Growth has held up emerging markets better than expected in 2025 despite a sharp rise in US tariffs, that's according to a new note from Goldman Sachs.
Analysts now forecast EM growth of 4% for the year, close to its long-run potential.
In terms of an investment play, Goldman Sachs recommends long positions in the Brazilian Real and South African government bonds, and says it is 'overweight' Chinese, Korean and South African equities.
Goldman reckons the apparent resilience in emerging markets is helped by a 10% year-to-date fall in the trade-weighted US Dollar, which has allowed some central banks to ease policy, and support growth.
Asia has led the regional performance, the American bank added, supported by strong technology exports and falling oil prices. In contrast, it noted that activity in Latin America and 'CEEMEA' ( Central Europe, the Middle East, and Africa) has softened, but still outperformed initial forecasts.
On inflation, Goldman Sachs notes that emerging market currency strength is now aiding disinflation in CEEMEA and Latin America - with the median returning to around 3%, and further declines are expected in 2026.
Equity and FX markets have also performed well, Goldman added, with the American bank expecting a rally in EM equities to continue into year-end, aided by the interest rate-cutting cycle and sustained investor demand for diversification.