What Are Emerging Economies?
An emerging economy is a nation with social and business activity in the process of rapid growth and industrialization. These markets occupy a position between the classifications of least-developed and fully-developed economies — characterized by higher volatility but substantially greater growth potential than their advanced counterparts.
The concept was popularized by economist Antoine van Agtmael in 1981 while working at the World Bank's International Finance Corporation. Since then, the identification of emerging economies has evolved considerably, incorporating indices from the IMF, MSCI, FTSE Russell, and S&P Dow Jones.
Key criteria typically include: per capita income below advanced-economy thresholds, ongoing industrialization, openness to foreign investment, and nascent but developing financial markets. These nations collectively represent the engine of future global economic expansion.
Distinguishing Features
- Above-average GDP growth relative to developed peers
- Expanding middle-class consumer base
- Increasing integration into global trade networks
- Undergoing structural transformation (agriculture → industry → services)
- Higher political and regulatory risk
- Currency and macroeconomic volatility
- Developing institutional frameworks
- Infrastructure gaps and capital market depth constraints
Major Groupings & Blocs
BRICS
Brazil · Russia · India · China · South Africa
Originally coined as "BRIC" by economist Jim O'Neill, this grouping identified four economies poised to rival the G7 by mid-century. South Africa joined in 2010. In 2024, the bloc expanded to include Egypt, Ethiopia, Iran, and the UAE, forming BRICS+.
Next Eleven (N-11)
Bangladesh · Egypt · Indonesia · Iran · Mexico · Nigeria · Pakistan · Philippines · South Korea · Turkey · Vietnam
Identified as high potential candidates for the 21st century's largest economies, based on macroeconomic stability, political maturity, trade openness, and education policies.
Index Classifications
MSCI EM Index · FTSE Emerging · S&P Emerging BMI
Major financial index providers maintain their own classification systems based on economic development, market size, liquidity, and accessibility. Inclusion in these indices significantly affects capital inflows and sovereign borrowing costs.
Emerging & Developing Economies
~155 countries across Africa, Asia, LATAM, MENA, EE
The IMF's World Economic Outlook groups all non-advanced economies under this category, providing standardized macro data for fiscal, monetary, and external sector analysis across the full spectrum of developing nations.
Leading Emerging Economies at a Glance
Selected economic profiles for major emerging markets. GDP figures in USD (nominal, latest available estimates). Growth rates reflect IMF projections.
| Country | Region | GDP (Nominal) | GDP Growth (Est.) | GDP per Capita | Primary Driver | Risk Profile |
|---|---|---|---|---|---|---|
| 🇨🇳 China | East Asia | $18.5T | +4.6% | $13,000 | Manufacturing, Tech | Moderate |
| 🇮🇳 India | South Asia | $3.9T | +6.5% | $2,700 | Services, IT, Manufacturing | Moderate-Low |
| 🇧🇷 Brazil | Latin America | $2.3T | +2.1% | $10,800 | Agri, Energy, Commodities | Elevated |
| 🇮🇩 Indonesia | SE Asia | $1.5T | +5.0% | $5,300 | Commodities, Digital Economy | Moderate |
| 🇲🇽 Mexico | Latin America | $1.8T | +1.5% | $13,900 | Nearshoring, Manufacturing | Moderate |
| 🇹🇷 Turkey | MENA/Europe | $1.3T | +3.1% | $15,200 | Tourism, Industry, Finance | Elevated |
| 🇻🇳 Vietnam | SE Asia | $430B | +6.1% | $4,300 | Electronics, Export Mfg. | Moderate-Low |
| 🇳🇬 Nigeria | Sub-Saharan Africa | $390B | +3.3% | $1,700 | Oil, Telecoms, Agriculture | Elevated |
| 🇸🇦 Saudi Arabia | MENA | $1.1T | +2.6% | $30,400 | Energy, Vision 2030 Diversif. | Moderate |
| 🇵🇭 Philippines | SE Asia | $440B | +5.8% | $3,900 | BPO, Remittances, Services | Moderate |
Sources: IMF World Economic Outlook (2024–2025), World Bank Open Data, UN National Accounts. Figures are estimates and subject to revision.
Macroeconomic Performance
GDP Growth: Emerging vs. Advanced Economies
Average annual growth rate (%), 2015–2025E
Foreign Direct Investment Inflows
Top emerging market recipients (USD Billions, 2023)
Share of Global GDP (PPP)
Emerging & Developing vs. Advanced Economies, 2024
Consumer Price Inflation
Average CPI (%), selected emerging markets, 2024E
Drivers of Long-Run Growth
Demographic Dividend
Many emerging markets — particularly in Sub-Saharan Africa, South Asia, and Southeast Asia — possess young and rapidly expanding workforces. A high ratio of working-age to dependent population can generate sustained productivity gains when coupled with adequate education and employment policy.
Urbanization
The migration of rural populations to urban centers drives agglomeration economies, improves productivity, and expands consumer markets. By 2050, approximately 70% of the world's urban population growth will occur in Africa and Asia, creating enormous infrastructure and services demand.
Technology Leapfrogging
Emerging markets often bypass legacy infrastructure to adopt frontier technologies — mobile banking over branch networks, solar microgrids over centralized utilities, digital-first commerce over traditional retail. This accelerates productivity convergence with advanced economies.
Trade Integration
Participation in global value chains (GVCs) allows emerging economies to industrialize by specializing in specific production segments. Regional trade agreements — RCEP, AfCFTA, CPTPP — are deepening intra-regional linkages and reducing dependence on single export markets.
Rising Middle Class
Household income growth in emerging markets is generating a new global consumer class. By 2030, the Asia-Pacific region is expected to account for over 50% of global middle-class consumption, fundamentally reshaping corporate strategy, FDI flows, and trade patterns.
Institutional Improvement
Property rights enforcement, judicial independence, anti-corruption initiatives, and regulatory reform compound economic gains. Improving scores on indices like the World Bank's Doing Business (discontinued 2021) and the Worldwide Governance Indicators correlate strongly with FDI attraction and sustained growth.
Structural Headwinds
Currency Volatility & External Debt
Many emerging economies carry significant portions of sovereign debt denominated in foreign currencies (primarily USD). Dollar appreciation cycles — triggered by Fed tightening — compress fiscal space, raise debt-service costs, and can precipitate balance-of-payments crises. The 2022–2023 tightening cycle forced severe adjustments in Sri Lanka, Ghana, Zambia, and Pakistan.
Commodity Dependence & Dutch Disease
Resource-rich emerging economies face persistent risks from commodity price cycles. Reliance on oil, metals, or agricultural exports creates revenue volatility, crowds out manufacturing, and can cause "Dutch Disease" — where resource export windfalls appreciate the real exchange rate, undermining the competitiveness of the broader tradeable sector.
Governance & Institutional Weakness
Corruption, inadequate rule of law, weak contract enforcement, and political instability impose significant efficiency costs. They deter foreign investment, misallocate public resources, and undermine the social contract. High perception of corruption correlates strongly with lower investment rates and slower convergence to advanced-economy income levels.
Climate Vulnerability & Transition Risk
Emerging economies are disproportionately exposed to physical climate risks — flooding, drought, and extreme heat — while simultaneously facing pressure to decarbonize nascent industrial bases. The "just transition" debate centers on whether developing nations can pursue growth trajectories that advanced economies historically relied upon, or must accept constrained pathways with limited financial support.
Debt Sustainability
(Low-Income Countries) ~72%
risk of debt distress ~60%
in USD ~85%
Source: IMF Debt Sustainability Framework, 2024
Key Risk Indicators
The Decade Ahead
The 2020s represent a pivotal decade for emerging economies — shaped by geopolitical realignment, the energy transition, post-pandemic structural shifts, and the diffusion of transformative technologies including generative AI and advanced manufacturing.
Three macro-level forces are likely to define outcomes: the degree to which emerging markets can attract and absorb foreign capital efficiently; the pace of domestic institutional reform; and their ability to participate in — rather than be disrupted by — the global green transition.
The fragmentation of the global trading system into competing spheres of influence creates both risk and opportunity. Nearshoring and "friend-shoring" trends are redirecting supply chains toward politically aligned emerging markets — notably Vietnam, Mexico, India, and Morocco.
Rapid mobile penetration and fintech adoption are lowering transaction costs, expanding financial inclusion, and building data infrastructure that enables new business models. India's UPI, Kenya's M-Pesa, and Brazil's PIX exemplify how emerging markets are setting the global standard for digital financial infrastructure.
Nations with renewable energy endowments, critical mineral reserves, and low-cost labor are positioned to become key nodes in the global green economy. The transition creates export opportunities in lithium, cobalt, nickel, and clean hydrogen — but requires policy frameworks to capture value domestically rather than exporting raw resources.
Trade, investment, and development finance flows between emerging economies are growing in significance. China's Belt and Road Initiative, the New Development Bank, and regional development banks are reshaping the architecture of international economic cooperation beyond the Bretton Woods framework.
IMF Projections: Emerging & Developing Economies, 2025–2029
Source: IMF World Economic Outlook, October 2024; projections subject to revision.