Emerging Markets: Where Growth is Happening Now

Emerging markets have captured global attention with their rapid expansion and innovation. As investors, entrepreneurs, and policymakers seek sustainable opportunities, it is essential to understand the forces shaping growth in these dynamic regions.

Macro Economic Outlook and Growth Figures

Emerging markets (EM) are poised to expand at approximately 3.7–4.0% in 2025, still more than double the under-2% pace of advanced economies. Over the next five years, the average EM growth rate is expected to hold at 4.0% annually, compared to just 1.7% in developed markets. This divergence highlights the shifting epicenter of global economic activity toward Asia, Africa, and Latin America.

Inflation pressures in EMs are easing, with average rates forecast to drop to around 5% in 2025 from 8% in 2024. However, some countries—Bolivia, Ghana, Turkey—continue to grapple with double-digit inflation, while China stands out at near-zero inflation, offering stability in a turbulent global environment.

This table illustrates how a mix of demographic momentum, commodity booms, and policy reforms can drive growth beyond conventional expectations.

Regional Highlights: Key Markets to Watch

Several regions stand out as epicenters of growth and innovation. Each offers unique investment themes and development trajectories.

• Asia: India, Vietnam, Philippines, Thailand, Indonesia, Malaysia, China.
• Africa: Kenya, South Africa, Nigeria, Egypt.
• Latin America: Brazil, Mexico, Colombia, Chile, Peru, Argentina.

In Asia, the internet economy is on track to hit $600 billion by 2030, driven by e-commerce, fintech, and digital services. Africa’s fintech sector, led by mobile payment platforms, is expanding rapidly; Kenya alone raised $638 million in startup funding in 2024. In Latin America, robust consumer demand and urbanization are elevating sectors from retail to renewable energy.

Sectors Driving the Surge

Three themes underlie the emerging market renaissance: digital transformation, urbanization, and sustainable development.

• Digital Transformation and Startups
• Consumer Economy and Urban Growth
• Clean Energy and Sustainability

Global firms are committing a massive investment of $4 trillion globally to digital transformation by 2027. Emerging markets often leapfrog traditional stages of development, adopting mobile banking and cloud technologies with unprecedented speed. In Southeast Asia, a thriving startup ecosystem is creating unicorns in fintech and agritech.

Rapid urbanization fuels consumption. Africa’s urban population projected to reach 60% by 2050 will reshape infrastructure needs, while India’s young demographics and mobile-first mindset sustain e-commerce growth. Renewable energy projects—from solar parks in India to wind farms in Brazil—underscore a commitment to green transitions even amid budget constraints.

Risks and Headwinds

Despite bright prospects, emerging markets face significant challenges:

• Trade Tensions: Ongoing tariff disputes can disrupt supply chains and investment flows.
• Inflation Volatility: Some economies still struggle to contain double-digit inflation.
• Resource Dependence: Oil and mineral exporters remain vulnerable to commodity shocks.
• Governance Risks: Political instability and regulatory unpredictability pose hurdles.

Investors must weigh these headwinds against high growth potential. Diversification across regions and sectors can help mitigate country-specific risks, while thorough due diligence on legal frameworks and market entry rules is essential.

Future Drivers and Opportunities

Several long-term trends promise to sustain EM momentum:

• Tech Adoption: Young, connected populations drive digital services.
• Manufacturing Shifts: Relocation from China to India, Vietnam, Mexico.
• Financial Inclusion: Mobile money platforms expand access.

Urbanization and rising incomes will nurture a global middle class. As EMs account for nearly half of world GDP in 2025—up from one-quarter 25 years ago—their consumption markets will provide resilient demand. Favorable valuations, with EM equities trading at favorable at approximately 1.1 times PEG ratios, make this an opportune moment for patient, long-term capital allocation.

Strategic Considerations for Investors and Companies

Effective engagement in emerging markets requires a nuanced approach. Key factors include:

• Political Stability and Regulatory Environment
• Currency and Inflation Dynamics
• Sector-specific Growth Catalysts
• Demographics and Urbanization Trends

By aligning investments with robust digital infrastructure, renewable energy initiatives, and consumer-driven sectors, stakeholders can capitalize on growth while managing volatility. Partnerships with local enterprises and governments can also enhance market access and operational resilience.

In an era where traditional powerhouses grow slowly, emerging markets shine as engines of prosperity and innovation. Understanding regional dynamics, sectoral shifts, and risk frameworks empowers investors and policymakers to harness this growth responsibly and sustainably.