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New Growth Projections Predict the Rise of India, East Africa and Fall of Oil Economies
May 7, 2015
Cambridge, Massachusetts
– South Asia and East Africa top the list, while oil-driven economies
face the sharpest fall in new growth projections and rankings of
productive dynamism for 128 countries, as presented by researchers at
the Center for International Development at Harvard University (CID).
Using their own measure of economic complexity that captures the
productive capabilities embedded in a country’s exports, CID researchers
paint a new picture of the economic growth landscape, which foresees
growth in emerging markets to continue to outpace developed countries.
They also predict important reversals among growth leaders, with India
expected to overtake China.
After decades spent trailing the growth of its
northern neighbor and economic rival, India now tops the projections of
annual growth rates to 2023. This finding adds to the recent debate over
India’s own revisions to its 2014 growth statistics, which showed
India’s growth edging out China for 2014.
Source: The Atlas of Economic
Complexity, 2015. Harvard Center for International Development. Note:
Rankings out of 128 countries.
“Our Economic Complexity predictions find India’s
disputed upper hand in growth will expand into a widening gap in the
medium-term, with growth projections to 2023 predicted to be at 7.9
percent annually, well ahead of the 4.6 percent projected for China,”
said Ricardo Hausmann, Professor of the Practice of Economic Development
at Harvard Kennedy School (HKS), the leading researcher of The Atlas,
and the director of CID.
Relative to China’s 9.1 percent annual growth of
the past quarter century, this growth projection presents an important
slowdown for China, but stands just below the 6 percent growth rate in
2020 predicted by the IMF and China’s leadership.
CID’s projections are also bullish on East Africa.
Four East African countries – Uganda, Tanzania, Kenya, and Madagascar –
rank in the top ten, with all predicted to grow at least 6 percent
annually. The projections also favor Pakistan’s potential, at 5.1
percent predicted growth, presenting a clear picture of South Asia and
East Africa’s positive growth outlook. Southeast Asia also includes
several high-growth countries, driven by its largest country, Indonesia,
which is anticipated to grow at 5.2 percent annually to 2023.
Outlooks for Europe and the U.S. show little
optimism. The U.S. growth rate in 2023 is predicted to be 2.4 percent,
while major European players range from 2.3 percent in Italy to 3.7
percent in Spain. Among OECD countries, Turkey holds the greatest
optimism, at 5.3 percent growth. Overall, the model predicts significant
convergence in global incomes, with significant catch-up in parts of
Sub-Saharan Africa and Southeast Asia.
Source: The Center for International Development at Harvard University. Economic Complexity Index. 2015
“Countries accumulate productive knowledge by
developing their respective capacity to make both more products, and
products of increasing complexity—this underpins economic growth,” said
Hausmann. “Countries like India, Kenya, and the Philippines have made
important recent gains in diversifying their exports into more complex
products. Historically, these gains in economic complexity have
translated into higher incomes, which position them as the frontrunners
globally for their growth prospects.”
CID’s projections are based on newly released 2013
global trade data and The Atlas of Economic Complexity, an online tool
which measures a country’s productive knowledge and predicts its rate of
growth. Productive knowledge – the knowledge that goes into making
products – captures more relevant information as to the drivers of
economic growth, to provide a more accurate explanation for why
countries are rich or poor. The Atlas shows remarkable accuracy in
predicting future economic growth. Relative to the leading measures of
governance, competitiveness, and education, The Atlas’ Economic
Complexity measures are found to best forecast growth rates—with 10
times greater accuracy than the World Economic Forum’s Global
Competitiveness Index.
New Country Rankings in Economic Complexity
Along with the growth projections, CID released the
new 2013 Economic Complexity Index (ECI). The ECI ranks countries based
on the average complexity of their export basket, using the same
indicator that generated the growth projections. Of the countries that
made the greatest improvements in ECI from 2003-2013, four of the top
five are in Sub-Saharan Africa: Zambia, Tanzania, Uganda and Malawi. The
region is not uniformly improving, however, as Mauritania, Namibia, and
Zimbabwe are among the group with the worst declines in ECI. Policy
approaches toward diversification and the management of commodities,
like oil, increasingly diverge within regions and underpin differing
economic outcomes.
Source: The Atlas of Economic
Complexity, 2015. Harvard Center for International Development. Note:
Rankings out of 128 countries.
The Economic Complexity growth projections
underscore that not all exports are created equal. Rather, moving into
greater productive diversity and more complex exports may hold the
secret to countries’ growth prospects.
The countries that slipped the most in the
complexity rankings are all commodity-driven economies, including Libya,
Venezuela, Namibia, Georgia and Qatar. After a decade that saw oil
prices triple to $98 at the end of 2013, oil-based economies translated
higher prices into larger export value, becoming some of the fastest
growing countries over the 2003-2013 period. This growth is not expected
to be sustained; however, as CID’s growth projections show the
concentration of exports in oil has come at the expense of greater
diversification into other industries not as sensitive to price
fluctuations. The dramatic decline in oil prices in mid-2014 bear out
these risks: these oil-driven economies have witnessed downward
revisions to their official growth projections, with a correction more
closely aligned to the CID projections.
“Resource wealth appears to be rife with pitfalls
that inhibit the diversification of productive knowledge into more
complex areas, as seen from Libya to Venezuela to Qatar,” said Sebastian
Bustos, a lead CID researcher on the project. “But this is not destiny,
as Oman and the United Arab Emirates show the scope of what is
achievable by focusing on productive capabilities and strategically
increasing the complexity of one’s exports, starting from nearby
products that rely on similar capabilities to those currently present in
the country.”
The top of the rankings remain largely unchanged,
with Japan, Switzerland, and Germany maintaining the greatest diversity
in productive knowledge. The United States ranks 12th in the 2013
rankings, slipping four places over the prior decade. South Korea, by
contrast, has shown the greatest rise among the leaders, up 13 spots to
fourth. Other top risers are China (up 14 spots to 23rd), and Thailand
(up 12 spots to 25th). When comparing a country’s ECI rankings to its
income per capita over time, the growth projections look favorably on
those countries, like Vietnam, that show the capabilities to produce
more complex products than expected by its current income level. At 66th
globally, Vietnam now outranks countries with significantly higher
income per capita, like Chile (67th) and Australia (76th), as predictive
of higher income growth in Vietnam. This pattern holds at the other
extreme, too, where previous iterations of the rankings showed Greece as
an outlier for having a higher income level than expected for its level
of complexity, predicting a dip in growth.
Source: The Center for International Development at Harvard University. Economic Complexity Index. 2015
About the Center for International Development
The Center for International Development (CID) at
Harvard University is a university-wide center that works to advance the
understanding of development challenges and offer viable solutions to
problems of global poverty. CID is Harvard’s leading research hub
focusing on resolving the dilemmas of public policy associated with
generating stable, shared, and sustainable prosperity in developing
countries. Our ongoing mission is to apply knowledge to and
revolutionize the world of development practice.
Contact: Chuck McKenney
Email: chuck_mckenney@hks.harvard.edu
Phone: (617) 495-8496
Date: May 7, 2015
Harvard experts predict Uganda economic growth
Publish Date: Jul 13, 2015
INDIA and Uganda are poised to lead global growth in the next decade as new economic projections indicate the ascendency of countries on the Indian Ocean rim and East Africa.
With average annual growth projections of 7.9% and 7.0% for India and Uganda, respectively, the latest report by the Centre for International Development (CID) at Harvard University indicates relative stagnation for Europe and the US, while China’s growth will start to peter out.
CID’s projections are based on the newly released 2015 global trade data and The Atlas of Economic Complexity, an online tool which measures a country’s productive knowledge and predicts its rate of growth.
According to the Financial Times’ John Authers, a senior columnist, “CID has a successful record of identifying which countries are positioned to grow. Based on the latest global trade data for 2015, they aim to identify the drivers of why some countries grow, while others do not.”
Authers published an article about the predictions in the Financial Times.
With the exception of India and Philippines, all the countries in the top 10 are in Africa — Kenya (6.7%), Malawi (6.5%), Tanzania (6.5%), Egypt (6.0%), Madagascar (5.9%), Zambia (5.8%), Senegal (5.5%) and Philippines (5.5%).
“Our economic complexity predictions find India’s disputed upper hand in growth will expand into a widening gap in the medium-term, with growth projections to 2023 predicted to be at 7.9% annually, ahead of the 4.6% for China,” said
The projections also favour Pakistan’s potential, at 5.1% predicted growth, presenting a clear picture of South Asia and East Africa’s positive growth outlook.
The report notes that countries like India, Kenya and the Philippines have made quantum leaps in diversifying their exports “into more complex products”.
Citing the example of Libya, Venezuela, Namibia, Georgia and Qatar — all oil-based economies — the report warns of the dangers of failure to economically diversify as vindicated by the plummeting oil prices.
“For Uganda’s case, the economic projections are feasible. Government’s current investment in infrastructure will spur agriculture and create jobs,” Dr. Tom Mwebaze, Makerere University’s head of the department of policy and development economics, told New Vision on Sunday when asked about the projections.
Citing the example of China, Mwebaze downplayed concerns about Uganda’s fast-growing population turning out to be an impediment.
Commenting about the predictions, finance minister Matia Kasaija said: “This growth rate is feasible and in line with our projection. This will be possible if we continue investing in infrastructure, woo investors, avoid sinking resources into consumptive expenditure and encouraging more Ugandans to enter the money economy".
As to whether this will help scale down poverty levels is another matter. It is possible to increase wealth creation without reducing poverty” he added.
