Emerging Markets

Definition and Characteristics of Emerging Markets

An emerging market is a country that has some characteristics of a developed market, but does not meet all the standards to be a developed market.
They are economies that are moving from a low income, less developed, often agriculture-based economy towards a more modern, industrial and technologically advanced one.
Characteristics may include a market undergoing rapid growth and industrialisation, increasing domestic and foreign investments, urbanisation, and increasing political stability.
Examples of emerging markets as of today include India, China, Brazil, Russia, and South Africa (often grouped together as the BRICS countries).

Emerging markets are engines of economic growth for the global economy, contributing significantly to world GDP and expected to account for 50% of world GDP by 2020.
They offer a large consumer base, with increasing purchasing power due to rising incomes and enhancement of quality of life.
Investment opportunities in these markets also tend to be high, attracting both domestic and foreign investors.

Despite the opportunities, there are substantial risks associated with investing in emerging markets.
These include economic instability, political volatility, inadequate physical and institutional infrastructure, corruption, and regulatory complications.
Emerging markets are typically more susceptible to cyclical downturns as these economies are largely export driven.

Economic development in these markets often focuses on industrialisation, improvements in infrastructure, human capital development, and opening up to foreign trade and investment.
The transition from a traditional economy to one that is more modern involves significant social, economic and environmental challenges.
These can include rapid urbanisation leading to overpopulation in cities, increasing inequality, or environmental degradation.

Globalisation has played a significant role in the growth of emerging markets, providing opportunities for trade expansion, foreign investments, and integration into the global economy.
However, this increased interconnectedness has also exposed emerging markets to shocks from the global economy.
The flow of goods, services and investments are influenced by various global factors including economic fluctuations in developed countries, international trade agreements, and changes in global commodity prices.

With rapid development often comes a significant increase in environmental pressures as natural resources are extracted and used at an increasingly fast rate.
However, emerging markets also have the opportunity to learn from the mistakes of developed countries, and integrate sustainability into their development strategies.
This can involve adopting clean technologies, investing in renewable energy, promoting sustainable agriculture, and developing green infrastructure.