Courtesy of The Financial Times, a report on how Ethiopia has seized the crown as fastest-growing country in the 2010s — but is now ripping up its playbook:

A country that is in the process of ripping up its economic model and has been forced to go cap in hand to the IMF might be expected to be one mired in recession.

Yet Ethiopia, which is undergoing a sharp reversal in strategy under Nobel Peace Prize-winning prime minister Abiy Ahmed, has been the world’s fastest-growing economy over the past decade, both in overall and per capita terms.

Since 2009, Ethiopia’s gross domestic product has jumped 146.7 per cent, according to data collated by the IMF, while in per capita purchasing power parity terms it has risen 149 per cent, enough to put it top of both lists as the decade draws to a close*.

The 112m-strong east African state is one of a number of countries to have doubled its output by both of these measures this decade, ranging from heavyweights China and India to relative economic minnows Mongolia, Turkmenistan and Laos.

Nauru, Rwanda and Ghana have also doubled real gross domestic product, while Myanmar, Bangladesh and Cambodia has seen 100 per cent-plus rises in per capita output in purchasing power parity terms, despite the economic gloom that has enveloped much of the past decade.

However, progress has been far from widespread, with conflict-riven Libya and Yemen seeing GDP plunge by 71 per cent and 36 per cent respectively, while things have gone so badly in Syria and Venezuela that the IMF has stopped collating data.

The average person is also now poorer in Equatorial Guinea, Greece, the Central African Republic, Sudan and Trinidad & Tobago than they were in 2009.

When it comes to the winners, “you could argue that almost all of these have very strong Chinese links or have adopted the Chinese growth model”, said Charles Robertson, chief economist at Renaissance Capital, an emerging markets-focused investment bank, referring to the likes of Mongolia, Laos, Cambodia, Ethiopia and Rwanda, as well as Vietnam, another strong performer. 

Among African states, Ethiopia has arguably been the keenest pupil of the Chinese growth model, embarking on an authoritarian, state-led investment push, focused on infrastructure and manufacturing. 

“Ethiopia has been growing really hot on a model that was initially brought in by [former prime minister] Meles Zenawi, who was a committed Marxist,” said François Conradie, head of research at NKC African Economics.

“It was state-led growth, public investment in infrastructure — roads and a lot of electricity. They realised the competitive advantage they had through hydropower [via the Blue Nile, river Omo and others] and using those dams for irrigation to boost agriculture, and building roads and allowing farmers to get their produce to market.”

Mr Robertson said Ethiopia had investment rates above 40 per cent of GDP, “which is Chinese-type levels”.

Unlike China, however, Ethiopia did not have enough domestic savings to pay for such an investment blitz and was forced to borrow, sending its debt-to-GDP ratio soaring to 60 per cent, as of last year, from 27 per cent at the start of the decade, according to the central bank. This has left it at “high risk” of falling into debt distress, the IMF has said.

“That [growth] model has come up against some hard limits in terms of debt,” said Mr Conradie, who said NKC was “pretty certain” there is additional off-balance sheet debt lurking in state-owned enterprises. 

Since his election in 2018, reformist prime minister Mr Abiy has spoken frequently of the limits to Ethiopia’s Asian-style state-led development model, has opened large chunks of the economy to foreign investment for the first time and sought a $3bn IMF loan, as well as technical assistance for his liberalisation agenda, a policy shift described as “seismic” by NKC.

“They are now doing all these reforms to attract private investment and get cash inflows [via privatisations],” Mr Conradie said. “There is a political pushback against these reforms. The president has alienated a lot of people who are close to power and there is quite a lot of violence in Ethiopia for the first time.”

Despite the U-turn, Mr Robertson did believe the statist model had delivered some genuine gains, however, ranging from the $4bn Grand Ethiopian Renaissance Dam to a sharp rise in food production, which means the country is now able to withstand droughts.

Elsewhere, several south-east Asian states to have benefited from a trifecta of globalisation, proximity to a rapidly growing China and, in some countries such as Vietnam, following Beijing’s state-led capitalist model, said Gabriel Sterne, head of global macro research at Oxford Economics.

“As China grows, activity moves down the food chain,” benefiting lower-cost Asian countries, he said.

Mr Robertson said Laos and Cambodia have been among the prime beneficiaries as their manufacturing sectors have expanded, while both have also seen “really impressive tourism booms”.

Bangladesh has also chalked up rapid growth since its textile sector took off a decade ago, although again this took a Beijing-style “heavy-handed government push through an investment-led growth model [while] not brooking much political opposition”.

As with Ethiopia, “the risk is that you build up a little too much debt along the way”, Mr Robertson said, although Bangladesh’s higher level of domestic savings means government debt has been kept in check so far.

Mr Sterne instead said there were questions on how much wealthier Bangladesh could become via this development model.

“Textiles are OK, but you have no market power,” he said. “You are at the bottom of the value chain and if market prices go against you, you get squeezed for margins. It gets you only so far.”

As for India, despite a doubling of its GDP by both measures over the decade, Mr Sterne said it “should have done better”.

“It has had banking and institutional problems, but there is a decent level of education [in India],” he said. “The call centre sector and the invisibles have done well but there is huge potential there and they have maybe half-realised their potential.”

Among the African high-fliers, Ghana has benefited from offshore oil installations coming online since the discovery of the Jubilee oilfield in 2007.

Mr Conradie cautioned that while oil production bolsters GDP, “it doesn’t necessarily make Ghanaians richer”, while excessive government spending has pushed up public debt to around 60 per cent of GDP.

Rwanda has instead adopted an authoritarian pro-growth, but pro-foreign investment, model that some have compared to that of Singapore.

“They used every dollar they had to build a conference centre and hotels and make sure the airport and roads were good,” Mr Robertson said, helped by generous development aid from international donors.

“They have done a lot in terms of improving the investment environment, cutting interest rates, cutting red tape,” said Mr Conradie, although he argued that strong growth was somewhat easier for the poorest countries growing off a very low base.

“It’s more sustainable than in other places because they made it really easy to come and set up a business in Rwanda. It’s becoming an easier place to set up regional headquarters than Kenya,” he added.

However, on the downside, “it’s very authoritarian. People disappear for getting involved in politics. I’m not a fan, [although] there is a case that people don’t need democracy, they need schools and hospitals.”

Moreover, there are allegations that Rwanda has manipulated its official statistics to hide a rise in poverty, casting a degree of doubt over its data in general, even if the infrastructure improvements are indisputable. 

“They aren’t above massaging the statistics, so you have to take the figures with a pinch of salt. They definitely massage the inflation numbers,” Mr Conradie said.

Similar concerns overshadow another seemingly strong performer, Turkmenistan, which, at least according to the official data, has seen a 130 per cent leap in GDP over the past decade, second only to Ethiopia, and a 128 per cent rise in per capita GDP in PPP terms, behind only Ethiopia and China.

John Payne, an economist at Oxford Economics, said the central Asian country “benefited massively” in the first part of the decade as prices for its all-important gas exports rose, aided by surging demand from near-neighbour China.

Given lower gas prices since 2014, however, coupled with slowing Chinese growth, it might be expected that Turkmenistan would be bearing the brunt. However, official sources — embedded in the IMF figures — claim growth is still around 6 per cent, even as any supporting data have mysteriously disappeared.

“They stopped publishing statistics in 2017, [although] they are still saying there is 6 per cent growth,” Mr Payne said. “There are lots of reports saying [that figure] isn’t reputable and shouldn’t be trusted. When you think about how the gas market is working, and how China is slowing, it doesn’t add up. There are rumours of double-digit inflation and food subsidies.”

At the other end of the scale, Equatorial Guinea has been by far the worst performing state not riven by conflict, with GDP slumping by 28 per cent in the past decade, and per capita PPP income shrinking 43 per cent: 2019 was the fifth straight year in which GDP has contracted by at least 4.5 per cent.

Like many oil exporters, Equatorial Guinea has been hit by falling prices, but its problems run deeper than that. The government of President Teodoro Obiang Nguema and members of his family are accused of institutional corruption and human rights violations.

“They are massively corrupt,” Mr Conradie said. “There is massive reputational risk in investing there.