<hdr>The World Factbook 1994: Faroe Islands<nl>Economy</hdr><body>
<list>
<item><hi format=bold>Overview:</hi> The Faroese, who have long enjoyed the affluent living standards of the Danes and other Scandinavians, now must cope with the decline of the all-important fishing industry and one of the world's heaviest per capita external debts of nearly $30,000. When the nations of the world extended their fishing zones to 200 nautical miles in the early 1970s, the Faroese no longer could continue their traditional long-distance fishing and subsequently depleted their own nearby fishing areas. The government's tight controls on fish stocks and its austerity measures have caused a recession, and subsidy cuts will force nationalization in the fishing industry, which has already been plagued with bankruptcies. Copenhagen has threatened to withhold its annual subsidy of $130 million—roughly one-third of the islands' budget revenues—unless the Faroese make significant efforts to balance their budget. To this extent the Faroe government is expected to continue its tough policies, including introducing a 20% value-added tax (VAT) in 1993, and has agreed to an IMF economic-political stabilization plan. In addition to its annual subsidy, the Danish government has bailed out the second largest Faroe bank to the tune of $140 million since October 1992.
<item><hi format=bold>National product:</hi> GDP—purchasing power equivalent—$662 million (1989 est.)
<item><hi format=bold>National product real growth rate:</hi> 3% (1989 est.)
<item><hi format=bold>National product per capita:</hi> $14,000 (1989 est.)
<item><hi format=bold>Agriculture:</hi> accounts for 27% of GDP and employs 27% of labor force; principal crops—potatoes and vegetables; livestock—sheep; annual fish catch about 360,000 metric tons
<item><hi format=bold>Economic aid:</hi>
<list style=hang>
<item>• <hi format=ital>recipient:</hi> receives an annual subsidy from Denmark of about $130 million
