Peru & Ecuador: among fastest growers worldwide until 2050

20.08.2012 By: TRANSFER Consultancy based on report HSBC

Recently a HSBC Global Research report showed that of all Latin American countries Peru and Ecuador most likely will be the fastest to climb up the world ranking list in the next 40 years. Together with Bolivia the three Latin American economies will grow rapidly until 2050, with a growth percentage above the average of 5%. In fact, together with Africa, the former Soviet Union, China, India, Philippines, Egypt and Uzbekistan, the three Latin American countries today are marked as countries with great progress despite of a very low level of development.

According to HSBC Global Research by 2050 Peru most likely will climb 20 points (from 46 to 26) in the global economic ranking list, with a Gross Domestic Product (GDP) of USD 735,000 million (USD 85,000 in 2010). The income per capita will grow from USD 2,913 in 2010 to USD 18,940 in 2050.

For Ecuador it foresees a jump of 14 points in the same ranking list (from 76 to 62), with an immense GDP growth of USD 206,000 million in 2050 (USD 24,000 million in 2010). The income rise per capita will be USD 10,546 (2010: 1,771). In 2011, the growth of Ecuador's economy was 7.78%, according to a report of the Central Bank.

Bolivia will advance 25 points to reach position 71. The GDP in 2050 is estimated at about USD 145,000 million (2010: USD 12,000 million), while its income per capita could amount to USD 8,652.

These statistics are immense if you compare them with the perspectives of all Latin American countries. The study shows that Central and South America in general will grow at an average of 4.9% in the decade between 2010-20, 4.5% for the period 2020-30, 4.1% in 2030-40 and 3.9% in 2040-50.

Colombia for example is also highlighted with an expected GDP growth in 2050 of USD 725,000 million (142,000 million in 2010) and an income per capita of USD 11,530 in 2050, which is also remarkable but less spectacular.

Karen Ward, senior global economist at HSBC, who led the study, explained that the forecasts were based on indicators such as income per capita, rule of law, respect for democracy, education levels and population changes. She warns for factors that can cause the switch to long-term savings as inflationary pressures and the use of credit though. But her conclusion is positive: "The history of emerging markets is just the beginning. As new emerging markets take force, emerging economies offer great potential to boost the global economy by 2050 ".

Bloomberg View columnist Enrique Krauze also concluded that Peru is heading for a stable and modern economy. The Peruvian Ministry of Economy and Finance confirmed that the absolute poverty rate is being reduced and has already been shrinking over the past 10 years (from 53% to 31%, though it still stands at 54 percent in rural areas). The objective is to reduce this rate to 15% by 2020. At the same time, a modernizing economy and business-friendly environment is being maintained, and only Chile is considered a more hospitable environment for investment in the region. With an inflation rate forecast to be between only 2.4 - 2.6% (2012), the country is growing by about 6%/year and has quintupled its external investments and boosted its exports six fold.

The Guardian mentioned something similar for Ecuador: In recent years increased government revenues (oil and taxes) were put to good use in infrastructure investment and social spending. Ecuador now has the highest proportion of public investment to GDP (10%) in Latin America and the Caribbean.