Rethinking Emerging Economies in the 21st Century
Understanding emerging economies requires moving beyond simplistic categories and adopting an approach that considers productive capabilities, global integration, and local strengths
When a multinational decides to expand into an emerging economy, it does so for a variety of reasons. It may be attracted by the potential of new markets, lower labor costs, or strategic natural resources. Government incentives or higher growth rates typical of these economies may also be factors. But a number of questions quickly arise: Is there a universally valid list of emerging economies? Who decides which economies are “emerging” and which are not? And above all, what factors actually define these markets?
The classification of emerging economies can be a determining factor in international business strategies. However, traditional classifications are often overly simplistic, which affects companies, policymakers, and communities alike. Gaining deeper insight into these markets is essential both for those designing market entry strategies and for those shaping economic policy.
In the article “Redefining Emerging Economies: The REE Framework for Nuanced Understanding and Engagement” (AIB Insights, 2025),” I analyze 47 emerging and frontier economies between 2009 and 2021 and introduce the REE Framework (Redefine, Engage, Elevate), which incorporates key indicators to provide a multidimensional understanding of these markets. My analysis shows that metrics such as GDP fail to capture the specific realities of these economies. Instead, incorporating indicators related to productive capacities and globalization provides a better picture of their development and potential.
(Re)defining Emerging Economies
The classification of emerging economies has evolved since Antoine van Agtmael coined the term in 1981. Yet, no universally accepted list of such economies exists. Current classifications rely on criteria developed by organizations like the International Monetary Fund (IMF) or consulting firms such as MSCI and S&P, each with its own limitations. These often use one-dimensional metrics or geographic groupings that overlook the complex realities of development, leading to suboptimal business strategies and policies.
In my study, I propose an alternative method that incorporates the UNCTAD Productive Capacities Index (PCI), which covers eight dimensions—human capital, natural capital, energy, ICTs, structural change, transport, institutions, and the private sector—alongside the KOF Globalization Index, which measures economic integration, social connectivity, and political cooperation.
The REE Framework is built around three key components:
- Redefine, which calls for adopting a multidimensional assessment that goes beyond simple metrics like GDP, considering factors such as human capital development and institutional quality.
- Engage, which promotes the use of context-sensitive approaches, recognizing that markets that may appear similar can follow vastly different development trajectories.
- Elevate, which focuses on leveraging each group’s internal strengths, whether in private sector dynamism, human capital, institutional resilience, or balanced growth potential.
The classification of the 47 emerging and frontier economies analyzed between 2009 and 2021 also considered fluctuations during global recessions. Frontier economies are typically defined as those that lie between emerging markets and smaller or less developed economies. Using dynamic time warping for temporal clustering, I identified similarities in development trajectories regardless of starting points or absolute values. This approach embraces complexity and avoids the oversimplification of traditional classifications.
Based on this analysis, four groups were identified:
- Steady risers: Economies showing gradual and balanced growth, such as China, India, Vietnam, Russia, Nigeria, and the UAE. In Latin America, Colombia stands out in this group.
- Robust accelerators: Countries with strong performance across multiple sectors, including Poland, Thailand, Malaysia, and Turkey. In the region, Chile, Mexico, and Peru are key examples.
- Talent-rich challengers: Nations with exceptional human capital that still face economic challenges, such as Egypt, Greece, Tunisia, and Ukraine; Argentina represents this group in Latin America.
- Resource rollercoasters: Countries with institutional resilience amid the volatility caused by reliance on raw materials, including Slovakia, South Africa, and Zambia. Brazil is the Latin American representative.
This analysis shows that emerging and frontier economies follow different development paths, which cannot be fully understood through traditional classifications based solely on geography or income levels.
The classification provides a way to design tailored development strategies, form “development affinity groups,” and create specific metrics and policies for each trajectory, taking into account institutional context and internal advantages.
Through this lens, multinationals can identify which elements of their business model must be adapted—from product localization to partnerships and supply chains—while policymakers gain a structured and complementary approach to engage with these complex realities and design better-adapted strategies.
The author is Professor in the Department of Strategy and Leadership at EGADE Business School.
