Dear Reader,

Welcome to the final FMN newsletter of 2024. It’s been a busy year—and one where frontier markets proved less immune to global geopolitics than usual.

To remind you all just how eventful this year has been, we’ve created our first year-in-review with regional roundups and our coverage charted by country.

We hope you enjoy reading the 2024 roundup as much as we enjoyed putting it together. As always, if you like what we do and want to support us going forward, please consider signing up for a pro-level subscription.

Whether you’re a new subscriber or you’ve been with us for years, we’re as grateful as ever to have you on board. We look forward to continuing to provide you with meaningful, thought-provoking and useful content in the months and years to come.

By Ken Stibler, Noah Berman, Nojan Rostami and Mariel Ferragamo. Executive editor: Dan Keeler

Latin America 

Pain and gain

Latin America’s economic narrative in 2024 was marked by a strong shift toward fiscal discipline and security-focused governance, often at significant social cost. Despite the pain, this year saw regional economies hold up well to the US Federal Reserve’s rate rises, which have historically created conditions for capital outflows and crises.  

The year also marked a realignment, with unexpected economic bright spots emerging even as traditional powerhouses grappled with structural challenges. Paraguay achieved record exports and secured an investment-grade credit rating while Panama nearly lost its investment-grade.

The Dominican Republic also successfully balanced migration management with economic growth. Uruguay’s strong governance metrics and strategic positioning in Mercosur-China relations highlighted the potential of smaller, well-managed economies.

Meanwhile, Colombia, Peru, and Panama—historically stable performers—experienced headwinds, ranging from political fragmentation and stagnant growth models to rising competition. Changing commodity-sector dynamics contributed to the structural reversal. Bolivia’s dwindling gas reserves forced it to recalibrate its energy policies, while Argentina looks ready to achieve energy independence. 

Security concerns dramatically reshaping economic policy emerged as a defining theme. Ecuador’s security-focused referendum and El Salvador’s controversial but politically popular ‘megaprison’ strategy set new regional precedents for “mano dura” (iron fist) approaches to governance, with Honduras following suit.

The region also emerged as a subtle center of public financial innovation with various forms of green bonds, local-currency market development, and multilateral bank development reform, starting with the IDB. However as previous decades show, increases in the complexity of capital sourcing can sow the seeds for future crises, a particular concern as traditional sovereign growth models showed strain, particularly in countries heavily dependent on commodity exports.

The year ahead

Looking ahead, 2025 looks set to be a pivotal year for a region whose economies often disappoint. The success of emerging economic stars shows that new development models can be successfully pursued, and rewarded by investors. Yet a breakdown in institutional capacity across the region makes stagnation likely. 

Competition from Chinese exports is expected to intensify, particularly in automotive and electronics. Simultaneously, however, slowing Chinese growth and declining demand for Latin America’s commodities, such as copper, iron, soy, oil and wheat, threaten traditional export models. This dual pressure could accelerate industrial diversification and tempt governments to further dabble in hot new markets, such as lithium, which already look oversupplied.

Energy transition efforts will also face growing challenges as countries—particularly those whose economies rely heavily on fossil fuel production—struggle to reconcile environmental commitments with economic realities. Green financing initiatives may offer partial solutions, although implementation challenges persist.

Security concerns, rhetoric and crackdowns appear likely to intensify. Several upcoming elections could amplify this trend, although attempts by larger countries to copy El Salvador President Nayib Bukele’s heavy-handed initiatives will likely fail.

The post-Covid monetary tightening cycle held up well to the end of the Fed’s 2023/24 tightening cycle, but slowing global growth—and anxious and vulnerable politicians across the region—are raising pressures to ease. In turn, central banks across the region are likely to pivot toward more accommodative stances even as inflation risks remain. 

Benefitting from continued complexity and conflict across Africa, European, and Middle Eastern markets, LatAm countries that demonstrate the ability to maintain fiscal discipline while managing security concerns and social stability should see stronger investment flows.

—Ken Stibler 

Asia

Sea change

When President-elect Donald Trump prepares to reenter the White House, a chorus of advisors will encourage him to shift America’s priorities toward Asia. The direction this pivot takes will be determined by the relationship between the US and China, with peace and prosperity for billions of people hanging in the balance.

Many people in Asia’s frontier economies have already benefitted from mounting competition over the past year between the world’s two superpowers. Western and Chinese manufacturers alike poured billions of dollars into Southeast Asia’s manufacturing sector. Their motivations were different: Western firms are looking to diversify their supply chains away from China while Chinese companies are looking to offset weakening domestic demand.

In part because of these forces, the economies of Vietnam, the Philippines, and Cambodia are expected to have grown by 6% this year. Vietnam, where companies headquartered in the US, Japan, Europe, South Korea, and China have each invested, stands out. Factories now sit in former rice fields. Exports are set to rise by 15%. FDI is also growing, though at a more modest 7%. 

Islands in a storm

Competition between China and the West also provided an economic boost for a handful of Pacific island nations. For years these countries have been calling for greater investment in climate adaptation. A 2022 deal between China and the Solomon Islands proved the nudge necessary to make these investments happen, with many taking place this year.

Australia reached agreements with Nauru, Papua New Guinea, Tuvalu, Vanuatu and even the Solomons in its attempt to offset China’s rapidly growing influence over the region. The US also opened an embassy in Vanuatu and signed a security deal with Fiji.

But some waters are still choppy. In the South China Sea, tensions flared between the Philippines and China, threatening to disrupt an artery of global commerce through which 60% of maritime trade flows. After a clash in June during which the Chinese Coast Guard brandished axes and knives, the Philippines signed a $500 million defense deal with the US, already its treaty ally. A July deal over the sea between Manila and Beijing briefly offered hope that tensions were cooling, but both sides quickly pared back the deal’s requirements. Experts see little hope for resolution in the year ahead.

Some of frontier Asia’s trends this year had little to do with the US or China, however. Pakistan and Sri Lanka began to perk up after years of economic mismanagement. Both signed deals with the IMF that will inject billions of dollars into their economies by the end of the decade. Even Sri Lanka’s new president, the leader of the country’s Marxist party, agreed to respect the IMF arrangement, arguing that it would be too costly to scrap it.

Investors rewarded the two countries, scooping up high-yield bonds en masse as part of a broader shift into frontier debt.

—Noah Berman

Europe

Security focus breeds insecurity

Eastern Europe’s economic landscape continued to be influenced heavily by security imperatives, with defense spending reaching historic levels across the region. Poland led this trend, allocating 4% of GDP to defense in a banner year that also saw the country simultaneously emerging as a leading voice within EU policy discussions.

Slovakia’s pro-Russia shift and Georgia’s eastward pivot illuminated deepening regional fractures, while Hungary’s growing alignment with China—particularly visible during Xi Jinping’s visit—underscored the complex geopolitical currents affecting investment flows.

Over the course of 2024, investment patterns illuminated the growing competition for influence between the US, EU, China and Russia. As a result, countries in the CEE region are increasingly having to scrutinize capital sources for security implications while using diplomatic relationships to secure economic partnerships.

The year also witnessed continued—albeit quiet—supply chain reorganization in sectors such as manufacturing and agriculture as countries’ export markets and trading partners changed. Energy infrastructure underwent parallel transformation, with LNG terminals and nuclear projects accelerating across Poland, Romania and the Baltic states. Monetary policy battles also dominated headlines, with Hungary’s aggressive tightening leading to demand compression, while Romania achieved a more balanced economic landing. 

A region divided

Emerging Europe enters 2025 as a region divided—between reformers and backsliders, between integrationists and isolationists, and between economic recovery and lingering vulnerabilities. The region’s markets are heavily exposed to the security context, with the ability to balance security imperatives with fiscal sustainability a key differentiator for CEE economies. Success may require innovative financing solutions and deeper regional cooperation, particularly in defense procurement and energy security initiatives.

Fiscal pressures loom large. Sustained defense spending surge is straining public finances, particularly as social spending demands grow amid persistent inflation concerns. Several countries face difficult choices between military modernization and social program maintenance, especially as populations age.

Countries will also struggle to navigate the complex intersection of climate commitments, energy security, and economic pragmatism. Ukraine’s reconstruction trajectory will heavily influence regional economic dynamics, with its success in securing debt relief and sustainable financing playing a crucial role.

Russian hybrid pressure tactics are expected to intensify, potentially targeting critical infrastructure and financial systems. This threatens to add risk premiums to regional investments and could complicate major infrastructure projects.

Foreign capital flows may prove even more selective in 2025, with investors likely to differentiate more sharply between countries based on reform progress and geopolitical alignment. Countries that successfully handle these competing pressures—such as Poland—while maintaining fiscal discipline will likely see stronger investment flows.

—Ken Stibler

Middle East

GCC markets strengthen 

Gulf Cooperation Council members this year saw their domestic capital markets recover from a weaker 2023 after robust growth in prior years. According to Fitch its members were among the largest emerging-market debt issuers of the year, taking outstanding issuance by the GCC over $1 trillion.

The region’s equity capital markets, as measured by IPO fundraising, also grew this year, after a regionwide slump to $10.7 billion in 2023 from 2022’s $22.0 billion. In the first 11 months of 2024, Saudi Arabia, UAE and Oman between them raised over $11 billion, overtaking the UK.

Much of this fundraising was driven by sovereign wealth fund holdings and state-owned companies coming to market as part of a privatization effort, Bloomberg reports. The effort is facing headwinds, though, highlighted by a recent series of headline-grabbing GCC IPOs with weak secondary demand. 

Iran’s Very Bad No Good Year

Iran suffered serious setbacks in 2024 after a year in which it appeared to be gaining friends and influence regionally and globally. Its allies Hamas and Hezollah have both essentially been militarily defeated, their leadership, logistics, and overall logistics having been more or less destroyed. A series of tit-for-tat direct exchanges with Israel have left Iran itself with reduced missile stockpiles, its drone and missile supply chains disrupted, and its air defences destroyed.

Most recently, the fall of the Assad Regime in Syria, with Turkey seemingly filling the power vacuum, puts Iran’s opponents in the driver’s seat.

The re-election of Donald Trump in the US could also increase pressure on Iran. Although it has weathered a sanctions storm before, it’s now dealing with a historically weak currency, anemic oil demand from China, security crises in its neighborhood, and a critical energy shortage.

Saudi Arabia stumbles

Saudi Arabia has had a mixed year. On the foreign policy front, the Kingdom has raised its profile, successfully playing to the middle in the Israel-Palestinian crisis and consolidating its position as the leading Arab voice on the issue. 

Saudi Arabia’s economic picture is less clear. It’s reportedly considering abandoning its oil price target and increasing production after OPEC’s failure to boost oil prices by cutting production. Meanwhile, the nation’s sovereign wealth fund, the Public Investment Fund, restructured its internal organization and scaled-back its international investments, pivoting to local markets in part due to a shortfall in expected FDI for Saudi’s Vision 2030 program.

A broader cash crunch prompted Saudi Arabia to also increase drawdowns from state-oil company Aramco and to issue more debt, making it the largest EM dollar bond issuer in 2024.

Conflict and competition

Over the coming year, the contrast between the conflict-ridden Levant and the Gulf states, which are pivoting away from regional geopolitical entanglements to refocus on economic and diplomatic competition, will likely intensify. While countries such as Lebanon, Syria and Iraq grapple with rebuilding shattered infrastructure or stabilizing fragile economies, Saudi Arabia and the UAE will be accelerating their rivalry in tourism, financial services and advanced manufacturing.

The Gulf’s fiscal resilience will face mounting pressure from a wave of non-OPEC oil supply from emerging producers such as Guyana and Namibia. Lower revenues will force Gulf governments to rely more heavily on borrowing and sovereign wealth funds to sustain spending on ambitious diversification projects and extensive welfare programs. Balancing these competing priorities—preserving social contracts while investing in long-term economic transformation—will test the region’s financial discipline.

—Nojan Rostami

Africa

Elections and democracy

Almost half of Africa’s countries saw elections of some kind this year and in many, the results changed the political landscape. A record five bucked their incumbent party, including Botswana, Ghana, Mauritius, Senegal and the breakaway territory of Somaliland. 

Even where the incumbent prevailed, voters signified they wanted change. Mozambique saw mass public demonstrations against the ruling party’s claimed victory. South Africa’s ruling ANC lost its majority for the first time. Namibia’s long-leading party also lost seats, but welcomed its first woman leader. Senegal chose the continent’s youngest-ever democratically elected leader, passing a test of democratic resilience in the process and providing a symbolic win for a continent with youngest population and some of the oldest leaders.  

Citizens in some other West and Central African countries were not so fortunate. After a flurry of coups in the region by leaders promising to better serve their populations, there were none in 2024, but those leaders seem reluctant to move toward democracy anytime soon.

As more countries gear up to go to the polls—including Chad on Dec. 29th, and Côte d’Ivoire and Malawi next year—they will continue to test the continent’s building democratic momentum.

Dual energy transitions

Africa’s energy sector made uneven progress this year toward the twin goals of universal access and a transition to clean energy. While there was a record number of new mini-grid connections, around half the continent’s population still lacks access to electricity. Even so, the definition of “access” is deeply unambitious, representing barely enough juice for a few small appliances. 

The longstanding pull of fossil fuels persists—and is perhaps getting stronger. The soon-to-be launched African Energy Bank in Abuja has bolstered African cooperation on energy projects, but critics worry it will lock in long-term fuels. Concerns come as the continent is racked with some of its worst temperature extremes, droughts and floods in decades in countries such as Chad, Niger and Zambia—and along with them, the world’s highest adaptation costs. 

A clean energy tide is coming, however; a court in coal-dependent South Africa ruled that it cannot procure more coal due to its health and environmental impacts. Solar, meanwhile, was the top technology for new generating capacity in 21 other African markets last year, including Namibia and Madagascar. Ratcheting up climate finance and grid investment next year for even more will be crucial to hitting energy goals. 

A mixed picture on debt

Public debt is slowly declining, but still above pre-pandemic levels, highlighting the severity of the burden. Last year, 18 African countries recorded a debt-to-GDP ratio of over 70%. The continent’s debt service between 2024 and 2030 is expected to cost $463 billion. 

Ghana is digging its way out of a $45 billion hole; the relief deal it made with international creditors, at $13 billion, is the largest in continental history. Zimbabwe’s President Emmerson Mnangagwa is renewing efforts to restructure the country’s debt—which stands at 80% of its GDP—with the IMF, which for a long time wouldn’t touch the failing Zimbabwean market. Zambia has also tried to revamp its indebted economy with a series of tactics.

Far from being contained, though, the continent’s debt problem has been spreading. Countries including Angola, Chad, Malawi, Kenya and Mozambique are also in talks with the World Bank, the IMF, and other international lenders.

In many countries, such as Ghana, Nigeria and Kenya, the debt burden is compounding cost-of-living crisesputting them at risk of being locked out of global markets and falling further behind on development goals. There is a faint glimmer of hope on the horizon, however. According to the African Development Bank, the continent’s GDP growth is projected to rise to 4.3% in 2025. 

—Mariel Ferragamo 

Global

FMN’s Coverage this Year

As we look back on 2024 it’s interesting to see the spread of our own coverage. Some countries that are not terribly exciting for most investors received more than their fair share of coverage—we’re looking at you, Russia and Iran. Others that we see as having meaningful potential for investors, such as Morocco, Côte d’Ivoire, Uzbekistan and Kazakhstan got short shrift.

Overall, though, we think the spread of coverage provides a pretty accurate snapshot of the world in 2024—and might even offer some ideas of countries to watch in 2025.

If you have any thoughts on frontier- or emerging markets to which we should be paying more attention—or themes and trends you’d like to see covered more—please let us know. We always welcome your feedback.

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