DUBAI: A holistic approach to building resilience in emerging markets—through structural reforms, technological investment, and private sector engagement—is crucial for ensuring sustainable growth, according to a Davos panel discussion.
The discussion, held on Wednesday at the World Economic Forum, focused on how these economies can overcome current challenges and position themselves for long-term success.
Structural Reforms Critical for Growth
Emerging markets have managed recent global shocks, such as rising interest rates, the pandemic, and increased energy prices, due to long-term investments in macroeconomic stability.
However, Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF), warned that per capita GDP growth has slowed since the pandemic. She emphasized that further structural reforms are needed to boost productivity and private sector investment.
“Emerging markets need to reinvest in reforms that deepen capital markets, encourage innovation, and enhance human capital,” Gopinath said. She noted that countries like Ƶ and Mexico are exceptions, having maintained growth despite global slowdowns.
Gopinath also pointed to artificial intelligence (AI) as a potential driver of productivity but highlighted a significant digital divide. While advanced economies face 60% job exposure to AI, low-income countries remain far behind, with only 26% exposure. She said that emerging markets need to invest in digital infrastructure and education to harness the full potential of AI.
Rising Debt Concerns for Emerging Economies
Global debt levels were another major topic of concern. Public sector debt globally now stands at $100 trillion and is projected to reach 100% of global GDP by 2030. Gopinath warned that debt levels are often underestimated, potentially creating a “serious issue” for countries to address in the coming years.
The solution, she said, lies in attracting private sector investment. For example, climate finance will require 80-90% of funding from private investors. Governments must create policies that de-risk investments and encourage private capital to flow into critical areas like climate adaptation and digital transformation.
Ƶ’s Vision 2030: A Model for Resilience
Ƶ’s Finance Minister, Mohammed Aljadaan, shared how the country’s Vision 2030 has laid the foundation for structural reforms. Through initiatives such as the Expenditure and Project Efficiency Authority, the country has significantly improved government spending efficiency and attracted increasing private sector investments.
Aljadaan also emphasized that resilience-building initiatives may not yield immediate returns but prove their value in times of crisis. Ƶ’s strong recovery during the COVID-19 pandemic was attributed to the country’s long-term planning and alignment between government and private sectors.
Multilateral Development Banks’ Role in Supporting Growth
Meanwhile, multilateral Development Banks (MDBs) play a key role in supporting resilience in emerging markets, Odile Françoise Renaud-Basso, President of the European Bank for Reconstruction and Development (EBRD) said,
They help countries develop effective macroeconomic frameworks and create environments that attract private investment, she explained.
However, Renaud-Basso noted that MDBs cannot substitute private capital but can help foster investment-friendly policies by improving regulatory frameworks, strengthening the rule of law, and simplifying processes.
The panel underscored that emerging markets face numerous challenges but have a tremendous opportunity for growth if they pursue a holistic strategy that integrates structural reforms, technology adoption, and private sector engagement.
Through such measures, these economies can not only recover from the impacts of recent crises but also build a foundation for sustainable growth.
