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
Resilience Through Choppy Waters
We expect the Fed's September hike to reinforce upward pressure on policy rates in those emerging market (EM) where inflation exceeds targets. This is particularly the case for large net energy importers, as higher oil prices lift inflation expectations.
Strong tech exports are supporting EM Asia's trade and manufacturing. They are offsetting higher energy prices, tighter policy rates, and global volatility. More than one-third of exports from Malaysia, Vietnam, Thailand, and the Philippines consist of tech-related goods.
Despite the pickup in inflation, growth has remained broadly resilient across EM EMEA. The increase in prices has generally been less severe than previously expected, and domestic demand dynamics have remained robust.
EM sovereign yields broadly moved higher with the U.S. rates, although dispersion was significant, with Colombia up 65 basis points (bps) and Türkiye down 57 bps. Corporate spreads tightened across regions, signaling resilient demand. Meanwhile, EM (excluding China) issuance slowed to $11.2 billion from $217 billion in China.
Credit quality is stable with no downgrades in August, led by upgrades of China Minmetals Corp., H&H International Holdings Ltd., and Corporacion InmobiliariaVesta. However, negative bias remains concentrated in cyclical sectors (chemicals, packaging, and environmental services [CP&ES; 38%], automotive [33%]) and LatAm, where it rose to 16.3% following outlook revisions on three entities.
Latin America
August 10, 2026
Colombia's New President Inherits A Difficult Fiscal Situation
Avelardo de la Espriella assumed office as Colombia's president on Aug. 7, 2026, with fiscal consolidation as a top policy priority.
In S&P Global Ratings' view, there is significant uncertainty about the new government's capacity to pass substantial fiscal reforms to reverse the weakening of public finances in recent years.
We expect that the general government fiscal deficit will remain high over the next four years, boosting the sovereign's debt above 65% of GDP by 2028, absent strong corrective policies.
EM EMEA
Maritime chokepoints around the Middle East
June 25, 2026
Credit Conditions Europe Q3 2026: Resilient Through Stormy Waters
Overall: Europe’s credit conditions remain resilient, helped by adaptable businesses and constructive financing markets, but the macro outlook is lackluster. Growth is likely to stagnate in the second half of 2026, while energy-driven inflation continues to weigh on central banks and borrowers.
Risks: Downside risks are evolving rather than disappearing. Key pressure points include potential for renewed Middle East energy disruption, rising EU-China trade frictions in strategic sectors, spillovers from higher long-term yields, and AI-enabled cyber threats that could test operational resilience across sectors.
Ratings: Rating actions broadly remain aligned with underlying credit fundamentals. Banks, insurers, and structured finance show resilience, while pressure is more concentrated among lower-rated borrowers and weaker sectors, including autos and chemicals, and issuers facing refinancing needs.
EM Asia-Pacific
Credit Conditions
June 25, 2026
Credit Conditions Asia-Pacific Q3 2026: Hormuz Reopens, Fragility Remains
The reopening of the Strait of Hormuz would lower tail risk, but supply normalization will be uneven and costly. Second-order shocks could cause more credit pains.
Tighter monetary policy to stem inflation could come amid capital outflows, potentially at the expense of growth. Additional policy support may narrow fiscal space.
AI-demand is cushioning Asia-Pacific's growth from a supply shock, but overlapping strains will widen the credit gap. Prioritization of supply security over cost could drive a structural rewiring of trade flows.
Frontier Markets
Emerging Markets
July 29, 2026
African Markets Quarterly Highlights: Resilient Ratings, Rising Risks
Triple threat to Africa (inflation, growth, and financing) remains in place: Rising diesel, gasoline, and shipping fuel costs are weakening fuel demand across most markets, while inflation in countries such as Ghana and Mozambique is approaching growth-sensitive levels. A strong El Niño climate pattern could further amplify food-price pressures.
The energy price shock is widening policy and credit divergence across Africa. Southern Africa has absorbed some of the region's largest fuel-price increases, while subsidy regimes in the Economic and Monetary Community of Central Africa (CEMAC) and Angola have limited the household impact at the expense of higher fiscal burdens.
External liquidity risks vary widely across Africa, reflecting differences in both financing needs and reserve buffers. While reserve pooling supports resilience in WAEMU and CEMAC, CEMAC remains more exposed to external shocks due to its heavier reliance on hydrocarbon exports.
External financing conditions have stayed mostly supportive. African sovereign U.S. dollar yields edged up only modestly to around 8.0% from mid-June lows despite broader inflation pressures. Yet growing divergence in localcurrency yields, led by Egypt (+258 basis points [bps]), Nigeria (+190 bps), and Ghana (+93 bps), points to increasingly differentiated domestic funding conditions.
Sovereign ratings remain resilient, with African reforms and steady financing conditions sustaining positive momentum despite the Middle East war, illustrated by our recent upgrade of Nigeria to ‘B’ on the back of its improving macroeconomic profile.