Thirty years before, Thirty years later
05 Feb 2023
Argentina had a head start to South Korea in 1986 when it had a per capita GDP of US $3614 compared to South Korea’s per capita GDP of US $2835. Fast forward to thirty years later in 2016, South Korea not only surpassed but dwarfs Argentina’s 2016 per capita GDP of US $12790 by a colossal margin, with South Korea’s GDP standing tall at US $ 29288. This discrepancy is fueled by the difference in the Compounded Annual Growth Rate (CAGR) of their respective economies.
While Argentina’s economy growth rate for the time measured stood at 4.3%, south Korea hit an economy growth rate of 8.1% at the same time, accounting for the differences in the economy and consequently everything from employment opportunities, development infrastructure, quality of education, healthcare and so on.
A very similar story is found in comparing the examples of Mexico and Portugal. In 1985, both of these countries started with identical per capita GDP: Mexico with US $2569 and Portugal with US $2705. Again, thirty years later in 2015, Mexico remained at US $9,616 while Portugal stood at US $19,250. In this time period, the respective CAGR for both Mexico and Portugal’s economies remained at 4.2% and 6.9% respectively, the difference of which is reflected in the living standard of its citizens.
Its evidently clear that the even a slight difference in the economy’s average growth rate can compound to a very large discord between what could have been and what did. Here’s another example: China and Nigeria are among the countries with the largest population and among the largest countries in their respective continents. In 1990, they both shared similar characteristics; a large percentage of population living impoverished under extreme poverty, a very substandard development infrastructure, low quality health care and education and generally a very poor economic ecosystem.
China had a per capita GDP of US $318 in 1990, almost half the per capita GDP of Nigeria at US $568. Thirty years later with the support of unprecedented economy CAGR of 12.3%, China changed drastically with per capita GDP standing at US $10408 in 2020, about five times more than Nigeria’s per capita GDP of US $2074 in 2020. This growth helped China uplift more than 800 million people out from poverty helping it virtually abolish absolute poverty. It is also a great example of how economic growth rate has a very real impact in transforming people’s lives.
Now, coming to Nepal, if you look at the recorded economic history of Nepal, one can stipulate of two different economic regimes, one that corresponds to a time of pre and post economic liberalization (before and after 1992). For the first thirty years from 1962 to 1992, Nepal’s economy grew from a per capita GDP of $55 to $170.6 with CAGR of 3.84%. For the next thirty odd years Post 1992, Nepal grew at a pace of 7.02% from per capita GDP of $170.6 in 1992 to $1223 in 2021.
The pace of the next thirty years of Nepal’s economic journey will be instrumental in determining the fate of millions of its citizens. Let’s hypothesize three scenarios of how Nepal’s economy will grow at this time:
Scenario 1:
If Nepal’s economy for this time grows at a CAGR of around 6%, a bit short of our recent 30-year growth trajectory, our per capita GDP will amount to $7024. Comparable countries today having a similar per capita GDP include Brazil, Thailand and South Africa.
Scenario2:
At the same time, if Nepal grows at an optimistic growth rate of 7.6% a year, per capita GDP of Nepal will amount to around $11,000. Comparable countries today having a similar per capita GDP include China, Russia and Malaysia.
Scenario 3:
On the other hand, if Nepal’s really finds its feet working and hits a mammoth 9.6% economic growth rate in this timeframe, our per capita GDP will amount to $19130. Comparable countries today with a similar per capita GDP include modern day Greece and Poland.
