Emerging Bets: Chasing Growth Beyond Borders

Investment opportunities in emerging markets offer high growth potential, though they come with elevated risks.

A key trend shaping these opportunities is the global “China + 1” strategy, where multinational companies seek to reduce dependence on China by expanding operations into other emerging economies to diversify supply chains and manage geopolitical risk.

This shift is driving increased attention to emerging economies with strong fundamentals, improving governance, and strategic advantages such as low-cost labour, growing domestic markets, and resource availability. These markets are characterised by rapid economic expansion, rising middle classes, and evolving financial systems.

Investment options include public equities, sovereign bonds, private equity, and infrastructure development.

Let’s look at some key emerging markets

India

GDP growth projected at 6.5%–7.2% in 2025.
Growth driven by strong domestic demand, digital innovation, and infrastructure development.
Benefits from a young, large population and an expanding middle class.
Gaining from supply chain diversification and emerging as a tech and fintech hub.
Government support is boosting electronics, pharma, and renewables.
Challenges: unemployment, regulatory issues, and climate risks.

India’s economic outlook in 2025 is highly positive, with GDP growth expected to be around 6.5%–7.2%[1][2], driven by strong domestic demand, digital innovation, and major infrastructure and manufacturing initiatives.

The country benefits from a large, young population and a fast-growing middle class, which supports robust consumer and technology sectors. India is emerging as a global tech and fintech hub, while also gaining from supply chain diversification away from China. Government reforms and incentives are boosting industries like electronics, pharmaceuticals, and renewables. However, challenges such as unemployment, regulatory hurdles, and climate risks remain.

Overall, India presents a compelling long-term investment case, particularly in sectors like technology, green energy, infrastructure, and consumer goods.

Vietnam

GDP expected to grow 6.5%–8%, among Asia’s fastest.
Supported by strong exports, especially in high-tech manufacturing.
Attracts FDI (~$25B annually) due to the “China + 1” strategy.
Key sectors: electronics, digital economy, e-commerce, fintech, tourism, and renewables.
Major projects: $67B high-speed rail; advancing industrial and green energy sectors.
Risks: global trade volatility and inflation management.

Vietnam’s economic outlook over the next 1 to 5 years is highly promising, with GDP growth projected between 6.5% and 8%, making it one of Asia’s fastest-growing economies[3][4] .

The country is set to benefit from strong export performance, particularly in high-tech manufacturing, and sustained foreign direct investment, which is expected to remain near $25 billion annually. Vietnam’s strategic role in the “China + 1” strategy continues to attract global manufacturers looking to diversify supply chains, aided by a young workforce, political stability, and improving infrastructure[5].

Key growth sectors include high-tech electronics manufacturing, led by major players like Samsung, Apple, and Intel, along with a booming digital economy expected to reach $45 billion by 2025 and up to $200 billion by 2030[6]. E-commerce, fintech, and digital banking are expanding rapidly.

Additionally, Vietnam’s tourism and hospitality sector is rebounding strongly, contributing around 6.6% of GDP[7]. Major infrastructure investments, such as a proposed $67 billion high-speed rail line connecting Hanoi and Ho Chi Minh City, are set to enhance trade and mobility. The country is also advancing in renewable energy and industrial materials, including thermoplastics, to support industrialisation and green goals.

While global trade uncertainties and inflation management remain challenges, Vietnam’s strong fundamentals, reform-oriented policies, and sectoral momentum support a highly favourable medium-term growth trajectory.

Brazil

GDP forecast at 2.4% in 2025.
Strength in agribusiness, rare earths, and digital services.
Record grain exports and foreign investment in mining
Growth in tech partnerships and green finance via reforestation projects.
Challenges: high interest rates (14.75%), inflation, political uncertainty, and regulatory risks.
Vulnerable to commodity price swings and environmental issues.

Brazil’s economic outlook over the next 1 to 5 years is cautiously optimistic, with GDP growth forecasted at 2.4% in 2025, driven by strong agricultural output and resilient performance in early 2025[8].

Key sectors such as agribusiness, rare earths, and digital services are seeing momentum. Record grain harvests continue to bolster exports, while foreign investment is flowing into rare earth mining projects like Aclara Resources’ $600 million venture[9]. The tech sector is expanding through partnerships like Uber’s integration with iFood[10], and large-scale reforestation projects are attracting green finance[11].

However, persistent challenges temper investor confidence. High interest rates (currently at 14.75%[12]) and inflationary pressures are likely to dampen domestic demand and slow growth in the second half of the year. Political uncertainty, fiscal reform delays, and heavy reliance on commodity exports increase vulnerability to global shocks. Environmental and regulatory risks, such as deforestation and inconsistent policy enforcement, further complicate the investment landscape[13].

While opportunities exist, especially in strategic sectors, investors must navigate these headwinds carefully.

Korea

GDP growth projected between 1.0%–2.1%; subdued outlook.
Weaknesses in exports, domestic consumption, and political uncertainty.
Government plans $470B semiconductor cluster investment over 23 years.
Facing pressures in semiconductors from global competition and trade issues.
An aging population shrinking workforce, and an increasing fiscal burden.
Growth depends on geopolitical stability and policy reforms.

South Korea’s economic outlook for 2025 is subdued, with GDP growth projections ranging from 1.0% to 2.1%. The Bank of Korea has revised its forecast downward to 1.5%, citing pressure on exports and domestic demand due to U.S. tariff policies and domestic political uncertainty[14].

The OECD has also cut its projection to 1.5%, reflecting concerns over global trade tensions and internal instability, while the Korea Development Institute forecasts 1.6%, citing growing external and domestic uncertainties[15].

Major headwinds include sluggish domestic consumption, a slowing export sector, and political instability. The semiconductor industry, a vital part of Korea’s economy, is facing global trade pressures and intensifying competition.

In response, the South Korean government has announced a $470 billion investment plan over 23 years to build the world’s largest semiconductor cluster and boost chip self-sufficiency.

Additionally, South Korea’s aging population, the fastest-aging in the OECD, is putting downward pressure on long-term growth by shrinking the labour force, reducing consumer demand, and increasing government spending on pensions and healthcare.

Despite these efforts, overall economic momentum remains fragile and highly dependent on the resolution of geopolitical tensions and domestic policy clarity.

What to look out for

For investors, emerging markets continue to offer attractive long-term growth potential, particularly as global supply chains diversify under the “China + 1” strategy.

Countries like India and Vietnam are benefiting most from this shift, thanks to strong demographics, improving infrastructure, and expanding technology and manufacturing sectors. India’s booming consumer base and digital transformation make it a compelling destination, while Vietnam’s export-driven growth and role in global electronics supply chains signal robust momentum.

Brazil presents sector-specific opportunities in agriculture, rare earths, and green finance, but political and regulatory uncertainty remain key risks. Meanwhile, South Korea, though more developed, faces slower growth due to aging demographics and external pressures, with its semiconductor sector a focal point for government investment.

Moving forward, investors should closely monitor policy reforms, political stability, demographic trends, and global trade dynamics to navigate both the opportunities and risks across these diverse markets.