KUALA LUMPUR: Moody's Ratings has maintained a stable outlook for emerging markets (EMs) in 2027, supported by strong investment cycles, sustained commodity demand and the reorganisation of global supply chains, despite challenging macroeconomic conditions.
“We expect GDP growth in the largest EMs to remain steady at a slow level overall, although it will vary depending on the effectiveness of their government policies and the relative strength of investment cycles,” the rating agency said in its its 2027 emerging markets outlook report.
It said economic growth across major emerging economies was expected to remain broadly steady, although performance would vary depending on government policies and the strength of investment activities.
Moody's said emerging market governments, companies and banks had weathered volatility arising from tariffs, geopolitical disputes and high energy prices in 2026 without significant deterioration in overall credit quality.
However, it cautioned that higher interest rates, elevated energy costs and persistent trade uncertainty would increasingly differentiate credit performance across countries and sectors.
"Those favourably exposed to the ongoing technology-driven commodity demand and security-focused reorganisation of supply chains will fare best," it said.
Moody's noted that investments in digital infrastructure, electricity grids and electrification would continue to support demand for certain commodities over the next 12 months.
It identified Malaysia as among the emerging markets where early investments in digital infrastructure had been concentrated, alongside China, India, Brazil, Indonesia and Mexico.
The rating agency said digital infrastructure investments were expanding into more emerging economies, although some projects could struggle to generate sufficient returns because of limited demand or connectivity constraints.
Malaysia was also identified among oil and gas-producing countries positioned to benefit from sustained energy demand and elevated prices until energy markets normalise.
Moody's expects oil prices to remain high and volatile, averaging around US$90 per barrel in 2027.
On Malaysia's economic outlook, the rating agency projected gross domestic product growth of 4.6% in 2027, moderating from 5.2% in 2026.
It expects inflation to remain relatively contained at 2.1% next year, compared with 2% this year.
Across Asia-Pacific emerging markets, economic growth is projected to moderate to 4.7% in 2027 from 4.9% in 2026.
Moody's said credit conditions among Asia-Pacific emerging market sovereigns had become more stable heading into 2027, supported by resilient domestic demand, continued public and private investment, and improved capacity to absorb economic shocks.
Fiscal consolidation is expected to continue across the region, albeit at a slower pace because of capital investment and social spending requirements.
Meanwhile, Moody's said the restructuring of global supply chains would continue to attract foreign direct investment into selected emerging economies as companies sought to diversify production and strengthen supply security.
It added that most emerging market sovereigns were expected to stabilise their debt burdens through spending restraint, revenue-raising measures or both.
Nevertheless, higher borrowing costs could weigh on debt affordability, particularly for borrowers with substantial financing requirements and limited access to funding.
Moody's also warned that a sharper-than-expected slowdown in digital infrastructure investment, a stronger US dollar and prolonged trade disruptions could pose additional risks to emerging market growth.
