Emerging markets, caught between economic giants, face tough 2025, JPMorgan says
Emerging markets are in for a tough and uncertain year due to policy shifts in the United States and uncertain growth in China, JPMorgan said in its annual outlook, predicting emerging markets bond funds were in line for sizeable outflows.
«EM growth faces significant uncertainty in 2025, caught between two giants — China and the U.S. — with policy changes in the latter potentially delivering a large negative supply shock that will have spillovers across EM,» JPMorgan said on Tuesday.
The bank said its base case sees growth across developing nations slowing to 3.4% in 2025 from 4.1% this year. Looking at emerging markets ex-China, JPMorgan predicted growth to moderate to 3.0% from 3.4%. Emerging-market fixed income was set to be at the sharp end of the stick, with Donald Trump's return to the White House and a Republican Congress posing «challenging headwinds» due to tariff policy, geopolitical shifts and domestic U.S. policy leading to a stronger dollar as well as higher rates.
The Wall Street bank predicted emerging market dedicated bond funds were set to suffer outflows of between $5 billion and $15 billion next year.
«U.S. policy's impact on sentiment to EM is likely to be the main drag, with the lagged impact of Fed easing providing some offset,» JPMorgan analysts wrote.
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