Emerging-Market Issuers Braced For Headwinds As Slower Growth Meets Tariff Shock
By FIDELUS ZWANSON
EMERGING markets may have weathered one storm—but another, more subtle tempest is forming on the horizon. According to Fitch Ratings, issuers across emerging economies face rising macro risks in 2026, as growth slows, trade tensions escalate and liquidity conditions tighten. Fitch Ratings+1
Growth Losing Steam
Fitch now projects global emerging-market GDP to decelerate to 3.7 % in 2026, down from 4.1 % this year and below the 2020-26 average of 4%. Fitch Ratings Much of the drag comes from spill-over effects of escalating U.S. tariffs in 2025, hitting export-heavy economies such as India (36 % effective tariff rate), Brazil (27 %), Indonesia (22 %) and Vietnam (19 %). EconomyNext+1 Even China—often seen as a buffer—slowed to 4.8 % growth in Q3 25 amid weak domestic demand. EconomyNext
Growth may still appear decent, but for many issuers—governments and corporates alike—the margin for error is narrowing.
Liquidity Near Term—But Risk Looms
Fitch notes that near-term liquidity remains broadly robust, aided by emerging-market central banks prolonging easing cycles as the U.S. dollar loses steam. EconomyNext+1
However, this isn’t comfort enough: should investor sentiment sour or shocks deepen, high-yield emerging-market issuer spreads are vulnerable to sharp widening—especially since many spreads are already compressed relative to historical norms. EconomyNext
In short: liquidity may hold for now, but stability is unsteady.
Trade and Tariffs: Export-Dependent Economies in the Crosshairs
The U.S.’s stepped-up “reciprocal” tariff rates are forcing a re-alignment of global trade flows. While some export destinations may shift, cost pressures and weaker demand spotlight economies reliant on external markets.
Export-dependent firms and sovereigns may find revenue streams less predictable, raising refinancing risks and stretching budgets that were already lean.
What It Means for Issuers
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Greater caution for new issuance – With growth weaker and risk rising, emerging-market issuers may need to pay more to attract funding.
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Higher refinancing risk – Maturing debts in weaker growth environments may be harder to roll over, particularly for higher‐yield borrowers.
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Vulnerability to sentiment swings – When investor confidence falters, emerging-market capital draws may reverse swiftly, leading to volatility.
Editorial Take: The Half-Light of Reform
Emerging markets have, in recent years, garnered praise for resilience. But resilience is not immunity. The consensus view—of ongoing growth, ample liquidity and steady issuance—is growing shaky.
Indeed, this may be a moment of latent tension: the environment looks benign now, yet structural weaknesses lurk beneath. For many issuers, success in the past came from riding favourable tides—but the tide is changing.
Trade shocks, slower demand, higher debt burdens and narrow safety margins may redefine how emerging markets borrow, spend and grow. It is not doom-and-gloom—but it does demand vigilance, discipline and clarity.
Emerging markets must not only pursue reform but internalise the idea that era of easy external funding may be fading. Policymakers and corporate treasurers alike must prepare for a world where growth is lower, buffers must be larger and surprises come faster.
In 2026, emerging-market issuers won’t simply be rewarded for staying afloat—they’ll be judged on how cleverly they adapt.
timesofindia.indiatimes.com
ft.com
