The outdated frame

For years, EM was boxed as a commodity proxy, a levered play on China, or a diversifier in a DM‑centric portfolio. The economic architecture has shifted: EM and developing economies now account for the majority of global GDP on a PPP basis and growth projections expect that gap to persist. But more important than growth differentials is what’s powering them: stronger balance sheets in many markets and faster‑moving policy frameworks. 

The new EM reality: Bigger, faster, more flexible

With a handful of exceptions, the public and private debt burdens across large parts of EM remain meaningfully lower than in many advanced economies, which gives policymakers more room to act. We saw that difference in the post‑pandemic cycle when several EM central banks moved earlier and maintained positive real policy rates, stabilizing currencies and protecting domestic savers rather than chasing the market mood. This isn’t the EM of the 1990s. Leading EM economies have the institutional capacity to act, and to act first.

Trade exposures have evolved, too. China’s export share to the US has fallen while intra‑EM trade has risen; Europe’s trade deals with India and Mercosur underscore a rewiring of demand corridors that diversify away from a single external engine. Sensitivity to the US cycle persists in places like Korea, Taiwan and Mexico, but the direction of travel is toward regional ecosystems with their own sources of demand.

You can now read the full whitepaper at the link below