Outperformers: High-growth emerging economies and the
companies that propel them PART III
2.
Changing times spell
potential new opportunities for emerging economies
Global conditions are
changing. Manufacturing seems to be peaking earlier than it used to in
developing countries, for example, and cross-border trade flows have lost some of their dynamism since the 2008
financial crisis. With these changes come not only challenges but also new
opportunities for emerging economies in both manufacturing and services.
We highlight three
fundamental changes in the global landscape that all emerging economies will
have to navigate:
i. Demographic changes worldwide
Demographic changes are
already affecting the global economy. A decline in the working-age population
in some countries, such as Germany and Japan, for example, is acting as a drag
on growth. At the same time, we see a powerful countertrend in the form of
rising urbanization in emerging economies, which is boosting consumption as
people move to cities and join the burgeoning consuming class. We expect
emerging economies overall to represent 62 percent of total consumption growth
between 2015 and 2030, the equivalent of $15.5 trillion, with 22 percent of
that coming from China alone.
ii. Shifting trade patterns
For the first time in
history, developing economies are participating in more than half of the global
trade of goods. “South-south” trade—shorthand for trade among emerging
economies (even if they are not in the Southern Hemisphere)—is growing faster
than north-south or north-north trade. Overall, the share of goods trade among
emerging markets, both south-south and China-south, have risen from 8 percent
in 1995 to 20 percent in 2016.
China is a significant
driver of this south-south trade. As China moves away from some labor-intensive
manufacturing and toward more R&D-intensive manufacturing, it may create
new opportunities for India, Vietnam, and other emerging economies, especially
for goods produced in low-income countries from Indonesia to Uzbekistan.
iii. An unfolding digital revolution
We estimate that automation has the potential to increase productivity in developing economies by
0.8 to 1.2 percentage points a year between 2015 and 2030.
Digital technologies
have already enabled new business models and opened new markets. In Kenya, for
example, M-Pesa allows mobile money transfers, while in Indonesia, GoJek, a
motorcycle-hailing application, has opened new frontiers in transportation.
Against this backdrop
of changing trends, manufacturing has been a
powerful engine of economic growth and employment in outperforming economies
over the past three decades, and it will continue to play an important role.
Manufacturing is peaking earlier in the development process than it used to, a
phenomenon that Dani Rodrik, an economist at Harvard University, has dubbed “premature
deindustrialization.”
This phenomenon
complicates but may not frustrate developing economies’ ambitions; we find that
manufacturing may still have room to grow, especially in low-income countries,
and it can remain a source of job creation, especially where low wages and a
strategic location make countries an attractive destination for garment makers
and other labor-intensive manufacturers. Our analysis shows that more than 20
countries can still increase both manufacturing and value, based on likely
trends in labor cost alone.
For their part,
services account for more than 60 percent of GDP and more than half the total
jobs in emerging economies, but in most countries the service sector has not
historically been a significant contributor to productivity growth. That is now
changing, partly thanks to technology, which enables providers ranging from
call-center workers to radiologists to more easily compete around the world.
The share of services as a proportion of total global exports has risen from 19
percent in 1995 to 24 percent today. The share of employment in services is
also becoming more relevant at an earlier stage of development.
v. The global economy could receive an $11 trillion boost
if all emerging economies emulate outperformers
What would happen if
the 53 emerging economies with middling or underperformance could match the
historical productivity gains of the 18 outperformers? It would require them to
lift their annual average productivity growth from the 1.4 percent rate between
2000 and 2015 to 4.2 percent, the average annual rate achieved by the
outperformers. To estimate the impact, both for the emerging economies and for
the global economy, we simulated this increase using a macroeconomic model.
The effects are
striking: for developing economies, the overall per capita GDP growth rate
could rise to 4.6 percent. This could push their average per capita GDP more
than 50 percent above the consensus forecasts for 2030 and lift 200 million
people to the consuming class and 140 million more people out of poverty—an
increase of almost two full percentage points of the global population.
The global economy would
experience a bounce, growing at an average of 3.5 percent a year, compared with
consensus forecasts of 2.8 percent. That growth could directly add $11 trillion
to global GDP by 2030. About $8 trillion of that would come directly from the
53 hitherto middling and underperforming emerging economies.
The remaining $3
trillion would come indirectly, as increased economic activity and income in
the 53 nations affect global demand in advanced and outperforming emerging
economies. The $11 trillion boost to global output amounts to roughly 10
percent of the world’s economy and would be equivalent to adding another China.
How credible is such a
scenario? Tripling productivity growth rates is certainly an ambitious goal,
but the precedent has already been set: this is what the 11 recent
outperformers achieved between 1995 and 2015 compared with the baseline period
of 1980 to 1995.
Geographic regions all
have strengths and weaknesses in common—and all have the potential to
strengthen their pro-growth cycles.
Across the varied
global landscape, we can identify some individual countries that are aspiring
newcomers to our list of outperformers. These are countries that are putting in
place and strengthening their economic fundamentals, in accordance with the
elements of our heat map. Some of them are already achieving GDP per capita
growth that exceeded 3.5 percent in 2011 to 2016.
Five
countries—Bangladesh, Bolivia, Philippines, Rwanda, and Sri Lanka—have exceeded
the 3.5 percent annual per capita growth rate in 2011 to 2016 and also rank in
the top 25 percent of our performance index.
A second cluster of
countries consists of Kenya, Mozambique, Paraguay, Senegal, and Tanzania. These
countries have moved into the top quartile of our economic performance scores,
reflecting improvement in key productivity, income, and demand drivers, but
they have not yet achieved consistent 3.5 percent GDP per capita growth.
Finally, two other
countries achieve the 3.5 percent GDP growth benchmark, but their economic
performance is less stellar, which puts them in the second quartile. They are
the Republic of Côte d’Ivoire and Dominican Republic.
For the 18
outperformers we identified, meanwhile, congratulations are in order—but
complacency is not. Even the best-performing regions in our analysis have room
for economic improvement across a range of indicators.
As the global landscape
evolves, developing countries will face changing trends that may make their
passage to outperformance more challenging than, and in any case different
from, the outperformers that went before them. Yet we still see plenty of
opportunity in both individual countries and whole regions. Companies can seize
the opportunity, as can policy makers.
For the sake of the
global economy—and the hundreds of millions of people who continue to live in
poverty and aspire to a more prosperous life, it is important that they do so.
By Jonathan Woetzel, Anu Madgavkar, Jeongmin Seong, James Manyika, Kevin Sneader, Oliver Tonby, Andres Cadena, Rajat Gupta, Acha Leke, Hayoung Kim, and Shishir Gupta
FOR FULL ARTICLE WITH
EXHIBITS https://www.mckinsey.com/featured-insights/innovation-and-growth/outperformers-high-growth-emerging-economies-and-the-companies-that-propel-them?cid=other-eml-alt-mgi-mck-oth-1809&hlkid=5591465d08a247d799948d6817e948f4&hctky=1627601&hdpid=d18ce580-34a0-4144-b49f-4218725ab2d7
No comments:
Post a Comment