From Ethiopia to Laos: in search of the ‘mines’ of economic growth in 2019

Laos, Ethiopia, Georgia or Panama. In a context marked by economic downturn, uncertainty and trade war, these will be some of the economic growth mines in the following twelve months. According to the last International Monetary Fund’s (IMF) forecasts, these territories will continue to accelerate this year, defeating all their neighbours in the region.

The IMF lowered in October last year two tenths their growth forecast for global economy, placing it in 3.7% for 2018 and 2019. This downward revision coincided with the reports from other international organisms, like the OECD, which alerted “the global economic growth has touched the ceiling”.

What is the main reason? Moderation in the rise of emerging and global trade, the two economic motors in the last decades. The commerce will go from growing 5.2% in 2017 to 4.2% in 2018 (which final figures are still unknown) and 4% in 2019. In that setting, which countries will lead that year the growth in Africa, Latin America or South-East Asia?

Sub-Saharan Africa

In sub-Saharan Africa, Ethiopia is the market with the best growing forecasts for this year, with a peak of 8.5%, according to the IMF. The rise more than duplicates the forecasted for the whole region, where a growth of 3.5% is contemplated.

In the last year, Ethiopia submitted a bid to become a new supply centre for fashion industry, and operators like H&M already carry out some productions in the country.

The Ethiopian market has kept since 2006 a growing rate greater than the average in its region, with double-digit increases until 2012. In 2017, it was the second country that grew the most in the world, just after Libya, with a rise of 10.9%.

Ethiopia is the second most populated country in Africa, but its PIB per capita is low and 30% of their inhabitants live beneath the poverty threshold, which prevented for now to be positioned as an attractive consumer market.

North Africa

Libya will go back to position in 2019 with one of the countries that grow the most, a quota that already reached in 2017, when its GDP was shot up 64% due to the escalation in oil prices. For 2019, IMF estimates a rise of 10.8%, even though it will be significantly moderated in 2020 and 2021, with an increase of almost 1.4% during both years.

Such rise is motivated mainly by the increase of oil production, on which Libyan economy almost entirely depends, what compensates, according to the IMF, the little public investment.

Political instability, the insecurity and the lack of trust of consumers in the bank system, which results in a lack of liquidity, according to Cia World Factbook, that places the country still quite far away from becoming a possible consumption destiny.

Europe

Georgia and America will share in 2019 the gold of the fastest growing economies. For both of them, IMF anticipates a growth of 4.8%, even though the rate presents a downturn facing the projections for 2019, which stood in 5.5% in case of Georgia and 6% in case of Armenia.

In short term, forecasts are better for Georgia, where a rise of 5.3% is estimated for 2023, while Armenia’s rate will remain in 4.5%. Armenian economy is affected by its geographical isolation and a scarce export base, as well as some sectors’ monopolies that have harmed the economic dynamism.

The former Soviet Socialist Republic is very dependent of the Russian evolution and its governmental and commercial support, as the country controls key infrastructures in the country, such as energy. Armenian consignments generate around 12% and 14% of the country’s GDP, according the IMF.

In this context, Armenia is searching for new allies outside its borders, especially from the European Union, with which signed a Comprehensive and Enhanced Partnership Agreement in 2017 after the free trade agreement they planned to sign in 2013 was unsuccessful due to Russian pressures.

In Georgia, economy is still trying to completely recover after 2009 crisis, after a conflict with Russia in 2008. The country, with a liberal government that has been maintaining low regulation policies, little taxes and free market, is also looking to diversify its portfolio of partners externally, and in 2017 it signed an agreement of free trade with China.

With a GDP per capita higher than the one of India or Morocco, but with a high level of unemployment, the development of international brands is still incipient. Inditex, for instance, has thirteen stores in the country, while H&M landed in the country in 2017 with an opening in the capital, Tiblisi.

Eurozone

In the Eurozone, Slovakia is going to be the country with the highest growing rate in 2019, slightly ahead of Ireland. The Slovakian economy kept a good rhythm in the last decades: between 2000 and 2009 it advanced 4.5%, standing as the second market in the Eurozone that better evolved, and its steady growth trend continues from then.

After the advancement of 3.4% in 2017, the IMF forecasts a growth acceleration for the following years, with an expected rise of 3.9% for 2018 and 4.1% for 2019. In the medium term, Slovakia will continue being one of the countries in the region with better forecasts, with an increase of 3.5% in 2023. International fashion is present in the country, which has barely 5 million inhabitants: Inditex has sixteen stores and H&M has twenty-two.

However, private consumption is more moderate than in other countries from Visegrad, like the Check Republic, and its economic distance with Western Europe remains significant.

Latin America

Its dollarized economy, its condition of a tax haven and its position of strategical hub for the commerce have driven the development of Panama economy, which remains as the one that grows the most in Latin America. For 2019, a rise of 6.8% is forecasted, in contrast to last year’s expected 4.6%.

However, the economic impulse of the country has not been translated likewise into all the population: Panama is the second country with the highest rate in inequality of all Latin America, and one fourth of their inhabitants live in poverty.

With all this, the strong purchasing power upper classes have, made up of both locals and foreigners that work in the country, and their opening to commerce have placed it as an interesting consumer market inside Latin American territory.

Asia

Given the lack of end of the year data, India will beat China as the economy that grows the most in Asia, according to IMF forecasts, and it will also keep the gold this year. The entity will estimate a growth of 7.3% for 2018 and 7.4% for 2019, in contrast with the increases of 6.6% and 6.2% expected for China.

According to these estimations, India will surpass the United Kingdom as the fifth largest power in the world this year, although the experts warn of the risk of slowdown in exports and production for global economic downturns.

India, which will as well become the most populated country in the world in 2022, according to the United Nations, is increasingly integrating into the global trade, and the economic liberalization measures and the external openness are already bearing its fruits.

This year is going to be key for the country, which will try the support to its Prime Minister, Narendra Modi in the presidential elections. Even though Modi said he expects to “beat all records”, the regional comities in December gave a major boost to the opposing party that won in two out of the five states.

South-East Asia

The growth in South-East Asia is led by Laos, with an increase of 7% in 2019. Laos is one of the communist countries with an only party, but since the end of the 80s it started to decentralize the power and drive the private company.

The country maintained a growth of 6% per year between 1988 and 2008, and in the last decade it became one of the better developing markets in Asia, with annual rates of 7%. With all, the scares infrastructure, the small sized domestic market and the corruption remain as some of the barriers to foreign investment in the country.

After Laos, the two economies that will grow the most in South East Asia are Myanmar and Cambodia, two key centres for fashion supply, for which the IMF forecasts an increase of 6.8% this year. However, its position of production hub could change this year, since Brussels is studying to eliminate Myanmar’s zero tariff due to the rohingya’s crisis and started a process to eliminate the access to the Asiatic country by the trade preference program Everything But Arms (EBA), challenging retail imports for 3.42 billion euros.