Finance ministers, central bankers, and global policymakers gathered in the Kingdom yesterday for the AlUla Conference for Emerging Market Economies. Slowing growth, rising debt, and a fragmented geopolitical landscape shaped the conversation as the realization settles in that emerging markets can no longer rely on the stability of global financial markets for their own growth.

The global reset

Fragmentation and uncertainty were the buzzwords this year. Most speakers agreed that protectionism and geopolitical factors are actively hindering technology diffusion and talent mobility, leading the global economy to grow by just 3.3% in 2025, down from a pre-pandemic average of 3.7%.

We are now in a world of “sweeping transformations in geopolitics, technology, and trade,” IMF Managing Director Kristalina Georgieva said in her opening remarks. More shocks are to come, Georgieva warned, noting that many nations will have to face them with “depleted fiscal buffers.”

EMs stood their ground

Emerging markets now account for nearly 60% of global GDP in purchasing power terms and 70% of global growth, Finance Minister Mohammed Al Jadaan said yesterday, adding that “the 10 emerging economies in the G20 alone account for more than half of the world's growth.”

What underpinned the resilience? Independent central banks and clearer inflation targets, Georgieva said. Central bank governors, including Poland’s Adam Glapinski, echoed the sentiment, saying that institutional independence allowed for hiking interest rates to battle inflation at a time when the decision was unpopular with the markets, society, and political lobbies.

Regional cooperation is also becoming more vital, Georgieva added, saying that lowering barriers and deepening integration can help preserve trade as an engine of growth. She cited the GCC, ASEAN, and the African Continental Freetrade Area as leaders in this trend.

The debt trap

Growth in emerging markets remains threatened by the “debt cliff”: Half of all low-income countries are currently in, or at high risk of, a debt crisis, Al Jadaan said, highlighting the need for more “disciplined debt management” to weather the new headwinds. China’s Finance Minister Lan Fo’an echoed the sentiment, warning that tightening global liquidity has restricted consumption and investment in emerging markets.

Saudi Central Bank Governor Ayman Mohammed Alsayari urged central banks to build reserves as a strategic shield by deploying countercyclical policies that protect domestic growth from a hostile global financial system. The Kingdom built policy buffers to absorb financial shocks, Alsayari argued, citing the accumulation of reserves during periods of economic growth. Primarily funded by oil receipts, these reserves allowed Saudi to "support balance of payment needs strategically" and smooth economic activity during downturns, he added.

Still, reserves alone are not enough, Alsayari noted, as countries must foster “greater financial market depth,” specifically in debt capital markets and money market funds. This depth allows emerging markets to “diversify the structure of the funding base,” reducing reliance on external or volatile funding sources, he added.

What’s next?

The consensus in AlUla seems to be that the next decade is a sprint. Supply-side shocks are now the norm rather than the exception, and winners will be the economies that build institutional buffers and stop waiting for the old rules of globalization to return.

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