Emerging Economies and Financing of SMEs

Emerging Economies

Emerging economies are those “low-income, rapid-growth countries using economic liberalization as their primary engine of growth” (Hoskisson, Eden, Lau, & Wright, 2000, p.249) and they differ significantly from developed economies in terms of institutional framework in which businesses operate. Economically, emerging economies usually have higher GPD growth and lower GDP per capita, compared with developed economies. For example, over the last decade between 2006 and 2015 (Table 1), countries with low to middle income had an average GDP growth at 5.66% annually, higher than that of countries with high income (1.37%) and this is especially pronounced in East Asia and Pacific countries which has an average annual GDP growth rate at 8.48%. Table 1 also shows that high income countries have a much higher GDP per capita (US$40,000) than that of low income countries ($532). Due to economic globalisation, the variation in export has become narrow between emerging (low to middle income countries) and developed (high income) economies, ranging from 20% (Latin and Caribbean countries) to 34% (Middle East and North African countries).

Source: Data are from World Bank.