From the Field

Three key themes in emerging markets for 2024

March 11 2024
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Today, I’d like to talk you about the emerging markets and the three themes that we see that are in store for 2024. 

Our first theme is inflation, and, particularly, falling inflation paving the way for central banks to cut interest rates across the space. Over the course of 2022, inflation spiked in a number of countries, particularly in Latin America and Central and Eastern Europe. That inflation is falling quickly now, opening the way for central banks to cut interest rates aggressively. 

Our second theme is growth. Over the past 10 to 15 years, the global economy has been very synchronized, and China has been a particular supporter of growth in a number of EM countries. However, going forward China's in the process of restructuring its economy in a multiyear basis, and its growth will no longer be as fast as it was in the past. As a result, China's ability to support emerging market growth is more limited, and they will have to turn to other sources of growth such as their own domestic demand or, perhaps, green energy to drive growth going forward. 

Our third and final theme is to keep an eye on frontier markets. A number of these countries lost market access in 2022 in the face of high developed market interest rates. We're seeing some of these countries start to return to debt capital markets. As a result, default fears are easing and that should support returns over the course of 2024. 

Thanks for joining us today, and we look forward to sharing more insights with you in the future.

Key Insights

  • Falling inflation in emerging markets (EM) is paving the way for interest rate cuts in 2024.
  • China's ability to support EM growth is more limited now, so developing countries will have to find new sources to drive economic growth in the future.
  • EM external debt could benefit if frontier issuers are able to regain access to the international debt capital markets.

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International investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. The risks of international investing are heightened for investments in emerging market and frontier market countries. Emerging and frontier market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed market countries. Fixed‐income securities are subject to credit risk, liquidity risk, call risk, and interest‐rate risk. As interest rates rise, bond prices generally fall.

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