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Mozambique may soon join the “above average” group of emerging markets in terms of economic growth which consulting firm McKinsey has called “outperformers” in a report released on Wednesday.
The country is not yet in the 18-country list that the consultant considers to have achieved a certain set of economic growth indicators in recent decades, but is included among the “recent accelerators”, signalling its potential to join the next wave of “outperformers”.
In the report “Outperformers: High-growth emerging economies and the companies that propel them”, the McKinsey Global Institute (MGI) analysed the GDP per capita growth in 71 developing economies from 1965 to 2016, and identified 18 – about one in four – as outperformers.
Seven countries (China, Hong Kong, Indonesia, Malaysia, Singapore, South Korea and Thailand) reached or exceeded 3.5% annual GDP per capita growth over this 50-year period. Another geographically more dispersed and more recent group of eleven countries saw GDP per capita growth of at least 5% between 1995 and 2016: Azerbaijan, Belarus, Cambodia, Ethiopia, India, Kazakhstan, Laos, Myanmar, Turkmenistan, Uzbekistan and Vietnam.
“These 18 countries not only showed exceptional average performance, but also consistency, exceeding the growth rate established in at least three quarters of the last periods of 50 and 20 years, respectively,” the MGI emphasises.
There are several countries among the next potential outperformers.
Some of them, such as Bangladesh, Bolivia, the Philippines, Rwanda and Sri Lanka, experienced GDP per capita growth of more than 3.5% between 2011 and 2016. Others, such as Mozambique, Kenya, Paraguay, Senegal and Tanzania, improved productivity, and demand, but have not yet reached that growth target consistently.
Of the 15 countries in the sub-Saharan region (the poorest region in the world, with a GDP per capita of only $1.57), only one, Ethiopia, performed above average.
Ghana, Mozambique and Rwanda, which have recently experienced periods of rapid growth, have outpaced long-term outperformers in the last ten years.
MGI explains the above-average performance with “pro-growth policy agendas” and the contribution of large companies that have helped drive growth.
In Mozambique, the Mozal aluminium smelting company (the largest in the country and the second largest in Africa) stands out as a growth engine, generating around 30% of exports and 53% of the flow of foreign exchange since it was created in 1998.
“Mozal’s growth has had a significant impact on the country’s infrastructure and the company was responsible for expanding the port and developing an industrial park near the capital Maputo. The company, which consumes four times more electricity than the rest of the country put together, has to buy electricity from South Africa,” the report notes.
Among the new challenges for emerging markets, MGI identifies demographic changes, new south-south patterns of international trade and the digital revolution.
MGI also identifies manufacturing opportunities in low-income, low-industrialisation countries, highlighting successful examples such as the accelerated development of industrial sectors such as furniture, automotive and pharmaceuticals in India.
“If these countries can increase productivity, added value and employment in manufacturing can also increase”, to the benefit of countries like Mozambique, Ethiopia, Bangladesh, India, Kenya, Nepal, Rwanda and Vietnam.
Overall, outperformers have helped raise from extreme poverty (people living on less than $1.90 a day) about 1 billion people since 1990 and generated 44% of emerging market consumption between 1995 and 2016.
If the remaining 53 countries (with average or below-expected performance) achieved productivity gains similar to the 18 outperformers, the global economy would generate 11 billion dollars and global per capita growth would increase to 4.6%, the MGI estimates.