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Jun 20th 2007 From the Economist Intelligence Unit Source: Country ViewsWire
Annual data Population (m) GDP (US$ bn; market exchange rate) GDP (US$ bn; PPP)
2006(a) Historical averages (%) 299.4 Population growth 13,247 Real GDP growth 13,247
200206 1.0 2.9 3.2 2.6 -5.6 0.9
Real domestic demand growth GDP per head (US$; market 44,244 Inflation exchange rate) GDP per head (US$; PPP) 44,244 Current-account balance (% of GDP) Nominal effective exchange 82.0 FDI inflows (% of rate (av; 2000=100) GDP) (a) Actual.
Background: The US has the highest level of output in the world, with GDP valued at US$13.2trn in 2006. Serious economic imbalances have emerged in recent years, including an overvalued housing market (currently in the process of correction), a low propensity to save and an unprecedented current-account deficit. Inflationary pressures have risen as a result of an increasingly tight labour market, but should ease as a consequence of the ongoing slowdown. Political structure: Powers are constitutionally divided between the executive, legislative and judicial branches, and between the federal and state governments. The president heads the executive branch. The federal legislature, Congress, consists of a House of Representatives, whose members are elected from constituencies based on population, and a Senate, whose members are elected state-wide (two per state). The president is elected every four years and House members every two years. Senators serve a six-year term, with one-third elected at each congressional election. Policy issues: A range of tax cuts approved in 2001-05 will expire in 2010, and these are likely to be extended only with substantial modifications. A reform of the alternative minimum tax will become increasingly pressing. Public finances leave little room for additional tax cuts, and demographic ageing will require a major review of entitlement programmes in the long term. A reform of immigration to facilitate access to guestworker status and to legalise the status of unregistered aliens may be approved. Taxation: In general, corporate tax rates are high compared with rates in other industrialised countries. Tax jurisdiction in the US is a complex web of powers divided between the federal government, the states, and local counties and municipalities. Sales tax varies from state to state. Foreign trade: The merchandise trade deficit reached a record US$836bn in 2006, and the current-account deficit reached a record 6.5% of GDP, raising fears of a disorderly adjustment. There may be some further progress on trade liberalisation, but targeted protectionist measures will also become more common. Such measures will focus on China, given its huge bilateral trade surplus with the US.
Main exports 2006 Capital goods (excl auto) Industrial supplies Consumer goods (excl auto) Automotive vehicles, parts&supplies Leading markets 2006 Canada Mexico Japan China UK
% of total 45.8 30.5 14.3 11.8
Main imports 2006 Industrial supplies Consumer goods (excl auto) Capital goods (excl auto) Automotive vehicles, parts&supplies Leading suppliers 2006 Canada China Mexico Japan Germany
% of total 36.1 26.5 25.0 15.4
% of total 22.2 12.9 5.8 5.3 4.0
% of total 16.4 15.5 10.7 8.0 2.9
Economic data – United States
Jun 20th 2007
There will be few major policy changes over the next two years, as power is shared by a Republican president, George W Bush, and a Democrat-controlled Congress. Nevertheless, there will be some progress in isolated fields as the Democrats seek to avoid the impression of being obstructionist. Approval of immigration reform remains a possibility, and a compromise on some tax and entitlement changes can also not be excluded. At the next federal election, in November 2008, besides polls for all the seats in the House of Representatives and one-third of the seats in the Senate, a presidential election will also be held. At this early stage, the most likely scenario is that the Democrats will hold onto their majorities in both houses Congress and win the presidency, which will most likely be taken by Hillary Clinton. The federal budget deficit will decline further in fiscal years 2006/07 (OctoberSeptember) and 2007/08. Mr Bush is becoming more serious about curbing spending growth, after earlier excesses, although expenditure on homeland security and non-discretionary items will continue to rise at a significant, albeit slower, pace. The Economist Intelligence Unit expects one cut to the central bank's reference rate in late 2007, with the rate hovering near the"neutral"level of around 5% in subsequent years. GDP growth is forecast to decelerate in 2007 as the housing and manufacturing sectors continue to struggle. This will eventually curb private consumption growth. Businesses are better placed, but they are also likely to restrain their spending in the medium term. Growth will average 2.5% per year in 2007-11. High energy prices fed through into producer and consumer price inflation in 2006. Inflation will fall in 2007, owing to the slowdown in the economy, but will pick up with the recovery in demand in 2008, averaging 2.5% per year in 2007-11. With monetary policy being tightened in both the euro zone and Japan, interest rate differentials between the US, Europe and Japan will shrink, resulting in further downward pressure on the dollar against both the euro and the yen. The dollar should regain some strength against the euro in 2008-11 but not against the yen. The current-account deficit will improve as a share of GDP, bringing the deficit as a share of GDP down to 5.5% in 2011. The external payments situation will remain poor relative to most other OECD economies.
Key indicators Real GDP growth (%) Consumer price inflation (av; %) Federal government budget balance (% of GDP) 2006 3.3 3.2 -1.9 2007 1.9 2.3 -1.4 -6.1 5.1 116.3 1.34 2008 2.5 2.5 -1.1 -6.0 5.0 103.5 1.35 2009 2.7 2.6 -0.9 -5.8 5.3 95.8 1.30 2010 2.7 2.5 -0.8 -5.7 5.3 93.5 1.27 2011 2.7 2.5 -0.8 -5.5 5.3 91.8 1.26
Current-account balance (% of -6.5 GDP) US$ 3-month commercial paper rate (av; %) Exchange rate¥:US$ (av) Exchange rate US$:€(av) 5.0 116.3 1.26
Factsheet – India
May 21st 2007 From the Economist Intelligence Unit
Annual data Population (m) GDP (US$ bn; market exchange rate) GDP (US$ bn; purchasing power parity) GDP per head (US$; market exchange rate) GDP per head (US$; purchasing power parity) Exchange rate (av) Rs:US$
2006(a) Historical averages (%) 1,095 Population growth 915.7 Real GDP growth 4,288 840 3,910
200206 1.5 7.8
Real domestic demand 7.5 growth Inflation 4.5 0.2 1.1
Current-account balance (% of GDP) 45.3(b) FDI inflows (% of GDP) (a) Economist Intelligence Unit estimates. (b) Actual.
Background: India gained independence in 1947, after two centuries of British colonial rule. Partition at the same time created the state of Pakistan, with which India has fought three wars, two over the disputed territory of Kashmir. India is the second most populous country in the world, with nearly 1.1bn people in 2006. Its economy is the 12th-largest in the world measured in nominal US dollars, but rises to third-largest when measured at purchasing power parity exchange rates. The large (and inefficient) public sector co-exists with a sizeable and diversified private sector. Political structure: India has been a democracy since independence. The centralisation of decision-making has led to the growth of regional parties, and coalition government is now the norm. Democratic procedures are, on the whole, respected. The prime minister is the head of government, requiring the support of a majority in the national parliament. The president is the head of state, and, although limited in executive power, can influence the formation of governments at both state and national levels when no party has gained an outright majority. The judiciary is formally independent, and is becoming increasingly assertive. Policy issues: The booming economy is allowing the government to undertake big spending programmes at the same time as reducing the fiscal deficit. The government has been forced to abandon its disinvestment process at the behest of the mainly communist Left Front parties. Although it has managed to push through a reduction in subsidies, many important economic reform measures have been put on hold in response to the demands of coalition politics. Taxation: The top rate of personal income tax and corporation tax for Indian companies is 30%. The corporation tax rate for foreign companies is 40%. However, a complex system of exemptions reduces the effective tax rate for Indian companies to less than 20%. All firms pay a 10% tax on distributed profits. Customs duties have been lowered substantially, but remain high by international standards.
Foreign trade: India's trade deficit rose to US$63.8bn in 2006 in balance-of-payments terms, up from US$46.9bn in 2005. Exports performed strongly, rising by 19% to US$121.5bn, but imports jumped by 24% to US$185.3bn, largely owing to higher international oil prices and to demand for industrial inputs and consumer goods. The US remains India's largest trading partner, although China is India's leading supplier and its second-largest export market.
Major exports 2005/06 Engineering goods Textiles&textile products Gems&jewellery Petroleum products
% of total 21.0 15.6 15.1 11.2
Major imports 2005/06 Petroleum&petroleum products Electronic goods (incl computer software) Gold&silver Machinery (excl electrical&electronic) Leading suppliers 2005 China US Belgium-Luxembourg Singapore
% of total 30.9 9.9 7.9 6.9
Leading markets 2005 US China UAE UK
% of total 17.6 8.7 7.7 4.5
% of total 6.9 6.1 4.9 4.6
Source : http://www.economist.com/countries/India/profile.cfm?folder=Profile-FactSheet
Economic data – India
May 21st 2007
The Indian National Congress-led government is likely to remain in power until the end of its term of office in May 2009. The other parties in the ruling United Progressive Alliance coalition, and the Left Front communist parties that support it, have little to gain by bringing down the government. The result of the next general election will be another fractured mandate, with three potential groupings that could win power: a Bharatiya Janata Party (BJP)- or Congress-led coalition, or an alliance of left-wing and regional parties. The dispute with Pakistan over the future of Kashmir will remain at the centre of India's diplomatic concerns. Relations are forecast to remain relatively constructive, and armed exchanges are likely to be confined to border areas. Relations between India and the US will strengthen during the forecast period. A renewed effort to liberalise the economy in 2007 will be limited by the practicalities of coalition politics (particularly demands made by the government's Left Front allies) and by Congress's focus on the rural sector. Nevertheless, past liberalisation means that the private sector has already become dynamic enough to ensure that economic growth will remain strong. India's economic boom will continue, albeit at a slightly slower pace. Real GDP growth (on an expenditure basis) is forecast to slow from 9.2% in fiscal year 2006/07 (April-March) to an annual average of 7.6% between 2007/08 and 2011/12. Information technology (IT) and IT-enabled services (ITES) output will grow rapidly in the forecast period, reflecting India's cost advantages in these sectors. The Reserve Bank of India (RBI, the central bank) will maintain a bias towards monetary tightening in 2007 to bring inflation under control. Monetary policy will move to a more neutral orientation in 2008-11, provided annual wholesale price inflation does not exceed the RBI's target range of 4.5-5% for a sustained period of time. India will record large surpluses on its services account over the forecast period, driven by foreign earnings from IT and ITES. Although the merchandise trade account will post an expanding deficit, reflecting high global oil prices and an increase in local demand for consumer goods, this will be sustainable as a result of the rising services surplus and continued inflows of remittances from Indians working overseas.
Key indicators Real GDP growth (%) Consumer price inflation (av; %) Budget balance (% of GDP) Current-account balance (% of GDP) Lending rate (av; %) Exchange rate Rs:US$ (av) Exchange rate Rs:¥100 (av) 2006 2007 2008 2009 2010 2011 9.2 6.2 -3.7 -1.1 11.2 45.3 39.0 8.5 5.9 -3.4 -1.6 11.5 41.8 36.1 8.0 5.2 -3.0 -1.8 11.3 41.0 39.2 7.6 5.0 -3.2 -1.5 10.7 41.0 42.5 7.1 5.0 -3.0 -1.4 10.2 41.0 43.9 7.0 5.0 -2.8 -1.6 10.0 41.0 44.7
Factsheet – China
Jul 3rd 2007 From the Economist Intelligence Unit Source: Country ViewsWire
Annual data Population (m) GDP (US$ bn; market exchange rate) GDP (US$ bn; purchasing power parity) GDP per head (US$; market exchange rate) GDP per head (US$; purchasing power parity) Exchange rate (av) Rmb:US$ (a) Economist Intelligence
Historical averages (%) 1,314.5(b) Population growth 2,720.2 Real GDP growth 9,903.8 2,069 7,534 Real domestic demand growth Inflation
2002-06 0.6 10.1 9.2 1.5 4.0 3.1
Current-account balance (% of GDP) 7.97(b) FDI inflows (% of GDP) Unit estimates. (b) Actual.
Background: The People's Republic of China was founded in 1949 by the Chinese Communist Party (CCP). The CCP chairman, Mao Zedong, then led the country for nearly three decades. After gaining power in 1978, two years after Mao's death, Deng Xiaoping introduced economic reforms. From 1989 to 2002 Jiang Zemin presided over a more collective leadership. The CCP is now led by Hu Jintao, who is also state president. Mr Jiang's faction remains influential. Political structure: The CCP dominates the government. Mr Hu is general secretary of the CCP, state president and chairman of the Central Military Commission, which controls the armed forces. Wen Jiabao leads the government as premier. The politburo standing committee is the main decision-making body. The National People's Congress is a largely rubber-stamp legislature. The Chinese People's Political Consultative Conference groups political, social and religious constituencies within a powerless institution. There is no formal political opposition to the CCP, and dissent is firmly suppressed. Policy issues: China's leaders want continuing economic liberalisation and sustainable growth alongside enduring political control. They recognise that many people have failed to benefit since economic reforms were launched at the end of the 1970s, and that such large numbers of disadvantaged citizens constitute a political liability. Accordingly, the balance of economic development is being altered in favour of social priorities. The economy is opening up following China's accession to the World Trade Organisation in 2001, and the government will continue to pursue further liberalisation. A private sector made up of domestic and foreign-funded interests is now strongly encouraged to expand and complement the state sector. Taxation: The rate of corporate income tax is theoretically 33%. In practice, a raft of preferential policies reduces the tax paid by foreign-invested enterprises (FIEs). The government has announced that preferential policies for FIEs will gradually be phased out. Foreign trade: In 2006 merchandise exports were worth US$970bn and imports stood at US$792bn (according to customs data), resulting in a trade surplus of US$177bn.
Major exports 2006 Electrical machinery&equipment Clothing&garments Yarn&textiles Petroleum&products Leading markets 2006 US Hong Kong Japan South Korea
% of total 10.5 9.8 5.0 1.1 % of total 21.0 16.0 9.5 4.6
Major imports 2006 Electrical machinery Petroleum&petroleum products Industrial machinery Textiles Leading suppliers 2006 Japan South Korea Taiwan US
% of total 22.1 10.6 3.5 2.1 % of total 14.6 11.3 11.0 7.5
Economic data – China
Jul 3rd 2007, From the Economist Intelligence Unit
The president, Hu Jintao, will cement his authority during the forecast period. Mr Hu is promoting allies in the run-up to the 17th congress of the ruling Chinese Communist Party, due in late 2007, paving the way for an eventual successor. The government will focus on development needs in rural areas and in central and western provinces, in an attempt to prevent widening inequalities from producing a political challenge to the regime. Strengthening central control over the regions will also be a priority for Mr Hu's administration as more cash is disbursed from the centre to the regions to fund welfare programmes. The integration of China into the world political system will cause tensions with the US, not least because the two countries' political perspectives differ sharply. Disagreements over Iran, Taiwan and Central Asia are likely. Relations with Japan will remain difficult, despite a recent easing of tensions. China will become more diplomatically proactive, especially in Africa. Real GDP growth will slow slightly but will remain impressive, easing gradually from 10.7% in 2006 to a forecast 7.1% in 2011. The government is attempting to boost the contribution of private consumption to overall growth. The tax burden on rural residents will fall, boosting their disposable income, and the growing trend for urban Chinese to buy homes and cars will also give a fillip to consumption spending during the forecast period. Investment spending growth will slow gradually, but low interest rates will support speculative borrowing, especially against a background of higher inflation. So far, this has led to asset price bubbles, especially in some real estate markets and also in the stockmarket. However, the risks to the wider economy of a bursting of either the property or the stockmarket bubble are relatively minor. The renminbi will continue to be held in a floating exchange-rate system managed primarily against the US dollar. Increasing volatility and sustained appreciation will be permitted throughout the forecast period, with the exchange rate averaging Rmb6.45:US$1 in 2011. The government will make gradual progress on the liberalisation of the capital account. The current-account surplus will fall as a proportion of GDP during the forecast period, in line with a moderation in China's export growth and strong growth in GDP. Services exports will be boosted by the 2008 Olympic Games in the capital, Beijing, and by the 2010 Shanghai World Expo.
Key indicators Real GDP growth (%) Consumer price inflation (%; av) Budget balance (% of GDP) Current-account balance (% of GDP) Commercial bank prime rate (%; year-end) Exchange rate Rmb:US$ (av) Exchange rate Rmb:¥100 (av) 2006 2007 2008 2009 2010 2011 10.7 1.7 -1.2 9.2 6.1 7.97 6.86 10.5 3.0 -0.7 10.7 6.6 7.63 6.47 9.6 3.0 -0.5 9.8 6.9 7.30 6.87 8.3 3.3 -0.2 8.9 6.9 7.00 7.25 7.6 3.3 -0.2 8.3 7.0 6.72 7.19 7.1 3.3 -0.1 7.4 7.0 6.45 7.03
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