The top 10 emerging economies of 2014 - how did they do?

MT's crystal ball was somewhat cloudy when it came to IS and Ebola.

by Rachel Savage
Last Updated: 27 Oct 2015

In its infinite wisdom, and with solid a dose of hubris, MT gave you its top 10 emerging economies at the start of 2014 – for the adventurous investor, you understand.

But the blitzkrieg of IS across Syria and Iraq and the ravages of Ebola in west Africa somehow failed to show up in MT’s crystal ball, so some of the picks turned out to be more than a little bit pie in the sky – at least in the short-term.

Nonetheless, in the interests of dyed in the wool, honest journalism MT is throwing our hands up and showing you the good, bad and ugly of our top 10 emerging economies of 2014 in the last year. In alphabetical order:

1. Ethiopia

GDP growth 2014: 8.2%*
What we said before: ‘The good news is that the government is keen to attract foreign investment.’

The Lion of Judah in Ethiopia's capital Addis Ababa. Credit: Wikimedia Commons

And now? Many people still think Bono and Bob Geldof’s fist-pumping famine fundraising when they think of Ethiopia, but the world’s most populous landlocked nation has outdone itself economically this year. GDP forecasts have been upgraded, meaning it hangs onto its crown as Africa’s fastest growing non-oil producing nation.

But while it’s been doing pretty well lately with the help of Chinese loans and investment, Ethiopia is still not free of the various ills that ail many developing countries.

The ruling EPRDF party, which has been in power for the last 23 years, has made a habit of locking up critical journalists and opposition leaders this year as it nervously eyes an April election. The plan for a multi-billion dollar dam on the Blue Nile is irking downstream neighbours worried about their water supply. It languishes at 110th place, out of 175 countries, in Transparency International’s Corruption Perceptions Index and has slipped seven places to 132 in the World Bank’s Ease of Doing Business rankings.

A 108-page prospectus for a $1bn (£640m) sovereign bond – its first ever – released at the start of December warned prospective investors of the possibility of famine, internal political tensions and the reigniting of war with neighbouring Eritrea. But it looks like investors rather appreciated the Government’s honesty or just weren’t that bothered about those risks – the bond was 2.6 times oversubscribed.

2. Iraq

GDP growth 2014: -2.7%*
What we said before: ‘Unless you are part of the US military-industrial complex, this is one market that is only for the extremely brave - and long-term – investor.’

IS fighters triumphant. Credit: Ogbodo Solution/Flickr

And now? The basket case that is Iraq hardly needs introducing, but, in case you weren’t keeping an eye on the news this year, brutal terrorist group Islamic State (IS - or ISIS or ISIL or Daesh) swept across Iraq in the summer. It took over the second-largest city Mosul and a number of oil fields, enslaved women from religious minorities and beheaded anyone who pissed it off, including Western journalists.

It stopped just short of capital Baghdad as the Iraqi army, weakened by the now-deposed Prime Minister and wannabe dictator Nouri al-Maliki having stuffed it with Yes Men, fled before it. An American-led coalition is now going for that tried and tested tactic of bombing the group, while the Kurds are fighting back from their state-in-all-but-name in northern Iraq, but IS are far from on the back foot.

And the statistics, for once, don’t lie. There are more than 2 million refugees, 1.5 million of whom are internally displaced Iraqis, according to the UN. At the start of the year GDP growth was forecast to be 6.4%. Now the IMF predicts the economy shrunk 2.7% in 2014.

Unless you’re part of the aforementioned military-industrial complex, or can persuade the Iraqi Kurds you can help them make the most from their oil, Iraq is somewhere for international investors to steer well clear of for the foreseeable future.

3. Liberia

GDP growth 2014: 2.2%^
What we said before: ‘For the intrepid investor… lots of room to grow and gaps in the market for pretty much everything.’

Ebola nurses in neighbouring Guinea. Credit: EC/ECHO

And now? A desperately poor country ravaged by 20 years of civil war until 2003, Liberia was never well prepared to deal with a deadly epidemic. In 2012, it had fewer than two doctors per 100,000 people. The US had 245. 

Ebola, however, does not discriminate, and has so far killed 3,384 people out of 7,862 people infected in the west African country, according to the World Health Organisation’s most recent estimates, making it the worst hit in the region.

The outbreak has hit foreign investment hard, with projects such as the $200m-plus reconstruction of the Mount Coffee hydroelectric plant put on hold indefinitely. GDP growth is forecast to be less than half of what was predicted at the start of the year and the World Bank thinks the combined cost of the disease to Liberia, Sierra Leone and Guinea will be around $2bn in 2014 and 2015.

Ebola’s spread is slowing, though, and foreign money will hopefully be free-flowing for when the country is ready to get back on its feet. For any companies well-placed to help with that, benefits will come from doing The Right Thing as much as financially.

4. Macau

GDP growth 2014**: 6%
What we said before: ‘Macau's huge gambling sector dominates its economy and puts Las Vegas to shame.’ 

Gambling heaven at night. Credit: Wikimedia Commons

And now? Last year, gambling mecca Macau could fairly have been chalked up as a relatively safe bet for investors. The former Portuguese colony, technically part of the mainland but run semi-independently like Hong Kong, has notched up double-digit growth rates in recent years, as both mega-rich and newly middle class Chinese flocked to the territory for a flutter.

But Chinese president Xi Jinping’s crackdown on corruption and Government largesse in the last couple of years has hit Macau hard. Gaming brings in 80% of its revenues, and so-called ‘high rollers’ account for two-thirds of that, according to Bloomberg.

There have also been murmurs of protest over wages and a lack of democracy, although they have been relatively small compared to neighbouring Hong Kong, and just as civilised.

The economy grew 6% in the first three quarters of 2014, making it unlikely to record double digits this year. But that’s still positively buoyant compared to the stagnant West and there’s plenty more investment in new resorts and casinos to come.

5. Mongolia

GDP growth 2014: 9.5%^
What we said before: ‘There's more to Mongolia these days than yaks' milk and yurts.’

There's a goldrush under that ground. Credit: Wikimedia Commons

And now? There could be as much as $3 trillion worth of minerals under Mongolia – a country larger than France, Germany and Spain combined. But despite those earthly riches, the shine has come off Mongolia’s metals lately, as demand from around the world, most importantly from neighbouring China, has fallen.

The Government has spent big on subsidies on everything from food to construction materials and mortgages to prop up growth while foreign direct investment has fallen (down 70% year-on-year in the first half of 2014). The result has been a widening trade imbalance, plunging foreign exchange reserves, spiralling inflation and its currency, the togrog, losing 14% of its value in 2014.

An enormous new copper mine in the Gobi Desert also got bogged down this year as the Government, which owns 34%, argued with majority owner Rio Tinto. Not ideal, given it could contribute a third of GDP when it’s up and running, according to the Economist.

Mongolia is still among the fastest-growing countries in the world, though, and all resource-dependent economies have similar pitfalls. For investors that make their money from said resources the landlocked Asian nation could still prove to be a goldrush.

6. Panama

GDP growth 2014: 6.8%^
What we said before: ‘What's particularly attractive to investors is the currency: Panama uses the US dollar.’

Even bigger ships will be carving their way through Panama - eventually. Credit: Wikimedia Commons

And now? Panama’s democracy is in rude health, with Juan Carlos Varela unexpectedly beating previous president Ricardo Martinelli’s favoured candidate in May. Varela swept to power on welcome promises to clamp down on corruption and continue a huge public works programme, and a not so welcome populist pledge to put price controls on food.

That’s still generally good news for investors, as is the fact that Panama continues to be the fastest growing central American country, even if growth has eased off a bit in recent years. The isthmus nation has relatively low corporate tax rates, although it’s been attracting ire lately from those accusing it of being a tax avoiders’ haven. Ironically, it’s also down in 166th place in the World Bank’s Doing Business ratings when it comes to paying taxes.

Meanwhile, the expansion of the Panama Canal is still very much delayed. The third lock was originally meant to be finished this year, but is now slated to open in 2016 as a Miami court mulls over the claim for $2.3bn in cost overruns (it was originally meant to cost $3.2bn) by the European-Panamanian consortium building it.

The president is rather optimistically talking about building a fourth lock, but then again the $50bn, 5-year project to build a rival canal across Nicaragua looks like it’s going nowhere fast too.

7. Rwanda

GDP growth 2014: 7.2%^
What we said before: ‘While questions remain over human rights… it's hard to argue with President Paul Kagame’s economic track record.’

Paul Kagame: Reformer, despot or both? Credit: Wikimedia Commons

And now? Two decades after genocide ravaged Rwanda, when as many as 1 million Tutsis and moderate Hutus were murdered in just three months, President Paul Kagame is ploughing ahead with his mission to turn his tiny country into the Singapore-cum-Silicon Valley of Africa.

The Government has invested heavily in education, infrastructure and the internet and has also pledged to wean itself off its dependency on foreign aid (it was given almost $900m in 2012). This year, in its push to become a regional hub for everything from finance to healthcare, it has been working with neighbouring Uganda and coastal Kenya to remove the barriers to growth that come from being landlocked.


20 years after the genocide: Rwanda - a country transformed


In 2012 it took around 18 days to move a container overland from Rwanda’s capital Kigali to the Kenyan port of Mombasa. That has now been slashed to six days. The three countries’ citizens can travel passport-free and study at universities as if they were locals. Tariffs and even mobile phone roaming charges could soon be abolished.

The main danger for investors is political. Neighbouring Burundi is increasingly racked by Hutu-Tutsi tensions and a slide back into civil war there risks spilling over into Rwanda. Meanwhile, Kagame has shown no sign of preparing for his succession in 2017, when he is constitutionally mandated to step down. Instead, he has allegedly been knocking off opponents.

8. Serbia

GDP growth 2014: -0.5%*
What we said before: ‘Still reeling from the bloody Balkan conflicts of the 1990s, Serbia is nevertheless looking to the future and has put together a lucrative package to entice foreign investors.’

Floods tipped Serbia back into recession this year. Credit: Zoran Dobrin/Wikimedia Commons

And now? Serbia slipped into its third recession since 2009 earlier this year, after deadly floods in May wreaked more than a billion euros worth of damage, tipping the Balkan state into the red.

A reformist Government, elected with a landslide in March, says it’s determined to bring down the country’s budget deficit, currently the highest in Europe at 8% of GDP. It recently agreed a three-year €1bn deal with the IMF, which envisages that being halved by 2016.

That won’t be easy, though, in a country with a bloated public sector that looks fondly back to the Communist era. Just 1.1 million Serbs out of a working-age population of 4.6 million work in the private sector, according to the World Bank.

The Government has made a start cutting public sector wages and has earmarked 500 companies for privatisation. But critics say the former goes nowhere near far enough, while many of the firms the state wants to get rid of aren’t actually viable (99 had received zero bids at the start of November).

Nonetheless, that still means plenty of opportunities for foreign investors in a market close to the EU that may one day be part of it.

9. Timor-Leste

GDP growth 2014: 6.6%^
What we said before: ‘There are fruits to be had for patient investors.’

Small country, big problems. Credit: Graham Crumb/Flickr

And now? Teeny tiny Timor-Leste, which won independence from Indonesia in 2002, is still worth a punt for the super-patient investor. After all, the country of just 1.2 million people is jointly exploiting an enormous offshore oil and gas field with Australia, with rights to half of the estimated $40bn reserves. It is in the midst of a disagreement with the Aussies over said reserves, but managed to get the UN to order them to stop spying on the south east Asian nation’s legal discussions in March.

The poverty-stricken country is still experiencing growing pains, though. It slipped 14 places to 133rd in Transparency International’s Corruption Perceptions Index this year and growth forecasts have been revised down from 8% to less than 7%.

Meanwhile, its independence hero prime minister Xanana Gusmão broke repeated promises to stand down in the autumn to make way for a younger generation, after his party begged him to stay, and seems the only politician able to hold the inept, corrupt government together.

But there are still opportunities for investors in industries other than oil, notably forestry, agriculture and mining – especially if Timor-Leste’s politicians can get their act together and stamp out corruption.

10. Tunisia

GDP growth 2014: 2.7%*
What we said before: ‘Tunisia, where the now-wintery Arab Spring was sparked by a street vendor setting himself on fire in protest at government harassment, has become increasingly open for business.’

Tunisians have been making their voices heard. Credit: Amine Ghrabi/Flickr

And now? Tunisia is where the Arab Spring sprung and also its last remaining hope. And it’s so far so good – the secular Nidaa Tounes party was voted into both parliament and the presidency in October and December respectively, under a new liberal constitution, and the Islamist Nahda party has for now settled gracefully into opposition.

But while politics is inching forwards, the economy is so far stuck in the era of autocrats, tangled up in red tape, corruption and protectionism. With youth unemployment, one of the root causes of the Arab Spring protests, still pushing 30%, almost three-quarters of Tunisians now say a strong economy is more important than democracy. Meanwhile, a jihadist insurgency, albeit a relatively low level one, rumbles on in the poorer, more conservative south.

Successive governments have started to cut energy subsidies and implement new taxes. And a recent World Bank report pointed out the nation of 11 million has ‘everything it needs to become the 'Tiger of the Mediterranean' – proximity to Europe, a well-educated workforce and decent infrastructure. If its politicians keep on reforming and getting on with one another, and the anarchy in Libya doesn’t spread across borders, then Tunisia could still make a pretty good bet for investors looking for a foothold in north Africa.

*IMF forecast
^World Bank forecast
** First three quarters of 2014

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