Economies around the world are classified into different categories based on their level of economic development, growth, and other characteristics. There are three different types of economies: developing, emerging and advanced. Policymakers and economists use these classifications to understand economic characteristics, challenges and growth patterns.

What are Developing Economies?

Developing economies are characterised by low levels of economic development, with a significant portion of the population living in poverty. As a result of low economic development, these economies generally have low per capita incomes and limited infrastructure. Additionally, most developing economies are reliant on agriculture and primary commodities (necessary survival goods) as they are not technologically advanced enough to produce any other goods or services.

As of 2020, the World Bank classified countries with a GNI per capita of $1,035 USD or less to be considered developing economies. 27 countries fell under this category. Many examples of developing economies are located in sub-Saharan Africa. This includes countries such as Niger, Mali and Burkina Faso. These countries have common themes of poverty, low levels of productivity and underdeveloped infrastructure.

This can be demonstrated by the following graph which presents, on average, the HDIs of countries that are considered to be developing, emerging and advanced.

From the graph, we can see that the HDI levels of advanced economies are significantly higher than those of developing and emerging economies.

What are Emerging Economies?

Emerging economies are nations that are currently experiencing rapid industrialisation, growing economic sectors, and increasing influence on global affairs. These countries are considered to be transitioning from developing to advanced economies. Characterised by rising incomes, expanding middle classes, and increasing integration into the global economy, emerging economies generally have a growing manufacturing sector, improving infrastructure, and a more diversified economic base compared to developing economies. Although emerging economies seem to be improving with high rates of economic growth, economic inequalities are still present.

Countries such as Brazil, Russia and India are considered to be emerging economies. As of 2023, China and India alone account for about half of global economic growth, highlighting the increasing importance of emerging economies to global trade and the global economy. This instance brings to light a curious situation. China, being the world's second-largest economy with a GDP of $17.89 trillion USD, is one of the world's biggest exporters. So how can an economy this big not be considered advanced? This is because of its low economic development. In China, there is a major disparity between lower-class and upper-class individuals. This was evident during COVID, where lower-class factory workers were forced to sleep and essentially live in their factories, to maintain employment.

What are Advanced Economies?

Advanced economies are considered to be the most developed economies in the world. They are characterised by high levels of per capita income, advanced technology, and a dominant service sector. They offer high standards of living, well-developed infrastructure, and efficient health and educational systems. These economies are often market-oriented and have significant global economic, political, and cultural influence.

For example, the United States, Japan, Germany and Australia are considered to be advanced economies. These countries are all part of the international organisation OECD. In 2021, the countries part of OECD accounted for about 46% of global GDP, despite only making up 18% of the world's population. This shows the profound significance advanced economies have on the global economy, specifically in trade.

However, advanced economies still face various sets of challenges. These include ageing populations, rising income inequality and the need to maintain competitiveness in an increasingly globalised world. Policymakers in these countries often focus on promoting innovation, investing in education and skills development, and ensuring the sustainability of social protection systems.