Over the past decade, emerging markets have delivered robust growth. Now, as 2025 unfolds, investors and policymakers are witnessing a revival. In this article, we explore key indicators driving this recovery and suggest actionable strategies to harness new opportunities.

Economic growth and inflation trends

Emerging market GDP is set to grow at 3.7% in 2025. While this is slightly below the decade average of 4%, it remains twice as fast as advanced economies. Excluding China, the forecast climbs to 4.2%, buoyed by the easing of trade tensions brings hope between the U.S. and China. Such momentum underscores the resilience of domestic demand across diverse regions.

Inflationary pressures have begun to recede. From a peak of 8% in 2024, EM inflation is expected to moderate to around 5%. Central banks in many markets are now in position to ease rates, which should support consumption and investment. Yet, variations persist as countries like Bolivia, Ghana, and Turkey continue to grapple with double-digit inflation.

Financial markets and evolving sentiment

The MSCI Emerging Markets IMI Index rose by 1.7% in Q1 2025, outperforming its developed market counterparts. China’s technology rally has been instrumental in this performance, reflecting renewed investor confidence. Brazil and several CEEMEA markets also posted gains amid improved macro conditions, while India experienced some profit-taking and softer data.

Currency movements and expectations of interest rate cuts in advanced economies have created a supportive backdrop. A weakening U.S. dollar makes local assets more attractive, and the steady financial gains for investors have renewed interest in sectors such as fintech, renewable energy, and consumer technology.

Sectoral and regional highlights

Emerging markets are not monolithic. Key drivers differ by region and sector, so a targeted approach can yield superior returns. Below are some standout examples:

• Southeast Asia: projected internet economy of $600 billion by 2030, led by e-commerce and digital infrastructure.
• Latin America’s hydrocarbons and mining, with Argentina registering a $5.4 billion energy surplus in 2025 thanks to new incentives.
• African fintech and mobile banking booms, delivering financial inclusion and robust user growth in Nigeria, Ghana, and Kenya.
• Central Europe: Poland’s market up over 35% YTD, while Thailand lags by nearly 12%, highlighting the need for precise country selection.

Investors seeking to capitalize on this rebound should monitor policy reforms and fiscal discipline, which have been linked to sustained outperformance in markets like Peru and Indonesia. Conversely, countries facing political uncertainty or populist pressures may underperform.

Trade policy and geopolitical factors

After years of escalation, the U.S. and China imposed a 90-day pause on new tariffs in May 2025. This shift has improved export prospects and accelerated domestic stimulus and tech innovation in China. However, global trade uncertainty persists, with new U.S. reciprocal tariff proposals still under negotiation.

Investors should stay alert to geopolitical developments, such as potential conflict in the Middle East or shifts in U.S. Treasury yields. These factors could spark volatility and affect commodity prices, especially oil, which remains a key risk factor for many energy-importing economies.

Risks and downside scenarios

No recovery is without challenges. Key headwinds include:

• Escalation of Middle East conflict driving up oil prices.
• Unanticipated delays in rate cuts by major central banks.
• Weak economic data from the U.S. dampening global demand.
• Renewed trade friction with new tariffs or regulatory barriers.

In addition to external shocks, domestic fiscal constraints pose threats. Many EMs face large fiscal deficits, prompting rating agencies to remain vigilant. Although sovereign credit upgrades outpaced downgrades in early 2025, countries with weak revenue bases may struggle. Investors should watch debt-to-GDP ratios and reform agendas closely before committing capital.

Long-term trends shaping emerging markets

Beyond immediate opportunities, structural shifts will define EM performance over the next decade. Among the most potent are:

• Rapid digital innovation is transforming consumer markets and service delivery.
• Demographic dividends, with young populations driving consumption in India, Africa, and Southeast Asia.
• Green energy and sustainability, with continued investment in renewables despite shifts in U.S. policy.
• Urbanization and infrastructure build-out, supported by public-private partnerships and multilateral financing.

Each of these trends offers potential for outsized growth and social impact. Smart allocation toward tech-enabled companies, green infrastructure projects, and consumer-focused businesses can deliver both returns and positive outcomes.

In sum, 2025 is shaping up to be a pivotal year for emerging markets. With renewed global collaboration and momentum and robust domestic dynamics, the stage is set for a meaningful upswing. Investors who combine strategic insight with disciplined execution can capture value while contributing to sustainable development across key regions.

Key takeaways for investors include: conduct thorough country analysis focusing on demographics and digital adoption; prioritize sectors with structural tailwinds such as renewables and fintech; and remain agile by monitoring policy developments and geopolitical shifts. By doing so, you can navigate volatility while capturing the long-term upside of emerging markets.