Emerging market economies are more resilient than investors realise

Emerging market economies should be able to withstand the challenges that US President Donald Trump's second administration throws their way. They are considerably more resilient than they were during his first stint in the presidency thanks to a handful of factors we argue in an article published in FT Adviser that can be read here. Even debtor emerging economies are in a good position to withstand global shocks.

In a nutshell, domestic debt levels are relatively stable, while falling interest rates and the fact that a greater proportion of their borrowing is denominated in domestic currencies makes outstanding debt easier to service (see Fig. 1).

Both private and government debt levels (see Fig. 2) are significantly lower than among developed countries. Private sector debt among EM debtor countries was 84% of GDP in 2024, compared with 180% of GDP among developed economies. And the relative levels of government debt are 57% versus 100%.

At the same time, deglobalisation is less of a force than many fear. Exports between emerging economies are considerably higher than their exports to the US (see Fig. 3).Throw in the fact that the Chinese economy is recovering (it has been an engine of growth for much of the emerging world) and the upshot is that emerging economies are in a much better position than they were in 2018, when Trump first stepped on the international stage.