1. The Digital Transformation Accelerates

Image

It will come as little surprise that one of the most significant drivers influencing any emerging market outlook for 2025 will be the ongoing digital transformation. Rapid technological innovation has only further emphasized the need for digital transformation, rendering it a central priority for business leaders looking to leverage the skillsets and cost-efficiencies of global supply chains. In recent years, rapid advancements in mobile internet access, e-commerce, fintech, and digital infrastructure have helped to transform many EM economies, allowing them to leapfrog traditional development stages and placing them in a prime position for global investment. In 2025, this trend is expected to intensify, especially in regions such as Southeast Asia, Africa, and India.

Southeast Asia’s internet economy is predicted to hit $600 billion by 2030, driven by high mobile penetration and a young, tech-savvy population that tops digital engagement in key global metrics, including: time spent online, mobile app usage, and mobile internet usage. The expansion of mobile banking and digital payments will continue to open up financial services to previously underserved populations, particularly in countries like Indonesia and the Philippines. For businesses, this presents a golden opportunity to tap into millions of new consumers through e-commerce platforms and digital marketing strategies

In Africa, the fintech revolution has found a stronghold in a population of 1.2 billion people possessing by far the youngest median age in the world. Today, 70% of sub-Saharan Africa is under the age of 30, and this young, motivated workforce offers the potential for rapid economic growth. Countries like Nigeria, Kenya, and South Africa are leading the charge, with mobile payment systems and digital wallets rapidly expanding, and innovative startups providing financial solutions to people who were previously excluded from formal banking systems. Consequently, the African fintech market is expected to see the highest growth in global fintech revenues, and this financial integration can play a prominent role in furthering development in other sectors.

India remains one of the world’s largest and most dynamic digital markets. Since the government’s launch of the Digital India project in 2015, the country’s goals of creating robust digital infrastructure, accessible government services, and empowered citizens has fostered both rapid economic growth and resilience. Beyond traditional IT solutions, businesses looking to invest in India will find opportunities in a variety of burgeoning sectors such as online retail, fintech, and digital healthcare, where demand is expected to surge as more people come online.

2. Sustainability and Green Investment Grows

Image

Sustainability is no longer a fringe concern in emerging markets—it is fast becoming a core focus. As countries seek to address climate change and environmental degradation, the push toward green energy and sustainable infrastructure is gaining momentum. The potential for rapid growth in EM brings with it the risk of simply exporting the climate footprint of developed nations to developing ones. This means that businesses operating in EM will need to align with local environmental policy, as governments and consumers increasingly demand responsible practices. Fortunately, technological advancements in climate solutions have made them increasingly cost competitive, providing significant investment and commercial opportunity that will help drive green development.

In India, the renewable energy sector is poised for significant expansion, with the government targeting 500 gigawatts of non-fossil fuel energy by 2030. For businesses involved in clean energy, infrastructure development, and electric vehicles, India offers a promising landscape for green investment. Similarly, Brazil’s commitment to sustainable agriculture and deforestation control presents opportunities in agribusiness and eco-friendly supply chains.

In Africa, sustainability initiatives are becoming central to economic planning. Countries like Morocco and Kenya are leading efforts in renewable energy, with solar and wind power projects becoming key aspects of their development strategies. The African Continental Free Trade Agreement (AfCFTA)—uniting 1.3 billion people in a $3.4 trillion economy—will also aim to promote sustainable trade across the continent as it works to drive $450 billion in income gains while lifting 30 million people out of extreme poverty and raising incomes of 68 million others. This process will be highly dependent on bolstering foreign competition and direct investment, providing global businesses with a pathway into a growing economy.

For multinationals, investing in sustainable projects in EM will be crucial to accessing new growth areas while managing reputational risks. However, businesses must ensure they work closely with local governments and communities to implement meaningful sustainability initiatives that align with regional priorities.

3. Geopolitical Risks and Trade Shifts

EM in 2025 will continue to be shaped by geopolitical forces, particularly as global powers like the U.S. and China compete for influence. Trade relations, supply chain diversification, and local political developments will play a pivotal role in how businesses navigate these markets.

The U.S.-China trade tensions have already led to significant shifts in global supply chains and this trend is expected to persist in 2025, with the outcome of the U.S. presidential election primed to play a key role. Many Chinese and foreign manufacturing companies will continue to adopt a “China-plus-one” strategy, seeking to diversify production away from China to reduce their exposure to tariffs and geopolitical risks. As a result, Association of Southeast Asian Nations (ASEAN) countries will continue to benefit, with Indonesia, Malaysia, Singapore, Thailand, the Philippines, and Vietnam positioned to grow from this shift as businesses relocate manufacturing operations to more politically stable and cost-competitive regions.

In Latin America, political volatility remains a concern, particularly in countries like Argentina and Venezuela, where economic instability, hyper-inflation, and governance issues have impacted investor confidence. However, Brazil and Mexico continue to offer attractive markets for foreign direct investment (FDI) despite some political uncertainty. Mexico’s proximity to the U.S. and participation in the United States-Mexico-Canada Agreement (USMCA) make it an appealing alternative for North American businesses looking to nearshore their operations.

Africa, too, presents both opportunity and risk. While the AfCFTA aims to enhance intra-African trade and create a more integrated market, political instability in countries like Ethiopia and Sudan could pose challenges for businesses. For companies entering these markets, maintaining flexibility and staying attuned to political developments will be essential.

4. Rising Consumer Demand and Urbanization

Demographic trends in EM continue to provide compelling reasons for businesses to invest, with rapid population growth in Africa, and developing nations in Southeast Asia and the Middle East providing both challenges and opportunities for these economies. In 2025, the continued urbanization of EM will fuel consumer demand, particularly in sectors such as retail, healthcare, and real estate.

In India and Southeast Asia, rising incomes and the growth of middle-class populations are creating a booming consumer market. Companies in consumer goods, fashion, and retail should expect increased demand for both affordable and premium products. As more people move to urban areas, there will also be a growing need for healthcare services and infrastructure development.

With the world’s youngest median age, Africa’s urban population is forecast to reach 60% by 2050, making it one of the fastest urbanizing regions in the world. While a high increase in working-age population presents the challenge of producing jobs, it also represents a huge opportunity for businesses in retail, construction, telecommunications, and technology.

Latin America’s consumer market remains robust despite ongoing political challenges. In particular, Brazil and Mexico continue to be key markets driven by young populations and increasing digitalization. Companies that invest in understanding local preferences and tailoring their offerings will find growth opportunities in these dynamic markets.

Strategic Positioning in Emerging Markets for 2025

As we look toward 2025, it is clear that EM will continue to play a crucial role in driving global economic growth. While there will always be risk in EM, recent trends show that there is also vast opportunity to diversify and grow both investments and businesses. What remains critical is understanding the individual nuances of the region that one is preparing to enter, aligning strategies with local trends, maintaining a level of adaptability, and paying close attention to local socio-political dynamics. Those that invest in building strong local partnerships, embracing new technologies, and prioritizing sustainability will position themselves well for future success. 

Build Your Emerging Market Strategy With Duke Executive Education

Image

While entering EM can seem like a risky and complicated process, expansion can often create significant opportunities to drive innovation, develop competitive advantages, and mitigate risk. The Leading Global Business Strategy program offered at Duke's Fuqua School of Business is specifically designed to help entrepreneurs, investors, executives, and business leaders confidently approach global and emerging markets in order to achieve their business goals.