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Study course “economies of foreign countries” Lecturer – iermakova Olga Anatoliivna, PhD in Economics content

1) Countries classification

2) Developed countries:

the USA

China

Japan

European Union

Germany

3) Emerging Markets:

Russia

Saudi Arabia

South Africa

4) Transitional economies:

Ukraine

Georgia

5) Challenges faced by the world economy

I. Countries classification

The World Bank’s main criterion for classifying economies is gross national income (GNI) per capita. In previous editions of our publications, this term was referred to as gross national product, or GNP. Based on its GNI per capita, every economy is classified as low income, middle income (subdivided into lower middle and upper middle), or high income. Other analytical groups based on geographic regions are also used. The Bank's analytical income categories (low, middle, high income) are based on the Bank's operational lending categories (civil works preferences, IDA eligibility, etc.).

Geographic region: Classifications and data reported for geographic regions are for low-income and middle-income economies only. Low-income and middle-income economies are sometimes referred to as developing economies. The use of the term is convenient; it is not intended to imply that all economies in the group are experiencing similar development or that other economies have reached a preferred or final stage of development. Classification by income does not necessarily reflect development status.

Income group: Economies are divided according to 2011 GNI per capita, calculated using the World Bank Atlas method. The groups are: low income, $1,025 or less; lower middle income, $1,026 - $4,035; upper middle income, $4,036 - $12,475; and high income, $12,476 or more.

Lending category: IDA countries are those that had a per capita income in 2011 of less than $1,195 and lack the financial ability to borrow from IBRD. IDA loans are deeply concessional—interest-free loans and grants for programs aimed at boosting economic growth and improving living conditions. IBRD loans are noncessional. Blend countries are eligible for IDA loans because of their low per capita incomes but are also eligible for IBRD loans because they are financially creditworthy.

Notes: Income classifications are set each year on July 1. These official analytical classifications are fixed during the World Bank's fiscal year (ending on June 30), thus countries remain in the categories in which they are classified irrespective of any revisions to their per capita income data. Taiwan, China, is also included in high income.

The development of a country is measured with statistical indexes such as income per capita (per person) (gross domestic product), life expectancy, the rate of literacy, et cetera. The UN has developed the Human Development Index (HDI), a compound indicator of the above statistics, to gauge the level of human development for countries where data is available.

A developed country or "more developed country" (MDC), is a sovereign state that has a highly developed economy and advanced technological infrastructure relative to other less developed nations. Most commonly the criteria for evaluating the degree of economic development is gross domestic product (GDP), the per capita income, level of industrialization, amount of widespread infrastructure and general standard of living. Which criteria are to be used and which countries can be classified as being developed are subjects of debate.

Developed countries have post-industrial economies, meaning the service sector provides more wealth than the industrial sector. They are contrasted with developing countries, which are in the process of industrialization, or undeveloped countries, which are pre-industrial and almost entirely agrarian. According to the International Monetary Fund, advanced economies comprise 65.8% of global nominal GDP and 52.1% of global GDP (PPP) in 2010. In 2011, the ten largest advanced economies by either nominal GDP or GDP (PPP) are the United States, Japan, Germany, France, the United Kingdom, Italy, Canada, Spain and South Korea.

A developing country, also called a less-developed country (LDC), is a nation with a low living standard, undeveloped industrial base, and low Human Development Index (HDI) relative to other countries.

Countries with more advanced economies than other developing nations, but without the signs of a developed country, are categorized under the term newly industrialized countries.

Developing countries are, in general, countries that have not achieved a significant degree of industrialization relative to their populations, and have, in most cases, a medium to low standard of living. There is a strong correlation between low income and high population growth.

The terms utilized when discussing developing countries refer to the intent and to the constructs of those who utilize these terms. Other terms sometimes used are less developed countries (LDCs), least economically developed countries (LEDCs), "underdeveloped nations" or Third World nations, and "non-industrialized nations". Conversely, developed countries, most economically developed countries (MEDCs), First World nations and "industrialized nations" are the opposite end of the spectrum.

To moderate the euphemistic aspect of the word developing, international organizations have started to use the term less economically developed country (LEDCs) for the poorest nations—which can, in no sense, be regarded as developing. That is, LEDCs are the poorest subset of LDCs. This may moderate against a belief that the standard of living across the entire developing world is the same.

The concept of the developing nation is found, under one term or another, in numerous theoretical systems having diverse orientations — for example, theories of decolonization, liberation theology, Marxism, anti-imperialism, and political economy. Another important indicator is the sectoral changes that have occurred since the stage of development of the country. On an average, countries with a 50% contribution from the Scondary sector of Manufacturing have grown substantially. Similarly countries with a tertiary Sector stronghold asl osee greater rate of Economic Development.

The "BRIC" countries, Brazil,Russia, India, and China are difficult to categorize because of their rapid economic development in recent years. However, they are still not developed countries.

The category of newly industrialized country (NIC) is a socioeconomic classification applied to several countries around the world by political scientists and economists.

NICs are countries whose economies have not yet reached Developed Country status but have, in a macroeconomic sense, outpaced their developing counterparts. Another characterization of NICs is that of nations undergoing rapid economic growth (usually export-oriented). Incipient or ongoing industrialization is an important indicator of a NIC. In many NICs, social upheaval can occur as primarily rural, or agricultural, populations migrate to the cities, where the growth of manufacturing concerns and factories can draw many thousands of laborers.

NICs usually share some other common features, including:

• Increased social freedoms and civil rights.

• Strong political leaders.

• A switch from agricultural to industrial economies, especially in the manufacturing sector.

• An increasingly open-market economy, allowing free trade with other nations in the world.

• Large national corporations operating in several continents.

• Strong capital investment from foreign countries.

• Political leadership in their area of influence.

• Rapid growth of urban centers and population.

A transition economy or transitional economy is an economy which is changing from a centrally planned economy to a free market. Transition economies undergo economic liberalization, where market forces set prices rather than a central planning organization. In addition to this trade barriers are removed, there is a push to privatize state-owned businesses and resources, and a financial sector is created to facilitate macroeconomic stabilization and the movement of private capital. The process has been applied in China, the former Soviet Union and Communist bloc countries of Europe, and many third world countries and detailed work has been undertaken on its economic and social effects.

The transition process is usually characterized by the changing and creating of institutions, particularly private enterprises; changes in the role of the state, thereby, the creation of fundamentally different governmental institutions and the promotion of private-owned enterprises, markets and independent financial institutions. In essence, one transition mode is the functional restructuring of state institutions from being a provider of growth to an enabler, with the private sector its engine. Another transition mode is change the way that economy grows and practice mode. The relationships between these two transition modes are micro and macro, partial and whole. The truly transition economics should include both the micro transition and macro transition. Due to the different initial conditions during the emerging process of the transition from planned economics to market economics, countries uses different transition model. Countries like P.R.China and Vietnam adopted a gradual transition mode, however Russia and some other East-European countries, such as the former Socialist Republic of Yugoslavia, used a more aggressive and quicker paced model of transition.