Gross Domestic Product (GDP) represents an estimate of a country’s total value of finished goods and services. It considers these goods and services over a specific period, usually every year. Overall, GDP is an indicator of a country’s total economic activity. High GDPs represent higher production of goods and services.
For some countries, GDP may remain constant or have minimal movement over a period. These usually include developed or stable countries. For others, however, the GDP rate may fluctuate significantly. Usually, these consist of emerging markets or countries. Before understanding emerging market GDP growth, it is crucial to understand what emerging markets are.
What is an Emerging Market?
Emerging markets are economies that have similar characteristics as developed economies. However, some factors prevent their classification as a developed economy. In emerging markets, the per capita income is low to medium. These nations also become a part of the global market with their growth. There are several characteristics that emerging markets exhibit.
In emerging markets, the trading volume usually grows. Similarly, the economy attracts investors from around the globe. One reason for this is the increase in the liquidity of both equity and debt markets in the nation. However, these countries still need regulations. One characteristic of emerging markets is the development of enhanced financial regulations. It, in turn, helps investors gain more confidence in its investment markets.
How do Emerging Markets work?
There are no specific requirements for a nation to be an emerging market. Usually, however, countries that go through significant positive economic changes may qualify as emerging markets. One feature that these countries exhibit is simulating developing countries. However, these changes are unquantifiable. Instead, most experts look at the economy’s GDP growth to establish whether it classifies as an emerging market.
There are several characteristics that differentiate emerging markets from others. Usually, if a country exhibits these characteristics, it may classify as an emerging market. The primary feature of these markets is low or medium per capita income. Usually, this income is lower than average. It occurs because of rapid growth in the economy.
Emerging markets also illustrate high volatility. It comes due to the rapid social changes that occur in the economy. Similarly, the country’s currency exchange rates may also fluctuate rapidly due to it. Despite these, emerging markets experience active economic growth. On top of that, these countries have a substantial potential for growth in the future as well.
What is Emerging Market GDP Growth?
GDP growth represents the difference between a nation’s GDP over a specific period. The GDP growth rate for most emerging markets has been over 4%. This rate is higher than the GDP growth rate for developed countries, which stayed low at 2%-3%. Among the emerging markets, countries in Asia showed the best GDP growth.
In Asia, the two largest emerging markets are India and China. These two countries are responsible for over 35% of the world’s population and labour force. Outside Asia, countries such as Brazil and Russia are on top of the list. These four countries also account for 30% of global production. Together, emerging market economies make up almost 70% of the world’s total GDP growth.
Conclusion
Emerging markets include countries that show similar characteristics as developed nations. These countries are in the process of undergoing a substantial change. The emerging-market GDP growth rate is usually 4% or above.
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