The 3 Countries With the Most Growth Potential
The Best Investments Aren't Always Obvious
Ethiopia, Turkmenistan, and the D.R. of Congo were the three fastest growing economies in 2015, according to the World Bank, growing at 9.5%, 8%, and 8%, respectively. However, not all of these countries represent great investment opportunities. For example, many of these countries face a high level of political risk that Western investors may want to avoid.
Instead of just looking at raw growth in gross domestic product (GDP), investors should instead seek high-growth economies that are also well-diversified. For instance, India's economy was the 6th fastest growing in the world in 2015 and is very well-diversified.
In this article, we’ll take a look at three promising countries that are all poised for significant and diversified growth over the coming years.
India: The China Alternative
India has the world’s 7th largest economy, with a nominal GDP of around $2.28 trillion, while economists are projecting 7% growth in 2016. After significant free market economic reforms in the 1990s, the country’s economic growth has propelled it into one of the world’s most influential economies, and a member of the so-called BRIC (Brazil, Russia, India and China) nations.
Currently, India’s primary obstacle to sustainable growth is the economic slowdown of its peers - including China in 2015 - as well as changes being made in the way that it calculates economic statistics that has drawn some criticism among investors. Many other regulatory challenges may also be hampering growth, although many investors and international firms agree that the country offers great long-term investment opportunities.
Investors looking to add Indian exposure to their portfolios should consider:
- iPath MSCI India ETN (NYSE: INP)
- WisdomTree India Earnings Fund (NYSE: EPI)
- iShares S&P India Index Fund (NYSE: INDY)
Ethiopia: Africa's Shining Star
Ethiopia has a relatively small economy, with a nominal GDP of just $132 billion, but many economists believe it could become the world's fastest growing. While agriculture represents nearly half of its economy, the country's major strides in massive agricultural investment has dramatically accelerated growth. The government has also committed to pro-poor spending aimed at halving its poverty rate and making the most of its growing workforce.
On the downside, critics believe that the country's stability is due to systematic repressive practices that have prevented competition within national and local politics. These practices could result in a higher geopolitical risk for international investors, while the market's relatively small size and undeveloped equity markets mean that securities are likely to be more volatile and risky than many developed countries, like the U.S. and European union constituents.
Investors looking to add Ethiopian exposure to their portfolios should consider:
- Market Vectors Africa ETF (NYSE: AFK)
- Frontier Markets ETF (NYSE: FRN)
- Nyota Minerals (OTC: NYOTF)
Ireland: Fueled by the Low Euro
Ireland has become one of the eurozone's most promising economies, with a nominal GDP of 183.8 billion euros, making it the 44th largest in the world. While the country has suffered through its share of financial crises, including a property bubble and the global financial crisis, the economy has rapidly recovered thanks to the European Central Bank's easy money policy following the 2008 financial crisis that helped lower the value of the euro.
In mid-2015, Ireland's government predicted that GDP would expand by 6%, matching 2014's post-crash record and maintaining the firm as the fastest growing economy in the eurozone. The improving economy could also lead to calls for tax cuts and spending increases that could accelerate the country's growth over the coming years.
Investors looking to add Ireland exposure to their portfolios should consider:
- iShares MSCI Ireland Capped ETF (NYSE: EIRL)
The Bottom Line
International investors looking beyond the United States for higher returns have a number of different options, but they may want to look beyond headline growth rates for diversified economies that have sustainable long-term growth potential. The three aforementioned countries fit this criteria and U.S. investors can easily partake in their growth using a variety of different ETFs.