Developing Economy Definition

A developing economy is an economy that is in the process of industrialization and modernization. Developing economies are characterized by low per capita incomes, high levels of poverty, and poor infrastructure. They are usually classified as emerging markets or middle-income countries.

The term “developing economy” is often used interchangeably with “emerging market” or “less developed country” (LDC). However, there is no agreed-upon definition of what constitutes a developing economy. The World Bank classifies countries into four income categories: low-, lower-middle-, upper-middle-, and high-income countries. Low-income economies are defined as those with a GNI per capita of less than $1,045; lower-middle-income economies are those with a GNI per capita between $1,046 and $4,125; upper-middle-income economies are those with a GNI per capita between $4,126 and $12,745; and high-income economies are those with a GNI per capita of $12,746 or more.

The IMF classifies countries according to their level of development using an index called the country classification indicator (CCI). The CCI ranges from 0 to 1, with 0 being the least developed and 1 being the most developed.