Macroeconomic headwinds will present a growing challenge to emerging market issuers across sectors in 2026 as the US tariff shock continues to evolve, says Fitch Ratings.
However, near-term prospects for emerging market liquidity remain broadly robust, supported by the extension of monetary easing cycles in several emerging market countries.
“We forecast global emerging market GDP growth will slow to 3.7% in 2026, from 4.1% this year. We predict growth in emerging markets next year will be below the average for 2020-2026 of 4%, though emerging market growth this year has been stronger than we had expected in June, when we projected it at 3.7%”.
Slower GDP growth in part reflects the spillover from US tariff increases in 2025.
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Trade diversion has helped to sustain China’s export expansion, despite the hit to its US exports from tariffs, but China’s growth still slowed to 4.8% in 3Q25 on weaker domestic demand.
The US has set “reciprocal” rates for some emerging markets that are higher than we anticipated. Estimated effective tariff rates, which factor in exclusions and sectoral tariffs, built into our forecasts are as high as 36% for India, 27% for Brazil, 22% for Indonesia and 19% for Vietnam.
However, tariffs remain subject to change. Under its baseline, Fitch said prospects for further monetary loosening in several major emerging markets will support debt issuance and refinancing, as central banks move to take advantage of the domestic disinflationary effect of US dollar weakening and to offset external risks to growth.
