What are emerging markets?

Emerging markets are economies undergoing economic development, industrialisation and deeper integration into international trade and financial systems. They tend to occupy an intermediate position between developing economies and advanced economies.. 

The International Monetary Fund (IMF) groups the global economy into advanced economies and emerging market and developing economies, although it stresses that this classification is not based on a single strict set of economic criteria. Factors such as income per capita, export diversification and integration into the global financial system help inform the distinction.

There is therefore no universal definition of an emerging market. International institutions, development organisations and financial index providers use different criteria depending on their objectives. While organisations such as the IMF and the World Bank focus primarily on economic and development indicators, financial index providers may place greater emphasis on market accessibility, liquidity and investability.

MSCI, for example, evaluates equity markets according to economic development, size and liquidity requirements, and market accessibility. This helps explain why a country can be considered emerging from an investment perspective even when some of its socioeconomic indicators resemble those of more advanced economies.

Understanding these differences is particularly relevant for companies planning international expansion. Decisions about market selection, positioning and commercial strategy require professionals to assess economic indicators alongside consumer behaviour and competitive conditions, areas also addressed within programmes such as the Master in Marketing and Sales Management.

Characteristics of Emerging Markets

Emerging markets generally combine significant growth potential with higher economic and financial uncertainty than mature economies. Their characteristics vary considerably from country to country, which means that the label should not be interpreted as describing a homogeneous group.

One common feature is the transformation of the productive structure. Economies may move progressively from activities with lower added value towards manufacturing, technology and advanced services. This process is often accompanied by infrastructure investment, urbanisation and the expansion of domestic consumer markets.

Another relevant characteristic is increasing integration into international capital markets. Companies and governments can gain greater access to foreign investment and financing, while local currencies and financial assets become more exposed to changes in global liquidity, interest rates and investor sentiment.

Digitalisation is also reshaping many emerging economies. According to UN Trade and Development (UNCTAD), developing countries attracted around $531 billion in announced greenfield investment projects related to the digital economy between 2020 and 2024. Almost 80% of that investment was concentrated in ten economies, illustrating both the scale of the opportunity and the significant differences that exist within the developing world.

Emerging markets can therefore share broad characteristics while following very different development paths. Institutional quality, infrastructure, demographic trends, access to capital and technological adoption all influence their economic trajectory.

Why Are Emerging Markets Important?

Emerging markets have become increasingly relevant to companies, governments and investors because of their role in international production, consumption, trade and investment. Their importance extends beyond GDP growth and includes their contribution to global supply chains, digital transformation and the energy transition.

Their Role in the Global Economy

Emerging and developing economies represent a major component of global economic activity. Large economies such as China, India, Brazil, Mexico and Indonesia play important roles in manufacturing, services, energy, agriculture and international trade.

Foreign direct investment provides another measure of this relevance. UNCTAD's World Investment Report 2025 showed that the global investment environment remained challenging in 2024. When volatile financial conduit flows are excluded, global FDI declined by 11%, while developing economies experienced very different trends depending on their region.

Asia remained the largest recipient region for foreign direct investment, despite a moderate decline in 2024. Southeast Asia performed particularly strongly, with FDI increasing by 10% to approximately $225 billion, according to UNCTAD.

Emerging economies are also increasingly important as sources of international capital. Multinational companies originating in developing markets invest beyond their domestic borders, participate in acquisitions and establish operations across both developing and advanced economies.

For European companies, these relationships are connected to broader international investment initiatives. The European Union's Global Gateway strategy focuses on investment in digital infrastructure, climate and energy, transport, health, education and research. The European Commission reports that Team Europe had mobilised more than €306 billion through the initiative since 2021.

Opportunities for Business Expansion

For businesses, emerging markets can provide access to expanding consumer segments and new sources of demand. Rising urbanisation, technological adoption and increases  in household purchasing power can create opportunities across sectors such as consumer goods, financial services, telecommunications, renewable energy and e-commerce.

Companies can also use international expansion to diversify their geographic exposure. Operating across several markets may reduce dependence on demand conditions in one country, although diversification itself does not eliminate political, financial or operational risks.

Digitalisation has expanded the range of potential opportunities. UNCTAD identifies India, Malaysia, Indonesia, Singapore, Vietnam and China among the Asian economies receiving a significant share of digital greenfield investment in developing regions. Brazil and Mexico are prominent destinations in Latin America, while Egypt and Nigeria are among the leading African destinations.

Success in these markets depends on detailed analysis rather than assumptions based on the emerging-market label. Pricing, distribution channels, regulation, cultural preferences and local competition can vary significantly between countries and even between regions within the same country.

Examples of Emerging Markets Around the World

There is no single definitive list of emerging markets because classifications vary according to the institution and methodology used. Nevertheless, several economies in Asia, Latin America, Africa and the Middle East are commonly included within emerging or developing market frameworks.

Regional analysis is useful because neighbouring economies often share trade relationships and investment trends, although their individual characteristics may differ considerably.

Emerging Markets in Asia

Emerging markets in Asia include some of the world's largest and most rapidly transforming economies. China and India occupy particularly significant positions, while Southeast Asian economies such as Indonesia, Malaysia, the Philippines, Thailand and Vietnam have become increasingly integrated into regional and global supply chains.

Digital investment illustrates the region's importance. According to UNCTAD, six Asian economies, India, Malaysia, Indonesia, Singapore, Vietnam and China, accounted for more than 60% of announced digital greenfield investment directed towards developing economies between 2020 and 2024.

The region combines extensive manufacturing capacity with expanding technology ecosystems and large consumer markets. E-commerce, digital payments, mobility and advanced manufacturing have become important areas of business development.

The opportunities differ considerably by country. Companies evaluating Asian markets therefore need to consider factors including regulatory requirements, market entry barriers, local partnerships, consumer preferences and the maturity of distribution networks.

Emerging Markets in Latin America

Emerging markets in Latin America include major economies such as Brazil, Mexico, Colombia, Chile, Peru and Argentina, although their classification can differ depending on the organisation or financial index consulted.

The region has strategic importance because of its natural resources, agricultural production, industrial capacity and expanding digital economy. Countries such as Chile, Argentina and Peru also occupy important positions in global supply chains for minerals used in electrification and the energy transition, particularly copper and lithium.

Investment conditions, however, vary significantly. UNCTAD reported that foreign direct investment into Latin America and the Caribbean fell by 12% in 2024, even though announcements of greenfield projects increased in several major economies, including Argentina, Brazil and Mexico.

Digital investment offers another area of potential development. Brazil and Mexico were the leading Latin American destinations for announced digital greenfield investment among developing economies during the 2020-2024 period analysed by UNCTAD.

For European and Spanish companies, Latin America can also offer commercial advantages derived from established economic relationships and, in many markets, linguistic and cultural connections. Market-entry decisions still require country-specific analysis of regulation, demand and competitive conditions.

Emerging Markets in Africa and the Middle East

Africa and the Middle East contain economies at very different stages of economic and financial development. Markets such as South Africa, Egypt and Morocco combine established industrial or service sectors with growing investment in energy, infrastructure and digital technologies.

Africa recorded particularly strong foreign investment growth in 2024, according to UNCTAD, although investment remained concentrated in a relatively small number of projects and destinations. Digital development is another important trend, with Egypt and Nigeria among Africa's leading destinations for digital greenfield projects.

In the Middle East, economic diversification programmes have encouraged investment outside traditional hydrocarbon industries. Saudi Arabia and the United Arab Emirates have become major destinations for digital investment in West Asia, according to UNCTAD's analysis of the digital economy.

Renewable energy, transport infrastructure, telecommunications and digital services offer areas of potential business development across both regions. Nevertheless, companies must evaluate each market independently because regulatory systems, infrastructure quality, political conditions and access to finance can differ substantially.

Advantages and Risks of Investing in Emerging Markets

Investing or expanding into emerging markets can offer growth and diversification opportunities, although these potential benefits are accompanied by risks that require careful assessment.

One advantage is exposure to economies where structural changes can support new business activity. Population growth, urbanisation, infrastructure investment and rising digital adoption may generate opportunities that are less common in mature markets. Companies can also access new customer groups, suppliers and production networks.

International investors may use emerging-market assets to broaden portfolio diversification. Companies pursuing international expansion can similarly diversify their sources of revenue and reduce dependence on a single domestic market.

The risk profile is equally important. Currency volatility can affect the value of investments and the profitability of international operations. Exchange-rate movements can alter import costs, export competitiveness and the value of revenues when converted into another currency.

Regulatory and institutional conditions can create additional uncertainty. Changes to taxation, foreign investment rules, trade regulations or capital controls may affect operating models. Companies therefore need robust legal, financial and country-risk analysis before entering a market.

Liquidity can also become a concern during periods of global financial stress. Investors may reduce their exposure to emerging-market assets when risk appetite falls, potentially producing sharp movements in currencies, bonds and equities.

There are also differences in the availability and consistency of corporate and sustainability information. Businesses and investors increasingly need to evaluate ESG reporting, environmental exposure and governance standards when assessing long-term projects.

These risks do not affect every emerging economy in the same way. The term covers countries with very different institutions, economic structures and financial systems. A useful approach is therefore to assess each market individually, considering its macroeconomic conditions, regulatory environment, competitive landscape and relationship with international capital flows.

Emerging markets occupy an increasingly significant position in global business. They combine expanding consumer markets, industrial development, technological adoption and growing participation in international investment with higher levels of economic, regulatory and financial uncertainty in many cases. Understanding these differences allows companies and investors to identify opportunities while making more informed decisions about market entry, international expansion and capital allocation.