Emerging markets (EMs) are set to experience a year of significant growth divergence in 2024, according to S&P Global’s Economic Outlook for Q2 2024. This divergence is primarily due to varying economic conditions across countries, with some expected to see a moderation in growth after outperforming in 2023, and others anticipated to experience an uptick following underperformance.
The report highlights a marginal improvement in macroeconomic conditions for EMs since the end of 2023, fueled by resilient global growth, especially in the United States, and easing financial conditions as central banks in major economies are expected to loosen monetary policies. This environment supports a cautiously optimistic outlook for EMs, but challenges remain, including the lagged effects of high interest rates and potential slowdowns in major economies.
Significant among the report’s findings is the expected growth moderation in countries like Brazil, Mexico, and India, which had strong performances in 2023. Conversely, nations such as Colombia, Peru, Thailand, Hungary, Poland, and South Africa, which faced economic headwinds last year, are projected to grow modestly faster in 2024. However, the report cautions that growth in these countries will likely remain subdued, highlighting the uneven recovery path ahead for EMs.
Inflation dynamics and monetary policy shifts are central to the outlook, with expectations of rate cuts by the U.S. Federal Reserve and the European Central Bank (ECB) contributing to a more favorable financial condition for EMs. These changes are anticipated to encourage continued rate reductions by EM central banks, particularly in Latin America, and eventual easing in EM Asia.
The report also addresses risks to its baseline growth forecast, including geopolitical tensions, the potential for a U.S. recession, and electoral uncertainty in several EMs. These factors could significantly impact economic activity, investment, and policy predictability across EMs.
Overall, S&P Global’s Economic Outlook for Q2 2024 underscores a cautiously optimistic view for emerging markets, tempered by an acknowledgment of the complex web of challenges and risks these economies face. The expected growth divergence underscores the importance of country-specific factors and external economic influences, painting a nuanced picture of the EM landscape in the year ahead.
