Introduction to Emerging Markets

The term emerging markets is commonly used to describe an economy with a GDP per capita substantially below the advanced world average and typically with a growth potential above the global average. According to the World Bank’s definition an emerging markets country has a Gross National Income (GNI) per capita less than approximately USD 9,000.

Within this category differences between individual countries vary a lot in terms of economic
governance and institutional framework, infrastructure, physical size and political regime. As an example, on one hand investment grade sovereigns like Singapore and Brazil are both classified as emerging markets economies but the very same countries are also classified as Newly Industrialized Countries/Economies (NIC/NIE).

Contrary but also within the emerging markets bucket speculative grade sovereigns like the Dominican Republic and Ecuador are also categorized as Less Developed Countries (LDC). As such there is no key definition to describe an emerging markets economy. Over time a country can mature to be categorized an advanced economy while others can emerge from unrated illiquid poorly regulated frontier markets status to become emerging markets economies included in global indices.

Since 2008/2009 the threshold between emerging markets economies and developed world has become more blurred. Thanks to coherent and sound governance combined with fiscal discipline during much of the past decade, many emerging economies are today in better shape than most economies in developed world in terms of budgets and debt metrics with the infrastructural, political and institutional framework being the typical lagging issues left.