capita output in each of the last three years, 1991-93. Undependable weather conditions and a shortage of arable land hamper long-term growth in agriculture, the leading economic sector. In industry and services, Nairobi's reluctance to embrace IMF-supported reforms has held back investment. Ethnic clashes and continued suspension of quick disbursing aid by the international donors kept growth at only 0.5% in 1993.

Small, landlocked, and mountainous, Lesotho has no important natural resources other than water. Its economy is based on agriculture, light manufacturing, and remittances from laborers employed in South Africa (recently equal to about 45% of GDP). The great majority of households gain their livelihoods from subsistence farming and migrant labor; a large portion of the adult male workforce is employed in South African mines.

Manufacturing depends largely on farm products to support the milling, canning, leather, and jute industries; other industries include textile, clothing, and construction (in particular, a major water improvement project which will permit the sale of water to South Africa). Industry's share of GDP rose from 6% in 1982 to 13% in 1991.

Civil war since 1990 has destroyed much of Liberia's economy, especially the infrastructure in and around Monrovia. Businessmen have fled the country, taking capital and expertise with them. Many will not return. Richly endowed with water, mineral resources, forests, and a climate favorable to agriculture, Liberia had been a producer and exporter of basic products, while local manufacturing, mainly foreign owned, had been small in scope.

Political instability threatens prospects for economic reconstruction and repatriation of some 750,000 Liberian refugees who have fled to neighboring countries. The political impasse between the interim government and rebel leader Charles Taylor has prevented restoration of normal economic life, including the re-establishment of a strong central government with effective economic development programs.

The socialist-oriented economy depends primarily upon revenues from the oil sector, which contributes practically all export earnings and about one-third of GDP. In 1990 per capita GDP was the highest in Africa at $5,410, but GDP growth rates have slowed and fluctuate sharply in response to changes in the world oil market. Import restrictions and inefficient resource allocations have led to shortages of basic goods and foodstuffs.

Windfall revenues from the hike in world oil prices in late 1990 improved the foreign payments position and resulted in a current account surplus through 1992. The nonoil manufacturing and construction sectors, which account for about 20% of GDP, have expanded from processing mostly agricultural products to include petrochemicals, iron, steel, and aluminum. Although agriculture accounts for only 5% of GDP, it employs about 20% of the labor force.

Climatic conditions and poor soils severely limit farm output, and Libya imports about 75% of its food requirements. The UN sanctions imposed in April 1992 have not yet had a major impact on the economy because Libya's oil revenues generate sufficient foreign exchange that, along with Libya's large currency reserves, sustain food and consumer goods imports as well as equipment for the oil industry and ongoing development projects.

Madagascar is one of the poorest countries in the world. Agriculture, including fishing and forestry, is the mainstay of the economy, accounting for over 30% of GDP and contributing more than 70% of total export earnings. Industry is largely confined to the processing of agricultural products and textile manufacturing; in 1991 it accounted for only 13% of GDP. In 1986 the government introduced a five-year development plan that stressed self-sufficiency in food (mainly rice) by 1990, increased production for exports, and reduced energy imports. Subsequently, growth in output has been held back because of protracted antigovernment strikes and demonstrations for political reform.

Landlocked Malawi ranks among the world's least developed countries. The economy is predominately agricultural, with about 90% of the population living in rural areas. Agriculture accounts for 40% of GDP and 90% of export revenues. After two years of weak performance, economic growth improved significantly in 1988-91 as a result of good weather and a broadly based economic adjustment effort by the government. Drought cut overall output sharply in 1992. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations.

Mali is among the poorest countries in the world, with about 70% of its land area desert or semidesert. Economic activity is largely confined to the riverine area irrigated by the Niger. About 10% of the population live as nomads and some 80% of the labor force is engaged in agriculture and fishing. Industrial activity is concentrated on processing farm commodities. In consultation with international lending agencies, the government has adopted a structural adjustment program for 1992-95, aiming at GDP annual growth of 4.6%, inflation of no more than 2.5% on average, and a substantial reduction in the external current account deficit.

A majority of the population still depends on agriculture and livestock for a livelihood, even though most of the nomads and many subsistence farmers were forced into the cities by recurrent droughts in the 1970s and 1980s. Mauritania has extensive deposits of iron ore, which account for almost 50% of total exports. The decline in world demand for this ore, however, has led to cutbacks in production. The nation's coastal waters are among the richest fishing areas in the world, but overexploitation by foreigners threatens this key source of revenue.

The country's first deepwater port opened near Nouakchott in 1986. In recent years, drought and economic mismanagement have resulted in a substantial buildup of foreign debt. The government has begun the second stage of an economic reform program in consultation with the World Bank, the IMF, and major donor countries.

The economy is based on sugar, manufacturing (mainly textiles), and tourism. Sugarcane is grown on about 90% of the cultivated land area and accounts for 40% of export earnings. The government's development strategy centers on industrialization (with a view to exports), agricultural diversification, and tourism. Economic performance in 1992 was impressive, with 6% real growth and low unemployment.

Economic activity is based primarily on the agricultural sector, including fishing and livestock raising. Mayotte is not self-sufficient and must import a large portion of its food requirements, mainly from France. The economy and future development of the island are heavily dependent on French financial assistance. Mayotte's remote location is an obstacle to the development of tourism.

Morocco faces the typical problems of developing countries--restraining government spending, reducing constraints on private activity and foreign trade, and keeping inflation within bounds. Since the early 1980s the government has pursued an economic program toward these objectives with the support of the IMF, the World Bank, and the Paris Club of creditors. The economy has substantial

assets to draw on:

the world's largest phosphate reserves, diverse agricultural and fishing resources, a sizable tourist industry, a growing manufacturing sector, and large remittances from Moroccans working abroad. However, a severe drought in 1992-93 has depressed economic activity and held down experts. Real GDP contracted by 2.9% in 1992, and growth for 1993 is estimated at only 2%. Despite these setbacks, initiatives to relax capital controls, strengthen the banking sector, and privatize state enterprises went forward in 1993. Servicing the large debt, high unemployment, and vulnerability to external economic forces remain long-term problems for Morocco.

One of Africa's poorest countries, Mozambique has failed to exploit the economic potential of its sizable agricultural, hydropower, and transportation resources. Indeed, national output, consumption, and investment declined throughout the first half of the 1980s because of internal disorders, lack of government administrative control, and a growing foreign debt. A sharp increase in foreign aid, attracted by an economic reform policy, resulted in successive years of economic growth in the late 1980s, but aid has declined steadily since 1989.

Agricultural output is at only 75% of its 1981 level, and grain has to be imported. Industry operates at only 20-40% of capacity. The economy depends heavily on foreign assistance to keep afloat. Peace accords signed in October 1992 improved chances of foreign investment, aided IMF-supported economic reforms, and supported continued economic recovery.

The economy is heavily dependent on the mining industry to extract and process minerals for export. Mining accounts for almost 25% of GDP. Namibia is the fourth-largest exporter of nonfuel minerals in Africa and the world's fifth-largest producer of uranium. Alluvial diamond deposits are among the richest in the world, making Namibia a primary source for gem-quality diamonds. Namibia also produces large quantities of lead, zinc, tin, silver, and tungsten. More than half the population depends on agriculture (largely subsistence agriculture) for its livelihood.

Niger's economy is centered on subsistence agriculture, animal husbandry, and re-export trade, and increasingly less on uranium, its major export throughout the 1970s and 1980s. Uranium revenues dropped by almost 50% between 1983 and 1990. Terms of trade with Nigeria, Niger's largest regional trade partner, have improved dramatically since the 50% devaluation of the African franc in January 1994; this devaluation boosted exports of livestock, peas, onions, and the products of Niger's small cotton industry.

The government relies on bilateral and multilateral aid for operating expenses and public investment, and is strongly induced to adhere to structural adjustment programs designed by the IMF and the World Bank.

The oil-rich Nigerian economy continues to be hobbled by poor macroeconomic management that has resulted in an average annual inflation rate of 60%, a growing foreign debt, and a worsening balance of payments. A deepening political crisis in 1993 has compounded the government's failure to reign in deficit spending, which prevents it from reaching an agreement with the IMF and its bilateral creditors on debt relief. Investment in both oil and non-oil sector industry has been undermined by corruption and squandered on white elephant projects that have failed to generate diversification or new employment.

The economy has traditionally been based on agriculture. Sugarcane has been the primary crop for more than a century, and in some years it accounts for 85% of exports. The government has been pushing the development of a tourist industry to relieve high unemployment, which recently amounted to one-third of the labor force. The gap in Reunion between the well-off and the poor is extraordinary and accounts for the persistent social tensions.

The white and Indian communities are substantially better off than other segments of the population, often approaching European standards, whereas indigenous groups suffer the poverty and unemployment typical of the poorer nations of the African continent. The outbreak of severe rioting in February 1991 illustrates the seriousness of socioeconomic tensions. The economic well-being of Reunion depends heavily on continued financial assistance from France.

Almost 50% of GDP comes from the agricultural sector; coffee and tea make up 80-90% of total exports. The amount of fertile land is limited, however, and deforestation and soil erosion have created problems. The industrial sector in Rwanda is small, contributing only 17% to GDP. Manufacturing focuses mainly on the processing of agricultural products. The Rwandan economy remains dependent on coffee/tea exports and foreign aid.

Weak international prices since 1986 have caused the economy to contract and per capita GDP to decline. A structural adjustment program with the World Bank began in October 1990. Ethnic-based insurgency in 1990-93 devastated wide areas of the north and displaced hundreds of thousands of people. A peace accord in mid-1993 temporarily ended most of the fighting, but massive resumption of civil warfare in April 1994 in the capital city Kigali has been taking thousands of lives and severely damaging short-term economic prospects

The economy depends primarily on financial assistance from the UK. The local population earns some income from fishing, the raising of livestock, and sales of handicrafts. Because there are few jobs, a large proportion of the work force has left to seek employment overseas.

The economy has remained dependent on cocoa since the country gained independence nearly 15 years ago. Since then, however, cocoa production has gradually deteriorated because of drought and mismanagement, so that by 1987 output had fallen to less than 50% of its former levels. As a result, a shortage of cocoa for export has created a serious balance-of-payments problem. Production of less important crops, such as coffee, copra, and palm kernels, has also declined.

The value of imports generally exceeds that of exports by a ratio of 4:1. The emphasis on cocoa production at the expense of other food crops has meant that Sao Tome has to import 90% of food needs. It also has to import all fuels and most manufactured goods. Over the years, Sao Tome has been unable to service its external debt, which amounts to roughly 80% of export earnings. Considerable potential exists for development of a tourist industry, and the government has taken steps to expand facilities in recent years.

The government also implemented a Five-Year Plan covering 1986-90 to restructure the economy and reschedule external debt service payments in cooperation with the International Development Association and Western lenders.

After 14 years of mixed compliance with IMF and World Bank economic reform programs, Senegal finds its economy remains hostage to negative economic forces. Declining terms of trade, weather-related setbacks, and relentless growth in population have held back overall growth and left per capita incomes stagnant, if not diminished. The economy continues to rely on exports of fish, peanuts, and phosphates for hard currency earnings.

A 50% devaluation of the African franc in January 1994 is likely to lead to substantial increases in local currency prices for producers that may spur improved production. A sheltered import-substitution sector, comprising textiles, shoes, and other light manufacturing, will remain plagued, however, by high labor, transportation, and energy costs. Public finances face a decade-long trend in declining tax revenues, making the government increasingly dependent on official development assistance from bilateral donors.

In this small, open, tropical island economy, the tourist industry employs about 30% of the labor force and provides more than 70% of hard currency earnings. In recent years the government has encouraged foreign investment in order to upgrade hotels and other services. At the same time, the government has moved to reduce the high dependence on tourism by promoting the development of farming, fishing, and small-scale manufacturing.

The economic and social infrastructure is not well developed. Subsistence agriculture dominates the economy, generating about one-third of GDP and employing about two-thirds of the working population. Manufacturing, which accounts for roughly 10% of GDP, consists mainly of the processing of raw materials and of light manufacturing for the domestic market. Diamond mining provides an important source of hard currency. In 1990-93, the government, with the support of the IMF and the World Bank, has made substantial progress toward structural reform and better fiscal management.

The government readily met all IMF/WB targets in December 1993. The budget deficit had been dramatically reduced; the government workforce had been cut by 25%; large amounts of domestic debt had been retired; arrears to the IMF, World Bank, and other creditors had been reduced. On the negative side, continued incursions by the Liberian rebels, bandits, and army deserters in southern and eastern Sierra Leone have severely strained the economy and threaten economically critical regions of the country.

One of the world's poorest and least developed countries, Somalia has few resources. Moreover, much of the economy has been devastated by the civil war. Agriculture is the most important sector, with livestock accounting for about 40% of GDP and about 65% of export earnings. Nomads and seminomads who are dependent upon livestock for their livelihoods make up more than half of the population. Crop production generates only 10% of GDP and employs about 20% of the work force.

The main export crop is bananas; sugar, sorghum, and corn are grown for the domestic market. The small industrial sector is based on the processing of agricultural products and accounts for less than 10% of GDP. Greatly increased political turmoil in 1991-93 has resulted in a substantial drop in output, with widespread famine.

Many of the white one-seventh of the South African population enjoy incomes, material comforts, and health and educational standards equal to those of Western Europe. In contrast, most of the remaining population suffers from the poverty patterns of the Third World, including unemployment and lack of job skills. The main strength of the economy lies in its rich mineral resources, which provide two-thirds of exports. Economic developments for the remainder of the 1990s will be driven largely by the new government's attempts to improve black living conditions and to set the country on an aggressive export-led growth path.

The shrinking economy in recent years has absorbed less than 5% of the more than 300,000 workers entering the labor force annually. Local economists estimate that the economy must grow between 5% and 6% in real terms annually to absorb all of the new entrants.

Sudan is buffeted by civil war, chronic political instability, adverse weather, high inflation, a drop in remittances from abroad, and counterproductive economic policies. The economy is dominated by governmental entities that account for more than 70% of new investment. The private sector's main areas of activity are agriculture and trading, with most private industrial investment predating 1980. The economy's base is agriculture, which employs 80% of the work force.

Industry mainly processes agricultural items. Sluggish economic performance over the past decade, attributable largely to declining annual rainfall, has reduced levels of per capita income and consumption. A large foreign debt and huge arrearages continue to cause difficulties. In 1990 the International Monetary Fund took the unusual step of declaring Sudan noncooperative because of its nonpayment of arrearages to the Fund.

The government implemented a comprehensive economic reform program in 1992 that included slashing the fiscal deficit, liberalizing foreign exchange regulations, and lifting most price controls, but it had backtracked on most reforms by mid-1993 because of its fear of generating a domestic backlash. The government's failure to pursue economic reform, its continued prosecution of the civil war, and its growing international isolation have led to a further deterioration of the non-agricultural sectors of the economy during 1993. Agriculture, on the other hand, after several disappointing years, enjoyed favorable growing conditions in 1993, and its strong performance produced an overall growth rate in GNP of about 7%.

Tanzania is one of the poorest countries in the world. The economy is heavily dependent on agriculture, which accounts for about 58% of GDP, provides 85% of exports, and employs 90% of the work force. Industry accounts for 8% of GDP and is mainly limited to processing agricultural products and light consumer goods. The economic recovery program announced in mid-1986 has generated notable increases in agricultural production and financial support for the program by bilateral donors.

The World Bank, the International Monetary Fund, and bilateral donors have provided funds to rehabilitate Tanzania's deteriorated economic infrastructure. Growth in 1991-93 featured a pickup in industrial production and a substantial increase in output of minerals led by gold.

The economy is heavily dependent on subsistence agriculture, which accounts for about 33% of GDP and provides employment for 78% of the labor force. Primary agricultural exports are cocoa, coffee, and cotton, which together generate about 30% of total export earnings. Togo is self-sufficient in basic foodstuffs when harvests are normal. In the industrial sector phosphate mining is by far the most important activity, although it has suffered from the collapse of World phosphate prices and increased foreign competition.

Togo serves as a regional commercial and trade center. The government's decade-long IMF and World Bank supported effort to implement economic reform measures to encourage foreign investment and bring revenues in line with expenditures has stalled. Political unrest, including private and public sector strikes throughout 1992 and 1993, has jeopardized the reform program and has disrupted vital economic activity.

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Tunisia has a diverse economy, with important agricultural, mining, energy, tourism and manufacturing sectors. The economy grew rapidly in the mid-1980s, GDP growth averaging 5.4% in 1983-85. Following a foreign exchange crisis caused by a sharp drop in agricultural output and tourism, combined with the oil price collapse in 1986, Tunisia inaugurated an IMF-sponsored economic rehabilitation scheme. Subsequent government structural reforms have helped liberalize and open the economy, and GDP growth has been positive since the start of the program.

A sharp rebound in tourism from the downturn caused by the Gulf war and strong agricultural performance boosted real GDP growth to more than 8% in 1992; growth fell back to 2.6% in 1993. Further privatization and further improvements in government administrative efficiency are among the challenges for the future.

Uganda has substantial natural resources, including fertile soils, regular rainfall, and sizable mineral deposits of copper and cobalt. The economy has been devastated by widespread political instability, mismanagement, and civil war since independence in 1962. (GDP remains below the levels of the early 1970s, as does industrial production.) Agriculture is the most important sector of the economy, employing over 80% of the work force.

Coffee is the major export crop and accounts for the bulk of export revenues. Since 1986 the government has acted to rehabilitate and stabilize the economy by undertaking currency reform, raising producer prices on export crops, increasing prices of petroleum products, and improving civil service wages. The policy changes are especially aimed at dampening inflation, which was running at over 300% in 1987, and boosting production and export earnings.

In 1990-93, the economy has turned in a solid performance based on continued investment in the rehabilitation of infrastructure, improved incentives for production and exports, and gradually improving domestic security.

Western Sahara, a territory poor in natural resources and having little rainfall, has a per capita GDP of roughly $300. Pastoral nomadism, fishing, and phosphate mining are the principal sources of income for the population. Most of the food for the urban population must be imported. All trade and other economic activities are controlled by the Moroccan Government.

The economy has been in decline for more than a decade with falling imports and growing foreign debt. Economic difficulties stem from a chronically depressed level of copper production and ineffective economic policies. In 1991 real GDP fell by 2% and in 1992 by 3% more. An annual population growth of 3% has brought a decline in per capita GDP of 50% over the past decade. A high inflation rate has also added to Zambia's economic woes in recent years.

Agriculture employs three-fourths of the labor force and supplies almost 40% of exports. The manufacturing sector, based on agriculture and mining, produces a variety of goods and contributes 35% to GDP. Mining accounts for only 5% of both GDP and employment, but supplies of minerals and metals account for about 40% of exports. Wide fluctuations in agricultural production over the past six years have resulted in an uneven growth rate, one that on average has matched the 3% annual increase in population. Helped by an IMF/World Bank structural adjustment program, output rose 3.5% in 1991. A severe drought in 1991/92 caused the economy to contract by about 10% in 1992.

No economic activity at present except for fishing off the coast and small-scale tourism, both based abroad.

no economic activity

Economic activity is limited to servicing meteorological and geophysical research stations and French and other fishing fleets. The fishing catches landed on Iles Kerguelen by foreign ships are exported to France and Reunion.

no economic activity

Some fishing takes place in adjacent waters. There is a potential source of income from harvesting fin fish and krill. The islands receive income from postage stamps produced in the UK.

Greenland's economic situation at present is difficult. Unemployment is increasing, and prospects for economic growth in the immediate future are dim. Following the closing of the Black Angel lead and zinc mine in 1989, Greenland became almost completely dependent on fishing and fish processing, the sector accounting for 95% of exports. Prospects for fisheries are not bright, as the important shrimp catches will at best stabilize and cod catches have dropped.

Resumption of mining and hydrocarbon activities is not around the corner, thus leaving only tourism with some potential for the near future. The public sector in Greenland, i.e., the central government and its commercial entities and the municipalities, plays a dominant role in Greenland accounting for about two-thirds of total employment. About half the government's revenues come from grants from the Danish Government.

Iceland's Scandinavian-type economy is basically capitalistic, but with an extensive welfare system, relatively low unemployment, and comparatively even distribution of income. The economy is heavily dependent on the fishing industry, which provides nearly 75% of export earnings and employs 12% of the workforce. In the absence of other natural resources - except energy - Iceland's economy is vulnerable to changing world fish prices. Iceland's economy has been in recession since 1988. The recession continued in 1993 due to a third year of cutbacks in fishing quotas as well as falling world prices for the

country's main exports:

fish and fish products, aluminum, and ferrosilicon. Real GDP declined 3.3% in 1992 and rose slightly, by 0.4%, in 1993. The center-right government's economic goals include reducing the budget and current account deficits, limiting foreign borrowing, containing inflation, revising agricultural and fishing policies, diversifying the economy, and privatizing state-owned industries. The recession has led to a wave of bankruptcies and mergers throughout the economy, as well as the highest unemployment of the post-World War II period. Inflation, previously a serious problem, declined from double digit rates in the 1980s to only 3.7% in 1992-93.

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 located on the island.

Coal mining is the major economic activity on Svalbard. By treaty (9 February 1920), the nationals of the treaty powers have equal rights to exploit mineral deposits, subject to Norwegian regulation. Although US, UK, Dutch, and Swedish coal companies have mined in the past, the only companies still mining are Norwegian and Russian. The settlements on Svalbard are essentially company towns. The Norwegian state-owned coal company employs nearly 60% of the Norwegian population on the island, runs many of the local services, and provides most of the local infrastructure. There is also some trapping of seal, polar bear, fox, and walrus.

Afghanistan is an extremely poor, landlocked country, highly dependent on farming (wheat especially) and livestock raising (sheep and goats). Economic considerations have played second fiddle to political and military upheavals during more than 14 years of war, including the nearly 10-year Soviet military occupation (which ended 15 February 1989). Over the past decade, one-third of the population fled the country, with Pakistan sheltering more than 3 million refugees and Iran about 3 million.

About 1.4 million Afghan refugees remain in Pakistan and about 2 million in Iran. Another 1 million probably moved into and around urban areas within Afghanistan. Although reliable data are unavailable, gross domestic product is lower than 12 years ago because of the loss of labor and capital and the disruption of trade and transport.

Under the old central planning system, Armenia had built up a developed industrial sector, supplying machine building equipment, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy resources. Armenia is a large food importer and its mineral deposits (gold, bauxite) are small. The economic decline in the past three years (1991-93) has been particularly severe due to the ongoing conflict over the Armenian enclave of Nagorno-Karabakh in Azerbaijan.

Azerbaijan and Turkey have blockaded pipeline and railroad traffic to Armenia for its support of the Karabakh Armenians. This has left Armenia with only sporadic deliveries of natural gas through unstable Georgia, while other fuel and raw materials are in critical short supply. Inflation, roughly 14% per month in the first nine months of 1993, surged even higher in the fourth quarter. In late 1993, most industrial enterprises were either shut down or operating at drastically reduced levels.

Only small quantities of food were available (mostly humanitarian aid), heat was nonexistent, and electricity strictly rationed. An economic recovery cannot be expected until the Nagorno-Karabakh conflict is settled and until transportation through Georgia improves.

Azerbaijan is less developed industrially than either Armenia or Georgia, the other Transcaucasian states. It resembles the Central Asian states in its majority Muslim population, high structural unemployment, and low standard of living. The economy's most prominent products are oil, cotton, and gas. Production from the Caspian oil and gas field has been in decline for several years. With foreign assistance, the oil industry might generate the funds needed to spur industrial development.

However, civil unrest, marked by armed conflict in the Nagorno-Karabakh region between Muslim Azeris and Christian Armenians, makes foreign investors wary. Azerbaijan accounted for 1.5% to 2% of the capital stock and output of the former Soviet Union. Azerbaijan shares all the formidable problems of the ex-Soviet republics in making the transition from a command to a market economy, but its considerable energy resources brighten its prospects somewhat.

Old economic ties and structures have yet to be replaced. A particularly galling constraint on economic revival is the Nagorno-Karabakh conflict, said to consume 25% of Azerbaijan's economic resources.

Bangladesh is one of the world's poorest, most densely populated, and least developed nations. Its economy is overwhelmingly agricultural, with the cultivation of rice the single most important activity in the economy. Major impediments to growth include frequent cyclones and floods, government interference with the economy, a rapidly growing labor force that cannot be absorbed by agriculture, a low level of industrialization, failure to fully exploit energy resources (natural gas), and inefficient and inadequate power supplies.

Excellent rice crops and expansion of the export garment industry helped growth in FY92 and FY93. Policy reforms intended to reduce government regulation of private industry and promote public-sector efficiency have been announced but are being implemented only slowly.

The economy, one of the world's least developed, is based on agriculture and forestry, which provide the main livelihood for 90% of the population and account for about 50% of GDP. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with that of India through strong trade and monetary links. The industrial sector is small and technologically backward, with most production of the cottage industry type.

Most development projects, such as road construction, rely on Indian migrant labor. Bhutan's hydropower potential and its attraction for tourists are its most important natural resources; however, the government limits the number of tourists to 4,000 per year to minimize foreign influence. Much of the impetus for growth has come from large public-sector companies. Nevertheless, in recent years, Bhutan has shifted toward decentralized development planning and greater private initiative.

The government privatized several large public-sector firms, is revamping its trade regime and liberalizing administerial procedures over industrial licensing. The government's industrial contribution to GDP decreased from 13% in 1988 to about 10% in 1992.

All economic activity is concentrated on the largest island of Diego Garcia, where joint UK-US defense facilities are located. Construction projects and various services needed to support the military installations are done by military and contract employees from the UK, Mauritius, the Philippines, and the US. There are no industrial or agricultural activities on the islands.

Beginning in late 1978 the Chinese leadership has been trying to move the economy from the sluggish Soviet-style centrally planned economy to a more productive and flexible economy with market elements, but still within the framework of monolithic Communist control. To this end the authorities switched to a system of household responsibility in agriculture in place of the old collectivization, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprise in services and light manufacturing, and opened the economy to increased foreign trade and investment.

The result has been a strong surge in production, particularly in agriculture in the early 1980s. Industry also has posted major gains, especially in coastal areas near Hong Kong and opposite Taiwan, where foreign investment and modern production methods have helped spur production of both domestic and export goods. Aggregate output has more than doubled since 1978. On the darker side, the leadership has often experienced in its hybrid system the worst results of socialism (bureaucracy, lassitude, corruption) and of capitalism (windfall gains and stepped-up inflation). Beijing thus has periodically backtracked, retightening central controls at intervals.

In 1992-93 annual growth of GDP has accelerated, particularly in the coastal areas - to more than 10% annually according to official claims. In late 1993 China's leadership approved additional reforms aimed at giving more play to market-oriented institutions and at strengthening the center's control over the financial system. Popular resistance, changes in central policy, and loss of authority by rural cadres have weakened China's population control program, which is essential to the nation's long-term economic viability.

Georgia's economy has traditionally revolved around Black Sea tourism; cultivation of citrus fruits, tea, and grapes; mining of manganese and copper; and a small industrial sector producing wine, metals, machinery, chemicals, and textiles. The country imports the bulk of its energy needs, including natural gas and coal. Its only sizable domestic energy resource is hydropower. Since 1990, widespread conflicts, e.g., in Abkhazia, South Ossetia, and Mengrelia, severely aggravated the economic crisis resulting from the disintegration of the Soviet command economy in December 1991.

Throughout 1993, much of industry was functioning at only 20% of capacity; heavy disruptions in agricultural cultivation were reported; and tourism was shut down. The country is precariously dependent on US and EU humanitarian grain shipments, as most other foods are priced beyond reach of the average citizen. Georgia is also suffering from an acute energy crisis, as it is having problems paying for even minimal imports. Georgia is pinning its hopes for recovery on reestablishing trade ties with Russia and on developing international transportation through the key Black Sea ports of P'ot'i and Bat'umi.

India's economy is a mixture of traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of support services. Faster economic growth in the 1980s permitted a significant increase in real per capita private consumption. A large share of the population, perhaps as much as 40%, remains too poor to afford an adequate diet. Financial strains in 1990 and 1991 prompted government austerity measures that slowed industrial growth but permitted India to meet its international payment obligations without rescheduling its debt.

Policy reforms since 1991 have extended earlier economic liberalization and greatly reduced government controls on production, trade, and investment. US and other foreign firms are increasing their investment in India. In January 1994, international financial reserves were comfortably high.

Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation have helped Japan advance with extraordinary rapidity to the rank of second most powerful economy in the world. Industry, the most important sector of the economy, is heavily dependent on imported raw materials and fuels. Self-sufficient in rice, Japan must import about 50% of its requirements of other grain and fodder crops.

Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. Overall economic growth has been spectacular: a 10% average in the 1960s, a 5% average in the 1970s and 1980s. Economic growth came to a halt in 1992-93 largely because of contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets. At the same time, the stronger yen and slower global growth are containing export growth.

Unemployment and inflation remain remarkably low in comparison with the other industrialized nations. Japan continues to run a huge trade surplus - $120 billion in 1993, up more than 10% from the year earlier - which supports extensive investment in foreign assets. The new prime minister HATA in early 1994 reiterated previous governments' vows of administrative and economic reform, including reduction in the trade surplus, but his weak coalition government faces strong resistance from traditional interest groups. The crowding of the habitable land area and the aging of the population are two major long-run problems.

Kazakhstan, the second largest of the former Soviet states in territory, possesses vast oil, coal, rare metals, and agricultural resources. While the economy is gradually making the transition from a Soviet command system to a market system, strong elements of state control persist including government ownership of most economic assets and a continued system of mandatory state procurement for the key products such as grain and energy; likewise, agriculture remains largely collectivized.

On the other hand, new businesses are forming rapidly, the economy is opening to foreign investment, and 12% of state-owned commercial enterprises have been privatized. In 1993, a three-year industrial privatization program was launched; an independent currency was successfully introduced; and two large joint ventures were established with western oil companies. These far-reaching structural transformations have resulted in a cumulative decline in national income of more than 30% since 1990.

Loose monetary policies have kept the inflation rate high, averaging 28% per month for 1993 and accelerating at the end with the disruption caused by a new currency. Since the introduction of its independent currency in November 1993, the government has renewed its commitment to fiscal discipline and accelerating economic reform. However, growing economic hardship and rising ethnic tensions between Kazakhs and Russians over the division of economic assets will likely lead to strong pressure to backtrack.

More than 90% of this command economy is socialized; agricultural land is collectivized; and state-owned industry produces 95% of manufactured goods. State control of economic affairs is unusually tight even for a Communist country because of the small size and homogeneity of the society and the strict rule of KIM Il-song and his son, KIM Chong-il. Economic growth during the period 1984-88 averaged 2%-3%, but output declined by 3%-5% annually during 1989-92 because of systemic problems and disruptions in socialist-style economic relations with the former USSR and China.

In 1992, output dropped sharply, by perhaps 7%-9%, as the economy felt the cumulative effect of the reduction in outside support. The leadership insisted on maintaining its high level of military outlays from a shrinking economic pie. Moreover, a serious drawdown in inventories and critical shortages in the energy sector have led to increasing interruptions in industrial production. Abundant mineral resources and hydropower have formed the basis of industrial development since WWII. Output of the extractive industries includes coal, iron ore, magnesite, graphite, copper, zinc, lead, and precious metals.

Manufacturing is centered on heavy industry, including military industry, with light industry lagging far behind. Despite the use of improved seed varieties, expansion of irrigation, and the heavy use of fertilizers, North Korea has not yet become self-sufficient in food production. Six consecutive years of poor harvests, coupled with distribution problems, have led to chronic food shortages. North Korea remains far behind South Korea in economic development and living standards.

The driving force behind the economy's dynamic growth has been the planned development of an export-oriented economy in a vigorously entrepreneurial society. Real GNP increased more than 10% annually between 1986 and 1991. This growth ultimately led to an overheated situation characterized by a tight labor market, strong inflationary pressures, and a rapidly rising current account deficit. As a result, in 1992, economic policy focused on slowing the growth rate of inflation and reducing the deficit.

Annual growth slowed to 5%, still above the rate in most other countries of the world. Growth increased to 6.3% in 1993 as a result of fourth quarter manufacturing production growth of over 10% and is expected to be in the 8% range for 1994.

Kyrgyzstan is one of the smallest and poorest states of the former Soviet Union. Its economy is heavily agricultural, producing cotton and tobacco on irrigated land in the south, grain in the foothills of the north, and sheep and goats on mountain pastures. Its small and obsolescent industrial sector, concentrated around Bishkek, is heavily dependent on Russia and other CIS countries for customers and for inputs, including most of its fuel.

Since 1990, the economy has contracted by almost 40%. Kyrgyzstan's inflation was high in 1993, about 23% per month, but rates were declining at the end of the year. Kyrgyzstan introduced its national currency, the som, in May 1993, it has privatized 28% of its former state assets, and plans call for a massive voucher privatization in 1994. Although Kyrgyzstan will receive relatively large flows of foreign aid, ongoing economic restructuring will continue to be painful with an anticipated increase in unemployment as uneconomic enterprises close. President AKAYEV will be under strong political pressure to backtrack on some reform measures.

The economy is based on fishing, tourism, and shipping. Agriculture is limited to the production of a few subsistence crops that provide only 10% of food requirements. Fishing is the largest industry, employing 25% of the work force and accounting for over 60% of exports; it is also an important source of government revenue. During the 1980s tourism became one of the most important and highest growth sectors of the economy. In 1988 industry accounted for about 5% of GDP. Real GDP is officially estimated to have increased by about 10% annually during the period 1974-90.

Mongolia's severe climate, scattered population, and wide expanses of unproductive land have constrained economic development. Economic activity traditionally has been based on agriculture and the breeding of livestock - Mongolia has the highest number of livestock per person in the world. In past years extensive mineral resources had been developed with Soviet support; total Soviet assistance at its height amounted to 30% of GDP. The mining and processing of coal, copper, molybdenum, tin, tungsten, and gold account for a large part of industrial production.

Timber and fishing are also important sectors. The Mongolian leadership is trying to make the transition from Soviet-style central planning to a market economy through privatization and price reform, and is soliciting support from international financial agencies and foreign investors. The economy, however, has still not recovered from the loss of Soviet aid, and the country continues to suffer substantial economic hardships.

Nepal is among the poorest and least developed countries in the world. Agriculture is the mainstay of the economy, providing a livelihood for over 90% of the population and accounting for 60% of GDP. Industrial activity is limited, mainly involving the processing of agricultural produce (jute, sugarcane, tobacco, and grain). Production of textiles and carpets has expanded recently and accounted for 85% of foreign exchange earnings in FY94.

Apart from agricultural land and forests, exploitable natural resources are mica, hydropower, and tourism. Agricultural production in the late 1980s grew by about 5%, as compared with annual population growth of 2.6%. More than 40% of the population is undernourished. Since May 1991, the government has been encouraging trade and foreign investment, e.g., by eliminating business licenses and registration requirements in order to simplify domestic and foreign investment.

The government also has been cutting public expenditures by reducing subsidies, privatizing state industries, and laying off civil servants. Prospects for foreign trade and investment in the 1990s remain poor, however, because of the small size of the economy, its technological backwardness, its remoteness, and susceptibility to natural disaster. Nepal experienced severe flooding in August 1993 which caused at least $50 million in damage to the country's infrastructure.

Pakistan is a poor Third World country faced with the usual problems of rapidly increasing population, sizable government deficits, and heavy dependence on foreign aid. In addition, the economy must support a large military establishment. Rapid economic growth, averaging 5%-6% over the past decade has helped Pakistan cope with these problems. However, growth slumped to 3% in FY93 because of severe flooding, which damaged the key export crop, cotton.

Almost all agriculture and small-scale industry is in private hands. In 1990, Pakistan embarked on a sweeping economic liberalization program to boost foreign and domestic private investment and lower foreign aid dependence. The SHARIF government denationalized several state-owned firms and attracted some foreign investment. Pakistan likely will have difficulty raising living standards because of its rapidly expanding population. At the current rate of growth, population would double in 25 years.

Russia, a vast country with a wealth of natural resources, a well-educated population, and a diverse industrial base, continues to experience severe difficulties in moving from its old centrally planned economy to a modern market economy. President YEL'TSIN's government has made some progress toward a market economy by freeing most prices, slashing defense spending, unifying foreign exchange rates, and launching an ambitious privatization program.

Yet much of the old order persists and YEL'TSIN faces formidable opposition to further measures such as the reduction of subsidies to old-line industries. Output continues to fall although the mix is gradually becoming more responsive to Russia's needs. According to Russian official data, GDP declined by 12% in 1993 compared with 19% in 1992. Industrial output in 1993 fell 16% with all major sectors taking a hit. Agricultural production, meanwhile, was down 6%. The grain harvest totalled 99 million tons - some 8 million tons less than in 1992.

Unemployment climbed in 1993 but remained low by Western standards. The official number of unemployed rose from 578,000 at the beginning of 1993 to about 1 million - or roughly 1.4% of the work force - by yearend. According to the Russian labor minister, the actual number of unemployed probably was closer to 4 million. Government fears of large-scale unemployment continued to hamper industrial restructuring efforts. According to official statistics, average real wages remained flat.

Nonetheless, a substantial portion of the population, particularly the elderly and people in remote areas, finds its well-being steadily shrinking. The disparity in incomes between the rich and poor continued to rise in 1993, primarily reflecting the high earnings of enterprise managers and persons employed in the emerging private sector. The government tried to narrow the income gap by raising the wages of budget-funded workers - mainly teachers and health care specialists.

Official data may overstate hardships, because many Russians supplement their income by moonlighting or by bartering goods and services, activities that often go unreported. Russia made good progress on privatization in 1993 despite active opposition from key cabinet members, hard-line legislators, and antireform regional leaders. By yearend, for example, roughly 35% of Russia's medium and large state enterprises had been auctioned, while the number of private farms in Russia increased by 86,000, reaching a total of 170,000.

As a result, about 6% of agricultural land now has been privatized. Financial stabilization continued to remain a challenge for the government. Moscow tightened financial policies in early 1993 - including postponing planned budget spending - and succeeded in reducing monthly inflation from 27% in January to 20% in May and June. In the summer, however, the government relaxed austerity measures in the face of mounting pressure from industry and agriculture, sparking a new round of inflation; the monthly inflation rate jumped to 25% in August.

In response, Moscow announced a package of measures designed to curb government spending and inflation. It included eliminating bread subsidies, delaying payment obligations, raising interest rates, and phasing out concessionary Central Bank credits to enterprises and regions. The measures met with some success; the monthly inflation rate declined to 13% in December. According to official statistics, Russia's 1993 trade with nations outside the former Soviet Union produced a $16 billion surplus, up from $6 billion in 1992.

Moscow arrested the steep drop in exports that it had been suffering as a result of ruptured ties with former trading partners, output declines, and erratic efforts to move to world prices. Foreign sales - comprised largely of oil, natural gas, and other raw materials - grew slightly. Imports were down by 15% or so as a result of new import taxes and Moscow's reluctance to increase its debt burden by purchasing grain and other goods with foreign credits.

Russian trade with other former Soviet republics continued to decline and yielded a surplus of some $5 billion. At the same time, Russia paid only a fraction of the roughly $20 billion in debt coming due in 1993, and by mid-year, Russia's foreign debt had amounted to $81.5 billion. While Moscow reached agreement to restructure debts with Paris Club official creditors in April 1993, Moscow's refusal to waive its right to sovereign immunity kept Russia and its bank creditors from agreeing to restructure Moscow's commercial loans.

Capital flight continued to be a serious problem in 1993, with billions of dollars in assets owned by Russians being parked abroad at yearend. Russia's capital stock continues to deteriorate because of insufficient maintenance and new construction. The capital stock on average is twice the age of capital stock in the West. Many years will pass before Russia can take full advantage of its natural resources and its human assets.

Industry - dominated by the fast-growing apparel industry - has surpassed agriculture as the main source of export earnings and accounts for over 16% of GDP. The economy has been plagued by high rates of unemployment since the late 1970s. Economic growth, which has been depressed by ethnic unrest, accelerated in 1991-93 as domestic conditions began to improve and conditions for foreign investment brightened.

Tajikistan had the lowest per capita GDP in the former USSR, the highest rate of population growth, and the lowest standard of living. Its economy at the start of 1994 is producing at roughly the 1989 level and faces urgent reconstruction tasks from the 1992 civil war. Tajikistan's economy was severely disrupted by the breakup of the Soviet economy, which provided guaranteed trade relations and heavy subsidies and in which specialized tasks were assigned to each republic.

Its economy is highly agricultural (43% of the work force); it has specialized in growing cotton for export and must import a large share of its food. Its industry (14% of the work force) produces aluminum, hydropower, machinery, and household appliances. Nearly all petroleum products must be imported. Constant political turmoil and continued dominance of former Communist officials have slowed the process of economic reform and brought near economic collapse while limiting foreign assistance.

Tajikistan is in the midst of a prolonged monetary crisis in which it is attempting to continue to use the Russian ruble as its currency while its neighbors have switched to new independent currencies; Russia is unwilling to advance sufficient rubles without attaching stringent reform conditions.

Turkmenistan is a largely desert country with nomadic cattle raising, intensive agriculture in irrigated oases, and huge gas and oil resources. Half of its irrigated land is planted in cotton; it is the world's tenth largest producer. It also is the world's fourth largest producer of natural gas and has the fifth largest reserves. Furthermore, Turkmenistan has substantial oil resources; its two oil refineries make it an exporter of refined products.

Profiting from the move toward market prices for its oil and gas resources, Turkmenistan has suffered the least economic decline of the 15 states of the former USSR. With an authoritarian ex-Communist regime in power and a tribally based social structure, Turkmenistan has taken a cautious approach to questions of economic reform, using the profits from its gas and cotton exports to sustain a generally inefficient economy.

Economic restructuring and privatization have just begun, and price liberalization and price increases have been accompanied by generous wage hikes and subsidies. At the same time, Turkmenistan faces serious constraints on its gas and oil earnings because of the inability of its traditional regional customers to pay for the current level of purchases and the lack of pipeline access to hard currency markets. Faced with financial shortfalls, rampant inflation, and the desire to ensure a stable currency, the regime has become more receptive to market reforms yet still seeks to offer widespread social benefits to its population and to retain state domination over the economy.

Uzbekistan is a dry, landlocked country of which 20% is intensely cultivated, irrigated river valleys. It is one of the poorest states of the former USSR with 60% of its population living in overpopulated rural communities. Nevertheless, Uzbekistan is the world's third largest cotton exporter, a major producer of gold and natural gas, and a regionally significant producer of chemicals and machinery. Since independence, the government has sought to prop up the Soviet-style command economy with subsidies and tight controls on prices and production.

Such policies have buffered the economy from the sharp declines in output and high inflation experienced by many other former Soviet republics. By late 1993, however, they had become increasingly unsustainable as inflation soared and Russia forced the Uzbek Government to introduce its own currency. Faced with mounting economic problems, the government has increased its cooperation with international financial institutions, announced an acceleration of privatization, and stepped up efforts to attract foreign investors. Nevertheless, the regime is likely to resist full-fledged market reforms.

Anguilla has few natural resources, and the economy depends heavily on lobster fishing, offshore banking, tourism, and remittances from emigrants. In recent years the economy has benefited from a boom in tourism and construction. Development plans center around the improvement of the infrastructure, particularly transport and tourist facilities, and also light industry.

The economy is primarily service oriented, with tourism the most important determinant of economic performance. During the period 1986-91, real GDP expanded at an annual average rate of about 6%. Tourism makes a direct contribution to GDP of about 13% and also affects growth in other sectors - particularly in construction, communications, and public utilities. In 1992, reduced government capital spending and private sector investment, dampened by recession in the major world economies, slowed economic growth.

Tourism is the mainstay of the economy, although offshore banking and oil refining and storage are also important. Hotel capacity expanded rapidly between 1985 and 1989 and nearly doubled in 1990 alone. Unemployment has steadily declined from about 20% in 1986 to about 3% in 1991 and to less than 1% in 1992. The reopening of the local oil refinery, once a major source of employment and foreign exchange earnings, promises to give the economy an additional boost.

The Bahamas is a stable, developing nation whose economy is based primarily on tourism and offshore banking. Tourism alone provides about 40% of GDP and directly or indirectly employs about 50,000 people or 40% of the local work force. The economy has slackened in recent years, as the annual increase in the number of tourists slowed. Nonetheless, per capita GDP is one of the highest in the region.

A per capita income of $8,700 gives Barbados one of the highest standards of living of all the small island states of the eastern Caribbean. Historically, the economy was based on the cultivation of sugar cane and related activities. In recent years, however, the economy has diversified into manufacturing and tourism. The tourist industry is now a major employer of the labor force and a primary source of foreign exchange. The economy slowed in 1990-92 as Bridgetown's difficulty in financing its deficits caused it to exert control over domestic demands

The economy is based primarily on agriculture, agro-based industry, and merchandising, with tourism and construction assuming increasing importance. Agriculture accounts for about 30% of GDP and provides 75% of export earnings, while sugar, the chief crop, accounts for almost 40% of hard currency earnings. The US, Belize's main trading partner, is assisting in efforts to reduce dependency on sugar with an agricultural diversification program.

The economy, one of the most prosperous in the Caribbean area, is highly dependent on the tourist industry, which generates about 21% of the national income. In 1985 the government offered offshore registration to companies wishing to incorporate in the islands, and, in consequence, incorporation fees generated about $2 million in 1987. The economy slowed in 1991 because of the poor performances of the tourist sector and tight commercial bank credit. Livestock raising is the most significant agricultural activity. The islands' crops, limited by poor soils, are unable to meet food requirements.

The economy depends heavily on tourism (70% of GDP and 75% of foreign currency earnings) and offshore financial services, with the tourist industry aimed at the luxury market and catering mainly to visitors from North America. About 90% of the islands' food and consumer goods needs must be imported. The Caymanians enjoy one of the highest standards of living in the region.

In 1993 the economy grew at an estimated 6.5%, compared with 7.7% in 1992 and 2.1% in 1991. Increases in agricultural production (coffee and bananas), nontraditional exports, and tourism are responsible for much of the growth. Inflation in 1993 dropped to 9% from 17% in 1992 and 25% in 1991, an indication of basic financial stability. Unemployment is officially reported at 4.0%, but much underemployment remains.

Cuba's heavily statist economy remains in a severe depression as a result of the loss of massive amounts of economic aid from the former Soviet Bloc. In 1989-93, GDP declined by about 40% and import capability fell by about 80%. Reduced imports of fuel, spare parts, and chemicals combined with rainy weather to cut the production of sugar - the country's top export - from 7 million tons in 1992 to 4.3 million tons in 1993, causing a loss of more than $400 million in export revenue.

The government implemented several measures designed to stem the economic decline, e.g., legalizing the use of foreign currency by Cuban citizens in August 1993 in an attempt to increase remittances of foreign exchange from abroad. Authorities in September 1993 began permitting self-employment in over 100 mostly service occupations. Also in September the government broke up many state farms into smaller, more autonomous cooperative units in an attempt to increase worker incentives and boost depressed food production levels.

Fuel shortages persisted throughout 1993; draft animals and bicycles continued to replace motor-driven vehicles, and the use of electricity by households and factories was cut from already low levels. With the help of foreign investment, tourism has been one bright spot in the economy, with arrivals and earnings reaching record highs in 1993. Government officials have expressed guarded optimism for 1994, as the country struggles to achieve sustainable economic growth at a much-reduced standard of living.

The economy is dependent on agriculture and thus is highly vulnerable to climatic conditions. Agriculture accounts for about 30% of GDP and employs 40% of the labor force. Principal products include bananas, citrus, mangoes, root crops, and coconuts. Development of the tourist industry remains difficult because of the rugged coastline and the lack of an international airport.

Rapid growth of free trade zones has led to a substantial expansion of manufacturing for export, especially of wearing apparel. Over the past decade, tourism has also increased in importance and is a major earner of foreign exchange and a source of new jobs. Agriculture remains a key sector of the economy. The principal commercial crop is sugarcane, followed by coffee, cotton, cocoa, and tobacco. Domestic industry is based on the processing of agricultural products, oil refining, minerals, and chemicals.

Unemployment is officially reported at about 30%, but there is considerable underemployment. Growth fell to a moderate 3% in 1993 because of power shortages in industry and political uncertainty which slowed down foreign investment.

The agricultural sector accounts for 24% of GDP, employs about 40% of the labor force, and contributes about 66% to total exports. Coffee is the major commercial crop, accounting for 45% of export earnings. The manufacturing sector, based largely on food and beverage processing, accounts for 19% of GDP and 15% of employment. In 1992-93 the government made substantial progress toward privatization and deregulation of the economy. Growth in national output in 1990-93 exceeded growth in population for the first time since 1987, and inflation in 1993 of 12% was down from 17% in 1992

The economy is essentially agricultural and centers on the traditional production of spices and tropical plants. Agriculture accounts for about 15% of GDP and 80% of exports and employs 24% of the labor force. Tourism is the leading foreign exchange earner, followed by agricultural exports. Manufacturing remains relatively undeveloped, but is expected to grow, given a more favorable private investment climate since 1983. The economy achieved an impressive average annual growth rate of 5.5% in 1986-91 but stalled in 1992. Unemployment remains high at about 25%.

The economy depends on agriculture, tourism, light industry, and services. It is also dependent upon France for large subsidies and imports. Tourism is a key industry, with most tourists from the US. In addition, an increasingly large number of cruise ships visit the islands. The traditionally important sugarcane crop is slowly being replaced by other crops, such as bananas (which now supply about 50% of export earnings), eggplant, and flowers.

Other vegetables and root crops are cultivated for local consumption, although Guadeloupe is still dependent on imported food, which comes mainly from France. Light industry consists mostly of sugar and rum production. Most manufactured goods and fuel are imported. Unemployment is especially high among the young.

The economy is based on family and corporate agriculture, which accounts for 26% of GDP, employs about 60% of the labor force, and supplies two-thirds of exports. Manufacturing, predominantly in private hands, accounts for about 18% of GDP and 12% of the labor force. In both 1990 and 1991, the economy grew by 3%, the fourth and fifth consecutive years of mild growth. In 1992 growth picked up to almost 5% as government policies favoring competition and foreign trade and investment took stronger hold. In 1993, despite political unrest, this momentum continued, foreign investment held up, and growth was estimated at 4%.

About 75% of the population live in abject poverty. Agriculture is mainly small-scale subsistence farming and employs nearly three-fourths of the work force. The majority of the population does not have ready access to safe drinking water, adequate medical care, or sufficient food. Few social assistance programs exist, and the lack of employment opportunities remains one of the most critical problems facing the economy, along with soil erosion and political instability.

Trade sanctions applied by the Organization of American States in response to the September 1991 coup against President ARISTIDE have further damaged the economy. Output continued to drop in 1993 although not as sharply as in 1992.

Honduras is one of the poorest countries in the Western Hemisphere. Agriculture, the most important sector of the economy, accounts for more than 25% of GDP, employs 62% of the labor force, and produces two-thirds of exports. Productivity remains low. Industry, still in its early stages, employs nearly 9% of the labor force, accounts for 15% of GDP, and generates 20% of exports. The service sectors, including public administration, account for 50% of GDP and employ 20% of the labor force.

Basic problems facing the economy include rapid population growth, high unemployment, a lack of basic services, a large and inefficient public sector, and the dependence of the export sector mostly on coffee and bananas, which are subject to sharp price fluctuations. A far-reaching reform program initiated by former President CALLEJAS in 1990 is beginning to take hold. In 1993 the large fiscal deficit emerged as a key economic problem, the result of improvident state spending.

The economy is based on sugar, bauxite, and tourism. In September 1988, Hurricane Gilbert inflicted severe damage on crops and the electric power system, a sharp but temporary setback to the economy. By October 1989 the economic recovery from the hurricane was largely complete, and real growth was up to about 3% for 1989. In 1991, however, growth dropped to 0.2% as a result of the US recession, lower world bauxite prices, and monetary instability. In 1992, growth was 1.2%, supported by a recovery in tourism and stabilization of the Jamaican dollar in the second half of 1992.

The economy is based on sugarcane, bananas, tourism, and light industry. Agriculture accounts for about 10% of GDP and the small industrial sector for 10%. Sugar production has declined, with most of the sugarcane now used for the production of rum. Banana exports are increasing, going mostly to France. The bulk of meat, vegetable, and grain requirements must be imported, contributing to a chronic trade deficit that requires large annual transfers of aid from France.

Tourism has become more important than agricultural exports as a source of foreign exchange. The majority of the work force is employed in the service sector and in administration. Banana workers launched protests late in 1992 because of falling banana prices and fears of greater competition in the European market from other producers.

The economy is small and open with economic activity centered on tourism and construction. Tourism is the most important sector and accounts for roughly one-fifth of GDP. Agriculture accounts for about 4% of GDP and industry 10%. The economy is heavily dependent on imports, making it vulnerable to fluctuations in world prices. Exports consist mainly of electronic parts sold to the US.

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Tourism, petroleum refining, and offshore finance are the mainstays of the economy. The islands enjoy a high per capita income and a well-developed infrastructure as compared with other countries in the region. Unlike many Latin American countries, the Netherlands Antilles has avoided large international debt. Almost all consumer and capital goods are imported, with Venezuela and the US being the major suppliers.

Since March 1991, when President CHAMORRO began an ambitious economic stabilization program, Nicaragua has had considerable success in reducing inflation and obtaining substantial economic aid from abroad. Annual inflation fell from more than 750% in 1991 to less than 5% in 1992. Inflation rose again to an estimated 20% in 1993, although this increase was due almost entirely to a large currency devaluation in January.

As of early 1994, the government was close to finalizing an enhanced structural adjustment facility with the IMF, after the previous standby facility expired in early 1993. Despite these successes, achieving overall economic growth in an economy scarred by misguided economic values and civil war during the 1980s has proved elusive. Economic growth was flat in 1992 and slightly negative in 1993. Nicaragua's per capita foreign debt is one of the highest in the world; nonetheless, as of late 1993, Nicaragua was current on its post-1988 debt as well as on payments to the international financial institutions. Definition of property rights remains a problem; ownership disputes over large tracts of land, businesses, and homes confiscated by the previous government have yet to be resolved.

GDP expanded by roughly 5.9% in 1993, following growth of 8% in 1992; banking and financial services led the way in 1993. The economy thus continues to recover from the crisis that preceded the ouster of Manuel NORIEGA, even though the government's structural adjustment program has been hampered by a lack of popular support and a passive administration. Public investment has been limited as the administration has kept the fiscal deficit below 2% of GDP. Unemployment and economic reform are the two major issues the new government must face in 1994-95.

Puerto Rico has one of the most dynamic economies in the Caribbean region. Industry has surpassed agriculture as the primary sector of economic activity and income. Encouraged by duty free access to the US and by tax incentives, US firms have invested heavily in Puerto Rico since the 1950s. US minimum wage laws apply. Important industries include pharmaceuticals, electronics, textiles, petrochemicals, and processed foods.

Sugar production has lost out to dairy production and other livestock products as the main source of income in the agricultural sector. Tourism has traditionally been an important source of income for the island, with estimated arrivals of nearly 3 million tourists in 1989. Unemployment remains a severe problem at 18%.

The economy has historically depended on the growing and processing of sugarcane and on remittances from overseas workers. In recent years, tourism and export-oriented manufacturing have assumed larger roles.

Since 1983 the economy has shown an impressive average annual growth rate of almost 5% because of strong agricultural and tourist sectors. Saint Lucia also possesses an expanding industrial base supported by foreign investment in manufacturing and other activities, such as data processing. The economy, however, remains vulnerable because the important agricultural sector is dominated by banana production, which is subject to periodic droughts and tropical storms. The economy exhibited relatively strong growth in 1992-93 based on a recovery of the agricultural and manufacturing sectors and continued growth in construction and tourism.

Agriculture, dominated by banana production, is the most important sector of the economy. The services sector, based mostly on a growing tourist industry, is also important. The government has been relatively unsuccessful at introducing new industries, and high unemployment rates of 35%-40% continue.

Trinidad and Tobago's petroleum-based economy still enjoys a high per capita income by Latin American standards, even though output and living standards are substantially below the boom years of 1973-82. The country suffers from widespread unemployment, large foreign-debt payments, and periods of low international oil prices. Seven successive years of economic contraction were followed by small gains in output in 1990-91 of 1.2% and 0.9%, in turn followed by small declines in 1992-93 of roughly 1.0%. The government has begun to make progress in its efforts to diversify exports.

The economy is based on fishing, tourism, and offshore banking. Only subsistence farming - corn, cassava, citrus, and beans - exists on the Caicos Islands, so that most foods, as well as nonfood products, must be imported.

Tourism is the primary economic activity, accounting for more than 70% of GDP and 70% of employment. The manufacturing sector consists of textile, electronics, pharmaceutical, and watch assembly plants. The agricultural sector is small, most food being imported. International business and financial services are a small but growing component of the economy. One of the world's largest petroleum refineries is at Saint Croix.

An extremely poor country by European standards, Albania is making the difficult transition to a more open-market economy. The economy rebounded in 1993 after a severe depression accompanying the collapse of the previous centrally planned system in 1990 and 1991. Stabilization policies, including public sector layoffs and reduced social services, have improved the government's fiscal situation and reduced inflation. The recovery was spurred by the remittances of some 5% of the population which works abroad, mostly in Greece and Italy.

Foreign assistance and humanitarian aid also supported the recovery. Most agricultural land was privatized in 1992, substantially improving peasant incomes. Albania's limited industrial sector, now less than one-sixth of GDP, continued to decline in 1993. A sharp fall in chromium prices reduced hard currency receipts from the mining sector. Large segments of the population, especially those living in urban areas, continue to depend on humanitarian aid to meet basic food requirements.

Unemployment remains a severe problem accounting for approximately one-fifth of the work force. Growth is expected to continue in 1994, but could falter if Albania becomes involved in the conflict in the former Yugoslavia, workers' remittances from Greece are reduced, or foreign assistance declines.

Tourism, the mainstay of Andorra's economy, accounts for roughly 80% of GDP. An estimated 13 million tourists visit annually, attracted by Andorra's duty-free status and by its summer and winter resorts. The banking sector, with its "tax haven" status, also contributes substantially to the economy. Agricultural production is limited by a scarcity of arable land, and most food has to be imported. The principal livestock activity is sheep raising.

Manufacturing consists mainly of cigarettes, cigars, and furniture. Andorra is a member of the EU Customs Union; it is unclear what effect the European Single Market will have on the advantages Andorra obtains from its duty-free status.

Austria boasts a prosperous and stable socialist market economy with a sizable but falling proportion of nationalized industry and extensive welfare benefits. Thanks to its raw material endowment, a technically skilled labor force, and strong links to German industrial firms, Austria occupies specialized niches in European industry and services (tourism, banking) and produces almost enough food to feed itself with only 8% of the labor force in agriculture.

Increased export sales resulting from German unification, boosted Austria's economy through 1991, but Austria's GDP growth slowed to 2% in 1992 and -0.5% in 1993 due to the weak international economy, particularly in Germany - its largest trading partner. GDP growth will resume slowly in 1994, with estimates ranging from a 0.5% to a 1% increase. Unemployment has risen to 7% as a result of the slowdown and will continue to rise in 1994.

Problems for the l990s include an aging population, the high level of subsidies, and the struggle to keep welfare benefits within budgetary capabilities. Austria's government has taken measures to make the economy more liberal and open by introducing a major tax reform, privatizing state-owned firms, and liberalizing cross-border capital movements. Although it will face increased competition, Austria should benefit from the continued opening of eastern European markets, as well as the 1 January 1994 start of the European Economic Area which extends the European Union rules on the free movement of people, capital, and goods and services to four members (including Austria) of the European Free Trade Association (EFTA). Austria has concluded membership negotiations with the European Union and is expected to join in early 1995, thus broadening European economic unity. The government, however, plans to hold a national referendum on the matter on 12 June 1994; support for and opposition to membership appears about equal.

Belarus ranks among the most developed of the former Soviet states, with a relatively modern - by Soviet standards - and diverse machine building sector and a robust agriculture sector. It also serves as a transport link for Russian oil exports to the Baltic states and Eastern and Western Europe. The breakup of the Soviet Union and its command economy has resulted in a sharp economic contraction as traditional trade ties have collapsed.

At the same time, the Belarusian Government has lagged behind most other former Soviet states in economic reform; privatization has barely begun; the agriculture sector remains highly subsidized; the state retains control over many prices; and the system of state orders and distribution persists. Meanwhile, the national bank continues to pour credits into inefficient enterprises, fueling inflation and weakening incentives to improve performance.

The government is pinning its hopes on reintegration with the Russian economy, but such a path would only partially restore traditional trade ties. Until economic reform is embraced, Belarus will continue in its economic morass.

This small private enterprise economy has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base. Industry is concentrated mainly in the populous Flemish area in the north, although the government is encouraging reinvestment in the southern region of Walloon. With few natural resources Belgium must import substantial quantities of raw materials and export a large volume of manufactures, making its economy unusually dependent on the state of world markets.

Three fourths of its trade is with other EC countries. The economy grew at a strong 4% pace during the period 1988-90, but economic growth slowed to a 1% pace in 1991-92 and dropped by 1.5% in 1993. Belgium's public debt has risen to 140% of GDP, and the government is trying to control its expenditures to bring the figure more into line with other industrialized countries.

Bosnia and Herzegovina ranked next to The Former Yugoslav Republic of Macedonia as the poorest republic in the old Yugoslav federation. Although agriculture has been almost all in private hands, farms have been small and inefficient, and the republic traditionally has been a net importer of food. Industry has been greatly overstaffed, one reflection of the rigidities of Communist central planning and management. Tito had pushed the development of military industries in the republic with the result that Bosnia hosted a large share of Yugoslavia's defense plants.

As of April 1994, Bosnia and Herzegovina was being torn apart by the continued bitter interethnic warfare that has caused production to plummet, unemployment and inflation to soar, and human misery to multiply. No reliable economic statistics for 1992-93 are available, although output clearly has fallen substantially below the levels of earlier years.

The Bulgarian economy continued its painful adjustment in 1993 from the misdirected development undertaken during four decades of Communist rule. Many aspects of a market economy have been put in place and have begun to function, but much of the economy, especially the industrial sector, has yet to re-establish market links lost with the collapse of other centrally planned Eastern European economies. The prices of many imported industrial inputs, especially energy products, have risen markedly, and falling real wages have not sufficed to restore competitiveness.

The trade deficit, exacerbated by UN trade sanctions against neighboring Serbia, grew in late 1993, accelerating the depreciation of the lev. These difficulties in adjusting to the challenges of a more open system, together with a severe drought, caused nonagricultural output to fall by perhaps 8% in 1993. The government plans more extensive privatization in 1994 to improve the management of state enterprises and to encourage foreign investment in ailing state firms.

Bulgaria resumed payments on its $10 billion in commercial debt in 1993 following the negotiation of a 50% write-off. An IMF program and second agreement with official creditors on Bulgaria's smaller amount of official debt are required to close the debt deal.

Before the dissolution of Yugoslavia, the republic of Croatia, after Slovenia, was the most prosperous and industrialized area, with a per capita output roughly comparable to that of Portugal and perhaps one-third above the Yugoslav average. At present, Croatian Serb Nationalists control approximately one-third of the Croatian territory, and one of the overriding determinants of Croatia's long-term political and economic prospects will be the resolution of this territorial dispute. Croatia faces monumental economic problems

stemming from:

the legacy of longtime Communist mismanagement of the economy; large foreign debt; damage during the fighting to bridges, factories, power lines, buildings, and houses; the large refugee population, both Croatian and Bosnian; and the disruption of economic ties to Serbia and the other former Yugoslav republics, as well as within its own territory. At the minimum, extensive Western aid and investment, especially in the tourist and oil industries, would seem necessary to salvage a desperate economic situation. However, peace and political stability must come first; only then will recent government moves toward a "market-friendly" economy reverse the sharp drop in output. As of May 1994, fighting continues among Croats, Serbs, and Muslims, and national boundaries and final political arrangements are still in doubt.

The dissolution of Czechoslovakia into two independent nation states - the Czech Republic and Slovakia - on 1 January 1993 has complicated the task of moving toward a more open and decentralized economy. The old Czechoslovakia, even though highly industrialized by East European standards, suffered from an aging capital plant, lagging technology, and a deficiency in energy and many raw materials. In January 1991, approximately one year after the end of communist control of Eastern Europe, the Czech and Slovak Federal Republic launched a sweeping program to convert its almost entirely state-owned and controlled economy to a market system.

In 1991-92 these measures resulted in privatization of some medium- and small-scale economic activity and the setting of more than 90% of prices by the market - but at a cost in inflation, unemployment, and lower output. For Czechoslovakia as a whole inflation in 1991 was roughly 50% and output fell 15%. In 1992, in the Czech lands, inflation dropped to an estimated 12.5% and GDP was down a more moderate 5%. In 1993, Czech aggregate output remained unchanged, prices rose about 19%, and unemployment hovered above 3%; exports to Slovakia fell roughly 30%. An estimated 40% of the economy was privately owned.

In 1994, Prague expects 2% to 3% growth in GDP, roughly 9% inflation, and 5% unemployment. Economic growth in 1994 is less important than continued economic restructuring; a mere 1% growth would be noteworthy if restructuring is accompanied by rising unemployment and enterprise bankruptcies.

This modern economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, and high dependence on foreign trade. Denmark's new center-left coalition government will concentrate on reducing the persistent high unemployment rate and the budget deficit as well as following the previous government's policies of maintaining low inflation and a current account surplus.

In the face of recent international market pressure on the Danish krone, the coalition has also vowed to maintain a stable currency. The coalition hopes to lower marginal income taxes while maintaining overall tax revenues; boost industrial competitiveness through labor market and tax reforms and increased research and development funds; and improve welfare services for the neediest while cutting paperwork and delays.

Prime Minister RASMUSSEN's reforms will focus on adapting Denmark to the criteria for European integration by 1999; although Copenhagen has won from the European Union (EU) the right to opt out of the European Monetary Union (EMU) if a national referendum rejects it. Denmark is, in fact, one of the few EU countries likely to fit into the EMU on time. Denmark is weathering the current worldwide slump better than many West European countries.

As the EU's single market (formally established on 1 January 1993) gets underway, Danish economic growth is expected to pickup to around 2% in 1994. Danish approval of the Maastricht treaty on EU political and economic union in May 1993 has reversed the drop in investment, further boosting growth. The current account surplus remains strong as limitations on wage increases and low inflation - expected to be around 2% in 1994 - improve export competitiveness. Although unemployment is high, it remains stable compared to most European countries.

Bolstered by a widespread national desire to reintegrate into Western Europe, the Estonian government has pursued a program of market reforms and rough stabilization measures, which is rapidly transforming the economy. Two years after independence - and one year after the introduction of the kroon - Estonians are beginning to reap tangible benefits; inflation is low; production declines appear to have bottomed out; and living standards are rising.

Economic restructuring is clearly underway with the once-dominant energy-intensive heavy industrial sectors giving way to labor-intensive light industry and the underdeveloped service sector. The private sector is growing rapidly; the share of the state enterprises in retail trade has steadily declined and by June 1993 accounted for only 12.5% of total turnover, and 70,000 new jobs have reportedly been created as a result of new business start-ups. Estonia's foreign trade has shifted rapidly from East to West with the Western industrialized countries now accounting for two-thirds of foreign trade.

The Faroese, who have long enjoyed the affluent living standards of the Danes and other Scandinavians, now must cope with the decline of the all-important fishing industry and one of the world's heaviest per capita external debts of nearly $30,000. When the nations of the world extended their fishing zones to 200 nautical miles in the early 1970s, the Faroese no longer could continue their traditional long-distance fishing and subsequently depleted their own nearby fishing areas.

The government's tight controls on fish stocks and its austerity measures have caused a recession, and subsidy cuts will force nationalization in the fishing industry, which has already been plagued with bankruptcies. Copenhagen has threatened to withhold its annual subsidy of $130 million - roughly one-third of the islands' budget revenues - unless the Faroese make significant efforts to balance their budget. To this extent the Faroe government is expected to continue its tough policies, including introducing a 20% value-added tax (VAT) in 1993, and has agreed to an IMF economic-political stabilization plan. In addition to its annual subsidy, the Danish government has bailed out the second largest Faroe bank to the tune of $140 million since October 1992.

Finland has a highly industrialized, largely free market economy, with per capita output two-thirds of the US figure. Its key economic sector is manufacturing - principally the wood, metals, and engineering industries. Trade is important, with the export of goods representing about 30% of GDP. 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. The economy, which experienced an average of 4.9% annual growth between 1987 and 1989, sank into deep recession in 1991 as growth contracted by 6.5%. The recession - which continued in 1992 with growth contracting by 4.1% - has been caused by economic overheating, depressed foreign markets, and the dismantling of the barter system between Finland and the former Soviet Union under which Soviet oil and gas had been exchanged for Finnish manufactured goods.

The Finnish Government has proposed efforts to increase industrial competitiveness and efficiency by an increase in exports to Western markets, cuts in public expenditures, partial privatization of state enterprises, and changes in monetary policy. In June 1991 Helsinki had tied the markka to the European Union's (EU) European Currency Unit (ECU) to promote stability. Ongoing speculation resulting from a lack of confidence in the government's policies forced Helsinki to devalue the markka by about 12% in November 1991 and to indefinitely break the link in September 1992.

The devaluations have boosted the competitiveness of Finnish exports to the extent the recession bottomed out in 1993 with renewed economic growth expected in 1994. Unemployment probably will remain a serious problem during the next few years, with the majority of Finnish firms facing a weak domestic market and the troubled German and Swedish export markets. Declining revenues, increased transfer payments, and extensive funding to bail out the banking system pushed the central government's budget deficit to nearly 13% in 1993.

Helsinki continues to harmonize its economic policies with those of the EU during Finland's current EU membership bid. In early 1995, Finland is expected to join the European Union (formerly the European Community), thus broadening European economic unity.

One of the world's most developed economies, France has substantial agricultural resources and a highly diversified modern industrial sector. Large tracts of fertile land, the application of modern technology, and subsidies have combined to make it the leading agricultural producer in Western Europe. Largely self-sufficient in agricultural products, France is a major exporter of wheat and dairy products. The industrial sector generates about one-quarter of GDP, and the growing services sector has become crucial to the economy.

Although French GDP contracted by 0.7% in 1993, the economy showed signs of life by yearend. GDP growth, however, will remain sluggish in 1994 - perhaps reaching only 1.0%. Rapidly increasing unemployment will still pose a major problem for the government. Paris remains committed to maintaining the franc-deutsche mark parity, which has kept French interest rates high despite France's low inflation. Although the pace of economic integration within the European Community has slowed down, integration presumably will remain a major force shaping the fortunes of the various economic sectors.

With the collapse of communism in Eastern Europe in 1989, prospects seemed bright for a fairly rapid incorporation of East Germany into the highly successful West German economy. The Federal Republic, however, continues to experience difficulties in integrating and modernizing eastern Germany, and the tremendous costs of unification pushed western Germany into its deepest recession since World War II. The western German economy shrank by 1.9% in 1993 as the Bundesbank maintained high interest rates to offset the inflationary effects of large government deficits and high wage settlements.

Eastern Germany grew by 7.1% in 1993 but this was from a shrunken base. Despite government transfers to the east amounting to nearly $110 billion annually, a self-sustaining economy in the region is still some years away. The bright spots are eastern Germany's construction, transportation, telecommunications, and service sectors, which have experienced strong growth. Western Germany has an advanced market economy and is a world leader in exports.

It has a highly urbanized and skilled population that enjoys excellent living standards, abundant leisure time, and comprehensive social welfare benefits. Western Germany is relatively poor in natural resources, coal being the most important mineral. Western Germany's world-class companies manufacture technologically advanced goods. The region's economy is

mature:

services and manufacturing account for the dominant share of economic activity, and raw materials and semimanufactured goods constitute a large portion of imports. In recent years, manufacturing has accounted for about 31% of GDP, with other sectors contributing lesser amounts. Gross fixed investment in 1993 accounted for about 20.5% of GDP. GDP in the western region is now $19,400 per capita, or 78% of US per capita GDP. Eastern Germany's economy appears to be changing from one anchored on manufacturing into a more service-oriented economy. The German government, however, is intent on maintaining a manufacturing base in the east and is considering a policy for subsidizing industrial cores in the region. Eastern Germany's share of all-German GDP is only 8% and eastern productivity is just 30% that of the west even though eastern wages are at roughly 70% of western levels. The privatization agency for eastern Germany, Treuhand, has privatized more than 90% of the 13,000 firms under its control and will likely wind down operations in 1994. Private investment in the region continues to be lackluster, resulting primarily from the deepening recession in western Germany and excessively high eastern wages. Eastern Germany has one of the world's largest reserves of low-grade lignite coal but little else in the way of mineral resources. The quality of statistics from eastern Germany is improving, yet many gaps remain; the federal government began producing all-German data for select economic statistics at the start of 1992. The most challenging economic problem is promoting eastern Germany's economic reconstruction - specifically, finding the right mix of fiscal, monetary, regulatory, and tax policies that will spur investment in eastern Germany - without destabilizing western Germany's economy or damaging relations with West European partners. The government hopes a "solidarity pact" among labor unions, business, state governments, and the SPD opposition will provide the right mix of wage restraints, investment incentives, and spending cuts to stimulate eastern recovery. Finally, the homogeneity of the German economic culture has been changed by the admission of large numbers of immigrants.

The British military presence has been severely reduced and now only contributes about 11% to the local economy. The financial sector accounts for 15% of GDP; tourism and shipping services fees also generate income. Because more than 70% of the economy is in the public sector, changes in government spending have a major impact on the level of employment. Construction workers are particularly affected when government expenditures are cut.

Greece has a mixed capitalist economy with the basic entrepreneurial system overlaid in 1981-89 by a socialist system that enlarged the public sector from 55% of GDP in 1981 to about 70% in 1989. Since then, the public sector has been reduced to about 60% of GDP. Tourism continues as a major source of foreign exchange, and agriculture is self-sufficient except for meat, dairy products, and animal feedstuffs. Over the last decade, real GDP growth has averaged 1.6% a year, compared with the European Union average of 2.2%. Inflation is four times the EU average, and the national debt has reached 140% of GDP, the highest in the EU. Prime Minister PAPANDREOU will probably only make limited progress correcting the economy's problems of high inflation, large budget deficit, and decaying infrastructure.

His economic program suggests that although he will shun his expansionary policies of the 1980s, he will avoid tough measures needed to slow inflation or reduce the state's role in the economy. He has limited the previous government's privatization plans, for example, and has called for generous welfare spending and real wage increases. In 1994, the GDP growth rate is likely to remain low, and inflation probably will accelerate, remaining the highest in the EU. PAPANDREOU'S failure to improve the country's economic performance will further strain relations with the EU. Since Greece's accession to the then EC in 1981, Athens' heavy reliance on EU aid - amounting to about 6% of Greek GDP annually - and its poor use of Union funds have riled Brussels. Its ailing economy will continue to be a drag on European economic and monetary union.

Financial services account from more than 50% of total income. Tourism, manufacturing, and horticulture, mainly tomatoes and cut flowers, have been declining. Bank profits (1992) registered a record 26% growth. Fund management and insurance are the two other major income generators.

This unique, noncommercial economy is supported financially by contributions (known as Peter's Pence) from Roman Catholics throughout the world, the sale of postage stamps and tourist mementos, fees for admission to museums, and the sale of publications. The incomes and living standards of lay workers are comparable to, or somewhat better than, those of counterparts who work in the city of Rome.

Hungary is still in the midst of a difficult transition from a command to a market economy. Its economic reforms during the Communist era gave it a head start on this process, particularly in terms of attracting foreign investors - Hungary has accounted for about half of all foreign direct investment in Eastern Europe since 1989. Nonetheless, the economy continued to contract in 1993, with real GDP falling perhaps 1%. Although the privatization process has lagged, in December 1993 Hungary carried out the largest privatization yet in Eastern Europe, selling a controlling interest in the Matav telecommunications firm to private investors - including a 30% share to a US-German consortium for $875 million.

Overall, about half of GDP now originates in the private sector. Unemployment rose to about 13% in 1993 while inflation remained above 20%, and falling exports pushed the trade deficit to about $3 billion. The government hopes that economic recovery in Western Europe in 1994 will boost exports, lower the trade deficit, and help jump-start the economy. The budget, however, is likely to remain a serious concern; depressed tax revenue pushed up the budget deficit in 1993.

The economy is small and trade dependent. Agriculture, once the most important sector, is now dwarfed by industry, which accounts for 37% of GDP, about 80% of exports, and employs 28% of the labor force. Since 1987, real GDP growth, led by exports, has averaged 4% annually. Over the same period, inflation has fallen sharply and chronic trade deficits have been transformed into annual surpluses. Unemployment remains a serious problem, however, and job creation is the main focus of government policy.

To ease unemployment, Dublin aggressively courts foreign investors and recently created a new industrial development agency to aid small indigenous firms. Government assistance is constrained by Dublin's continuing deficit reduction measures.

Offshore banking, manufacturing, and tourism are key sectors of the economy. The government's policy of offering incentives to high-technology companies and financial institutions to locate on the island has paid off in expanding employment opportunities in high-income industries. As a result, agriculture and fishing, once the mainstays of the economy, have declined in their shares of GNP. Banking now contributes about 45% to GNP. Trade is mostly with the UK. The Isle of Man enjoys free access to European Union markets.

Since World War II the Italian economy has changed from one based on agriculture into a ranking industrial economy, with approximately the same total and per capita output as France and the UK. The country is still divided into a developed industrial north, dominated by private companies, and an undeveloped agricultural south, dominated by large public enterprises. Services account for 48% of GDP, industry 35%, agriculture 4%, and public administration 13%. Most raw materials needed by industry and over 75% of energy requirements must be imported.

After growing at an annual average rate of 3% in 1983-90, growth slowed to about 1% in 1991 and 1992 and fell by 0.7% in 1993. In the second half of 1992, Rome became unsettled by the prospect of not qualifying to participate in EC plans for economic and monetary union later in the decade; thus it finally began to address its huge fiscal imbalances. Thanks to the determination of Prime Ministers AMATO and CIAMPI, the government adopted a fairly stringent budget for 1993 and 1994, abandoned its highly inflationary wage indexation system, and started to scale back its extremely generous social welfare programs, including pension and health care benefits.

Monetary officials were forced to withdraw the lira from the European monetary system in September 1992 when it came under extreme pressure in currency markets. For the 1990s, Italy faces the problems of refurbishing a tottering communications system, curbing pollution in major industrial centers, and adjusting to the new competitive forces accompanying the ongoing economic integration of the European Union.

The economy is based largely on financial services, agriculture, and tourism. 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 earner. Milk products go to the UK and other EU countries. In 1986 the finance sector overtook tourism as the main contributor to GDP, accounting for 40% of the island's output.

In recent years the government has encouraged light industry to locate in Jersey, with the result that an electronics industry has developed alongside the traditional manufacturing of knitwear. All raw material and energy requirements are imported, as well as a large share of Jersey's food needs.

Latvia is rapidly becoming a dynamic market economy, rivaled only by Estonia among the former Soviet states in the speed of its transformation. The transition has been painful with GDP falling over 45% in 1992-93, according to official statistics, and industrial production experiencing even steeper declines. Nevertheless, the government's tough monetary policies and reform program, which foster the development of the private sector and market mechanisms, have kept inflation low, created a dynamic private sector - much of which is not captured in official statistics - and expanded trade ties with the West.

Much of agriculture is already privatized and the government plans to step up the pace of privatization of state enterprises. The economy is now poised for recovery and will benefit from the country's strategic location on the Baltic Sea, its well-educated population, and its diverse - albeit largely obsolete - industrial structure.

The prosperous economy is based primarily on small-scale light industry and tourism. Industry accounts for 53% of total employment, the service sector 45% (mostly based on tourism), and agriculture and forestry 2%. The sale of postage stamps to collectors is estimated at $10 million annually. Low business taxes (the maximum tax rate is 20%) and easy incorporation rules have induced about 25,000 holding or so-called letter box companies to establish nominal offices in Liechtenstein.

Such companies, incorporated solely for tax purposes, provide 30% of state revenues. The economy is tied closely to Switzerland's economy in a customs union, and incomes and living standards parallel those of the more prosperous Swiss groups.

Since independence in September 1991, Lithuania has made steady progress in developing a market economy. Over 40% of state property has been privatized and trade is diversifying with a gradual shift away from the former Soviet Union to Western markets. Nevertheless, the process has been painful with industrial output in 1993 less than half the 1991 level. Inflation, while lower than in most ex-Soviet states, has exceeded rates in the other Baltic states.

Full monetary stability and economic recovery are likely to be impeded by periodic government backtracking on key elements of its reform and stabilization program as it seeks to ease the economic pain of restructuring. Recovery will build on Lithuanian's strategic location with its ice-free port at Klaipeda and its rail and highway hub in Vilnius connecting it with Eastern Europe, Belarus, Russia, and Ukraine, and on its agriculture potential, highly skilled labor force, and diversified industrial sector. Lacking important natural resources, it will remain dependent on imports of fuels and raw materials.

The stable, prosperous economy features moderate growth, low inflation, and negligible unemployment. Agriculture is based on small but highly productive family-owned farms. The industrial sector, until recently dominated by steel, has become increasingly more diversified, particularly toward high-technology firms. During the past decade, growth in the financial sector has more than compensated for the decline in steel.

Services, especially banking, account for a growing proportion of the economy. Luxembourg participates in an economic union with Belgium on trade and most financial matters, is also closely connected economically to the Netherlands, and as a member of the 12-member European Union enjoys the advantages of the open European market.

Significant resources are limestone, a favorable geographic location, and a productive labor force. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources. Consequently, the economy is highly dependent on foreign trade and services. Manufacturing and tourism are the largest contributors to the economy. Manufacturing accounts for about 27% of GDP, with the electronics and textile industries major contributors and the state-owned Malta drydocks which employs about 4,300 people. In 1992, about 1,000,000 tourists visited the island. Per capita GDP at $6,600 places Malta in the middle-income range of the world's nations.

Moldova has pushed ahead boldly on economic reform since gaining its independence from the Soviet Union in 1991. It introduced a convertible currency - the leu - in late 1993 that has remained stable against the dollar, removed price controls on most products, eliminated licenses and quotas on most imports and exports, and freed interest rates. In 1994, Moldova aims to privatize at least one-third of state enterprises, lower inflation to 1% per month, and reduce the budget deficit to 3.5% of GDP. Moldova enjoys a favorable climate and good farmland but has no major mineral deposits.

As a result, Moldova's economy is primarily based on agriculture, featuring fruits, vegetables, wine, and tobacco. Moldova, however, must import all of its supplies of oil, coal, and natural gas, and energy shortages have contributed to sharp production declines since the break-up of the Soviet Union. Activities by separatist groups in the Dniester region have held back economic development in that area. Foreign economic assistance has been a tangible plus for Moldova, whereas direct foreign investment has been lacking.

Monaco, situated on the French Mediterranean coast, is a popular resort, attracting tourists to its casino and pleasant climate. The Principality has successfully sought to diversify into services and small, high-value-added, nonpolluting industries. The state has no income tax and low business taxes and thrives as a tax haven both for individuals who have established residence and for foreign companies that have set up businesses and offices.

About 50% of Monaco's annual revenue comes from value-added taxes on hotels, banks, and the industrial sector; about 25% of revenue comes from tourism. Living standards are high, that is, roughly comparable to those in prosperous French metropolitan suburbs.

This highly developed and affluent economy is based on private enterprise. The government makes its presence felt, however, through many regulations, permit requirements, and welfare programs affecting most aspects of economic activity. The trade and financial services sector contributes over 50% of GDP. Industrial activity provides about 25% of GDP and is led by the food-processing, oil-refining, and metalworking industries.

The highly mechanized agricultural sector employs only 5% of the labor force, but provides large surpluses for export and the domestic food-processing industry. Rising unemployment and a sizable budget deficit are currently the most serious economic problems. Many of the economic issues of the 1990s will reflect the course of European economic integration.

The Former Yugoslav Republic of Macedonia, although the poorest republic in the former Yugoslav federation, can meet basic food and energy needs through its own agricultural and coal resources. Its economic decline will continue unless ties are reforged or enlarged with its neighbors Serbia and Montenegro, Albania, Greece, and Bulgaria. The economy depends on outside sources for all of its oil and gas and its modern machinery and parts.

Continued political turmoil, both internally and in the region as a whole, prevents any swift readjustments of trade patterns and economic programs. The country's industrial output and GDP are expected to decline further in 1994. The Former Yugoslav Republic of Macedonia's geographical isolation, technological backwardness, and potential political instability place it far down the list of countries of interest to Western investors.

Resolution of the dispute with Greece and an internal commitment to economic reform would help to encourage foreign investment over the long run. In the immediate future, the worst scenario for the economy would be the spread of fighting across its borders.

Norway has a mixed economy involving a combination of free market activity and government intervention. The government controls key areas, such as the vital petroleum sector (through large-scale state enterprises) and extensively subsidizes agriculture, fishing, and areas with sparse resources. Norway also maintains an extensive welfare system that helps propel public sector expenditures to slightly more than 50% of the GDP and results in one of the highest average tax burdens in the world (54%). A small country with a high dependence on international trade, Norway is basically an exporter of raw materials and semiprocessed goods, with an abundance of small- and medium-sized firms, and is ranked among the major shipping nations.

The country is richly endowed with natural resources - petroleum, hydropower, fish, forests, and minerals - and is highly dependent on its oil sector to keep its economy afloat. Although one of the government's main priorities is to reduce this dependency, this situation is not likely to improve for years to come. The government also hopes to reduce unemployment and strengthen and diversify the economy through tax reform and a series of expansionary budgets.

The budget deficit is expected to hit a record 8% of GDP because of welfare spending and bail-outs of the banking system. Unemployment continues at record levels of over 10% - including those in job programs - because of the weakness of the economy outside the oil sector. Economic growth was only 1.6% in 1993, while inflation was a moderate 2.3%. Oslo, a member of the European Free Trade Area, has applied for membership in the European Union and continues to deregulate and harmonize with EU regulations. Membership is expected in early 1995.

Poland is continuing the difficult transition to a market economy that began on 1 January 1990, when the new democratic government instituted "shock therapy" by decontrolling prices, slashing subsidies, and drastically reducing import barriers. The economy contracted sharply in 1990 and 1991, but in 1992 real GDP grew 1% despite a severe drought. Real GDP expanded about 4% in 1993, the highest rate in Europe except for Albania.

About half of GDP now comes from the private sector even though privatization of the large state-owned enterprises is proceeding slowly and most industry remains in state hands. The pattern of industrial production is changing rapidly; output of textiles and construction materials is well above 1990 levels, while output of basic metals remains depressed. Inflation, which had exceeded 50% monthly in late 1989, was down to about 37% for all of 1993, as the government held the budget deficit below 3% of GDP. Unemployment has risen steadily, however, to about 16%. The trade deficit is also a problem, in part due to recession in Western Europe, Poland's main customer. The new government elected in September 1993 is politically to the left of its predecessor but is continuing the reform process.

Portugal's economy registered only 1.1% growth in 1992 and contracted by 0.4% in 1993, in contrast to the 4.5% average of the fast-paced 1986-90 period. Recession in the European Union, which accounts for 75% of Portugal's international trade, is the key factor in the downturn. The government's long-run economic goal is the modernization of Portuguese markets, industry, infrastructure, and workforce in order to catch up with productivity and income levels of the more advanced EU countries.

Per capita income now equals only 55% of the EU average. The government's medium-term economic objective is to be in the first tier of EU countries eligible to join the economic and monetary union (EMU) as early as 1997. Economic policy in 1993 focused on reducing inflationary pressures by lowering the fiscal deficit, maintaining a stable escudo, moderating wage increases, and encouraging increased competition. Resumption of growth in the short run depends on the revival of growth in Europe as a whole, not a likely prospect in the immediate future.

Despite the continuing difficulties in moving away from the former command system, the Romanian economy seems to have bottomed out in 1993. Market oriented reforms have been introduced fitfully since the downfall of CEAUSESCU in December 1989, with the result a growing private sector, especially in services. The slow pace of structural reform, however, has exacerbated Romania's high inflation rate and eroded real wages.

Agricultural production rebounded in 1993 from the previous year's drought-reduced harvest; food supplies are adequate, but expensive. Bucharest resisted pressure to devalue its currency despite a $638 million trade deficit in the first half of 1993 and the emergence of a black market for hard currency. Unable to support the currency, the national bank, nonetheless, was forced to depreciate the currency 65% over the course of the year.

The return of winter revealed that much of Romania's infrastructure had deteriorated over the last four years due to reduced levels of public investment. Residents of the capital reported frequent disruptions of heating and water services.

The tourist sector contributes over 50% of GDP. In 1991 more than 3.1 million tourists visited San Marino, 2.7 million of whom were Italians. The key industries are wearing apparel, electronics, and ceramics. Main agricultural products are wine and cheeses. The per capita level of output and standard of living are comparable to those of Italy.

The swift collapse of the Yugoslav federation has been followed by bloody ethnic warfare, the destabilization of republic boundaries, and the breakup of important interrepublic trade flows. Serbia and Montenegro faces major economic problems; output has dropped sharply, particularly in 1993. First, like the other former Yugoslav republics, it depended on its sister republics for large amounts of foodstuffs, energy supplies, and manufactures.

Wide varieties in climate, mineral resources, and levels of technology among the republics accentuate this interdependence, as did the communist practice of concentrating much industrial output in a small number of giant plants. The breakup of many of the trade links, the sharp drop in output as industrial plants lost suppliers and markets, and the destruction of physical assets in the fighting all have contributed to the economic difficulties of the republics.

One singular factor in the economic situation of Serbia and Montenegro is the continuation in office of a communist government that is primarily interested in political and military mastery, not economic reform. A further complication is the imposition of economic sanctions by the UN.

The dissolution of Czechoslovakia into two independent states - the Czech Republic and Slovakia - on 1 January 1993 has complicated the task of moving toward a more open and decentralized economy. The old Czechoslovakia, even though highly industrialized by East European standards, suffered from an aging capital plant, lagging technology, and a deficiency in energy and many raw materials. In January 1991, approximately one year after the end of communist control of Eastern Europe, the Czech and Slovak Federal Republic launched a sweeping program to convert its almost entirely state-owned and controlled economy to a market system.

In 1991-92 these measures resulted in privatization of some medium- and small-scale economic activity and the setting of more than 90% of prices by the market - but at a cost in inflation, unemployment, and lower output. For Czechoslovakia as a whole inflation in 1991 was roughly 50% and output fell 15%. In 1992 in Slovakia, inflation slowed to an estimated 8.7% and the estimated fall in GDP was a more moderate 7%. In 1993 GDP fell roughly 5%, with the disruptions from the separation from the Czech lands probably accounting for half the decline; exports to the Czech Republic fell about 35%. Bratislava adopted an austerity program in June and devalued its currency 10% in July.

In 1993, inflation rose an estimated 23%, unemployment topped 14%, and the budget deficit exceeded the IMF target of $485 million by over $200 million. By yearend 1993 Bratislava estimated that 29% of GDP was being produced in the private sector. The forecast for 1994 is gloomy; Bratislava optimistically projects no growth in GDP, 17% unemployment, a $425 million budget deficit, and 12% inflation. At best, if Slovakia stays on track with the IMF, GDP could fall by only 2-3% in 1994 and unemployment could be held under 18%, but a currency devaluation will likely drive inflation above 15%.

Slovenia was by far the most prosperous of the former Yugoslav republics, with a per capita income more than twice the Yugoslav average, indeed not far below the levels in neighboring Austria and Italy. Because of its strong ties to Western Europe and the small scale of damage during its brief fight for independence from Yugoslavia, Slovenia has the brightest prospects among the former Yugoslav republics for economic recovery over the next few years.

The dissolution of Yugoslavia, however, has led to severe short-term dislocations in production, employment, and trade ties. For example, overall industrial production has fallen 26% since 1990; particularly hard hit have been the iron and steel, machine-building, chemical, and textile industries. Meanwhile, the continued fighting in other former Yugoslav republics has led to further destruction of long-established trade channels and to an influx of tens of thousands of Croatian and Bosnian refugees.

The key program for breaking up and privatizing major industrial firms was established in late 1992. Despite slow progress in privatization Slovenia has reasonable prospects for an upturn in 1994. Bright spots for encouraging Western investors are Slovenia's comparatively well-educated work force, its developed infrastructure, and its Western business attitudes, but instability in Croatia is a deterrent. Slovenia in absolute terms is a small economy, and a little Western investment would go a long way.

After the economic boom of 1986-90, the Spanish economy fell into recession along with the economies of other EU member states. Real GDP barely grew in 1992 and declined by approximately 1% in 1993. Unemployment, now nearly one-fourth of the workforce, and the sharp downturn in business investment have contributed to sagging domestic demand. Devaluation of the peseta since September 1992 has made Spanish exports more competitive, but an export-led recovery in 1994 will depend largely on economic recovery in Spain's major market - the other EU nations.

A solid recovery will also require appropriate domestic policy actions, including controlling the budget deficit and wage increases, reforming labor market regulations, and possibly loosening monetary policy another notch. Foreign investors, principally from other EU countries, have invested over $60 billion in Spain since 1986. Despite the recession, inflation remained at about 5% in 1993. The main source of inflationary pressure is the fiscal deficit.

Aided by a long period of peace and neutrality during World War I through World War II, Sweden has achieved an enviable standard of living under a mixed system of high-tech capitalism and extensive welfare benefits. It has a modern distribution system, excellent internal and external communications, and a skilled labor force. Timber, hydropower, and iron ore constitute the resource base of an economy that is heavily oriented toward foreign trade.

Privately owned firms account for about 90% of industrial output, of which the engineering sector accounts for 50% of output and exports. In the last few years, however, this extraordinarily favorable picture has been clouded by inflation, growing unemployment, and a gradual loss of competitiveness in international markets. Although Prime Minister BILDT's center-right minority coalition had hoped to charge ahead with free-market-oriented reforms, a skyrocketing budget deficit - almost 14% of GDP in FY94 projections - and record unemployment have forestalled many of the plans.

Unemployment in 1993 is estimated at around 8% with another 5% in job training. Continued heavy foreign exchange speculation forced the government to cooperate in late 1992 with the opposition Social Democrats on two crisis packages - one a severe austerity pact and the other a program to spur industrial competitiveness - which basically set economic policy through 1997. In November 1992, Sweden broke its tie to the EC's ECU, and the krona has since depreciated about 25% against the dollar.

The government hopes the boost in export competitiveness from the depreciation will help lift Sweden out of its 3-year recession. To curb the budget deficit and bolster confidence in the economy, BILDT continues to propose cuts in welfare benefits, subsidies, defense, and foreign aid. Sweden continues to harmonize its economic policies with those of the EU in preparation for scheduled membership by early 1995, which will help to broaden European economic unity.

Switzerland's economy - one of the most prosperous and stable in the world - is nonetheless undergoing a painful adjustment after both the inflationary boom of the late-1980s and the electorate's rejection of membership in the European Economic Area in 1992. The Swiss finally emerged from a three-year recession in mid-1993 and posted a -0.6% GDP growth for the year. After a three-year struggle with inflation, the Swiss central bank's tight monetary policies have begun to pay off.

Inflation slowed to 3.3% in 1993 from about 4% in 1992 and is expected to slow down further to 1.5% in 1994. Unemployment, however, will continue to be a problem over the near term. Swiss unemployment reached 5.1% in 1993 and will likely remain at that level through 1994 before declining in 1995. The voters' rejection of a referendum on membership in the EEA, which was supported by most political, business, and financial leaders has raised doubts that the country can maintain its preeminent prosperity and leadership in commercial banking in the twenty-first century.

Despite these problems, Swiss per capita output, general living standards, education and science, health care, and diet remain unsurpassed in Europe. The country has few natural resources except for the scenic natural beauty that has made it a world leader in tourism. Management-labor relations remain generally harmonious.

After Russia, the Ukrainian republic was far and away the most important economic component of the former Soviet Union producing more than three times the output of the next-ranking republic. Its fertile black soil generated more than one-fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain and vegetables to other republics. Likewise, its diversified heavy industry supplied equipment and raw materials to industrial and mining sites in other regions of the former USSR. In 1992 the Ukrainian Government liberalized most prices and erected a legal framework for privatizing state enterprises while retaining many central economic controls and continuing subsidies to state production enterprises.

In November 1992 the new Prime Minister KUCHMA launched a new economic reform program promising more freedom to the agricultural sector, faster privatization of small and medium enterprises, and stricter control over state subsidies. In 1993, however, severe internal political disputes over the scope and pace of economic reform and payment arrears on energy imports have led to further declines in output, and inflation of 50% or more per month by the last quarter.

In first quarter 1994, national income and industrial output were less than two-thirds the first quarter 1993 figures, according to official statistics. At the same time an increasing number of people are developing small private businesses and exploiting opportunities in non-official markets. Even so, the magnitude of the problems and the slow pace in building new market-oriented institutions preclude a near-term recovery of output to the 1990 level. A vital economic concern in 1994 will continue to be Russia's decisions on the prices and quantities of oil and gas to be shipped to the Ukraine.

The UK is one of the world's great trading powers and financial centers, and its economy ranks among the four largest in Western Europe. The economy is essentially capitalistic; over the past thirteen years the ruling Tories have greatly reduced public ownership and contained the growth of social welfare programs. Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs with only 1% of the labor force.

The UK has large coal, natural gas, and oil reserves, and primary energy production accounts for 12% of GDP, one of the highest shares of any industrial nation. Services, particularly banking, insurance, and business services, account by far for the largest proportion of GDP while industry continues to decline in importance, now employing only 25% of the work force and generating only 21% of GDP. The economy is emerging out of its 3-year recession with only weak recovery in 1993; even so, the economy fared better in 1993 than the economies of most other European countries.

Unemployment is hovering around 10% of the labor force. The government in 1992 adopted a pro-growth strategy, cutting interest rates sharply and removing the pound from the European exchange rate mechanism. Excess industrial capacity probably will moderate inflation which for the first time in a decade is below the EC average. The major economic policy question for Britain in the 1990s is the terms on which it participates in the financial and economic integration of Europe.

Petroleum production and processing account for about 80% of export receipts, 60% of government revenues, and 30% of GDP. Economic conditions have fluctuated with the changing fortunes of oil since 1985, for example, during and following the Gulf crisis of 1990-91. Bahrain with its highly developed communication and transport facilities is home to numerous multinational firms with business in the Gulf. A large share of exports consists of petroleum products made from imported crude. Prospects for 1994 are good, with private enterprise the main driving force, e.g., in banking and construction.

The Greek Cypriot economy is small, diversified, and prosperous. Industry contributes 16% to GDP and employs 29% of the labor force, while the service sector contributes 60% to GDP and employs 57% of the labor force. An average 6.8% rise in real GDP between 1986 and 1990 was temporarily checked in 1991, because of the adverse effects of the Gulf War on tourism. Economic growth surged again in 1992, bolstered by strong foreign and domestic demand.

As the economy gained momentum, however, it began to overheat; inflation reached 6.5%. The economy has likely recorded a sharp drop in growth in 1993, due to the recession in Western Europe, Cyprus' main trading partner, but probably will pick up again in 1994. The Turkish Cypriot economy has less than one-third the per capita GDP in the south. Because it is recognized only by Turkey, it has had much difficulty arranging foreign financing, and foreign firms have hesitated to invest there.

The economy remains heavily dependent on agriculture, which employs more than one-quarter of the workforce. Moreover, because the Turkish lira is legal tender, the Turkish Cypriot economy has suffered the same high inflation as mainland Turkey. To compensate for the economy's weakness, Turkey provides direct and indirect aid to nearly every sector; financial support has reached about one-third of Turkish Cypriot GDP.

In 1991 roughly 40% of Gaza Strip workers were employed across the border by Israeli industrial, construction, and agricultural enterprises, with worker remittances accounting for about one-third of GNP. The construction, agricultural, and industrial sectors account for about 18%, 16%, and 12% of GNP, respectively. Gaza depends upon Israel for nearly 90% of its external trade. Aggravating the impact of Israeli military administration, unrest in the territory since 1988 (intifadah) has raised unemployment and lowered the standard of living of Gazans.

The Persian Gulf crisis and its aftershocks also have dealt blows to Gaza since August 1990. Worker remittances from the Gulf states have dropped, unemployment has increased, and exports have fallen. The withdrawal of Israel from the Gaza Strip in May 1994 brings a new set of adjustment problems.

Iran's economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and small-scale private trading and service ventures. Over the past several years, the government has introduced several measures to liberalize the economy and reduce government intervention, but most of these changes have moved slowly because of political opposition. Iran has faced increasingly severe financial difficulties in 1992-93 due to an import surge since 1989 and general financial mismanagement.

At yearend 1993 the Iranian Government estimated that it owed foreign creditors about $30 billion; an estimated $8 billion of this debt was in arrears. Earnings from oil exports--which provide over 90% of Iran's export revenues--are providing less relief to Iran than usual because of declining oil prices. Estimated overall growth was a robust 6.3% in 1992 and a moderate 3% in 1993.

The Ba'thist regime engages in extensive central planning and management of industrial production and foreign trade while leaving some small-scale industry and services and most agriculture to private enterprise. The economy has been dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s, financial problems caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran, led the government to implement austerity measures and to borrow heavily and later reschedule foreign debt payments.

After the end of hostilities in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities. Agricultural development remained hampered by labor shortages, salinization, and dislocations caused by previous land reform and collectivization programs. The industrial sector, although accorded high priority by the government, also was under financial constraints. Iraq's seizure of Kuwait in August 1990, subsequent international economic embargoes, and military action by an international coalition beginning in January 1991 drastically changed the economic picture.

Industrial and transportation facilities suffered severe damage and have been only partially restored. Oil exports remain at less than 10% of the previous level. Shortages of spare parts continue. Living standards deteriorated even further in 1993 and early 1994; consumer prices at least tripled in 1993. The UN-sponsored economic embargo has reduced exports and imports and has contributed to the sharp rise in prices.

The government's policies of supporting large military and internal security forces and of allocating resources to key supporters of the regime have exacerbated shortages. In brief, per capita output in 1993-94 is far below the 1989-90 level, but no precise estimate is available.

Israel has a market economy with substantial 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. Industry employs about 22% of Israeli workers, construction 6.5%, agriculture, forestry, and fishing 3.5%, and services most of the rest.

Diamonds, high-technology equipment, and agricultural products (fruits and vegetables) are leading exports. Israel usually posts current account 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 United States, which is its major source of economic and military aid. To earn needed foreign exchange, Israel has been targeting high-technology niches in international markets, such as medical scanning equipment.

The influx of Jewish immigrants from the former USSR, which topped 450,000 during the period 1990-93, increased unemployment, intensified housing problems, and strained the government budget. At the same time, the immigrants bring to the economy valuable scientific and professional expertise. Economic problems have eased as immigration has declined, but activity has slowed as the economy shifts from housing to export-driven growth.