Contents -- I. Introduction -- II. External Sector Developments and Key Vulnerabilities -- A. Balance of payments -- B. Evolution of REER indices -- III. Equilibrium Exchange Rate Estimation -- A. Behavioral equilibrium exchange rate approach -- B. Estimation results -- IV. External Sustainability Approach -- V. Export Performance and Nonprice Competitiveness Indicators -- A. External sector outcomes -- B. Nonprice indicators of competitiveness -- VI. Summary and Conclusions -- References -- Appendix -- Tables -- 1. Assumptions -- 2. Comparative Costs of Infrastructure Services in the Late 1990s -- 3. Comparativeness Rankings -- Figures -- 1. Balance of Payments Trends -- 2. Real Effective Exchange Rate Indices -- 3. Determinants of the Real Effective Exchange Rate -- 4. Equilibrium Real Exchange Rate Estimation -- 5. External Sustainability Assessment -- 6. Export Performance Indicators -- 7. Governance Indicators -- Appendix Tables -- 1. Unit Root Tests -- 2. Test for Model Reduction -- 3. Cointegration Tests: Trace Test and Maximum Eigenvalue -- 4. Results of Cointegration Estimation -- 5. Residuals Tests -- Appendix Figures -- 1. Breakdownpoint Chow Tests -- 2. Equilibrium REER Estimation: Cointegration Residuals.