The global economy is entering a transformative phase, with emerging markets (EMs) poised to become the primary engines of growth for 2026 and beyond.

Their projected steady expansion of 3.9% to 4% signifies a remarkable shift towards resilience and innovation.

Amidst disruptions like US tariffs and AI transitions, these markets are unlocking opportunities through strategic reforms and investments.

This article delves into the pathways that can harness this potential, offering practical insights for businesses and policymakers.

By understanding the dynamics at play, stakeholders can navigate challenges and capitalize on emerging trends.

The Growth Trajectory of Emerging Markets

Emerging markets are expected to outpace developed economies, with GDP growth projections highlighting their robust trajectory.

For 2026, EMs are forecasted to achieve an overall growth rate of 3.9%, up from 3.7% in 2025.

This resilience is driven by factors such as exports, domestic policies, and reduced debt levels.

Key regions like Asia and the Middle East are leading this charge, while Latin America faces subdued growth due to tariffs and fiscal issues.

The following table summarizes key projections and drivers from various sources:

This steady growth positions EMs to represent over 60% of global GDP, according to IMF data.

Their outsized impact on the world stage is becoming increasingly evident as they adapt to global shifts.

Strategic Pillars for Resilience and Expansion

To sustain growth, EMs are focusing on four key strategic priorities identified in McKinsey's 2026 Pulse Check Survey.

These priorities form a blueprint for building resilient economies and firms.

• Strengthen infrastructure and supply chains through investments in energy, transport, and logistics, supported by blended finance and local-currency lending.
• Accelerate digitalization and skills development by expanding digital public infrastructure and upskilling workforces for enhanced productivity.
• Expand capital access for SMEs using risk-sharing mechanisms and resilience-linked credit to foster entrepreneurship.
• Reduce policy frictions by implementing pro-growth policies, harmonized standards, and predictable frameworks to attract investment.

Additional structural strategies are also critical for long-term success.

• Supply chain diversification and near-shoring, with countries like Mexico and Indonesia benefiting from shifts.
• Investment in AI, semiconductor capex, and digital platforms to drive technological advancement.
• Domestic reforms in markets such as India, focusing on finance sector opening and consumption policies.
• Emphasis on sustainable and inclusive growth to reduce inequality and promote environmental focus.
• Maintaining fiscal discipline, with EM deficits averaging 4.2% of GDP, lower than developed markets.

Collaborative projects like IDB Invest’s Ready and Resilient Americas exemplify how institutions are mobilizing resources for impact.

These efforts highlight the importance of partnerships in achieving scalable outcomes.

Spotlight on Key Markets and Opportunities

Certain emerging markets stand out for their unique opportunities and growth potential in 2026.

A diversified ex-China constellation is emerging, offering balanced growth across regions.

• India leads with domestic demand and reforms, supported by consumption policies and AI integration, projecting growth rates of 7.5-7.8%.
• Mexico benefits from near-shoring and proximity to the US, despite tariff challenges clouding its outlook.
• Indonesia and Southeast Asia gain from supply chain shifts and robust export dynamics.
• South Korea and Taiwan are key players in AI infrastructure and chip manufacturing, capitalizing on tech demand.
• Brazil and Gulf nations offer cyclical plays with macro stability and lower interest rates, though elections pose volatility.
• Thailand shows a buoyant manufacturing outlook, adding to regional strength.

The table below outlines specific opportunities and challenges for select markets:

This diversity mitigates risks and provides investors with multiple avenues for engagement.

By focusing on these hubs, stakeholders can tap into localized growth drivers.

Navigating Challenges and Risks

Despite the optimism, emerging markets face significant hurdles that require careful management.

Understanding these risks is crucial for developing effective strategies.

• Subdued business confidence persists, with PMI Future Output Index at record lows, particularly in manufacturing sectors affected by tariffs.
• Tariffs and trade shifts, such as US tariffs implemented in April 2025, have prompted export rerouting and created uncertainties.
• Employment stagnation remains a concern, with indices hovering around neutral levels, indicating limited job growth.
• Inequality and uneven benefits from AI and tech advancements necessitate inclusive policies to ensure shared prosperity.
• Tight valuations and stretched sovereign spreads pose investment risks, amplified by geopolitical tensions.
• Inflation is muted, with input costs at six-month lows, offering some relief but also signaling potential deflationary pressures.

Proactive measures are essential to address these issues and sustain momentum.

By fostering resilience, EMs can turn challenges into catalysts for innovation.

Investment Outlook and Equity Potential

The investment case for emerging markets is strengthening, driven by favorable conditions and structural trends.

With weaker USD prospects and attractive valuations, EMs offer compelling opportunities.

• EM equities show robust earnings growth, with a CAGR of 14.9% over the next two years, outpacing some developed indices.
• Themes like AI supply chains, digitalization, and premium consumption are driving returns, supported by persistent policy easing.
• Resilience has been demonstrated through recovery from tariff shocks, with markets adjusting via strategic shifts.
• Allocations remain below benchmarks, indicating room for increased inflows as confidence builds.
• Sustainable funds have outperformed, highlighting the importance of environmental and social governance in long-term strategies.

Diversification benefits are clear, as EMs provide exposure to high-growth sectors not fully captured in developed markets.

Investors should consider thematic approaches to capitalize on these dynamics.

The Broader Context and Institutional Support

Institutions play a pivotal role in supporting emerging market growth through collaboration and funding.

Multilateral development banks (MDBs) are key actors in mobilizing private capital for resilience programs.

• Initiatives like the World Bank’s Tanger Med Port in Morocco exemplify infrastructure projects that enhance trade capacity.
• Global shifts, including US-China resource competition, position EMs as critical players in shaping economic narratives.
• Sustainability edges are gained through outperforming sustainable funds, emphasizing the need for green investments.
• Fiscal health has improved, with anchored inflation blurring lines between emerging and developed markets, fostering stability.

This institutional backbone ensures that growth strategies are implemented effectively and inclusively.

By leveraging these supports, EMs can accelerate their transformation and contribute meaningfully to global prosperity.

The journey ahead is filled with promise, as emerging markets harness innovation and resilience to unlock new frontiers.

With strategic focus and collaborative efforts, they are set to redefine economic paradigms for years to come.