Emerging economies have so far withstood the energy shock caused by the conflict in the Middle East better than expected. The surge in oil, gas and energy-related input prices was rapid, but less inflationary than in 2022. While monetary policy easing cycles have been interrupted in many countries, most central banks have been able to keep their policy rates unchanged since last February. Emerging financial markets have not faced a widespread loss of confidence, while macroeconomic buffers are stronger than in the summer of 2022, helping to absorb the rise in energy costs.
Panoramas as of 13 July 2026: a severe shock with varying effects in the North Africa/Middle East region; heightened fragilities in Sub-Saharan Africa; Latin America less exposed to the energy shock; Asia with strengths to face the energy crisis.
The Brazilian economy continues to withstand an ultra-restrictive monetary policy stance. In an election year, fiscal policy has become increasingly active to help cushion the impact of high interest rates and mitigate the effects of the oil shock on households' purchasing power. The resilience of economic activity comes at the cost of slower disinflation and a shift in the fiscal burden towards public banks. The policy mix—protective fiscal policy versus restrictive monetary policy—complicates the adjustments of prices, public finances, and inflation expectations amid more frequent supply shocks. The oil price shock has helped strengthen both external accounts and the reais
The presidential election on 21 June 2026 was won by Abelardo de la Espriella, an outsider who distances himself from the traditional figures of the Colombian right. His programme, which represents a total departure from that of the outgoing government, draws clear inspiration from the economic liberalisation advocated by Argentine President Javier Milei and the security measures of Salvadoran President Nayib Bukele. His accession to power in August therefore heralds major shifts in economic and fiscal policy, as well as in the fight against drug trafficking. Although economic growth has remained largely unaffected by the closure of the Strait of Hormuz, it is expected to slow in 2026, primarily due to more restrictive monetary and fiscal policies
Mexico’s economic outlook remains modest. It is characterised by a slowdown in private consumption and investment still held back by uncertainty and a lack of new infrastructure projects. Exports, the main drivers of economic activity, have benefited from the US regionalisation strategy, but the USMCA renegotiation is introducing new constraints. The US is tightening the conditions for accessing its market, threatening the competitiveness of the manufacturing sector, which remains dependent on Asian inputs. At the same time, rising public debt, continued support for Pemex and falling oil revenues are drastically reducing fiscal margins, exacerbating the country’s economic challenges.
The global race for artificial intelligence and the electrification of economies is leading to an increase in demand for metals. A recent study by S&P Global indicates that global electricity consumption is projected to grow by nearly 50% by 2040, fuelling a sustained rise in demand for copper, lithium, nickel, and other critical minerals. According to the International Energy Agency, demand for copper could rise by 30 to 40% by 2040, while demand for lithium could increase four- to sixfold, depending on the pace of adoption of low-carbon technologies.
In Colombia, the right-wing populist candidate Abelardo de la Espriella won the second round of the presidential election on Sunday, 21 June, which achieved a record voter turnout of 63.4%. Preliminary estimates indicate that he secured 49.7% of the votes, narrowly surpassing left-wing candidate Iván Cepeda, who garnered 48.7% and represented a continuation of the policies of outgoing President Gustavo Petro (2022-2026). This election marks a significant shift to the right for the country, following the lead of Argentina and Chile, now governed by President Javier Milei (since December 2023) and President Antonio Kast (since March 2026), respectively
Latin America is not exposed to the risk of a disruption in hydrocarbon supplies due to the conflict in the Middle East. However, the rise in international energy prices is exerting pressure on the region’s public finances. In Brazil, Mexico and Colombia, fuel subsidies are increasing the risk of fiscal slippage; however, this risk is somewhat mitigated by the projected rise in oil-related fiscal revenues. In Chile and Peru, the lack of subsidies points to a significant inflationary impact that could result in a monetary tightening. This would increase the interest burden on public debt, but the moderate fiscal deficits in these countries should enable them to absorb the shock
Latin America is considerably less exposed than other emerging regions to the repercussions of the war in the Middle East. This is mainly due to its very low risk of hydrocarbon supply disruptions: the vast majority of imported hydrocarbons come from the United States and other countries in the region, with only a negligible portion coming from the Middle East. Furthermore, several countries are net exporters (Argentina, Brazil, Colombia and Ecuador).
The Argentine economy has avoided recession due to strong exports. Fiscal policy is restrictive and will remain so, while inflation has picked up again in recent months. Growth is expected to slow in 2026 before rebounding in 2027. Empowered by his party's gains in the October 2025 mid-term elections, President Milei aims to push through his structural reforms swiftly. With backing from the IMF, the US Treasury and major international banks, foreign exchange reserves have been replenished, and the risk premium has fallen significantly. However, reserves remain low in view of the dollar-denominated debt servicing obligations for the next two years. Although the AI sector has yet to make a significant impact on growth, it is contributing to the development of the mining industry
The Brazilian economy is navigating between two currents: on the one hand, signs of a cyclical slowdown are mounting under the effects of monetary tightening; on the other hand, rebalancing mechanisms are emerging: disinflation is ongoing, interest rates cuts are in sight, the labour market is adjusting gradually to a more sustainable equilibrium, and economic growth is moving closer to its long-term potential. The current account deficit is resisting rebalancing, though it stays comfortably covered by steady inflows of foreign capital. The country's positioning in AI value chains reflects its comparative advantages: abundant natural and energy resources and a vibrant startup ecosystem
Chile’s economic growth will slow very slightly in 2026 but will remain close to its potential, while inflation will fluctuate around the 3% target. The mining sector continues to be an important driver of growth: high copper and lithium prices are bolstering exports and investment projects. The pace of fiscal consolidation and the investment outlook will largely depend on the new government's ability to implement the economic measures announced during the presidential campaign. Despite the proliferation of initiatives aimed at developing the AI sector, its contribution to growth remains low. Mining resources are an asset and projects are multiplying, but environmental and social constraints will have to be addressed.
Strong exports helped the Mexican economy to avoid recession in 2025, despite geopolitical tensions. Sluggish investment is a structural weakness in the country, and the outlook is not favourable. However, driven by household consumption, activity is expected to rebound in 2026, and Mexican growth could reach its potential. Nevertheless, the short- and medium-term outlook hinges largely on the outcome of the USMCA negotiations. The same is true in the AI sector, as the sharp increase in exports of AI-related products to the United States masks a structural weakness in the local industry, which is still primarily a low value-added assembly platform. Here again, the outlook hinges on future USMCA negotiations, which could introduce new regulatory requirements.
In today’s discussion, we delve into the public finances of emerging economies in 2025, based on an exclusive analysis of our most recent EcoPerspectives issue focused on these economies. With robust but slowing growth, rising public debt and limited fiscal flexibility, what challenges and opportunities lie ahead for these countries?
As a result of monetary tightening, Brazil's economic growth has been losing momentum over the last two quarters. Nevertheless, the slowdown in domestic demand is facilitating the disinflationary process, which is further bolstered by decreasing food and oil prices, along with the appreciation of the real. Despite highly restrictive monetary conditions, labour and credit markets continue to exhibit areas of resilience within the economy. The impact of trade tensions with the United States are currently limited, as lost exports find alternative destinations. Diplomatic efforts, combined with Brazil's geostrategic position, point to a possible easing of tensions ahead
Mexican economic growth held up well in the first half of 2025. The slowdown is expected to be more pronounced in the coming quarters: export momentum is likely to diminish due to the implementation of US tariffs, while domestic demand is expected to remain sluggish. Inflation is expected to decelerate moderately, and the cycle of monetary policy easing is likely to continue in 2026. Public finances represent a structural weakness in the Mexican economy. Consistent support for the oil company Pemex, fiscal spending rigidity and overly optimistic projections used by the government when setting its annual budget have resulted in the failure of the consolidation policies proposed by successive administrations. Consequently, the fiscal deficit has been widening since 2019
Since the spring, the macroeconomic and financial situation has deteriorated significantly. The successful stabilisation of 2024 was ultimately short-lived. The economy is expected to have formally entered recession in the third quarter. The current account is once again in deficit despite very restrictive fiscal policy, and despite massive support from the IMF since April, official foreign exchange reserves remain low compared with upcoming external debt repayments in 2026. Since September, the government has benefited from the support of the US Treasury, and President Milei's party emerged victorious from the mid-term elections, which has reassured investors
In Colombia, economic growth is rebounding after two years of poor performance, but several sectors are still lagging behind and investment is still weak. Attention is now turning to the 2026 parliamentary and presidential elections, which could lead to major shifts in economic and fiscal policy. The next administration will inherit a record-high fiscal deficit and a rapidly rising public debt. With the fiscal rule suspended for three years, it will need to act quickly to lay the foundations for fiscal consolidation before investor confidence is eroded further.
Against all odds, Argentine President Javier Milei’s party emerged victorious in the 26 October midterm elections, despite suffering an electoral setback less than two months earlier. What was behind this turnaround, given that the economic and social situation has deteriorated significantly since the spring? Will the easing of tensions on the peso and the risk premium be enough to avoid a recession? Will US financial support be enough to avert any risk of default on foreign debt?
The Mexican government has announced plans to increase customs tariffs. Asian countries in general, and China in particular, are being targeted. The measure is expected to be adopted by Parliament in November before being implemented next January for a period of one year.
Contrary to what was feared at the end of 2024-beginning of 2025, exports of goods of emerging countries held up well in the first part of the year. Asian countries are showing the best performances and Latin American countries are doing well. On the other hand, Central European countries appear, if not as the losers, at least as the most vulnerable to the transformations of global trade since the Covid crisis. For a large majority of EM, corporates’ expectations about their order books in June suggest a decline or slowdown in exports in the coming months.
The tightening of US trade policy presents Brazil with numerous challenges and pressure points through its effect on economic growth, commodity prices, the need to defend its export market shares and heightened competitive pressure within its borders stemming from the rerouting of inexpensive goods. However, this new environment also presents Brazil with opportunities to reposition itself in the global trade landscape enabling it to take advantage of the reconfiguration of trade flows and global value chains. This shifting geography could also act as a catalyst to accelerate its trade integration (Mercosur, EU, Canada, Mexico). In the short term, however, the most pressing challenges will be domestic
The outlook continues to deteriorate in Mexico, one of the countries most exposed to US economic policy. The Mexican economy is set to contract in the coming quarters, with weak domestic demand unable to offset the marked slowdown in exports. Mexico's Minister of the Economy has begun talks with Washington on a faster-than-expected renegotiation of the USMCA free-trade agreement. The aim is to reduce the short-term uncertainty surrounding bilateral relations between the two countries.
GDP growth is holding up rather well in Chile, buoyed by the mining sector and a solid domestic demand. The outlook is relatively favourable: inflation is contained, fiscal consolidation should continue and political risk remains moderate in the run-up to the presidential election at the end of the year. Lastly, apart from the announcements regarding the copper sector, the direct impact of the increase in tariffs imposed by the Trump administration on the Chilean economy is relatively low. Indirect effects, volatile commodity prices and uncertainties over the pace of progress in the global low-carbon transition, on the other hand, represent a very significant risk for the Chilean economy.
The vast majority of Latin American countries have been subject to 10% tariffs, the minimum rate, since April 2, imposed by the Trump administration. This leniency is due to the composition of their exports (raw materials and energy, whereas the Trump administration's “reciprocal” tariffs mainly targeted exporters of manufactured goods) and the fact that most of them have a trade deficit with the US.
