How many emerging market countries

Household consumption will benefit from falling inflation and higher government spending. Business leaders are still confident, even though they are taking a cautious approach to investment plans. Borrowing rates are low, and the banking sector, though still fragile, is doing better than it was three years ago. In the first five months of the fiscal year April-August , fiscal revenues increased sharply, and the government could lower its target for the fiscal deficit this year, from 6.

The debt-to-GDP ratio should decline, at least this year, reducing the risk of a sovereign downgrade by the rating agencies. Malaysia : Rising fiscal risk. Although the political situation has stabilised somewhat following the appointment of a new prime minister, the economic environment has deteriorated. The spread of the Covid pandemic in April forced the government to reintroduce lockdown measures that led to an economic contraction in Q2 The situation is unlikely to improve before Q4, once health restrictions are lifted thanks to an accelerated vaccination campaign.

In an attempt to boost growth, the government launched a series of economic support plans, even though fiscal revenue fell short of the full-year target in the first seven months of the year. Consequently, according to the Ministry of Finances, the fiscal deficit is expected to swell to between 6. The government announced that it would ask parliament to raise the debt ceiling in October.

Even though the central government can easily access financing on the domestic market, it must face up to a structural decline in fiscal revenues and higher interest charges. South Korea : A complex economy. Household debt has picked up rapidly over the past 18 months. The associated credit risks are limited, however, thanks to the implementation of macroprudential measures and the comfortable level of household financial assets.

Brazil : Fragile consolidation of the recovery. The recovery has failed to consolidate in Q2 , with production stalling over the quarter despite the dynamism of external demand and the normalization of activity in the service sector. The slowdown of the epidemic since the summer and the acceleration of the vaccination campaign, however, point to a rebound in the second half of the year.

But upside risk to growth will be challenged by the persistence of supply constraints in industry, the risk of electricity rationing, the slowdown in China and aggressive monetary tightening to counter soaring inflation.

Against this backdrop, the real is still struggling to appreciate despite the rise in rates and the good performance of external accounts. The threat of fiscal slippage ahead of the Presidential election is yet another downside risk to the inflation outlook. Mexico : Public finances inevitably deteriorate. Yet economic policy is unlikely to change much over the next two years. Following mid-term elections, the governing coalition managed to maintain a simple majority in the Chamber of Deputies.

Hungary : Full-fledged growth. Hungary is benefiting fully from a high international trade exposure, which is now driving its growth. Supply-side pressures are increasing, with high capacity utilisation rates and rising scarcity of labour. These local issues come on top of global industrial shortages. This has resulted in a significant acceleration in inflation, to which the Central Bank has responded with its first policy rate increase in 10 years.

Nevertheless, monetary policy remains relatively accommodative, as the Central Bank has acquired the equivalent of nearly 5 points of GDP of government debt in This support is important in a context where access to European funding including the resilience and recovery plan remains subject to sticking points notably the rule of law clause.

Turkey : Growth and inflation on the menu. Turkey is enjoying strong economic growth in , following the credit-driven stimulus implemented in The cumulative performance over and has allowed the country to close the growth gap that resulted from the series of shocks between and Investment and the industrial sector have thus regained their previous size.

Foreign currency reserves have recovered from the low levels they reached in Nevertheless, this has come at a price: inflation is running well ahead of levels seen in other emerging economies. As well as common factors rising prices for oil and other commodities , there are specific country drivers depreciation of the lira, untimely monetary policy decisions.

There may also be an impact on bank balance sheets as measures relaxing the classification of non-performing loans come to an end - this will need to be monitored. In addition to an expansionist credit policy, reforms that benefit corporates and a substantial infrastructure investment programme are also growth drivers. Egypt : Positive short-term prospects.

This bolstered the retail and construction sectors. As to the external accounts, there is not only the question of the attractiveness of Egyptian debt at a time when the US is expected to begin tightening monetary policy, but also the vulnerability of the current account deficit, which is subjected to the rigidity of imports, higher commodity prices and an uncertain recovery in tourism.

United Arab Emirates : An uneven economic recovery. The recession was severe, and the recovery this year is expected to be mild. That can come from three factors: natural disasters, external price shocks, and domestic policy instability.

Traditional economies traditionally reliant on agriculture are especially vulnerable to disasters, such as earthquakes in Haiti, tsunamis in Thailand, or droughts in Sudan. But these disasters can lay the groundwork for additional commercial development, as it did in Thailand. Emerging markets are more susceptible to volatile currency swings, such as those involving the U. They are also vulnerable to commodities swings, such as those of oil or food.

That's because they don't have enough power to influence these movements. For example, when the United States subsidized corn ethanol production in , it caused oil and food prices to skyrocket.

That caused food riots in many emerging market countries. When leaders of emerging markets undertake the changes needed for industrialization, many population sectors suffer, such as farmers who lose their land.

Over time, this could lead to social unrest, rebellion, and regime change. Investors could lose all if industries become nationalized or the government defaults on its debt. This growth requires a lot of investment capital. However, the capital markets are less mature in these countries than what is seen in developed markets. That's the fourth characteristic: currency swings.

Emerging markets don't have a solid track record of foreign direct investment. It's often difficult to get information on companies listed on their stock markets. It may not be easy to sell debt, such as corporate bonds, on the secondary market. All these components raise the risk. That also means there's a greater reward for investors willing to do the ground-level research.

If successful, rapid growth can also lead to the fifth characteristic, which is the higher-than-average return for investors. That's because many of these countries focus on an export-driven strategy. They don't have the demand at home, so they produce lower-cost consumer goods and commodities for export to developed markets. The companies that fuel this growth will realize a profit. This interaction translates into higher stock prices for investors.

It also means a higher return on bonds, which cost more to cover the additional risk of emerging market companies. It is this quality that makes emerging markets attractive to investors. As such, in October the G20 announced it would extend a debt-suspension initiative. Despite the economic effects of the Covid pandemic, emerging markets will remain of interest to investors in and beyond because of the high reward potential offered by their rapid development.

The economic agenda is often prioritised by government bodies in these countries. Market opportunities are presented by their expanding and youthful demographics, increasing levels of urbanisation and rising household purchasing power. Rapid technological development leaves the door open for these emerging economies to leapfrog development stages and make up lost ground relative to more advanced economies. Emerging markets are also diversifying investment offerings, with some — including Egypt, Saudi Arabia and Indonesia — issuing green bonds.

Meanwhile, the African Continental Free Trade Area comprises 54 out of 55 African countries as of June , and has encouraged regional trade since The emerging markets that are growing the most rapidly depend to a large extent on demographic advantages, as well as government priorities and regulations. In addition to navigating the most severe economic effects of the Covid pandemic, this means the most promising emerging markets for will include those where high-potential sectors have been clearly identified by policymakers and an ecosystem has been created to allow them to flourish.

This makes emerging economies a particularly exciting investment opportunity for investors seeking to diversify their portfolio. Examples of high-growth sectors in emerging economies include e-commerce in Indonesia , which benefits from a large domestic market, improvements in infrastructure and rising discretionary spending power; and the automotive and aerospace industries in Mexico, which have been bolstered by favourable regulations and trade deals.

You can explore each of the markets OBG covers by sector here. Read our internationally acclaimed intelligence on regions that are shaping the future balance of economic power , and explore a range of videos with key players in emerging economies.

This is often used as a performance benchmark for mutual funds and market growth. See this analysis to learn more about attractive opportunities that exist in economies not yet included in the indices. Read about risk and reward in emerging markets funds. We provide emerging market news and views, interviews with key public and private sector players in emerging economies , and an emerging markets blog. Your Money. Personal Finance. Your Practice. Popular Courses. Markets International Markets.

What Is an Emerging Market Economy? Key Takeaways An emerging market economy is an economy that is in the process of becoming a developed economy. Emerging market economies typically feature a unified currency, stock market, and backing system, and are in the process of industrializing. Emerging market economies can offer greater returns to investors due to rapid growth, but also offer greater exposure to some inherent risks due to their status.

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A mature economy is the economy of a nation with a stable population and slowing economic growth.