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1. India

Average growth 2021-2025: 7.2%

India is expected to record the fastest economic growth among the 132 countries covered by FocusEconomics over the next five years. While the country was hit hard by the Covid-19 pandemic and an ensuing harsh lockdown last spring, infection rates have fallen sharply in recent months, the domestic vaccination campaign is now underway, and recent economic signs—such as PMI readings and trade data—are encouraging. Surging consumption, investment and exports will spur growth in the coming years, while a supportive base effect in 2021 following 2020’s collapse will also play a role. Moreover, recently announced structural reforms, such as the aim of privatizing state-owned banks, allowing greater foreign participation in the insurance sector and market-oriented agricultural reforms, pose upside risks. That said, there are doubts over the political commitment to see the reforms through, while poor infrastructure will continue to impede growth. In addition, the decision in late 2019 to bow out of the Regional Comprehensive Economic Partnership (RCEP)—a free-trade pact recently agreed between ASEAN countries, Australia, China, Japan, New Zealand and South Korea—could hamper the external sector somewhat.

“With Covid-19 in check, the economy has already normalised faster than expected. Front-loaded and higher government spending, lagged effects of easier financial conditions, faster global trade and ongoing vaccinations should all combine to lead to a sharp pickup in cyclical growth. We reiterate our above consensus real GDP growth forecast of 13.5% y-o-y in FY22, vs -6.7% in FY21, with the budget adding upside risk to our FY23 projection (of 6.1%).” – Nomura

2. Bangladesh

Average growth 2021-2025: 6.9%

Bangladesh has weathered the Covid-19 crisis comparatively well: While growth momentum was hit last year by lower garment exports, robust remittance inflows and recovering industrial production have aided the recovery in recent months. Looking forward, rapid export growth and stronger domestic demand should drive the economy. Moreover, the country will continue to be blessed with favorable demographics: Past success at reducing fertility rates has seen the dependency ratio—the ratio of the working-age population to the population not in the labor force—plummet in recent decades, aiding productivity and boosting public coffers. That said, slow progress in vaccination poses a downside risk.

“The expected return of Bangladeshi workers to their workplaces abroad will prevent remittances from plummeting; this, in turn, will keep private consumption elevated. Higher investment spending stemming from a raft of ongoing infrastructure development projects and a pick-up in domestic activity will also support growth. The ongoing domestic recovery will be flattered further by positive base effects in the second half of the fiscal year, compared with the period of coronavirus-induced lockdown in the same period in 2020. A downside risk to our forecast comes from a potential rise in the coronavirus caseload in Bangladesh, which could prompt the government to deploy blunt containment measures once again. We do not expect growth to match the pre-pandemic range of 7-8% before 2022/23.” – Economist Intelligence Unit

3. Rwanda

Average growth 2021-2025: 6.7%

Rwanda’s economy has come a long way since the genocide of the early 1990s, which ripped apart the country’s economic, political and social fabric. Nominal GDP has risen from USD 2 billion in 2000 to USD 10 billion in 2019. While the Covid-19 crisis has certainly truncated progress over the last twelve months amid lower FDI and business closures, our panelists see real GDP growth averaging 6.7% from 2021 to 2025. Activity should be supported by surging investment. However, a fragile fiscal position, low domestic savings and expensive energy pose downside risks. Moreover, the country’s impressive development in recent decades has relied heavily on the leadership of Paul Kagame: An eventual end to his premiership could spell greater uncertainty.

“Regime stability appears assured over the short to medium term. The disruptions and economic impact of the Covid-19 pandemic does not appear to have altered public sentiment significantly, but challenges remain. Developments in and relations with neighbouring countries remain a potentially destabilising factor. Questions over President Paul Kagame’s succession remain important and factionalism within the Rwandan Popular Front (RPF) could arise over the long term. A managed transition to greater democracy remains a priority if the country hopes to avoid any shocks.” – Jee-A van der Linde, economist at Oxford Economics

4. Vietnam

Average growth 2021-2025: 6.7%

Vietnam has been one of East Asia’s star performers in recent years, spurred by a stable political climate, low labor costs and a relatively skilled workforce. The country has been highly successful at luring FDI, particularly into the fast-growing electronics and garments sectors. Vietnam is also an attractive base for firms looking to relocate from China due to the U.S.-China trade spat, and has signed a host of trade deals that boost market access for its goods, including recently the RCEP and an FTA with the European Union. Moreover, the country has handled Covid-19 in an impressive fashion, virtually stamping out the virus domestically, which allowed the economy to expand at one of the fastest paces globally last year. Over the coming years, the manufacturing sector should propel activity. However, a potentially slow recovery in visitor arrivals, exposure to external shocks and the fragile health of leader Nguyen Phu Trong pose downside risks.

“Successful and early containment of the Covid-19 pandemic locally has allowed business activities to gradually resume towards “normal” in Vietnam, and this is reflected in the sequential improvements in various data releases. While the upward trend of economic activities is likely to continue in 2021, this outlook is highly dependent on the containment of the pandemic globally and the rolling out of vaccines. […] Other factors in Vietnam’s favour include the spate of free trade agreements that would help drive exports and investments further. […] Vietnam’s current efforts in digital transformation and promoting e-commerce, as well as the dynamic and abundant workforce are further positive drivers for the outlook.” – Suan Teck Kin, head of research at United Overseas Bank

5. Cambodia

Average growth 2021-2025: 6.6%

Economic activity has been spurred in recent years by surging garment and construction sectors, although the economy was hard-hit by the pandemic in 2020 and likely contracted notably, amid income losses and lower tourism revenue. The economy should return to a strong growth trajectory this year as the impact of the pandemic fades and FDI remains strong, although high unemployment, tense relations with the EU—the key market for garment exports—and elevated twin deficits pose downside risks.

“Longer-term growth prospects remain strong, with […] FDI continuing to promote new sector development as global production relocates away from China. The forecast shows GDP growth staying close to 7% in 2023 as international demand recovers, fuelling a rebound in investment with a strong FDI component. Resultant productivity gains can enable domestic income growth which defuses discontent, even if politics remain repressive, and promotes expansion of net exports that keeps the current account deficit on its gradual downward course.”

6. China

  • 2019: 6.8%
  • 2020: 2.3%
  • 2021: 8.1%
  • 2022: 5.6%

China was the sole trillion-dollar economy to see positive growth in 2020. Its economy was quick to snap the contraction it experienced during the first quarter of 2020. China, the world’s second-largest economy, is expected to see 8.1% growth in 2021 as economic activity continues to normalize and domestic COVID-19 outbreaks remain under control. It is further expected to grow by 5.6% in 2022. It is estimated that China will likely overtake the U.S. to become the world’s largest economy sooner than earlier anticipated, although in terms of per capita income, China has a lot more catching up to do.

China’s exports are seeing a recovery, jumping 18.1% in December on a year-on-year basis, while its imports increased by 6.5% as per China’s official data. In 2020, China’s industrial enterprises achieved a total profit of 6,451.61 billion yuan, a year-on-year increase of 4.1%. In January 2021, China’s Manufacturing Purchasing Managers Index (PMI) was 51.3%, down by 0.6% points from last month, which was above the threshold for eleven consecutive months, indicating that the manufacturing industry continued to expand, but the pace slowed down. China is among the largest holders of U.S. Treasury securities.

7.  Spain

  • 2019: 2.0%
  • 2020: -11.5%
  • 2021: 5.9%
  • 2022: 4.7%

After a sharp fall of 11.5% in 2020, Spain is set to rebound with a 5.9% GDP growth in 2021. The country enacted a series of strict lockdown measures to combat the pandemic, which halted economic activity, turning Spain’s economy into one of the worst-hit in Europe. Sectors such as tourism, which accounts for about 12% of Spain’s economy, were hit severely. According to an IMF report, “The pandemic has taken a significant toll on Spain’s people and economy, following five years of strong growth and job creation. A second wave of infections that started in mid-July has put a lid on the recovery.”

Spanish authorities have provided swift income and liquidity support to limit the fallout of the pandemic. Spain mobilized as much as €200 billion (~20% of annual GDP) to protect its companies. In October, President Pedro Sánchez presented “The Recovery, Transformation and Resilience of Spanish Economy Plan.” The plan outlines the roadmap for the modernization of the Spanish economy, the recovery of economic growth and job creation. The plan draws inspiration from the UN 2030 Agenda and the Sustainable Development Goals and is directed to not just rebuilding Spain after the COVID-19 crisis but also preparing for the coming decade. Spain will seek support of €140 billion from the Next Generation EU to carry out these goals, with an amount of €72 billion for the period 2021-2023.

8.  France

  • 2019: 1.5%
  • 2020: -9.0%
  • 2021: 5.5%
  • 2020: 4.1%

Before COVID-19, France was the world’s most visited country. “Global tourism suffered its worst year on record in 2020, with international arrivals dropping by 74%”, according to the World Tourism Organization (UNWTO). The impact has been visible on the economy of France, which suffered a 9% contraction in GDP. France’s nominal GDP in 2019 was at $2.71 trillion. It contracted to $2.55 trillion according to IMF (October data) and will rise to $2.91 trillion in 2021 before crossing the $3 trillion mark in 2022.

The government of France presented a stimulus plan in September 2020 to support economic activity and job creation. “France Relance” or “Relaunch France” will be implemented as of this year and will extend until 2022. With a budget of €100 billion, “France Relance” has a clear strategic objective: to start building the France of 2030 by transforming the economy, with a focus on three key areas:

  1. Green transition: Supporting the transition to a greener, more sustainable economy.
  2. Competitiveness and economic resilience: Creating the most favorable conditions for companies to grow their business and protect jobs.
  3. Social and territorial cohesion: Ensuring solidarity between generations, regions, and all French citizens.

9.   United States

  • 2019: 2.2%
  • 2020: -3.4%
  • 2021: 5.1%
  • 2022: 2.5%

The U.S., the largest economy in the world, is fifth with a projected growth of 5.1% in 2021. Real gross domestic product (GDP) increased at an annual rate of 4% in Q4 2020, according to the advance estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased by 33.4%.

According to the Library of Congress research paper, “Until February 2019, China was the largest trade partner of the United States, and currently is in third place after Canada and Mexico while it remains the biggest source of imports.” The swelling trade deficit between China and U.S. has been the cause of tension between the two nations, and the Trump administration has initiated several tariff measures to reduce the trade imbalance. President Biden is not expected to provide concessions to China on this matter.

President Biden has issued an executive order dated January 25, 2021, focused on strengthening domestic manufacturing. It reads, “Today we’re getting to work to rebuild the backbone of America: manufacturing, unions, and the middle class. And the key plank of ensuring the future will be “Made in America.””

The unemployment rate peaked at an unprecedented rate in April 2020 (14.8%), remaining above 10% for three months, before declining to 6.7% in the month of December. According to a recent Quinnipiac University national poll, 61% of people are optimistic about the next four years with Biden as the President, while 68% of Americans support the $1.9 trillion stimulus relief bill.

The Rest of the Top Ten

The economies of Indonesia (4.8%), the United Kingdom (4.5%), Mexico (4.3%), Brazil (3.6%), and Canada (1.9%) complete the top 14 fastest-growing economies for 2021. Among the sixteen trillion-dollar economies, five countries—Indonesia, United Kingdom, Canada, Russia, and Italy—have a higher projected growth for 2022 compared to 2021.


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