Frontier markets have enjoyed a recovery in 2017, with aggregate GDP growth set to reach close to 3%, up from a seven-year low of 2.3% in 2016. Frontiers in Latin America and Sub-Saharan Africa have exited recession, while growth has strengthened among frontiers in Emerging Europe and Emerging Asia. The key exceptions to this trend have been frontiers in the Middle East and North Africa, where OPEC-agreed oil production cuts have trimmed growth in the major Gulf economies.
Looking ahead, frontier markets are likely to strengthen further in 2018. This will be driven by a rebound in the Middle East and North Africa as well as a continued acceleration in growth in Sub-Saharan Africa, which should more than offset softer growth in the other regions. As a result, the gap in growth between frontiers and the wider emerging world is likely to narrow next year.
This should be encouraging news for frontier financial markets. Frontier equity markets have struggled against their counterparts in the rest of the emerging world recently, but we don’t expect this period of underperformance to continue for much longer.
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