Emerging Economies Face Public Unrest Despite Recovery

Economic recovery across emerging markets has improved investor confidence and strengthened public finances, but households in Argentina, Morocco and Sri Lanka continue to face financial pressure. Reforms aimed at stabilizing national economies have reduced inflation in some countries and attracted investment, yet high living costs, limited purchasing power and persistent poverty are fueling dissatisfaction among residents.

According to the International Monetary Fund, reforms across emerging economies have helped restore economic stability after successive global shocks. Emerging economies are now growing at around 4%, approximately twice the pace of advanced economies, but the benefits have not reached all sections of society.

In Argentina, inflation has fallen to roughly 33% from nearly 300% since President Javier Milei took office in 2023. Imports have expanded and subsidies have declined, but some businesses are struggling with higher operating costs and weaker consumer demand.

Gustavo Raul Perez, who has operated a hardware store on the outskirts of Buenos Aires for six years, said the recovery had not translated into better conditions for ordinary people.

"This economic plan is for a few," Perez said.

Perez said the cost of restocking his store had tripled while customers had less money available to spend. He also described a deterioration in conditions for middle-income households.

"There was a middle class three years ago," Perez said. "It doesn't exist anymore."

Similar tensions are emerging elsewhere as governments pursue spending cuts, subsidy reductions and currency reforms. The pandemic and subsequent increases in food and fuel prices following Russia's full-scale invasion of Ukraine accelerated policy changes across many developing economies.

Simon Quijano-Evans of Macro Hive said governments faced difficult choices as they sought to restore economic stability and attract investment.

"absolutely no other choice," Quijano-Evans said, referring to the measures governments considered necessary to avoid an "abyss" of lost investment.

However, removing subsidies and weakening currencies can increase household expenses while spending cuts put additional pressure on incomes. If public anger undermines reforms, countries could lose investment and job creation opportunities needed to reduce the gap with wealthier economies.

In Morocco, foreign direct investment nearly doubled last year, but the country experienced deadly youth-led protests. In July, hundreds of would-be migrants also gathered near a neighboring Spanish enclave, highlighting continuing economic and social pressures.

Civil engineer Anass Sayad said development in Casablanca had not been matched by sufficient attention to essential public services.

"Morocco is developing at two different speeds," Sayad said.

The Moroccan government increased spending on education and healthcare in its 2026 budget, although the effects of the additional funding will take time to reach residents. The World Bank estimates that 1.2 billion people in developing countries will reach working age over the next decade, raising concerns about whether economies can generate enough employment.

Economic inequality has also prompted warnings from officials. Nigeria's finance minister cautioned that failing to address inequality was comparable to "sitting on gunpowder". Morocco's central bank has also identified persistent unemployment as a factor widening the gap between economic performance and public perceptions.

Torbjorn Soltvedt of Verisk Maplecroft warned that rising essential expenses could increase the risk of instability.

"When people in emerging markets are faced with rising food, fuel and energy costs...that is what they feel immediately," Soltvedt said.

According to his company, the average global risk of civil unrest reached its highest level in nearly a decade this year. International Monetary Fund chief Kristalina Georgieva has also warned that higher food and fuel costs, combined with declining development assistance, are placing additional pressure on vulnerable populations.

Food prices can have a particularly strong effect in developing economies, where food accounts for 30% to 50% of consumer price baskets, compared with 13% to 14% in the United States. Wealthier countries generally have greater fiscal capacity to help households absorb rising costs.

In Sri Lanka, the effects of the country's economic crisis remain visible despite the easing of financial turmoil and the aftermath of its debt default. Poverty remains above pre-crisis levels, leaving many households struggling to cover routine expenses.

Food vendor Sirimodara Wadaramge Sriyakanthi in Colombo begins preparing herbal porridge and rice packets before 5 a.m. She keeps lunch prices near $2 to make meals affordable while absorbing higher costs herself.

"I sell the lunch packets at a reasonable price so people can afford it," Sriyakanthi said.

She remains concerned about paying her son's school fees and her daughter's dance lessons as household expenses continue to mount.

"We have so many expenses," Sriyakanthi said.