A nation is considered among emerging markets when it has a sizable and rising middle class, rapid economic growth, and a sizable and growing contribution to global output. It also has a rapid pace of technological expansion and investment.
To many, the emerging markets subsector of international investing was previously a murky area of study. These rapidly developing countries are assuming an increasingly important role in the global economic system. Surprisingly, more than half of the expansion in the global economy has come from emerging markets in recent years.
We call the economies of countries that are transitioning from developing to developed emerging markets (EMs). Countries are evaluated using a wide range of socioeconomic metrics, such as the depth of their debt and equity markets and the effectiveness of their markets. Without further ado, let’s take a look at the world’s top emerging markets.
The 5 top emerging markets in the world
Here are the currently top emerging markets according to the evaluations.
The economy of Brazil enlarged at a rapid clip of 7.5% per year in the first few years of the 2010s. However, the rate of growth slowed and turned negative in 2016 to -3.5%. This is because of political uncertainty and trade sanctions. Brazil’s income and poverty levels also rose significantly between 2003 and 2014, but progress has slowed since 2015 because of decreased economic activity.
Brazil’s economy has taken a hit in recent years due to the Brazilian political instability and decreased government spending. Although, the future of the country looks bright. The domestic economy grew by 0.6% in 2019, and it is anticipated that this growth, which is dependent on agricultural commodities like coffee and soybeans, will be sustained through infrastructural development and foreign investments.
According to Gross Domestic Product, Russia is the 12th biggest economy on the planet. The economic effects of the country’s shift from communism to capitalism are dramatic. Until its downturn in 2015, Russia’s stock market had been one of the world’s best performers thanks to the global commodity boom.
In 2017, GDP growth in Russia reached 1.5 percent, marking the beginning of a turnaround. However, the Russian economy went into a tailspin after Russia invaded Ukraine in February 2022. The international community responded by slapping the country with severe economic and trade sanctions.
Though it has been the world’s second-largest economy, for over 25 years, China has been included among the emerging markets. A rise in the state system and rising financial risks have contributed to China’s economic recession over the last decade, after it experienced massive growth in the 1990s and 2000s.
As domestic and international demand for Chinese goods increased, the country’s growth rate increased in 2017 to 6.9%, the highest level since 2010. Although Beijing’s financial deleveraging policies intended to reduce debt, China’s growth slowed again in 2018 due to the rising trade war with the United States.
Market sentiment toward Chinese investments and the yuan has taken a hit due to worries about trade tensions, but the Chinese economy is still expected to grow by 6.2 percent this year.
India has the world’s seventh-largest economy and ranks third among emerging markets. After enacting trade openness and other significant economic reforms in 1991, India planted firmly itself as an emerging market. Indian GDP has been growing at a blistering pace lately. In the previous decade, it averaged 7.1%, though this number fluctuated due to political unrest and economic reforms.
Growth in exports and foreign investment have been primary factors in the development of India’s service and manufacturing sectors, which have contributed significantly to the country’s overall economic development over time. Capital and labor productivity are both increasing in India as a result of technological development and educational reforms. Along with China, India is currently a major emerging market.
One of the fastest-growing emerging markets, Mexico has attracted significant interest from financial backers. The country’s economy is the second largest in Latin America and the thirteenth biggest in the world. Despite a slowdown in growth during the global recession, Mexico has seen its GDP rise from 1.07 trillion dollars in 2016 to almost 1.2 trillion dollars in 2018 on a year-over-year basis.
The peso and Mexican stock market both closely track the value of the US dollar because of Mexico’s reliance on exports to that country. The cost of raw materials has fallen, and global markets have been volatile, but the forecast for the country is optimistic.
Will these emerging markets continue to grow rapidly
An optimistic outlook on the emerging markets’ future is on the rise. Nonetheless, investors’ wariness is still a result of the Federal Reserve’s hikes in interest rates in the United States, which has resulted in policy clamping by EM central banks. This may impede expansion. For emerging markets, another year of Federal Reserve interest rate hikes could be catastrophic.
Any escalation in tensions between the United States and China could have a negative impact on the economy and product supply chains around the world, so it’s likely that the trade war will be a major talking point.
Investors should think carefully about how the trade talks will affect their portfolio as a whole before placing any large bets this year.
Read also: Regulated and unregulated markets: what they are and their differences