Hawkish US Fed, higher bond yields could test emerging market resilience: Fitch
ANINew Delhi A more hawkish stance by the US Federal Reserve and rising government bond yields in developed economies could put pressure on emerging markets by increasing borrowing...
Fitch Ratings warns that a more aggressive stance from the US Federal Reserve and increasing bond yields in developed nations could challenge the resilience of emerging markets. In its latest commentary, the global rating agency stated that higher borrowing costs and capital outflows may arise due to tougher financing conditions for emerging economies.
Despite demonstrating resilience in recent quarters, emerging markets may face pressure if global inflation pressures ease, easing central banks' concerns. Fitch expects financing conditions to improve across most emerging markets in 2027, but cautions that countries heavily reliant on foreign-currency borrowing could be more vulnerable if rising bond yields in developed economies cause investors to pull funds out of these markets.
The projected growth for emerging markets excluding China is 3.3% in 2027, down from 3.6% in 2026. However, an unexpected correction in AI-related investments, which have benefited exports and economic activity in some Asian countries, could undermine growth support from investment and trade.
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