What are "emerging markets"?

Emerging markets refer to countries with developing economies that exhibit potential for rapid economic growth, often characterized by higher risks in investment. These markets are in transition from underdeveloped to more industrialized and market-oriented economies. They can experience significant growth due to factors such as increased foreign investment, expanding consumer markets, and improvements in regulatory frameworks.

One of the defining features of emerging markets is their rapid economic growth potential, which distinguishes them from developed economies that tend to have slower growth rates and more stable market conditions. Investors are often drawn to emerging markets because they can offer higher returns compared to established markets, but these investments also come with increased risks due to factors like political instability, less sophisticated financial systems, and fluctuating market conditions.

Developed economies typically lack the growth pace associated with emerging markets, which is why they do not fit this definition. Likewise, countries that primarily export technology and services do not encapsulate emerging markets as they may already have established economies with sophisticated industries. Finally, being part of economic unions does not determine whether a country is an emerging market, as union membership does not inherently correlate with economic growth potential.