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What Are Emerging Markets?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 03 November 2016
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Emerging markets are economies that are in a process of rapid development and industrialization, frequently offering an enormous potential for economic and political growth. Different financial and economic authorities qualify emerging markets on widely varying criteria; the general consensus may include any nation that has been undeveloped in recent times, yet is now in the process of development on financial, political, and social platforms. Emerging markets can be large or small, with some lists including enormous powerhouses such as China alongside tiny, if affluent, regions such as Qatar.

One of the reasons that emerging markets are a source of great focus is that they present a wealth of opportunities for investment and trade. For instance, if a country that had been closed to outside trade for generations suddenly opened its borders, the opportunities for importing, exporting, and security trading could be enormous. Many countries considered to be emerging markets are engaged in exactly this sort of border opening, using political and economic reform to enter a more market-based economy.

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In addition to increased investment and trade opportunities, emerging markets are also important to the foreign exchange market. A country in a sustained period of growth is more likely to have a stable currency, making it ideal for foreign exchange trades. An increase in currency trading can help further spur the growth in an emerging market, as more and more investors are drawn to the growing market. In this way, a country can feed off of its own expansion, using the attractive qualities of stability to allow further growth.

Financial institutions keep tabs on emerging markets through the creation of regularly-updated lists of developing economies. Each institution may use its own criteria, but most lists generally include nations that have a recent history of economic growth combined with political and social reform. One example of an emerging markets list is the “Next 11,” which consists of countries believed to be on track to becoming the largest economies in the 21st century.

Though not all lists of emerging markets agree, many contain similar results. Egypt, Indonesia, and Turkey have been mainstays on many lists since the late 20th century. China, South Africa, Brazil, and South Korea are also frequently found on emerging market lists. Unfortunately, these lists, however well researched, remain forecasts rather than fact; in a developing country, the possibility for renewed instability is an ever-present risk. Egypt, for example, has long been considered one of the most stable and promising emerging markets, but descended into severe turmoil following the 2011 revolution and overthrow of leader Hosni Mubarak.

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