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
Inflationary Pressures Keep Policy Restrictive
High refined fuel prices, El Niño, and expectations for more Fed hikes will keep most emerging market (EM) central banks in restrictive territory. Rising inflation expectations, partly as a result of higher fuel prices, could spread to nonenergy prices. Türkiye is the exception, with additional rate cuts expected over the next few quarters.
Food prices are rising in most EMs. Based on changes in the latest inflation versus three months earlier, the sharpest increases are in Mexico, India, Indonesia, Thailand, and Peru. Transport inflation is diverging: accelerating sharply in Vietnam but slowing in Argentina and Nigeria, even as food inflation picks up in both.
Higher tech imports and energy prices are weighing on EM Asia's trade balances. Despite very strong electronics exports, rising energy import bills and heavy data center-related technology purchases are lowering trade balances. Malaysia is the exception, benefiting as a gas exporter and key electronics exporter.
Growing financing needs are pushing capital markets to deepen. Saudi Arabia is broadening its issuer base under Vision 2030, while Africa looks to channel domestic savings into long-term investment. Deeper markets with stable policies and stronger institutions will be better placed to attract affordable capital.
EM bond yields diverged in October, with country-specific factors driving the moves. Yields rose in nine of 16 countries, led by Brazil (up 126 basis points [bps]), Nigeria (95 bps), and Indonesia (54 bps), while Mexico's fell 35 bps. EMs (excluding China) still drew debt inflows despite the largest portfolio outflow since March. Fed's December monetary policy decision and energy prices will shape financing conditions.
Latin America
Brazilian Credit Conditions Depend On Proactive Policy Adjustments After The 2026 Elections
Policy initiatives under the incoming fourth Lula administration, particularly those that redress high and rising fiscal vulnerabilities, are key for Brazil's macroeconomy, sovereign creditworthiness, and in turn credit conditions.
In the near term, persistent high interest rates and household debt will limit economic growth and weigh on corporate and infrastructure issuers as well as financial institutions.
Local and regional governments meanwhile face fiscal rigidities, whose easing will require policy follow-through at the federal level, and in some cases high indebtedness.
EM EMEA
Look Forward: Charting Progress on Saudi Arabia's Vision
Saudi Arabia is on one of the most expansive and compelling journeys of economic reform globally. At the heart of this transformation is Vision 2030, the strategic road map that guides the country’s transition from a hydrocarbon-based economy to a diverse and future-ready one with increased workforce participation.
As Saudi Arabia restructures its economy, it is also redefining the role of its financial markets in funding growth and attracting global capital. In the next phase of Vision 2030, the focus is increasingly shifting from the scale of investment toward productivity gains, efficient capital allocation, and a greater role for private and foreign capital.
EM Asia-Pacific
Credit Conditions
Credit Conditions & Outlook Asia-Pacific Q4 2026: Compounding Risks, Amplified Effects
Asia-Pacific's credit conditions remain supportive on resilient growth, functioning financing channels, and AI-linked export demand that is fueling tech-oriented economies.
But credit cushions are thinning on energy disruption, weaker currencies, potentially higher funding costs, and fiscal strains. • Rising government bond yields, elevated leverage, and competing sovereign and AIrelated funding needs could squeeze weaker borrowers into 2027.
AI concentration risk, China's domestic slowdown, climate shocks, cyber costs, and policy/geopolitical shifts point to wider credit dispersion.
Frontier Markets
Emerging Markets
November 05, 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.