EM Blog: AI is driving EM growth, but it's not driving FX

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EM Blog: AI is driving EM growth, but it's not driving FX

Deutsche Bank

Research

Global Emerging Markets Date

24 June 2026

EM Blog

AI is driving EM growth, but it's not

driving FX

Oliver Harvey

Two of the main macro themes over this year have been the conflict in the Middle

Macro Strategist

East and the tech cycle. We've noted already the relatively limited impact of the +44-20-754-51947

energy price shock on growth in EM, even in regions that should be most sensitive

from an import and geographic perspective, but what about tech? An update of

some of our top down EM growth indicators reveals some interesting dynamics.

1. EM growth continues to outperform, but entirely led by Asia. EM is a cyclical

asset class and the good news is that current growth rates and forecast ones

continue to show a healthy lead over a still resilient US economy (figure 1), even if

that is more than adequately reflected in recent EM currency out-performance. As

figure 2 shows, however, this growth lead is entirely driven by the Asia region, with

CEEMEA and Lat Am growth rates broadly comparable to US ones over recent and

coming quarters. At an aggregate level, it's notable that DM growth revisions

appear to have been worse affected by the Iran conflict than EM ones (figure 3).

2. Little currency transmission from growth to FX. At a cross sectional level,

however, the relationship between growth rates and currencies this year is solidly

negative (figure 4). The fastest growing economies (Taiwan, India, Indonesia,

Malaysia etc) have seen currencies meaningfully underperform. Growth laggards

such as Mexico, South Africa and Hungary have all seen much stronger FX

performance. If there is an impact from strong global growth to exchange rates it