Global and Frontier Markets in particular have gone through dramatic political and economic changes over the last 10 years.
Growth in developed markets has been entirely financed by higher debt levels. However, the picture is different in the frontier markets, where GDP levels increased 4 times more than the growth in debt ratios.
Stock markets and their investors have not recognized the full magnitude of economic progress of the emerging and frontier markets as they significantly underperformed during the past decade.
Frontier markets have built a solid foundation for stronger future returns on discounted valuations, fairly priced currencies and positive GDP and inflation dynamics.
BIGGER ECONOMIES & MORE CONSUMERS
ABOVE AVERAGE GROWTH
GDP GROWTH 2007 - 2018
During the past 10 years, frontier market GDP grew by 70%, well above the global average of 60% and 33% in developed markets. We expect that frontier economies will continue to accelerate and follow the out-performing emerging markets trend over the next 10 years.
POSITIVE DEMOGRAPHICS
POPULATION GROWTH 2007-2018
In line with emerging markets, the populations of frontier economies continue to expand faster than those of the developed markets. In an increasingly connected world, these demographics will translate into a long term growth trend of the frontier market’s consumer base
FAST GROWING MIDDLE CLASS
GDP PER CAPITA GROWTH 2007-2018
Most importantly, frontier markets population growth is translating into rising GDP per capita levels, which are well above the global average. This trend is expected to be the main driver behind the rise of billions of new consumers in these markets
STRONG BALANCE SHEETS
LOW DEBT LEVELS
GOVERNMENT DEBT AS % OF GDP
During the past decade, most frontier markets have managed to maintain their debt levels well below the global average.
The contrast is particularly stark when compared to the leverage levels in the US and the developed economies, which are not only much higher but also have rapidly increased during the past decade.
These strong balance sheets will allow FM to be well positioned in a cycle of rising interest rates
DEBT-FREE GROWTH
GDP GROWTH VS GROWTH DEBT RATIO
By putting GDP growth in perspective and factoring in the evolution of debt ratios, we have come to the conclusion that economic growth was mostly funded by debt in the developed economies.
In the case of the US, debt ratios grew at higher rates than GDP over the past 10 years. In contrast, frontier markets and Africa show a completely different picture with low reliance on debt.
Data Sources: Silk Invest; IMF; World Bank; UN
Note: FM include NG, MO, KE, GH, EG, CI, UAE, QA, OM, KW, SA, VT, BD, PK, LK & AR; Africa 7 include FM Africa countries plus ZA
