Page 37 - The Insurance Times January 2022

Key Attributes where there is significant potential for economic
A more useful way to look at defining emerging economies or political instability.”
is to consider some of their key attributes and see what help
this gives us. Key Characteristics of Emerging
economies
The major ones would be:
The key defining characteristics, therefore, are maturity and
a) Level of income instability.
This is a commonly used measure. The World Bank, for
a) Maturity is used to describe one of the stages in a
example, uses Gross Domestic Product (GDP) per head continuum or life cycle of development. The stages are
as a measure to classify countries as set out in following birth, growth, maturity and decline which follow a
Table. (Source- World Bank) pattern such as that depicted in Fig 1

Classification GDP per head USD
Low <755
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.

c) Stage of development Fig 1. Life Cycle
This is a factor that fits more closely with the word
emerging. There are a number of dimensions we could In the context of the stage of development of a country,
consider: the key measure is usually GDP, as income 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 extent of
tariff and other barriers to trade; economies. It is the uncertainty over what might
happen in the future. This uncertainty may be political
Y the size of the market in terms of goods such as or economic, sometimes it is both.
cars, telephones, electronic goods
Y the state of financial markets including the Political uncertainty arises where there is a history of instability
existence, size and degree of concentration of the or a high probability that change will occur. The causes of this
stock market, and the size and depth of local bond instability are many and include religious or tribal tensions,
markets. repressive regimes, domestic insurrection, war or threat of war,
economic problems, etc.
d) Stability
A defining characteristic of many emerging economies Comparison of emerging economies over
is a lack of stability either economically or politically
other economies
“We will define emerging economies as: those Change is more likely to occur in emerging economies and
countries which have started to grow but have yet the changes that occur happen more quickly and are more
to reach a mature stage of development and/or unpredictable.

The Insurance Times, January 2022 37