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Emerging and Established Risks
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Emerging and Established Risks
Sectors
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Featured Events
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Emerging markets encompass regions with significantly diverging fundamentals and a broad range of credit challenges—from persistent inflation and tightening financing conditions to sluggish domestic demand and geopolitical tensions.
Emerging and frontier markets are strategically positioned to drive global economic growth through the expansion of their domestic markets.
Emerging and frontier markets will play a crucial role in shaping the global economy and driving growth, contributing approximately 65% of global economic growth by 2035. Frontier markets will play a prominent role in this growth due to their favorable demographics—but face significant challenges from persistently high inflation and political uncertainty.
U.S. tariff uncertainty is set to persist beyond the August 1 deadline, with further delays in implementation possible. Mexico and emerging markets (EMs) in Asia face the highest direct exposure, while other EMs will be indirectly affected through lower investment and potential weakening in global demand.
Stronger-than-expected growth in H1 2025, helped by a small direct impact from U.S. tariffs so far, led us to revise up GDP projections for most EMs. However, the indirect effects—slower global demand and weaker investment stemming from trade uncertainty—are likely to weigh on growth in the second half of the year.
EM credit conditions have held up better than expected, given tariffs having a smaller impact on growth and a weaker dollar, which is attracting capital flows to EMs. We expect credit conditions in EMs to continue to face significant downside risks: tariffs, uncertainty about U.S. trade policy, further escalation in geopolitical risk, rising longterm government yields, and fiscal challenges across several EMs.
EM benchmarks and corporate yields narrowed in June, with an acceleration of corporate downgrades, triggered by the downgrade of Colombia to 'BB' from 'BB+'. Market activity was strong in China, particularly in the financial sector, and solid outside Greater China, yet slower than in May. Country-wise, Turkiye's issuance rebounded, while volumes in Brazil and the Philippines were sluggish in June.
Infrastructure
3 Jun 2025
Brazilian infrastructure groups' growing cash generation and steady operating performance should help manage rising debt service costs as interest rates should remain at 14.75% until year-end.
Financial Institutions
7 May 2025
While many emerging markets were among the first adopters of international regulations on capital and liquidity, most of them are still dragging on the implementation of a resolution regime.
Emerging Markets
7 May 2025
Smartphones and PCs are the most exposed to U.S. tariff risk among tech companies that produce in Asia.
Sovereigns
31 Mar 2025
Rising global geopolitical tensions and tariffs, uncertainties regarding U.S. policies on the African Growth Opportunity Act (AGOA) and USAID, challenges related to security, climate-related events, as well as volatile commodity prices, imply increasing financial and economic risks to countries on the African continent.