by an
average 4 percent per year during the period 2002-2004, with a
stable exchange rate and low inflation. Risk premiums on Peruvian
bonds on secondary markets reached historically low levels in late
2004, reflecting investor optimism regarding the government's
prudent fiscal policies and openness to trade and investment.
Despite the strong macroeconomic performance, the TOLEDO
administration remained unpopular in 2004, and unemployment and
poverty have stayed persistently high.

Philippines
The Philippines was less severely affected by the Asian
financial crisis of 1998 than its neighbors, aided in part by annual
remittances of $7-8 billion from overseas workers and no sustained
runup in asset prices or foreign borrowing prior to the crisis. From
a 0.6% decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in
2000, but slowed to 3.2% in 2001 in the context of a global economic
slowdown, an export slump, and political and security concerns. GDP
growth accelerated to 4.3% in 2002, 4.7% in 2003, and about 6% in
2004, reflecting the continued resilience of the service sector, and
improved exports and agricultural output. Nonetheless, it will take
a higher, sustained growth path to make appreciable progress in
poverty alleviation given the Philippines' high annual population
growth rate and unequal distribution of income. The Philippines also
faces higher oil prices, higher interest rates on its dollar
borrowings, and higher inflation. Fiscal constraints limit Manila's
ability to finance infrastructure and social spending. The
Philippines' consistently large budget deficit has produced a high
debt level and has forced Manila to spend a large portion of the
national government budget on debt service. Large, unprofitable
public enterprises, especially in the energy sector, contribute to
the government's debt because of slow progress on privatization.
Credit rating agencies are increasingly concerned about the
Philippines' ability to sustain the debt; legislative progress on
new revenue measures will weigh heavily on credit rating decisions.

Pitcairn Islands
The inhabitants of this tiny isolated economy exist
on fishing, subsistence farming, handicrafts, and postage stamps.
The fertile soil of the valleys produces a wide variety of fruits
and vegetables, including citrus, sugarcane, watermelons, bananas,
yams, and beans. Bartering is an importa