Asia home to the bulk of the world's outperforming emerging economies

25 September 2018 4 min. read

In a wide-ranging analysis on the performance of emerging economies over the past 50 years, the global management giant McKinsey & Company has determined Asia to be home to the vast majority of the globe’s consistent economic performers.

Tracking the performance of 71 of the world’s developing economies across all regions over the past half a century, the ‘Outperformers: High-growth emerging economies and the companies that propel them’ report released by McKinsey’s Global Institute think-tank has identified 18 stand-out emerging economies worldwide over the long and short-terms, with together 16 of those found in the Asian region.

Beginning from 1965, the long-term outperforming economies were considered to be those which achieved of exceeded real annual per capita GDP growth of 3.5 across the entire 50-year period – described by the World Bank as the benchmark required for low-income and lower-middle-income economies to achieve upper-middle-income status over this term.Outperforming emerging economies worldwideSeven economies achieved this sustained feat for the 50-year period, all of them situated in Asia: China, Hong Kong, Indonesia, Malaysia, Singapore, South Korea and Thailand. Meanwhile, 11 further economies were identified as short-term outperformers, having recorded GDP per capita growth of more than 5.0% annually for 20 years, with again the majority east of the Caspian Sea.

This secondary list of short-term high performers included Vietnam, Myanmar, Cambodia and Laos in Southeast Asia, together with a booming India and a cohort of Central Asian nations in Azerbaijan and the ‘Stans’ – Tajikistan, Kazakhstan, Turkmenistan and Uzbekistan. The only non-Asian nations to make either list were Belarus in Eastern Europe and Ethiopia in Africa.

Together, the list of long-term performers represents some 24 percent of the world’s current population and contributed up to 18 percent of global GDP as of 2016, while the second list accounts for a further 22 percent of global population – although as yet only generates 4 percent of worldwide GDP. In just over two decades to 2013, these outperforming economies have lifted 1 billion people out of extreme poverty, 95 percent of the world’s total.People lifted out of poverty worldwide

Adding to the Asian predominance of outperforming economies – with Asian cities tipped to generate almost half of the world’s economic output by 2035 according to forecasts from Oxford Economics – is a second cluster of five high-performing countries which have managed 3.5 percent annual per capita growth between 2011 and 2016, including Bangladesh, the Philippines and Sri Lanka. 

Examining why some emerging economies flourish and others, such as those in Lebanon, Russia, South Africa, Ukraine, Venezuela, and Zimbabwe, go on to underperform, the McKinsey report points to two primary factors; a pro-growth policy agenda aimed at boosting productivity, income and demand, and the standout role that large, ambitious companies within emerging economies have played in helping to drive that growth.

As to the former element, and consistent factors among the outperforming economies, the report states; “Governments in these countries have tended to invest in building competence, are agile and open to regulatory experimentation, and are willing to adapt global macroeconomic practices to the local contexts. Critically, their competition policies create an impetus for productivity growth, increased investment, and the rise of competitive firms.”Policy and institutional effectiveness in economic performance

With the governmental foundations in place, the report states that competition and contested leadership in the domestic private sector are key features of dynamic economies, citing the high prevalence of companies in outperforming economies which have had to rise above ‘brutal’ local competition to achieve sustained success – as evidenced by the generally smaller number of firms which stay at the top for prolonged periods.

“Top firms in outperformer economies are bolder, quicker, and more forceful than their peers, the McKinsey report states in conclusion, noting the benefit to their local economies in turn. “These firms bring productivity benefits by investing in assets, R&D, and job training, which create spillover effects for smaller firms. Large firms, in turn, benefit from the intermediary goods and services smaller companies provide through the supply-chain ecosystem.”