This Is What the Fastest Growing Emerging Economies Have in Common
By 2030, emerging markets will account for 62% of total growth in global consumption, the equivalent of $15.5 trillion in spending. But some countries are developing more quickly than others.
Anu Madgavkar, a partner at McKinsey Global Institute, the business and economics research arm of consulting firm McKinsey, evaluated nearly 70 countries to identify the “overachievers” in emerging markets. Her team found that seven nations—China, South Korea, Singapore, Hong Kong, Malaysia, Indonesia, and Thailand—all had at least 3.5% real GDP growth per capita year-over-year for the past 50 years.
Meanwhile, another 11 countries did well enough to get honorable mention by achieving per capita GDP growth of at least 5% for 20 years. Those countries include India, Vietnam, Kazakhstan, Uzbekistan, Ethiopia, Laos, Myanmar, Turkmenistan, Cambodia, Belarus, and Azerbaijan.
“These 18 really stood apart from the rest,” Madgavkar said at Fortune’s Global Forum conference in Toronto on Tuesday.
Several common factors explain the rapid growth in these countries, she said.
First was the ability for citizens to save and invest at very high rates. Second was the productivity gains that came from improved management practices and more advanced technology paired with the creation of institutions that could better support and enable growth and competition in important areas like infrastructure, according to Madgavkar.
She says that a couple of things differentiated the 18 countries named in the report from the others. They were governments assisting growth in these emerging markets and building consensus around a national economic vision.
“It’s not that all the outperformers were the same in this regard,” she said. “But there was this theme of actually setting an agenda and then figuring out what it would take to get private enterprise.”
Madgavkar noted a cluster effect to the top performing emerging markets, especially in Asia, as countries grow alongside each other. However, she pointed to Ethiopia as an exception—it’s the only African nation on the list—and a model that other emerging economies could copy.
Looking forward, Madgavkar said trends like automation could benefit growing economies, where there is still room to increase manufacturing production.
Madgavkar also pointed to trade among top performing countries—especially between China and other emerging markets—as an opportunity for further economic expansion.
“The ability for these outperformers to continue to create the environment where large firms can globalize and grow out—I think that’s going to be a critical factor,” Madgavkar said.