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
The War's Scope And Duration Shape Risks
The Middle East war has already pushed Brent crude to about $90 per barrel, underscoring that the Strait of Hormuz is a key global risk point. Credit implications will depend critically on how long and how widely the Middle East war spreads.
Large net energy importers in emerging markets (EMs) are most exposed to higher oil and gas prices. Economies with weaker external positions could face stronger capital outflow pressure, while persistent price increases would also lift inflation and, where subsidies exist, add to fiscal strains.
The Middle East war has intensified stress on EM currencies through safe-haven demand for the U.S. dollar and shifting interest rate expectations. Along with higher oil prices, weaker foreign exchange could amplify inflation pressures and prompt central banks to maintain a tighter policy stance.
The U.S. tariff overhaul changes the relative tariff position of most EMs, with Brazil among the largest beneficiaries, but it does little to reduce broader trade uncertainty. While the near-term macroeconomic impact may be limited in some cases, the risk of further tariff action remains elevated.
EM benchmarks generally decreased in February, while corporate borrowing costs recently increased on U.S. trade policy uncertainty and the Middle East war, amid the widening in corporate spreads. This led to a three-year low monthly issuance volume, with Malaysia representing the unique silver lining. Two fallen angels were recorded in the month.
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 03, 2026
Middle East Conflict: GCC Energy Value Chain Shows Exposures
Temporary closure of the Strait of Hormuz could disrupt crude oil and LNG flows. We understand that about 20% of global crude flow and about 20% of global LNG passes through the Strait of Hormuz daily. In our view, Asian markets are likely to be the most severely hit by sustained disruptions. This is because the majority of exports from the region through the strait are to Asia, namely China and India (see chart 1). We believe that in the short term, existing stockpiles could provide some buffer to any petroleum shortage. Most Asian countries have strategic reserves to cover at least 20 days of their domestic demand; South Korea and Japan, for example, hold enough reserves to cover over 200 days of their domestic consumption. A more prolonged closure of the strait, however, would be felt in the global energy market, and subsequently the broader oil and gas entities. In particular, while the geopolitical premium for oil prices could be between an estimated $5 per barrel [/bbl]-$20/bbl in 2026, a prolonged supply shock disruption could restrict access to about 20% of global crude oil and LNG, which is very material.
EM Asia-Pacific
China and Japan remain the biggest borrowers in Asia-Pacific
Credit Conditions
March 11, 2026
Watchpoints For Asia-Pacific If Energy Supply Disruptions Persist
The Middle East conflict is geographically distant from Asia‑Pacific--its economic and credit repercussions are not. The region is the major recipient of imports ferried across the Strait of Hormuz. That makes it vulnerable to disruptions in this important waterway.
Given Asia's net energy importing status, prolonged disruptions to energy supply and persistent high prices will affect households, corporates, banks and governments.
Many economies maintain strategic crude oil stockpiles to manage disruption over the short term. Any prolonged supply shortages pose a severe strain to the region's macro-credit conditions. Inflationary pressure could escalate, complicating monetary easing paths in the region, while market volatility could upend the current supportive financing conditions. Current accounts will come under pressure.
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.