licy -
raising interest rates in 2006 - while trying to preserve growth.
Foreign exchange reserves are bolstered by steady worker
remittances, but a growing current account deficit - driven by a
widening trade gap as import growth outstrips export expansion -
could draw down reserves and dampen GDP growth in the medium term.

Palau
The economy consists primarily of tourism, subsistence
agriculture, and fishing. The government is the major employer of
the work force, relying heavily on financial assistance from the US.
Business and tourist arrivals numbered 63,000 in 2003. The
population enjoys a per capita income twice that of the Philippines
and much of Micronesia. Long-run prospects for the key tourist
sector have been greatly bolstered by the expansion of air travel in
the Pacific, the rising prosperity of leading East Asian countries,
and the willingness of foreigners to finance infrastructure
development.

Palmyra Atoll
no economic activity

Panama
Panama's dollarised economy rests primarily on a
well-developed services sector that accounts for three-fourths of
GDP. Services include operating the Panama Canal, banking, the Colon
Free Zone, insurance, container ports, flagship registry, and
tourism. A slump in the Colon Free Zone and agricultural exports,
the global slowdown, and the withdrawal of US military forces held
back economic growth in 2000-03; growth picked up in 2004-06 led by
export-oriented services and a construction boom stimulated by tax
incentives. The government has implemented tax reforms, as well as
social security reforms, and backs regional trade agreements and
development of tourism. Unemployment remains high. In October 2006,
voters passed a referendum to expand the Panama Canal to accommodate
ships that are now too large to cross the transoceanic crossway. Not
a CAFTA signatory, Panama in December 2006 independently negotiated
a free trade agreement with the United States, which, when
implemented, will help promote the country's economic growth.

Papua New Guinea
Papua New Guinea is richly endowed with natural
resources, but exploitation has been hampered by rugged terrain and
the high cost of developing infrastructure. Agriculture provides a
subsistence livelihood for 85% of the population. Mineral deposits,
including oil, copper, and gold, account for nearly two-thirds of
export earnings. The economy has i