EM Meta-Forecast: Q1 2025

Executive Summary 

The year 2024 epitomized the inherent volatility and resilience of emerging and frontier markets. It unfolded amid a perfect storm of global headwinds: “higher for longer” interest rates in key developed markets (DMs), escalating geopolitical tensions, and a likely resurgence of protectionist policies under the re-elected Trump administration. Despite the challenges, growth markets as a group delivered steady returns driven by high starting interest rates, structural reforms and shifting investor sentiment.

In 2025, cautious optimism pervades. Inflationary pressures have eased across most EM regions, paving the way for monetary easing and policy recalibrations. Countries such as Egypt and Nigeria, which undertook significant currency adjustments in 2024, are emerging as focal points of investment. Their lowered budget and trade deficits and improved macroeconomic metrics highlight a broader theme: the crucial importance of structural reforms and fiscal discipline for investors.

However, the path forward is fraught with complexity. Geopolitical hotspots such as Ukraine, the Middle East and the South China Sea continue to cast a shadow over global trade and capital flows. Meanwhile, the forceful reassertion of US interests in trade negotiations introduces a layer of uncertainty for economies heavily reliant on exports.

Against this backdrop, EMs are far from monolithic, of course. Latin America stands out for its unexpectedly strong economic performance, with Brazil and Argentina leading a regional recovery. Sub-Saharan Africa remains a story of unfulfilled potential, with reform-minded economies such as South Africa and Ghana making strides amid lingering infrastructural challenges. 

Emerging Asia, a perennial growth driver, presents a nuanced picture. Robust domestic demand is offsetting external headwinds in countries such as India, while China’s attempt to stabilize its economy and move away from supply-side imbalances is testing the resilience of its economy.

In terms of asset classes, emerging market debt (EMD) continues to attract considerable interest, particularly in high-yield sovereigns and emerging-market corporates, where spreads remain enticing despite the narrowing gap with DMs. 

Equities offer pockets of opportunity, particularly in sectors aligned with global megatrends such as technology, green energy and healthcare. Meanwhile, local currency debt, although riskier in a strong-dollar environment, could offer substantial upside for investors with a high-risk tolerance.

The interplay of global and regional dynamics will dictate the narrative for EM investments. Key questions loom: Will China’s stimulus measures translate into sustained growth? Can Latin America build on its nascent recovery? How will geopolitical risks shape investor sentiment? And critically, will EMs’ structural advantages—youthful demographics, resource wealth and technological adoption—outweigh the drag of external vulnerabilities?

This meta-forecast synthesizes insights from leading investment outlooks to provide a panoramic view of the coming year’s emerging and frontier market landscape. For investors, it offers not just an appraisal of where EMs and FMs stand but a roadmap for where they are headed.

2025 Projections

Promise amid a precarious external environment

EM/FM Macro

Emerging and frontier markets (EM and FM) entered 2025 on a precarious yet promising footing, shaped by a year of contrasting fortunes. In 2024, these economies navigated a global environment defined by restrictive monetary policies in advanced economies, heightened geopolitical risks and significant trade disruptions. Yet, they demonstrated a remarkable capacity to adapt, leveraging structural reforms, robust domestic demand, and external tailwinds in selective cases to outperform expectations.