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Economy

In 2010, the year of the earthquake, Haiti’s economy contracted by 5.4 percent. In 2011, the Haitian economy had begun recovering slowly from the effects of the earthquake and a tumultuous electoral period the previous year. However, adverse natural shocks affecting agricultural output and the slow execution of public capital spending negatively affected the economic recovery in 2012. According to the Haitian Statistical Unit (IHSI), its preliminary estimate for GDP growth for 2012 is 2.8 percent, down from 5.6 percent in 2011. The IMF predicted growth of 6.5% in 2013.

Despite recent progress and the Haitian government’s commitment to improve investment, Haiti’s investment climate barely improved in 2012. The WB’s “Doing Business 2013" report ranks Haiti as 174 of 183 (first place being the best) on ease of doing business (falling off of one place, down from 173 in 2011). Economic growth in the 2012 fiscal year was impacted by adverse natural shocks (drought and two hurricanes) affecting agricultural output, political infighting and legislative inaction related to stalled elections, and the low execution of public capital spending, which also negatively impacted the investment climate.

Despite improvements in the telecommunications sector, Haiti did not become more competitive compared to the rest of the region. Overall costs to start a new business in Haiti remained high, while accesses to credit as well as structures for investor protection are still insufficient. The Martelly government continued to promote Haiti as “open for business," but officials recognized the need for coordinated efforts from both the Haitian government and the private sector to make it easier and cheaper for investors to do business in the country. Despite challenges, increased international attention on Haiti since the January 2010 earthquake and the pro-business agenda of the Martelly administration have led to increased interest in Haiti from foreign investors. Further reform and improvement of the business climate is necessary to transform this interest into meaningful investment.

By 2014, on the fourth anniversary of the devastating earthquake that struck the impoverished country, 145,000 people continued to live in make-shift camps. Nearly all earthquake rubble has been cleared away. More than 90 percent of Haitians had transitioned out of camps and into housing.

Haiti's economy remains the least developed in the western hemisphere because of political instability, natural disasters, a lack of natural resources (especially arable land), and high population density. Job opportunities are extremely limited. Only one in 50 Haitians has a steady wage-earning job. Most Haitians survive through subsistence farming. In 2004 Haiti's gross domestic product contracted 3.5 percent from the previous year. Additionally, the country had the highest rate of inflation among all Caribbean countries.

In 2004 Haiti had an estimated Gross Domestic Product (GDP) (in terms of purchasing power parity) of nearly US$12.1 billion. Although this figure topped some smaller Caribbean countries in total, Haiti's estimated per capita GDP (in terms of purchasing power parity) of US$1,500 ranks last in the western hemisphere and 193rd in the world. Haiti had a budget deficit of nearly US$200 million in 2004, a total equal to about 60 percent of the year's government revenues.

Purchasing power in Haiti has fluctuated dramatically throughout the past 15 years. Rising fuel prices and weak domestic demand, coupled with political instability, have produced nearly uncontrollable inflation at times. In 1994 the inflation rate reached 40 percent before an austerity policy and an influx of foreign aid brought the rate back under control. The inflation rate fell to a manageable 8.7 percent in 1999. However, exchange rate depreciation again pushed inflation to 40 percent in 2003. In 2004 the inflation rate held steady at an estimated 22 percent.

Although many Haitians make their living through subsistence farming, Haiti also has an agricultural export sector. Agriculture, together with forestry and fishing, accounts for about one-quarter of Haiti's annual gross domestic product and employs about 60 percent of the labor force. However, expansion has been difficult because mountains cover much of the countryside and limit the land available for cultivation. Of the total arable land of 550,000 hectares, 125,000 hectares are suited for irrigation, and of those only 75,000 hectares actually have been improved with irrigation. Haiti's dominant cash crops include coffee, mangoes, and cocoa. Haiti has decreased its production of sugarcane, traditionally an important cash crop, because of declining prices and fierce international competition. Because Haiti's forests have thinned dramatically, timber exports have declined. Roundwood removals annually total about 1,000 kilograms. Haiti also has a small fishing industry. Annual catches in recent years have totaled about 5,000 tons.

Haiti has a small mining industry, extracting minerals worth approximately US$13 million annually. Bauxite, copper, calcium carbonate, gold, and marble are the most extensively mined minerals in Haiti.

In 2001 manufacturing accounted for 7.9 percent of the gross domestic product (GDP) and industry as a whole for 16 percent. Less than 10 percent of the labor force works in industrial production. As a portion of the GDP, the manufacturing sector has contracted since the 1980s. The United Nations embargo of 1994 put out of work most of the 80,000 workers in the assembly sector. Additionally, the years of military rule following the presidential coup in 1991 resulted in the closure of most of Haiti's offshore assembly plants in the free zones surrounding Port-au-Prince. When President Aristide returned to Haiti, some improvements did occur in the manufacturing sector. Haiti's cheap labor brought some textile and garment assembly work back to the island in the late 1990s. However, these gains ultimately were undercut by international competition.

The leading industries in Haiti produce beverages, butter, cement, detergent, edible oils, flour, refined sugar, soap, and textiles. Growth in both manufacturing and industry has been slowed by a lack of capital investment. Grants from the United States and other countries have targeted this problem, but without much success. Private home building and construction appear to be one subsector with positive prospects for growth.

Haiti uses very little energy, about 250 kilograms of oil equivalent per head, per year. In 2002 Haiti produced 618 million kilowatt-hours of electricity while consuming 574 million kilowatt-hours. Most of the country's energy comes from burning wood. Haiti imports oil and consumes about 11,000 barrels per day, as of 2001. The Péligre Dam, the country's largest, provides the capital city of Port-au-Prince with energy. Thermal plants provide electricity to the rest of the country. Traditionally, the supply of electricity has been sporadic and prone to shortages?even with the country's low demand. Mismanagement by the state has offset more than US$100 million in foreign investment targeted at improving Haiti's energy infrastructure. Businesses have resorted to securing back-up power sources to deal with the regular outages. The potential for greater hydropower exists, should Haiti have the desire and means to develop it. The government controls oil and gas prices, insulating Haitians, to an extent, from international price fluctuations.

Haiti's services sector made up 57 percent of the country's gross domestic product in 2002. It employs 23 percent of Haiti's labor force. According to World Bank statistics, the services sector is one of the only sectors of Haiti's economy that sustained steady, if modest, growth throughout the 1990s.

Lack of a stable and trustworthy banking system has impeded Haiti's economic development. Banks in Haiti have collapsed on a regular basis. Most Haitians do not have access to loans of any sort. When reelected in 2000, President Aristide promised to remedy this situation but instead introduced a non-sustainable plan of "cooperatives" that guaranteed investors a 10 percent rate of return. By 2000 the cooperatives had crumbled, and Haitians collectively had lost more than US$200 million in savings.

Not surprisingly, tourism in Haiti has suffered from the country's political upheaval. Inadequate infrastructure also has limited visitors to the island. In the 1970s and 1980s, however, tourism was an important industry, drawing an average of 150,000 visitors annually. Following the 1991 coup, tourism has recovered slowly. The Caribbean Tourism Organization (CTO) has joined the Haitian government in efforts to restore the island's image as a tourist destination. In 2001, 141,000 foreigners visited Haiti. Most came from the United States. Further improvements in hotels, restaurants, and other infrastructure still are needed to make tourism a major industry for Haiti.




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