WHAT IS 'Mature Economy'

Mature economy is the economy of a nation with a stable population and slowing economic growth. A population has stabilized or is in decline when the birth rate is equal to or less than the mortality rate.

BREAKING DOWN 'Mature Economy'

Mature economy is one that has reached an advanced stage of development, categorized by slowing gross domestic product (GDP) growth, decreased spending on infrastructure, and a relative increase in consumer spending.

A mature economy with low population growth and generally low inflation results in reduced pressure to create new jobs since the workforce is not increasing. At the same time, in a mature economy there is enough growth for the economy to financially support retirees as they age and need more care.

Many of Western Europe's economies are considerably more mature than that of the United States, and are in marked contrast to the faster growing economies of the Far East.

Mature Economy Compared to an Emerging Market Economy

In contrast to a mature economy where both population and economic growth have stabilized, an emerging market economy refers to a nation’s economy that is progressing toward becoming more advanced, usually by means of rapid growth and industrialization. These countries experience an expanding global role both economically and politically.

Emerging market economies have lower per-capita incomes, higher unemployment rates, more political instability and lower levels of business or industrial activity than mature economies. However, emerging market economies also typically have much higher economic growth rates. Not everyone agrees entirely on which countries are emerging markets, but less developed nations throughout Asia, Africa, Eastern Europe and Latin America are generally considered to be emerging market economies.

Because their stocks can be quite volatile, emerging market economies carry a much higher risk for investing than mature economies. Anything from inflationary pressures to rising interest rates to signs of a global economic downturn could send emerging markets tumbling. Other unique risks for emerging market investment include political instability, currency fluctuations and changes in regulatory policy.

While emerging market economies carry more risk than mature economies, they also include potential for rapid economic growth and therefore higher returns. Investment in a mature economy is weighted more towards consumption and quality of life, and less towards infrastructure and other fixed asset projects.

Developed nations with mature economies can be downgraded to emerging market status, as was the case with Greece. Likewise frontier markets, which are less developed than emerging markets, can also upgrade to emerging markets, as was the case for Qatar and Argentina.

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