Page 37 - RMAI Bulletin July - September 2021

RMAI BULLETIN JULY TO SEPTEMBER 2021

it is one that is broadly utilized now a days. One way d) Stability
to depict emerging economy as simply “all those A defining characteristic of many emerging
countries not considered developed”. Developed here economies is a lack of stability either economically
meaning essentially the major European countries plus or politically
the US, Canada, Japan, Australia and New Zealand.
“We will define emerging economies as: those
Key Attributes countries which have started to grow but have
A more useful way to look at defining emerging yet to reach a mature stage of development
economies is to consider some of their key attributes and/or where there is significant potential for
and see what help this gives us. economic or political instability.”

The major ones would be: Key Characteristics of Emerging

a) Level of income economies
This is a commonly used measure. The World
Bank, for example, uses Gross Domestic Product The key defining characteristics, therefore, are
(GDP) per head as a measure to classify countries maturity and instability.
as set out in following Table. (Source- World Bank) a) Maturity is used to describe one of the stages in a
continuum or life cycle of development. The stages
Classification GDP per head USD are birth, growth, maturity and decline which
Low <755 follow a pattern such as that depicted in Fig 1
Lower Middle 755<2995
Upper Middle 2995<9265
High >=9265

b) Growth Rate
One reason that emerging markets have been
considered attractive has been that they often
exhibit a high rate of GDP growth. Many Asian
economies averaged 4–7 per cent growth during
the eighties and nineties for example, compared
with 1–3 per cent for developed economies, but
this has not been the case for all emerging market
countries.
Fig 1. Life Cycle
c) Stage of development
This is a factor that fits more closely with the word In the context of the stage of development of a
emerging. There are a number of dimensions we country, the key measure is usually GDP, as income
could consider: and development are closely linked.

Y the degree of openness in the economy as
measured by the degree of deregulation, b) Instability is the concern with many emerging
privatization of state enterprises, or the economies. It is the uncertainty over what might
extent of tariff and other barriers to trade; happen in the future. This uncertainty may be
political or economic, sometimes it is both.
Y the size of the market in terms of goods such
as cars, telephones, electronic goods
Political uncertainty arises where there is a history of
Y the state of financial markets including the instability or a high probability that change will occur. The
existence, size and degree of concentration of causes of this instability are many and include religious or
the stock market, and the size and depth of tribal tensions, repressive regimes, domestic insurrection,
local bond markets. war or threat of war, economic problems, etc.

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