”Emerging Markets, particularly India, are playing a crucial role in driving the global economic recovery in 2024 due to their resilience, adaptability and sound policy frameworks.”

Emerging Markets (EM) are playing a crucial role in driving the global economic recovery in 2024. We see three themes playing out:

1. Resilient, but not robust Emerging Market economic cycle: The weak macroeconomic momentum in the second half of 2023 has become positive in 2024 and is expected to improve moderately throughout the year. The recovery, driven by the export cycle, has also started to impact domestic demand due to a less restrictive policy mix.

2. Fed’s impact on Emerging Market Central Banks: If the Fed makes even a marginal pivot or stays on hold, the environment for Emerging Market Central Banks would remain favourable, as several have already begun their easing cycle. Domestic economic conditions, particularly inflation, have influenced the current monetary policy cycle in Emerging Markets. While disinflation is expected to continue gradually, it may fall short of inflation targets in Latin America and Eastern Europe in the second half of 2024. This means that the easing path may not be as pronounced as the hiking path. In most cases, the Fed’s actions should not dictate a directional change for most Emerging Market Central Banks. However, in some cases in Asia, the first Fed rate cut could signal the start of easing, allowing Central Banks to be more patient.

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