What Makes a Country Emerging?
An emerging country typically refers to a nation that is progressing toward becoming more advanced economically, but has not yet reached the status of a developed market. These economies often feature rapid industrialization, growing middle classes, and increasing integration into global trade and capital flows. The classification matters because it shapes how investors access these markets through dedicated funds, indices, and risk assessments.
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The term is not a formal legal or economic designation, but rather a practical label used by institutional investors, rating agencies, and international organizations. Multiple providers maintain their own list of emerging countries, and the composition can differ meaningfully from one list to the next.
Major Classifications and Who Publishes Them
Several organizations define emerging markets in different ways, which means the list of emerging countries can vary depending on the source.
MSCI Emerging Markets Index
MSCI is one of the most widely referenced providers. Its Emerging Markets Index is used by thousands of funds and exchange-traded products. MSCI periodically reviews its constituents, and countries can be reclassified between developed, emerging, and frontier markets based on criteria such as income per capita, market depth, liquidity, and capital account openness.
FTSE Russell Classifications
FTSE Russell maintains its own taxonomy, including the FTSE Emerging Index. It uses factors like World Bank income classification, market capitalization, and trading accessibility. Changes to the FTSE list of emerging countries can affect fund tracking and passive investment flows.
The World Bank and IMF
The World Bank classifies economies into four income groups: low-income, lower-middle-income, upper-middle-income, and high-income. While the World Bank does not produce an explicit list of emerging countries, its upper-middle-income and some lower-middle-income classifications overlap heavily with what investors typically call emerging markets. The International Monetary Fund uses similar groupings in its World Economic Outlook, often referring to emerging market and developing economies as a combined bloc.
Examples Frequently Found on the List
Although the exact composition shifts, a core group of countries appears on most mainstream emerging market lists. These include Brazil, Russia, India, China, and South Africa—the so-called BRICS nations—along with Mexico, Indonesia, Turkey, Saudi Arabia, and Poland. Taiwan and South Korea are sometimes included, and their classification has evolved over time as their economies and capital markets have deepened.
Other countries that frequently appear include Thailand, Malaysia, the Philippines, Vietnam, Colombia, Peru, Egypt, Nigeria, and Ghana. Some of these are more volatile or less liquid than the larger names, which affects how they are weighted in benchmarks and funds.
Frontier vs. Emerging Markets
It is useful to distinguish emerging countries from frontier markets. Frontier markets are typically smaller, less liquid, and further along the path of economic development than the most established emerging economies. Countries like Bangladesh, Kenya, Morocco, and Tunisia often appear in frontier indices rather than emerging ones, though the boundary is porous and depends on the provider.
The distinction matters for risk management. Emerging markets tend to offer greater liquidity, more mature regulatory frameworks, and larger market capitalizations, while frontier markets can provide diversification but also carry higher political and currency risk.
Why the List Matters
The classification of a country as emerging or developed influences several practical outcomes:
- Access to passive investment products tied to major benchmarks
- Different risk premiums and volatility profiles in asset pricing models
- Varied treatment of capital controls and currency convertibility
- Implications for sovereign credit ratings and borrowing costs
For institutional investors, staying current with the list of emerging countries is an operational necessity, because reclassifications can trigger mandatory buying or selling by index-tracking funds. For individual investors, understanding the underlying criteria helps in evaluating whether an emerging market allocation fits a portfolio's goals and risk tolerance.