How to Identify an Emerging Market

The Peterson Institute for International Economics has a mixed outlook for emerging markets. They expect a reasonably good year for China and India, but not for Brazil and Russia:

In its graphic, PIIE meant China, India, Russia, and Brazil when they referred to emerging markets. However, we don’t know precisely what they meant by an emerging market.

Emerging Market Economies

According to a leading economic development textbook, emerging market is a term mostly used by the financial press. Created as a substitute for the pejorative sounding “Third World, ” it was supposed to convey a “sense of progress.”

The problem though is the immense disparity among the emerging market countries. Some consume certain commodities while others produce them. In addition, their indebtedness varies as does their GDP growth.

In a 2019 report, Amundi gave us a list of emerging market countries. As they indicate, the U.S. is there as a reference:

Our Bottom Line: Classification

We can ask how to group countries.

One possibility is the following acronyms.

• BRIC/Brazil, Russia, India, and China: Coined by a Goldman Sachs employee in 2001 to showcase an up and coming group, the BRICs were supposed to soon lead the global economy.
• CIVETS/Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa: Identified in 2009, elevated and sustained economic growth was their common characteristic.
• VISTA: Vietnam, Indonesia, South Africa, Turkey and Argentina: Named in 2006, they were the group that competed with the BRICs.
• MANGANESE/Morocco, Angola, Nigeria, Ghana, Algeria, Namibia, Egypt, South Africa and Ethiopia: Originated in 2012, this is a dynamic African group.

We can also look to the The Human Development Index. Using health, knowledge and the standard of living as criteria, we can use the (HDI) to group nations as Advanced, Economies in Transition, and Developing Countries. By Advanced, they mean nations that have high HDI numbers, Next, the second group refers to formerly communist Eastern European countries. Then, quite large, the third group covers all with an HDI below .8. As a result, the range is from Brazil and China to Saudi Arabia and sub-Saharan Africa.

Below, Our World in Data illustrates HDI scores:

You can see that, depending on the characteristic you select, the emerging market countries can be sliced so very differently. But still, returning to my development text and today’s title, their common denominator is the financial press.

My sources and more: Hearing just one sentence on Bloomberg radio yesterday started me thinking about the diversity among emerging market countries. That took me to PIIE (Peterson Institute for International Economics) and the Amundi paper, “How to differentiate emerging countries? New approaches for classification and typology.” Then, finally, Todaro and Smith’s Economic Development is the ideal reference.