Defining an Emerging Market
The term “emerging markets” was coined in 1981 at the International Finance Corporation when promoting the first mutual funding investments in developing countries. While the term is sometimes considered unhelpful, it is important to identify and define these markets. Emerging markets are a hot topic as they are predicted to surpass the US, German, and UK economies in the future.
There are three factors that distinguish an emerging market from a developed market. Firstly, rapid economic growth defines emerging markets. Great examples of emerging markets are Brazil, Russia, India, China, and South Africa (BRICS). In recent decades, these developing countries have boosted their large economies based on global capital, technology, and talent. The GDP growth rates of these countries have outpaced those of more developed economies, lifting millions out of poverty and creating new middle classes and large new markets for consumer products and services. The large labor pools of these countries give their economies a huge advantage over more developed economies.
The second factor that defines the emergence of a developing economy is how much competition it offers in comparison to developed markets. Along with the rapid pace of development, these countries pose serious competition to current dominant economies in developed countries such as the United States, the United Kingdom, Germany, France, and Italy.
Lastly, emerging markets are often defined in terms of their financial situation and infrastructure. While their rapid growth and competitiveness are positive growth indicators, the amount of red-tape and inconsistencies involved in dealing with these markets marks them as emerging. Unfortunately, some argue that the corruption in these markets will halt them all together despite other growth factors.
While the economies of Brazil, Russia, India, and China are well on their way to surpassing “emergence”, the predicted emerging economies of the future are Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa (CIVETs). According to John Bowler, director of Country Risk Service at the Economist Intelligence Unit, the sizeable populations of some of these countries and the wealth of natural resources in others, just might make them the economic boomers of the next decade.
– Kira Maixner
