A previous post—How “complex” is the Mexican economy?—discussed The Atlas of Economic Complexity and noted that Mexico’s Economic Complexity Index (ECI) of 1.145 ranked it 20th among 128 countries. ECI indicates a wide range of complex knowledge capabilities related to productive enterprises. Mexico has a very high ECI given its income level; all other countries in the top 20 have significantly higher incomes than Mexico.
According to the Atlas, during the rest of the decade Mexico’s GDP should grow relatively rapidly to catch up with its ECI. Analyses in the Atlas indicate that during the last few decades countries with higher than expected ECIs compared to their income levels experience more rapid economic growth. While this relationship is empirically true, it should be noted that it does not explicitly include other factors thought to be important to economic growth (see Section 4 of the Atlas). Some of these other factors are governance and institutional quality, corruption, political stability, measures of human capital and competitiveness indicators. The Atlas implies that these other factors contribute to and thus are indirectly part of the Economic Complexity Index.
The analysis in the Atlas predicts that Mexico’s annual growth in real per capita GDP will be 3.5% from 2009 to 2020, ranking it 10th in the world in growth rate (see table). (The growth rates for some other countries are given in footnote 1 below.) Mexico’s annual growth in real per capita GDP is impressive given that its growth was only 0.8% per year for 1999 to 2009, the same as that for the USA. Growth in these two countries was slowed significantly during this period as a result of the very severe recession, the worst since the great depression. This rather slow growth is surprising given that Mexico’s ECI increased from 1998 to 2008 was ranked 30th worldwide. Though the Mexican economy suffered significantly during this period, it continued to develop new productive capabilities and become more complex. This added complexity is expected to generate accelerated economic growth in the current decade.
Rank Country % growth in GDP/person, 1999-2009 Expected % growth in GDP/person, 2009-2020, Income/person, 2009 Expected income/person, 2020
1 China 9.6 4.3 3,744 5,962
2 India 5.6 4.3 1,192 1,886
3 Thailand 3.1 4.0 3,893 6,023
4 Belarus 7.9 4.0 5,075 7,806
5 Moldova 4.8 4.0 1,516 2,321
6 Zimbabwe 449.0 3.8 - 6.2 676 ?
7 Ukraine 5.2 3.7 2,468 3,694
8 Bosnia-Herzegovina 4.1 3.6 4,525 6,669
9 Panama 3.9 3.6 7,155 10,529
10 MEXICO 0.8 3.5 8,143 11,894
The low growth rate of 0.8% per year for 1999 to 2009 represents “real” per capita growth corrected for inflation and population growth. In nominal terms, Mexico’s total GDP growth from 1998 to 2008 was 1.8% per year. It is expected to grow 4.8% per year for 2009 to 2020, which ranks its 22nd in the world, behind numerous poor African countries with rapidly growing populations. Of large or populous world countries, the only ones ranked ahead of Mexico are India (ranked 8th), the Philippines (12th), Egypt (14th), Pakistan (18th) and China (20th).
In summary, the Atlas of Economic Complexity predicts that the Mexican economy will grow very rapidly during the rest of this decade and beyond. Let’s hope that this prediction becomes a reality.
For comparison: Indonesia ranked 21st at 3.3%, Pakistan 27th at 3.1%, Guatemala 35th at 3.0%, South Africa 41st at 2.9%, Turkey 43rd at 2.8%, Brazil 48th at 2.7%, Argentina 54th at 2.6%, Russia 59th at 2.6%, USA 91st at 2.0%, Canada 104th at 1.7% and Nigeria 118th at 1.1%.
Ricardo Hausmann, Cesar Hidalgo, et. al. “The Atlas of Economic Complexity“, The Observatory of Economic Complexity (Harvard HKS/CDI – MIT Media Lab). Retrieved 19 May 2012.