ASIATODAY.ID, WASHINGTON — Economies classified as “frontier markets”, long touted as the proving ground for the next generation of global growth champions, have largely failed to live up to their potential since 2010, according to a new World Bank report.
The study finds that per capita investment growth in frontier markets during the 2020s has fallen to less than half the pace recorded in the 2010s, marking a prolonged period of underperformance despite favorable demographics, improving institutions, and abundant natural resources.
Frontier markets occupy a middle position in the global investment landscape—less integrated than emerging markets but more open than other developing economies.
Since their creation as an asset class in the 1980s and 1990s, with strong backing from the World Bank Group’s International Finance Corporation (IFC), they were expected to attract private capital and accelerate development.
That promise has largely gone unmet.
“With the exception of a handful of economies that have achieved investment-grade status over the past 25 years, frontier markets may well be the biggest disappointment in economic development,” said Indermit Gill, Chief Economist of the World Bank Group on January 20, 2026.
“They are better educated, live longer, and have stronger policies and institutions than other developing economies—but they have failed to translate these advantages into sustained progress.”
A Fifth of Humanity, a Fraction of Global Capital
Today, frontier markets are home to 1.8 billion people—nearly one-fifth of the world’s population.
Over the next 25 years, they are expected to add almost 800 million more people, more than the rest of the world combined. More than a third of these economies are located in Sub-Saharan Africa, many rich in minerals critical for renewable energy, telecommunications, and consumer electronics.
Yet their global economic footprint remains marginal. Frontier markets account for just 3.1% of global capital inflows and less than 5% of global output.
Since 2000, investment momentum has steadily weakened. Over the past quarter century, per capita investment growth has slowed to around 2% in the 2020s, down sharply from previous decades.
Open on Paper, Shallow in Practice
Measured by legal frameworks, frontier markets have made notable progress in financial openness.
Today, their financial systems are about half as open as those of advanced economies, up from roughly one-fifth in 2000.
In practice, however, financial development has lagged. Domestic currency markets remain shallow, and banks and financial institutions lend significantly less to households and businesses than their counterparts in emerging markets—constraining private-sector growth.
Fiscal Fragility and a Rising Debt Toll
The report identifies weak fiscal discipline as a major obstacle. Government spending has risen steadily, while revenues have stagnated. The result has been mounting debt burdens and repeated defaults.
Frontier markets now spend around 2.5% of GDP on net interest payments, more than emerging markets or other developing economies. Nearly 40% of frontier markets defaulted at least once between 2000 and 2024.
Since the COVID-19 pandemic, they have recorded more sovereign defaults than all other countries combined.
Success Stories—But the Exception, Not the Rule
Despite the bleak overall picture, a small group of frontier markets has defied the trend.
Viet Nam, once among the world’s poorest countries, now ranks among the 10 fastest-growing economies of the past 25 years. Rwanda rebuilt its economy after civil war, leveraging tourism and services. Meanwhile, Bulgaria, Costa Rica, Panama, and Romania have all attained high-income status since 2012.
Their paths differed, but their strategies converged: growth-friendly policies, investment-supporting infrastructure, prudent fiscal management, and institutional environments that attract private capital. The payoff has been substantial—per capita income in the top-performing frontier markets nearly quadrupled over the past 25 years.
“Frontier markets will play a critical role in meeting the global jobs challenge,” said M. Ayhan Kose, Deputy Chief Economist of the World Bank Group.
“They will account for nearly one-fifth of the 1.2 billion young people in developing countries entering the workforce in the next decade. But without deep reforms, their potential will remain unrealized.”
The Verdict: Opening Markets Is Not Enough
The World Bank’s conclusion is stark: liberalization alone will not deliver prosperity. Frontier markets must go beyond opening their economies to developing deep, resilient financial markets and building institutions capable of managing risk and sustaining investment.
Without that shift, the economies once seen as the world’s next growth frontier risk remaining exactly where they are—full of promise, but perpetually underperforming. (AT Network)
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