Emerging Markets
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.
How We Rate Emerging And Frontier Markets
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.
Monthly Highlights
Energy Shock Tests Resilience
Energy prices have reemerged as a key inflation risk for emerging markets (EMs). Higher energy prices due to the Middle East war have pushed median EM inflation to a post-2024 high, driven by housing and transport energy costs. Price controls eased impact in some countries last month, but persistent energy pressures risk broader second-round effects.
Markets are reassessing the near-term easing cycle in EMs. Rising energy and food price risks linked to the Middle East war are keeping central banks cautious, pushing market-implied policy rates higher. Rate cuts are likely delayed, with renewed hikes possible if inflation expectations become unanchored.
Energy availability is a key macro risk from the Middle East war. Prolonged disruptions could constrain oil and gas flows through the Strait of Hormuz, exposing energy-importing EMs to supply shocks.
Credit vulnerabilities in EMs are rising as the Middle East war drags on and energy disruptions persist. Strong growth and supportive financing conditions provide near-term resilience, but prolonged supply shocks would erode purchasing power, weaken fiscal and external positions, and tighten financing conditions.
EM benchmarks and corporate spreads increased in March, especially in Eastern Europe, the Middle East, and Africa (EM EMEA) and EM Asia, following the Middle East war. Primary markets were muted for speculative-grade and across EMs. China represented the notable exception, posting its highest monthly volume year to date.
Latin America
Credit Trends
March 03, 2026
Mexican Development Banks To Ramp Up Lending As A Tool Of Economic Policy
S&P Global Ratings expects Mexican development banks to continue taking a more relevant role over the next few years. This is based on Mexican government policy priorities.
The banks currently benefit from sufficient capital cushion and sound credit fundamentals to support expected growth.
Strategic lending allocation and collaboration with commercial banks and private agents will be fundamental for adequate loan portfolio performance and to achieve government policies.
EM EMEA
Maritime chokepoints around the Middle East
March 26, 2026
Credit Conditions Europe Q2 2026: Supply Strains, Credit Pains
Overall: Geopolitical risks cloud the European macro-credit outlook, which started the year fairly positively. Supply chain disruptions could increase inflation, tighten credit conditions, and impair earnings, particularly for energy-intensive industries. We therefore lowered our 2026 eurozone growth forecast to 1% and raised our inflation forecast to 2.4%.
Risks: The Middle East war, particularly the disruption of the Strait of Hormuz, affects supply chains and caused an energy supply shock. Trade fragmentation and political populism increase uncertainty, while AI disruption and cybersecurity threats are emerging structural challenges.
Ratings: Negative sector outlook biases remain, particularly in chemicals and autos. While upgrades dominate among financial institutions, downgrades among speculativegrade nonfinancial corporates have picked up in recent weeks, notably in the chemical sector. In the current environment, we do not rule out that the European high-yield default rate could rise toward our pessimistic forecast of 4.5% by the end of 2026.
EM Asia-Pacific
China and Japan remain the biggest borrowers in Asia-Pacific
Credit Conditions
April 01, 2026
Credit Conditions Asia-Pacific Q2 2026: Choke Point To Stress Points
Energy availability--not prices--is the biggest threat to Asia-Pacific credit. A widening Middle East conflict and the effective closure of the Strait of Hormuz are detrimental to the region, given its deep reliance on Middle Eastern energy and limited reserves. We view supply-chain disruption risk as high and worsening.
External shocks are colliding at the same time. Geopolitical tensions and volatile U.S. trade policy are accelerating supply-chain and trade fragmentation, amplifying the risk of higher inflation. Central banks' monetary easing could stop. Corporate borrowers may face the dual setbacks of slower revenues and higher interest costs. We have raised the financing risk trend to elevated and worsening.
China's domestic challenges persist. Sticky property woes and soft consumption continue to constrain the profitability of Chinese corporates. However, amid signs of reflation and still-strong exports, we lowered the risk around China's economy to elevated and unchanged.
AI and private credit are compounding tail risks. A reset of business models and emerging strains in private credit markets could raise contagion spillovers. Valuation corrections and shifts in financing conditions may add volatility
Frontier Markets
Sovereigns
21 January 2026
Frontier Markets Quarterly Highlights: Growth And Financing Conditions Should Remain Resilient In 2026
The August increase in U.S. tariffs has significantly raised the effective tariff rates for most frontier markets (FMs), with some exceeding 25%. Cambodia and Nicaragua are particularly vulnerable due to their high export shares to the U.S.
That said, many FM economies are driven by household consumption, at more than 70% of GDP in most cases, as opposed to ongoing global trade developments. We expect real GDP growth of about 4.4% for FMs in 2026, compared with 4.3% in 2025. Risks to our outlook include worsening security conditions, lower commodity prices, and a slowdown in global growth.
Favorable financing conditions for FMs continue, with FM index yields falling to 9.0% and risk premiums hitting alltime lows. Nonetheless, the risk-on market has downside potential if geoeconomic uncertainties intensify. Cumulative government-related bond maturities are set to reach $90 billion by the second quarter.
FM rating actions showed positive momentum in the past quarter. We took positive rating actions on Ghana, Zambia, and Uzbekistan, while we downgraded Senegal due to its debt position. Our upgrade of Uzbekistan led to rating actions among nonsovereigns, with 71% of our ratings in the region showing stable outlooks.