The concept of ‘emerging economies’ as opposed to advanced economies is multifaceted and often poorly defined. The simplest and most commonly used indicator is GDP per capita, on which the classification used by international financial institutions (IFIs) is largely based. However, if we broaden the range of indicators by structuring them according to an analysis of economic potential or country risk: 1/ China still exhibits characteristics of an emerging economy, yet is no longer classified as such given its status as an economic superpower; 2/ the distinction between advanced countries and those that have become advanced but remain classified as emerging markets by economic research departments and, in some cases, by IFIs, is no longer justified; 3/ the distinction remains relevant for other emerging markets, particularly commodity-exporting countries, including the Gulf states.
In their flagship publications (World Economic Outlook, Global Economic Prospects), the IMF and the World Bank distinguish between advanced and emerging economies, primarily on the basis of GDP per capita. The concept of an ‘emerging economy’ first appeared in the early 1980s to refer to ‘developing economies offering opportunities for investors’. It was revived in the early 2000s to refer to economies that still exhibited strong potential but appeared risky, as a consequence of the financial crises of the late 1990s[1][2]. Since then, this concept has referred alternately, or jointly, to one or other of these approaches.
The scope of emerging and developing countries has, of course, changed, and economies considered emerging in the early 1990s are no longer classified as such – in some cases for many years now – by the IMF and the World Bank. However, in most publications by the economic research departments of banks and large companies, these economies are still classified as emerging markets. These are mainly Asian countries that were once described as ‘newly industrialised’ (South Korea, Hong Kong, Singapore and Taiwan).
The aim of this editorial is to provide an objective analysis of the distinction between 1/ long-established advanced economies, 2/ formerly emerging economies that have become advanced (including the Newly Industrialised Countries of Asia and the economies of Central Europe, which, thanks to EU membership, have shown the greatest catch-up), which we shall refer to as ‘newly advanced’, and 3/ other emerging countries, based on indicators that complement per capita GDP alone[3]. This analysis focuses on two aspects: opportunities and risk[4][5].
China: a steamroller that sits uneasily with the concept of an emerging market, despite being classified as such
China remains an emerging market in terms of opportunities for businesses and investors, regardless of the indicator used: per capita GDP, but also – and above all – high growth potential despite the trend towards a slowdown since 2012; a major information and communication technology sector for the country’s economy, which the development of AI can only accelerate[6] ; and, finally, significant scope for further growth of the middle class compared with advanced countries (Table 1). Added to this are well-developed infrastructure and a competitive workforce with a good level of education.
In terms of risk, the balance also favours classification as an emerging economy. Volatility indicators (Table 2) are, admittedly, very similar to those of advanced economies, but the country is characterised by a structural budget deficit and public debt (whether or not adjusted for the government’s tax base) that are higher than in advanced economies (Table 3).
However, China must also be assessed in absolute terms, given its financial clout, the diversity and central role of its economy within Asian and global value chains, and the sheer scale of its ‘steamroller’ economy. A few figures: one percentage point of growth represents USD 200 billion, equivalent to half of South Africa’s GDP. The assets of the Chinese banking system are 1.3 times those of all European banks combined. Finally, foreign exchange reserves of its central bank (USD 3,416 bn at end-June 2026) make China a leading lender of last resort, particularly in its own currency.
Whilst the distinction between long-established advanced countries and newly advanced countries is no longer justified, it remains relevant with regard to emerging economies
Newly advanced countries still have a very marginal catch up compared with long-established advanced countries, but volatility indicators are on a par, including the exchange rate (with Hungary being the exception), and sovereign risk indicators are only marginally worse. If some of these countries are nevertheless considered to be riskier, it is due to potential or actual geopolitical risk (South Korea, Israel, Taiwan). It should be noted that, according to our analysis, Poland should be classified as a newly advanced emerging market, whilst it remains an emerging market for IFIs and economic research services.
As regards the countries considered as still emerging by both international financial institutions and economic research departments, the customary distinction between commodity-exporting countries and others remains relevant. However, in both cases, these economies exhibit, to varying degrees, the characteristics of emerging economies: a substantial gap in growth potential, an underdeveloped middle class, greater volatility in growth and inflation[7], and sovereign risk indicators that are all worse than those of advanced economies (with the exception of the structural budget balance).
Among commodity-exporting countries, a distinction should be made between the countries of the Gulf Cooperation Council (GCC) and the others. Indeed, i) the standard of living there is equivalent to that of advanced economies (if the population is limited to nationals only) and ii) the GCC countries can rely on their sovereign wealth funds to absorb shocks. Nevertheless, they share characteristics with emerging economies (low economic diversification, investment projects that may become ‘white elephants’, geopolitical risk). Finally, the ‘original sin’ (government debt denominated in foreign currencies, due to a lack of a sufficient domestic funding base in local currency) still characterises emerging commodity-exporting countries and still partly dollarised economies, such as Türkiye.
