EM Meta-Forecast: Q2 2025

Executive Summary

Emerging markets entered Q2 2025 with data still reflecting the momentum of a pre-tariff world. Across the financial and macroeconomic reports reflected in this aggregation, Q1 hard data painted a picture of resilience: emerging market (EM) equities outperformed developed markets, several local debt markets posted strong inflows, and credit upgrades outpaced downgrades. But beneath the surface, sentiment has shifted decisively. The reintroduction of aggressive US tariffs and escalating trade tensions triggered a repricing of risk across asset classes and regions, rapidly unwinding assumptions that had underpinned the early-year rally.

This rebalancing has not been uniform. Trade volatility is creating clear winners and losers. Countries with low US trade exposure and strong domestic demand—such as India, Colombia, and parts of Eastern Europe—have weathered the turbulence better than export-heavy economies in Asia and Africa, where political uncertainty and sectoral concentration have magnified downside risks. Commodity exporters, in particular, face twin pressures: oversupply in oil and metals markets is weighing on fiscal accounts, while weakened global demand—especially from China—is dampening earnings and investment.