Best Emerging Markets in 2014

The emerging markets can present great opportunities to investors, yet there’s plenty of risk. Remember the BRICs? Only one is still worth considering — the rest have struggled in the last year.

The beginning of 2014 has been bad for the emerging markets on concern of China’s slowing economic growth. Plus, the prospect of further cuts in U.S. stimulus has created a slight aversion to emerging markets, according to Bloomberg.

But markets always come back, and investors can benefit greatly if they’re ready. Bloomberg Markets recently compiled a list of the most exciting emerging markets, basing the ranking on overall investment climate projected through 2015.

Using 19 different indicators, Bloomberg awarded points to the emerging markets and then ranked them based on their final total score between zero and 100. Sources of data were Bloomberg, the International Monetary Fund, the Economist Intelligence Unit (EIU), Transparency International, the World Bank and the World Economic Forum.

Only one of the BRICs actually made the top 10, with the remaining three landing at spots 14, 15 and 21 out of 22. And while the new term people are throwing around is MINT, none of those countries landed in the top 10 either (and one of them didn’t even make the top 22).

Here are the 10 best emerging markets for 2014:

10. Czech Republic

Score: 52.63

GDP growth 2014-2015: 2.1%

Inflation rate 2014-2015: 1.65%

Current corruption score: 48

Current EIU political risk score: 32

Wenceslas Square in Prague. Photo by Peter Stehlik.

The Czech Republic has the lowest inflation rate not just in the top 10, but in all 22 emerging markets. In fact, the country is the only with inflation below 2%. But it also has the lowest GDP growth. In fact, even the U.S. is expected to do better with GDP growing by 2.5% in 2014, according to the International Business Times.

9. Poland

Score: 53.24

GDP growth 2014-2015: 3.15%

Inflation rate 2014-2015: 2.25%

Current corruption score: 60

Current EIU political risk score: 24

Old Market Square in Poznań. Photo by Lvova Anastasiya.

The higher the corruption score, the cleaner the country, which means Poland has one of the best scores in the top 10 emerging markets. Only one other country scored better. However, Poland’s political risk score isn’t great—according to EIU, the government is prone to bouts of instability as the center-right political party, Civic Platform, has historically low approval ratings.

8. Latvia

Score: 56.30

GDP growth 2014-2015: 4.13%

Inflation rate 2014-2015: 2.8%

Current corruption score: 53

Current EIU political risk score: 32

Riga Old Town. Photo by David Holt.

Unfortunately, Latvia, like other European countries, has a very high youth unemployment rate with 28% of those ages 15 to 25 unemployed and 15% of the entire country. Latvia isn’t particularly innovative, ranked behind Estonia and South Africa, and compared to the rest of Europe, Latvia has one of the worst five-year outlooks.

7. Peru

Score: 57.26

GDP growth 2014-2015: 5.53%

Inflation rate 2014-2015: 2.6%

Current corruption score: 38

Current EIU political risk score: 40

Downtown marketplace.

Peru is one of the most corrupt countries in the top 10 emerging markets the country doesn’t rank very well as a good place to do business, according to a Bloomberg ranking. Last year Peru ranked fourth on this list, and in 2013 real GDP growth was estimated at 5.5%.

6. Panama

Score: 58.78

GDP growth 2014-2015: 6.7%

Inflation rate 2014-2015: 4.15%

Current corruption score: 35

Current EIU political risk score: 40

Panama City skyline. Photo by Mario Roberto Duran Ortiz.

While Panama has the second-highest GDP growth projection for 2014-2015, it is also has the tenth highest inflation in the world. Like Peru before it, Panama doesn’t rank well for doing business, which might be partially explained by the fact that it ties for the worst corruption score in the top 10 emerging markets.

5. Thailand

Score: 58.97

GDP growth 2014-2015: 4.5%

Inflation rate 2014-2015: 2.65%

Current corruption score: 35

Current EIU political risk score: 54

Bangkok. Copyright Terence Ong.

Peru ties with Thailand for the worst corruption score in the top 10 emerging markets. This may be one of the best emerging markets, and Thailand may have one of the best GDP growth rates, but it’s also aging quickly, according to Bloomberg. However, Thailand has an incredibly low jobless rate: 0.9%, far better than any other country on this list.

4. Chile

Score: 59.26

GDP growth 2014-2015: 4.33%

Inflation rate 2014-2015: 2.9%

Current corruption score: 71

Current EIU political risk score: 26

Valparaiso

Chile’s corruption score is the best out of the top 10 emerging markets and is nearly the same the America’s, but Chile also has the second-highest political risk. Former President Michelle Bachelete will take office for four years, and although her reform proposals are left-leaning, the EIU points out that she selected a moderate cabinet.

In addition to having strong GDP growth, Chile has one of the most efficient health care systems and an unemployment rate of 6.4%.

3. Malaysia

Score: 62.04

GDP growth 2014-2015: 5%

Inflation rate 2014-2015: 3.1%

Current corruption score: 50

Current EIU political risk score: 30

Kuala Lumpur

Malaysia had the twelfth best GDP growth in 2012 at 5.61%. In fact, only two other top emerging markets had better GDP growth than Malaysia’s. Last year, Malaysia ranked sixth for the top emerging markets, so it has climbed up a bit. But, the country has reported rising inflation and now Malaysia’s currency is at the weakest in three years.

2. South Korea

Score: 68.44

GDP growth 2014-2015: 3.53%

Inflation rate 2014-2015: 2.55%

Current corruption score: 55

Current EIU political risk score: 38

Seoul

Emerging market stocks have had a tough start in 2014. Since South Korea’s growth has been fueled by exports, the country is vulnerable to global volatility, Bloomberg pointed out. The government has recorded revenue surpluses for every year since 2000 with the only exception being 2009. Bloomberg reported that this year the government plans a 2.5% increase in spending.

But the good news is that South Korea leads the world in innovation, according to another Bloomberg ranking.

1. China

Score: 69.61

GDP growth 2014-2015: 7.35%

Inflation rate 2014-2015: 3.15%

Current corruption score: 40

Current EIU political risk score: 54

Shanghai

Perhaps it’s no real surprise that China continues to show great promise. Despite the fact that China’s economy has been showing new signs of weakness, Bloomberg still ranks it as the top emerging market.

In 2013 the country expanded at the same pace as in the previous year (7.7%) and it’s expected to slow to 7.4% in 2014. It has emerged as the only strong consideration of the BRICs since Stander & Poor’s may cut India’s credit rating to junk, Brazil fell 0.5% in the third quarter of 2013 and Russia’s growth has decelerated or stayed flat every quarter since Vladimir Putin won reelection in March 2012, according to Bloomberg.