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The 3 Countries with the Most Growth Potential

Post on: 16 Март, 2015 No Comment

The Best Investments Aren’t Always Obvious

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In 2010, the three fastest growing economies in the world were Qatar with 16.3% growth, Paraguay with 15.3% growth and Singapore with 14.5% growth. However, not all of these countries represent great investment opportunities. For example, petroleum accounts for more than 70% of Qatar’s economy, so the increase in crude oil prices was the primary driver of growth.

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, Paraguay’s economy was the second fastest growing in the world in 2010 and is very well-diversified, with about 25% of its GDP coming from its industrial sector, 20% from agriculture and 60% from services.

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.

Peru: Latin America’s Shining Star

Peru has the world’s 42nd largest economy, with a nominal GDP of around $153 billion, while economists are projecting 7% growth in 2011. While the country’s economy has historically been tied to exports, recent economic growth has been fueled by domestic consumption. Meanwhile, the country has one of the lowest inflation rates and some of the strongest fundamentals in South America.

Despite the optimism, there are several risks associated with investing in Peru and Latin America in general that investors should consider. For instance, the region is well-known for its somewhat volatile political environment where socialism and capitalism often collide. The result can be rapidly evolving reforms and policies that can have a quick and potentially-negative impact on investments.

Investors looking to add Peruvian exposure to their portfolios should consider:

iShares MSCI Peru ETF (NYSE: EPU )
SPDR S&P Emerging Latin America ETF (NYSE: GML )
iShares S&P Latin America 40 Index ETF (NYSE: ILF )

India: The Alternative to China

India has the world’s 10th largest economy, with a nominal GDP of around $1.53 trillion, while economists are projecting 8% growth in 2011. 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 inflation, which has been stubbornly increasing. To combat the inflation, the government has been taking measures to slow down growth, which may adversely affect companies in the near-term. The short-term pain could pave the way to long-term gain, however, as it is well-positioned to become a leader in developing Asia.

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 )

Canada: The Neighbor to the North

Canada may not boast as strong of GDP growth as other countries on this list, but what it lacks in growth rates, it makes up for in stability. And with its ample natural resources, the country is also uniquely positioned to benefit from the recent boom in commodities. In the end, its stable financial system and steady growth rates make it a premier developed market play with exposure to hard assets.

While Canada’s economy is projected to grow faster than Western Europe, Japan and the United States in 2011, there are always risks even with the most developed countries. For instance, Canada’s unique exposure to crude oil, mineral deposits and other hard assets means that any negative movements in commodities could adversely affect the country’s economic growth.

Investors looking to add Canadian exposure to their portfolios should consider: