Whatís an Emerging Market Economy?

878 Words4 Pages
By definition an emerging market economy is one that has a low to middle per capita income which is in the process of moving from a closed economy to an open market economy. They currently represent approximately 20% of global economies. Although China is considered to be one of the largest economies of the world it is still classified as an emerging market due to its developments and reforms and low capita income per head. In general, emerging markets are deemed to be fast-growing economies into which developed economies look for new sources of income, and through their investment the emerging economy’s production levels rise thus increasing their GDP. The four largest emerging economies are Brazil, Russia, India and China, often abbreviated to the BRICs and the next four largest are Mexico, Indonesia, South Korea and Turkey. More recently, focus has fallen on Mexico, Indonesia, Nigeria and Turkey, now known as the MINT economies as the four emerging economies with the most promise. Emerging market economies experienced a challenging end to 2013 as the interest rates of developed economies reached rock bottom, commodity prices eased, demand from China slowed and the Federal Reserve Bank in America commenced the tapering of quantitative easing. Fear grew that increasing interest rates in the developed economies would result in negative returns in emerging market economies. In January 2014 the IMF predicted growth of 5.1% in 2014 and 5.4% in 2015 for emerging and developing economies compared with growth of only 2.2% in 2014 and 2.3% in 2015 for advanced economies. It would be dangerous to treat all emerging economies the same and this is reflected in the various economic figures, as estimated by the IMF, and it is difficult to pr... ... middle of paper ... ...ion attributable to a sales tax hike in the country. Japan had seen strong growth in previous months as consumers brought forward their spending ahead of the tax increase on the 1st April so it is likely that this will only have temporary impact. Seven of the countries to record a PMI figure below the global average of 52 came from the emerging markets. These were Mexico, India, Indonesia, Turkey, South Korea, Singapore and Indonesia, whilst there was better growth in Vietnam and Taiwan. For long term investors emerging market economies should continue to produce good returns despite the recent setbacks, however further volatility can be expected. Many of the countries have large young populations who aspire to Western standards of living. This will require huge investment from governments and structural reforms but should drive growth in these areas for decades.

    More about Whatís an Emerging Market Economy?

      Open Document