ment reluctantly
allows a large dollar market sector, fueled by tourism and
remittances from Cubans abroad.

Cyprus
The Greek Cypriot economy is prosperous but highly
susceptible to external shocks. Erratic growth rates over the past
decade reflect the economy's vulnerability to swings in tourist
arrivals, caused by political instability in the region and
fluctuations in economic conditions in Western Europe. Economic
policy is focused on meeting the criteria for admission to the EU.
EU-driven tax reforms in 2003 have introduced fiscal imbalances,
which, coupled with a sluggish tourism sector, have resulted in
growing fiscal deficits. As in the Turkish sector, water shortages
are a perennial problem; a few desalination plants are now on-line.
After 10 years of drought, the country received substantial rainfall
from 2001-03, alleviating immediate concerns. The Turkish Cypriot
economy has roughly one-third of the per capita GDP of the south.
Because it is recognized only by Turkey, it has had much difficulty
arranging foreign financing and investment. It remains heavily
dependent on agriculture and government service, which together
employ about half of the work force. To compensate for the economy's
weakness, Turkey provides grants and loans to support economic
development. Ankara provided $200 million in 2002 and pledged $450
million for the 2003-05 period. Future events throughout the island
will be highly influenced by the outcome of negotiations on the
UN-sponsored agreement to unite the Greek and Turkish areas.

Czech Republic
One of the most stable and prosperous of the
post-Communist states, the Czech Republic has been recovering from
recession since mid-1999. Growth in 2000-03 was supported by exports
to the EU, primarily to Germany, and a near doubling of foreign
direct investment. Domestic demand is playing an ever more important
role in underpinning growth as interest rates drop and the
availability of credit cards and mortgages increases. High current
account deficits - averaging around 5% of GDP in the last several
years - could be a persistent problem. Inflation is under control.
The EU put the Czech Republic just behind Poland and Hungary in
preparations for accession, which will give further impetus and
direction to structural reform. Moves to complete banking,
telecommunications, and energy privatization will encourage
addit