News, Culture & Society

Why Are Emerging Markets So Important?

When it comes to the biggest economic players, the same countries keep popping up, but as emerging economies make  their mark on today’s business landscape, other regions of the world are following suit. While English remains the most widely used language for many global companies advertising emerging market job opportunities examples of which include, interest in lesser-known languages such as Chinese is growing in smaller emerging markets. This is largely due to a number of factors, from the emergence of new markets, to better access to technology, to the rise of emerging markets.

The Emerging Markets Index

The Emerging Markets Index was created to compile a list of countries that deserve investors “attention. One of the most watched indicators for emerging markets remains the growth rate of foreign direct investment (FDI) in a country’s economy.

The list includes more than 800 securities from 21 markets, representing more than 80% of the world’s total market capitalization of $1 trillion. In 2009, only ten countries accounted for less than 1% or less of global investment in these markets. Since then, the number has increased considerably and the lists cover more countries than ever before, with over 1,000 securities represented by over 800 securities in 21 markets.

In the context of the MSCI index, the panel uses its Market Classification Framework to examine the market capitalization of securities in the world’s major emerging markets. Whether or not a market is considered “emerging” is precisely defined by a combination of factors such as market size, investment potential, and market structure.

Simply put, emerging markets are developing countries or countries that are growing or fast-growing, but whose populations will typically have low-to-medium per capita incomes.

Deregulation and Reform

Economic reforms and developments have led business analysts to pay more attention to the region, with some countries and star candidates entering the economic boxing ring with the promise of rapid growth on the near horizon. Asset management firm BlackRock has called for supportive long-term demographic trends underpinned by a growing working-age population, which has only fuelled investment interest in these markets, particularly in countries such as China, India, Brazil, and South Africa.

According to a report by PwC, the world’s three largest economies will be China, the US and India by 2050. At the same time, Indonesian, Nigerian, and Vietnamese markets will be strong, and Brazil will overtake Japan to become the world’s fourth-largest economy. At this point, Turkey is forecast to have a bigger economy than Italy. According to an analysis by the International Monetary Fund (IMF) and the UN World Economic Forum (UNFPA), more than 80% of the world’s population will live in emerging economies over the next 20 years.

So why are Emerging Markets so Vital to the Global Economy?

Simply put, they cover a large part of global economic growth and a significant portion of the world’s population.

For many companies, stubborn adherence to well-established markets may be not just blinkered, but potentially foolish. This is something that internationally minded business leaders simply cannot ignore.

China and India will play an important role in promoting ICT, biotechnology and nanotechnology, which will help them stay ahead of competing economies. Meanwhile, China, India, and Brazil are expected to account for more than half of global PPP growth.

Never mind the impact of Covid-19 in 2020 which is certainly a huge shock to the global economy, the age-old mantra of “business as usual” is further removed from reality, forcing politicians to think much more deeply than they may ever have before. If ever there was a time to think outside the box and not within the box, it is now.


Comments are closed.