Outlook 2025: Emerging Markets Debt in an Evolving World

While emerging markets (EM) debt lost some of its positive momentum in 2024, economic conditions are still resilient; fiscal, debt, and external dynamics are supportive; and disinflation creates opportunity for monetary policy easing. While a key risk is higher tariffs (which could negatively impact trade), we believe EM countries should be less directly exposed given the significant growth in intra-EM trade observed over the past few years. All in all, we expect a favorable market environment for EM debt in 2025 and believe that higher volatility induced by political noise and bombastic rhetoric could create opportunities for long-term investors.