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THERE’S been much talk about Africa’s rising prospects, and more recently, the recent slowdown driven by a commodity market slump, reduced demand from China and macroeconomic turmoil in several African economies.
But the growth, and reversal makes much more sense when compared with the economic performance of the rest of the world in the same time frame.
Even as Africa was roaring ahead, other rich countries were still growing – slower, but still growing. And of course, they had a much bigger head start in wealth per capita already.
To give some context, sub-Saharan Africa’s average per capita income of $1,431 is where the USA and Western Europe were around 1835, Eastern Europe and Latin America was around 1910, the Middle East was in 1950, East Asia was in 1965 and South Asia was in 1985, according to data from OECD.
Data from advisory services firm Deloitte shows GDP per person in emerging markets almost doubled between 2000 and 2009. The average annual rate of growth over that decade was 7.6%, 4.5% higher than the rate in rich countries.
As a result, the gap between developed and developing worlds narrowed, and on these trends, the emerging world would take only 30 years to catch up with the rich world, in terms of per capita wealth – just a generation, all things held equal.
But of course, such growth rates are impossible to sustain for three decades. Since 2008, the average GDP per capita in the emerging market world (as measured in purchasing power parity) grow only 2.6% faster than US GDP in 2013.
If China is excluded from the calculation then the difference is just 1.1%.
It means that at this rate, emerging markets (excluding China) will take 115 years to catch up with the US, in terms of per capita wealth.
But the outlook is less than rosy. According to the IMF’s 2015 growth projections, emerging markets are going to grow just 0.39% faster than the developed world, which means that convergence will now take 300 years!
On these trends: “The great expectations of the past decade are likely to be dashed,” says Martyn Davies; Managing Director: Emerging Markets & Africa, Frontier Advisory Deloitte, who prepared the presentation. “This will be the dominant feature of modern economic history.”