NRI Papers
No. 187 August 1, 2013
  What Are Emerging Economies?
— Stage Shifts
 
Takeshi MORI

The world's countries are classified into eight economic stages based on gross domestic product (GDP) growth rate, per capita GDP and size of GDP. Among these stages, countries that have a higher GDP growth rate and a lower per capita GDP relative to the global average are defined as those in the stage of emerging economies (the eight-stage model).

In most cases, the stage shift from being a low-growth developing economy to being an emerging economy is achieved by pursuing an export-based growth scenario. Based on this scenario, the government adopts the policies needed to address issues such as the identification of strategic export industries and how to procure (1) labor, (2) capital (funding) and (3) technology that are necessary factors of production in the selected industries either from home or abroad.

A country that has grown into an emerging economy will find itself at a stage shift crossroads where it can either take one step further forward to become a growing advanced economy, or a step back to being a low-growth developing economy. If a country continues economic growth and stays at the emerging economy stage for an extended period, it is likely to gradually lose its cost competitiveness, face issues such as income inequality that ultimately suppress growth, or might experience default on external debt, which could stop economic growth in its tracks.

Therefore, the government of an emerging economy needs to create new competitive advantages, and at the same time, eliminate the factors that can suppress growth, which is a task that is much more difficult than achieving the shift from a low-growth developing economy to an emerging economy.

Japan, which is now a mature advanced economy, should encourage the growth of emerging economies with which it has mutually beneficial relationships based on common strategic interests by investing its stocks such as the assets and technologies that it has accumulated. At the same time, the perspective of aiming for Japan's own growth by increasing its return on assets (ROA) is important.

Contents
I Classification of Stages of the World's Countries and Positioning of Emerging Economies
II Stage Shift from Being a Low-Growth Developing Economy to Being an Emerging Economy
III Stage Shift Turning Points Faced by Emerging Economies
IV How Stage Shifts Vary between Large and Small Countries
V Stage Shifts and Japan

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