Emerging economies: So far weathering the energy shock well

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.

In Asia, the region most dependent on hydrocarbons from Gulf countries, the authorities have acted swiftly to limit the risks of shortages by diversifying supply sources, mobilizing reserves and adjusting demand.

Most importantly, Asian countries that export tech goods have benefited significantly from the rise in artificial intelligence. Investment in AI infrastructure and global demand for chips and other electronic goods have bolstered economic growth and the external accounts of several emerging economies, sometimes offsetting the negative impact of the energy shock.

In the short term, the average growth rate of emerging economies is expected to slow only moderately. In our baseline scenario, we project an average real GDP growth of just under 4% in 2026, after 4.5% in 2025.

However, risks remain high, including persistent inflation, expected hikes in US Fed rates, geopolitical tensions, volatility in commodity prices and the risk of a correction in the tech cycle.

Emerging economies: Manageable consequences of the energy shock

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