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
Inflation Under Pressure From Multiple Fronts
The recovery in oil flows from the Gulf faces challenges once again. Shipments improved in June, yet remain well below pre-war levels, while renewed tensions raise the risk of further disruptions. We believe there is potential for ongoing operational challenges and uncertainty until a comprehensive agreement is finalized.
Inflation is broadening beyond energy. Higher fertilizer and food costs are passing through to consumer prices, especially in energy-importing emerging markets (EMs) with limited buffers. El Niño could intensify food-price pressures.
EM growth is set to slow in 2026 as higher inflation and interest rates weigh on activity. Renewed tensions in the Middle East and uncertainties over the U.S.-Iran peace deal continue to cloud the outlook.
Key EM risks remain elevated. Top risks for EMs include higher energy and food prices and supply disruptions, market volatility, rising trade protectionism, and weak Chinese domestic demand. Key structural risks include geopolitical fragmentation, climate-related disruptions, and uneven adoption of new technologies.
EM benchmark yields and credit spreads stabilized in June. Regional dispersion remained elevated, with Türkiye still standing out as an outlier despite lower yields. China remained the main driver of EM issuance volumes.
Latin America
June 08, 2026
This Time Could Be Different for Argentina
On June 10, 2026, S&P Global Ratings raised its local and foreign currency sovereign issuer credit ratings on Argentina to 'B-/B' from 'CCC+/C', reflecting diminishing economic vulnerabilities.
Argentina’s poor economic legacy for more than three decades gives cause for skepticism about the success of its current economic adjustment program, but there are grounds for cautious optimism about its long-term success.
The country remains vulnerable to adverse external shocks (such as higher global inflation and interest rates) and domestic shocks (such as shifts in economic and political expectations of residents) that could lead to capital outflows, undermining the currency. A successful stabilization program depends upon maintaining economic growth while bringing down inflation and accumulating more foreign exchange reserves.
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.