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.

1. EMERGING ECONOMIES OF THE
WORLD 2021
Dr. Amita Marwha
Faculty, Post Graduate Department of Economics, Isabella Thbourn College Lucknow
EMERGING ECONOMIES CONCLAVE

2. EMERGING MARKET ECONOMY
 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.

3. How Emerging Market Economies Are Classified?
Emerging market economies are classified in
different ways –
 Levels of income
 Quality of financial systems
 Growth rates are all popular criteria but the exact
list of emerging market economies can vary
depending on who you ask.

4. How Emerging Market Economies Are Classified?
 For example, the International Monetary Fund
classifies 23 countries as emerging markets,
while classifies 24 countries as emerging
markets.
 There are some differences between the two
lists. Standard and Poor's classifies 23 and
Russell classifies 19 countries as emerging
markets, while Dow Jones classifies 22 countries
as emerging markets.
 “An emerging market economy is transitioning from a low income, less
developed, often pre-industrial economy towards a modern, industrial

5. Emerging economies are characterised by-
 Increasing reliance on industrialisation and
manufacturing, a shift that is often designed to reduce
their dependence on agriculture, energy and other
natural resources or raw materials.
 These markets often focus on bolstering exports and
reducing imports to create a more favourable balance of
trade and ensure food security.
 Many emerging economies have crafted national
development plans to guide their progress towards these
aims.
 Government reforms may liberalise, diversify and
formalise a frontier market sufficiently for it to gain
emerging market status.

6. How emerging global markets are changing?
 Emerging markets have changed considerably in the
decade leading to 2020: financial inclusion widened and
technology penetration increased, most notably as
governments introduced regulatory reforms to promote
growth and mitigate risk.
 In recent years, many governments in emerging markets
liberalized a range of sectors and introduced a host of
reforms, including regulations surrounding financial
services. For example, Argentina regained emerging
market status in 2018 after its government removed
foreign exchange restrictions and capital controls,
eliminated cash reserves and monthly repatriation limits
in the equity market, and abolished lock-up periods for
investment.

7. How emerging global markets are changing?
 Technological development is also enabling a
transformation of emerging economies.
 In addition to facilitating entrepreneurship and innovation,
increasing mobile penetration and app-based payment
services have widened financial inclusion, which in turn
benefits more sectors than just financial services.
 For example, there is considerable potential for the
growth of e-commerce in emerging economies,
particularly as they begin to move away from cash and
reduce their preference for pay-on-delivery payment
methods.

8. Top emerging markets
 Trade has been a key driver of the rise of emerging
markets in recent years, aided by falling manufacturing
costs.
 Economic diversification has also been an important
driver of emerging market growth.
 Rapid technological innovation is disrupting traditional
business models, allowing emerging markets to leapfrog
established development stages and placing increased
focus on upskilling the labour force. As part of the so-
called Fourth Industrial Revolution
 Many emerging markets are characterised by a large and
growing young population, which makes it even more
crucial that they advance their education systems –
which may lag behind global standards – in order to

9. Emerging global markets in 2021
 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.
 Markets in Asia are set to benefit from the creation of the
world’s largest trade bloc in November 2020, the
Regional Comprehensive Economic Partnership.
Meanwhile, the African Continental Free Trade Area
comprises 54 out of 55 African countries as of June 2020,
and has encouraged regional trade since 2019.

10. China Lags as Thailand, Russia Rank Top
Emerging Market Picks
 According to a Bloomberg study of 17 developing
markets gauging their outlook for 2021 based on 11
indicators of economic and financial performance.
 Thailand topped the list, owing to its solid reserves and
high potential for portfolio inflows.
 Russia scored No. 2 thanks to robust external accounts
and a strong fiscal profile, in addition to an undervalued
ruble.
 China scores fairly poorly given that high expectations
are already baked.
 Brazil is a laggard due to a mounting fiscal deficit and
debt concerns.

11. China Lags as Thailand, Russia Rank Top
Emerging Market Picks
 According to a Bloomberg study of 17 developing
markets gauging their outlook for 2021 based on 11
indicators of economic and financial performance.
 Thailand topped the list, owing to its solid reserves and
high potential for portfolio inflows.
 Russia scored No. 2 thanks to robust external accounts
and a strong fiscal profile, in addition to an undervalued
ruble.
 China scores fairly poorly given that high expectations
are already baked.
 Brazil is a laggard due to a mounting fiscal deficit and
debt concerns.

12. China Lags as Thailand, Russia Rank Top
Emerging Market Picks
 Many emerging market economies are poised to recoup
economic losses, judging by various metrics surveyed by
Bloomberg. Healthy foreign reserves, particularly in Asia,
provide a cushion for external shocks, but elevated debt-
to-GDP readings will be worth monitoring for stability
risks. Developing-nation assets are heading for a back-
to-back winning year, thanks to unprecedented monetary
and fiscal stimulus deployed to fight the pandemic. As
the global recovery takes hold, and the Federal Reserve
keeps interest rates low, risk appetite should continue to
strengthen in 2021 amid favorable valuations and
attractive real yields that lure foreign buyers.

13. Covid Growth Healing
 There remains a worry especially among poorer, less-
developed countries that they’ll be left behind in global
vaccination distribution, with producers in the U.S. and
U.K. garnering much of the attention in their virus-
ravaged economies. And emerging markets have
certainly taken their share of hits to Covid-era growth,
including those like Thailand that are especially
dependent on tourism.


14. Covid Growth Healing
 There remains a worry especially among poorer, less-
developed countries that they’ll be left behind in global
vaccination distribution, with producers in the U.S. and
U.K. garnering much of the attention in their virus-
ravaged economies. And emerging markets have
certainly taken their share of hits to Covid-era growth,
including those like Thailand that are especially
dependent on tourism.
 That said, Bloomberg surveys show that analysts are
penciling in high rates of growth next year for some of
those that have been hardest-hit in 2020. Each of the top
five growth rates for 2021 are from Asia, led by India,
China, and the Philippines.


15. Lockdown Relief
 Goldman Sachs Group Inc.’s effective lockdown indexes
indicate that once the pandemic is under control, most
developing economies stand to gain a lot in terms of
activity catchup. Those indexes should all eventually
converge close to zero.

16. Structural Vulnerabilities
 Structural weaknesses that worsened amid the pandemic
also pose risks to emerging markets. Current-account
deficits, notably in Colombia and Turkey, mean these
countries are vulnerable to a negative shock.
 Fiscal deficits, especially in Brazil, South Africa and the
Philippines, have added to high government debt
burdens. The debt burdens in South Africa, Hungary,
India, and Brazil are also cause for concern.

17. Favorable Valuations
 Judging current real-effective-exchange rates (REER)
versus their five-year averages, Brazil, Turkey, Hungary
and Malaysia are especially undervalued compared to
the average of their peers. They each notch z-scores of
negative 1.4 or below.
 China’s central bank will be watched closely for any signs
of resistance to a stronger currency. With China’s
valuation the third-highest in our basket, there’s room for
an unsettling fall.

18. India Improves Standing amongst Big Emerging
Markets
 Rising investor confidence and slow but stable overall
growth confirms India’s economic recovery in 2021.
However, the country’s standing as a top Emerging
Market is put to the test by a second wave of Covid-19
cases and its export competitiveness.
 Bharat Climbs the Emerging Market Rankings
India has been rated as the second most attractive
Emerging Market after China in a recent report. Like the
rest of the World, it had felt the impact of Covid-19 and
the series of closures for much of 2020, with economic
indicators slowly picking up in the last Quarter. More
importantly, its standing among large EM has been
confirmed and improved according to February 2021
numbers.

19. India Improves Standing amongst Big Emerging
Markets
 Live Mint’s EM Tracker shows that India has built upon its
strengths, currently ranking right behind China in most of
the composite indices on financial and industrial activity.
 Crucially, foreign investors have been backing up the
Indian stock market, while others in the EM League have
seen a general sell-off trend.
 FDI in India rose 13% in 2020 – one of the few major
economies with a real offshore investment growth –
despite pandemic fears and a complicated financial
climate.
 Most of the sectors that have seen huge investments are
mostly related to technology and IT Services, Online
Casino India such as websites like PureWin, and
Telecoms.
 Experts forecast, however, that FDI diversification is not
far behind, as the desi consumer market has begun
proving its worth in a number of other economic
segments.

20. Overall Recovery and Growth Indicators
 Considering seven high-visibility indicators across the leading 10 EM
markets, India’s relative position has improved both overall and
selectively.
 Indices look at real economic activity (such as Manufacturing
Purchasing managers’ Index (PMI) or GDP growth) as much as
financial reports (e.g. stock market Capitalization).
 Composite scores reiterate a picture of the nation’s recovery: India is
one of a few select big countries (behind only China and Turkey) that
managed to reach a positive GDP growth for Q4 of 2020, while its
PMI is trailing just slightly Brazil’s reading.
 The trend has left Indian businesses more optimistic about
profitability in the coming year.
 Such optimism is also apparently shared by foreign investors,
channeling consistent funding towards Indian stocks in times of
global financial uncertainty.
 Bharat stock market Capitalisation levels have brought the rupee to
perform better than other EM currencies, as the nation has been
confirmed as the biggest recipient of offshore funding since the start
of 2021.

21. Threats to Economic Growth Still Linger
 Following a largely effective pandemic management in 2020,
India has beaten most of its EM counterparts in both
vaccinations and testing.
 Yet, a second wave is currently choking some States and
mobility restrictions are already in force. If the situation
persists, it could bring down economic activity and investor
interest.
 While capital outflow does not seem to be on the cards, India’s
bond markets are also concerned by rising public debt and
inflation.
 Posting higher inflation numbers than most other EM, the
nation has also seen its export competitiveness suffer. Slower
export recovery is revealed in February as well (less than 1%
growth), even when compared to pandemic-affected monthly
figures from a year ago.

22. Threats to Economic Growth Still Linger
 Exports are both an immediate concern and a long
term challenge. Inevitably, however, they also
depend on the Centre’s ability to sustain an efficient
vaccination campaign as a background for an
economic recovery plan.

23. Conclusion
 It is also the time to build stronger economies than emerging
markets had before the pandemic by taking steps to create
better and more equal access to health care and education,
strengthening public infrastructure, and retraining workers
displaced by the pandemic. Building resilience to climate
change and steering digitalization for inclusive growth are also
necessary.
 COVID-19 has caused more loss of human life in countries
with weak health systems and social safety nets.
 It has triggered greater economic losses in service-oriented
sectors and among unskilled, young, and female workers.
 To ensure a sustained recovery that does not leave anyone
behind, the rise in inequality and poverty must be contained.
Reducing informality, which accounts for one-fourth to one-
third of the economy for most emerging markets (Medina and
Schneider 2019), will allow more people to benefit from better
wages and redistributive measures.