Frontier markets, once widely regarded as incubators for the next wave of global economic powerhouses, have largely fallen short of expectations over the past several decades, a new World Bank study has revealed. According to Global Economic Prospects, a flagship report released this month by the World Bank Group, more than one-third of frontier market economies are located in Sub-Saharan Africa. Many of these countries are endowed with mineral resources critical to modern technologies, including renewable energy systems, telecommunications and consumer electronics.
Despite these natural advantages, the report notes that frontier markets have made limited progress in attracting investment since 2000. Investment growth per capita has declined steadily over the past 25 years, dropping to just two percent in the 2020s—less than half the pace recorded in the two preceding decades. As a result, frontier markets today account for only 3.1 percent of global capital inflows and less than five percent of total global economic output.
The report stressed that stronger fiscal discipline will be essential if these economies are to unlock their long-term growth potential. Commenting on the findings, World Bank Group Chief Economist and Senior Vice President for Development Economics, Indermit Gill, described frontier markets—excluding a small number that have achieved investment-grade status—as among the biggest missed opportunities in global economic development. “On average, people in frontier markets are better educated and live longer than those in other developing economies.
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Their policies and institutions are also of relatively higher quality, and many are rich in natural resources. Yet these advantages have not translated into sustained progress, making frontier markets the developing world’s lowest-hanging fruit,” Gill said. Frontier markets are home to approximately 1.8 billion people, representing nearly one-fifth of the world’s population, and are projected to add close to 800 million more people over the next 25 years—more than any other region combined.
World Bank Deputy Chief Economist and Director of the Prospects Group, Ayhan Kose, said these economies would play a pivotal role in addressing employment challenges across the developing world. Frontier markets are expected to account for nearly one-fifth of the 1.2 billion young people in developing countries who will reach working age over the next decade. Kose noted that the strongest-performing frontier markets, while following different development paths, share key characteristics, including growth-oriented policies, investment-supporting infrastructure, prudent fiscal management and institutions capable of attracting private capital.
“The results speak for themselves. Per capita incomes in the top-performing quarter of frontier markets have nearly quadrupled over the past 25 years,” he said.
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