Emerging Markets: Where Growth Stories Unfold

Emerging markets stand at the forefront of global expansion, offering a compelling blend of opportunity and complexity. In 2025 and beyond, these economies will continue to reshape growth narratives.

Global Growth Landscape

Emerging markets are forecast to grow around 3.7% in 2025, more than double the rate of advanced economies. With nearly 51% of global GDP and driving 66.4% of growth over the past decade, they remain indispensable engines of economic momentum.

By contrast, advanced economies such as the US, EU, and Japan are expected to register growth of only 1.5% or less. This divergence underscores the shifting balance toward dynamic, rapidly changing markets.

• India: 6.5%
• Philippines: 6.2%
• Saudi Arabia: 6.0%
• Indonesia: 5.1%
• China: 4.9% in 2025, 4.4% in 2026

Smaller outliers like South Sudan (24.3%) and Guyana (9.3%) illustrate how resource booms can skyrocket growth, though often with elevated volatility.

Regional Spotlights and Fastest-Growing Economies

Asia leads the charge, with India and the Philippines tapping robust domestic demand, technology adoption, and demographic tailwinds. China’s transition to a consumption-driven model has stabilized growth, while Southeast Asian nations leverage supply-chain shifts.

Latin America shows pockets of rapid recovery in Peru, Chile, Colombia, and Argentina, each reporting spurts of 10–13% growth tied to commodities, mining, and structural reforms. Europe’s catch-up markets—Romania, Hungary, Poland—are converging toward Western standards.

Africa’s giants—Nigeria, South Africa, Egypt—benefit from resource exports and expanding middle classes. Meanwhile, Middle Eastern oil exporters such as Saudi Arabia and the UAE accelerate investments in renewables and technology hubs.

Investment Trends and Financial Performance

Emerging market equities outperformed developed indices in Q2 2025: MSCI EM rose 12.7%, versus MSCI World’s 11.5% and the S&P 500’s 10.9%. Year-to-date returns exceed 23% for the median EM investor, topping the 16% gains in key developed benchmarks.

• Stabilization in China has restored confidence in global supply chains.
• Policy easing in India boosts consumer and infrastructure spending.
• End of tightening in Brazil reinvigorates local credit growth.
• Weakening US dollar enhances EM currency valuations.

Major financial institutions forecast further gains: Goldman Sachs projects the MSCI EM Index to climb from 1,373 to 1,480 by late 2026, reflecting sustained capital inflows and risk-on sentiment.

Sectoral Themes and Transformation

The clean energy transition is a defining megatrend. India’s solar manufacturing scales up rapidly, while China dominates global renewable capacity expansions. Latin American nations like Mexico and Colombia invest heavily in wind and solar, aiming to cut consumer costs.

Oil-rich Gulf states pursue diversification, channeling petrodollars into technology parks, tourism, and green hydrogen. These moves illustrate how resource economies are evolving to manage long-term transition risks.

Urbanization and a growing middle class fuel domestic consumption across Asia, Africa, and Latin America. Governments deploy fiscal packages for infrastructure, digital connectivity, and social services, setting the stage for sustained private-sector growth.

Challenges and Headwinds

• Persistent inflation: Average EM inflation is forecast at 5% in 2025, with outliers such as Turkey and Ghana facing double-digit rates.
• Geopolitical uncertainty: Ongoing trade tensions and tariff risks between major powers introduce volatility.
• Commodity dependence: Markets reliant on oil or minerals are vulnerable to price swings.
• Governance and institutions: Weak regulatory frameworks and informality undermine long-term stability.

Informal economies still account for large shares of total activity, complicating policy design and economic forecasting. Meanwhile, social and environmental pressures demand more inclusive development models.

Looking Ahead: The Near-Term and Longer View

Between 2025 and 2035, emerging markets are projected to average 4.06% annual GDP growth versus just 1.59% in advanced economies. This gap highlights the continued shift in global economic gravity toward dynamic, diverse regions.

Population momentum remains a key driver. With over 4.3 billion people, rapid urbanization and youth bulges will sustain consumer markets, labor forces, and entrepreneurial ecosystems.

However, divergence within the EM universe will widen. Investors and policymakers must emphasize stock selection, geographic differentiation, and sector-specific opportunities to navigate volatility and policy cycles effectively.

In a world of decelerating growth elsewhere, emerging markets offer both the promise of higher returns and the complexity of unique risks. For investors, businesses, and citizens alike, understanding these dynamic economies is essential to unlocking tomorrow’s growth stories.

Conclusion

Emerging markets truly represent the next chapter in global economic evolution. By balancing potential with prudence, stakeholders can harness these growth engines to foster resilient, inclusive progress in the decades to come.