Dear Reader,

Welcome to the latest edition of Frontier Markets News. As always, I would love to hear from you at [email protected] with news ideas, feedback and anything else you find interesting. 

Sent this by a friend? Sign up here to receive FMN in your inbox every weekend.

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

Africa

Mozambique opposition leader’s return spells more turmoil

Mozambique’s main opposition leader,  Venâncio Mondlane, this week returned from exile as violent protests and unrest that kicked off after last October’s presidential election continued to rock the country. Mondlane left the country claiming his life was in danger after he challenged the result of the poll that saw the ruling party candidate Daniel Chapo secure a convincing victory.  

Chapo is due to be sworn in on Wednesday. 

The ongoing unrest is having a negative impact on both the country’s economy and its people and could also increase Mozambique’s risk of debt default, Semafor reports. At least 250 people have died in the protests, according to the New York Times, and the chaos has sparked a mass exodus to Malawi in recent days, FRFI reports. 

Ghana’s new president plans to reshape economy

Ghana’s new president, John Mahama, took office on Tuesday following his December election victory, pledging in his inauguration speech to restore and stabilize the country’s ailing economy. Mahama promised to focus on improving the business and investment environment, supporting local development, tackling corruption and improving government efficiency. 

He also aims to establish new tax incentives to support the economy and to channel funds to social programs to uplift the 7.3 million Ghanaians living in poverty. 

Formerly an investor darling, Ghana has been struggling with crippling debt, high inflation and 20%-plus unemployment. Mahama’s predecessor, Nana Akufo-Addo, oversaw a sovereign debt default in 2022 that rocked the economy and sent inflation above 20%, where it has remained ever since.

Asia

UAE says it will roll over $2bn of Pakistan’s debt

The UAE has promised to grant Pakistan an extension on $2 billion worth of debt due this month, Pakistan’s Prime Minister Shehbaz Sharif announced on Tuesday. Sharif said the decision came during a meeting he had with UAE President Sheikh Mohamed bin Zayed bin Sultan Al Nahyan on Sunday, Reuters reports.

Reaching such an agreement with its external financiers is critical for Pakistan to continue receiving disbursements from its $7 billion program with the IMF. 

Pakistan’s economy has stabilized recently after sinking into crisis around the time of the COVID-19 pandemic and debt levels dropped to 81% of GDP last year from 94% in 2020. That figure is still far higher than a decade ago, when debt stood at just 63% of GDP.

Indonesia to join BRICS

Indonesia officially joined BRICS on Monday, when Brazil, the group’s current president, welcomed it into the bloc. 

The country will be the only representative in the group from Southeast Asia, where it is the largest economy and a regional power player.

• Indonesia keeps iPhone 16 ban despite $1.6 billion Apple offer to build AirTag factory (ABC News)

The accession closes an application process that began in 2023. Indonesia is now the bloc’s 10th member, following the accession of the UAE, Iran, Egypt and Ethiopia. Argentina had ambitions to join the group, but upon his inauguration President Javier Milei scrapped those plans.

Vietnamese EV national champion looks to double capacity

Vietnamese car company VinFast will double production this year as it looks to compete with a growing number of Chinese electric vehicles brands flooding the local market. The plan includes the opening of a second Vietnamese plant, which is set to begin operating in July, Nikkei reports.

Investment in vehicle production will add to Vietnam’s growing industrialization, which contributed to region-leading 7% economic growth last year, according to Vietnam Briefing.

Much of that growth was driven by Vietnam’s burgeoning role as an exporter of goods to the US. Chinese companies seeking to avoid US tariffs are building factories there, and US firms with the same goal are importing from those factories. As a result, the trade deficit between the US and Vietnam widened to some $110 billion in the first 11 months of last year—an 18% year-over-year rise, according to data released on Tuesday and analyzed by Reuters.

Middle East

Renewed clashes in Syria heighten regional concern

Fierce fighting over the past week in Syria’s northeast between the US-backed Kurdish SDF and Turkish-backed forces now consolidating power in Damascus has raised the specter of ethno-sectarian conflict rearing its head again, France24 reports.

Turkish President Recep Tayyip Erdogan has threatened a direct intervention if the situation continues to spiral. Meanwhile, the transitional government in Syria, largely represented by the former rebel group HTS, has continued its diplomatic push, promising EU leaders it would work to stop migrant flows and repatriate refugees.

• Syrian caretaker government to hike public sector salaries by 400% next month (Reuters)

• US unveils Syria sanctions exemption to bolster aid relief (Al Monitor)

This week, Iraq marked a milestone in its border wall construction project on its Syrian border, completing a new 400 kilometer stretch of a planned total of 600 kilometers. Construction began in 2018 but has taken on renewed urgency since the fall of the Assad regime.

Iran power outages hit Iraq’s economy

Iran’s ongoing energy crisis, caused by a shortage of gas and a strained, structurally deficient electricity grid, is crimping oil production in Iraq, The New Arab reports. The crisis has constrained energy exports from Iran—which constituted 60% of the gas supplied to Iraq’s power plants—and is expected to have spillover effects reaching beyond oil production cuts into rolling blackouts affecting homes. 

Iraq has for years purchased power from Iran via a sanctions waiver scheme approved by the US, although the future of these exports was already in doubt given the incoming Trump administration’s plan to increase economic pressure on Iran. The energy shortages are expected to reduce Iraq’s chances of achieving its longstanding goal of boosting oil production to six million barrels per day by modernizing infrastructure and consolidating oil sales from the semi-autonomous Kurdistan region.

Europe

Ukrainian businesses look west for opportunity

Ukrainian enterprises that shifted their operations into other countries in Central Europe after Russia’s 2022 invasion are successfully pivoting from their refugee customer base, Reuters reports. In Poland, where the Ukrainian population has swelled to over 1.5 million, Ukrainian entrepreneurs accounted for 10% of new businesses formed in 2024.

This expansion has provided a notable economic boost to host countries. Consulting firm Deloitte estimates that Ukrainian refugees could contribute up to 1.35% to Poland’s GDP in the long term.

Some Ukrainian business leaders are viewing Poland as a springboard to broader EU markets, using the country to learn European business standards and regulations while building more geographically diverse operations. This westward push represents a significant strategic shift for Ukrainian businesses that previously focused on eastern markets before the war disrupted their domestic operations.

Ongoing political uncertainty hits Romanian economy 

Political tensions are mounting in Romania as opinion polls continue to show pro-Putin far-right candidate Călin Georgescu is the front runner ahead of May’s presidential election. The election is a rerun of a November 2024 poll, which was annulled by the constitutional court over allegations of foreign interference.

Georgescu has over 40% support, according to the polls, while the ruling coalition is still scrambling to unite behind a strong candidate to counter the far-right challenge.

The political turmoil has taken a toll on Romania’s economic outlook. Fitch Ratings revised the country’s outlook to negative while maintaining its BBB- rating, ad projects the general government deficit will widen to 8.2% of GDP in 2024. While ING bank forecasts a recovery in 2025, with GDP growth reaching 2.6% on the back of EU funding and Schengen accession, the National Bank of Romania warns that deepening twin deficits remain the primary domestic risk factor.

Latin America

Colombia minimum wage increase set to boost consumer spending 

Colombia’s 9.45% minimum wage hike, decreed by President Gustavo Petro, is poised to strengthen purchasing power among formal low-skilled workers while presenting mixed economic implications, consultancy FrontierView finds. While the increase falls short of unions’ 34% target, it significantly exceeds business associations’ proposed 5.2% and continues a trend of real wage growth over the past five years.

Analysis from Banco de la República suggests the hike will fuel modest inflationary pressures. However, the measure’s impact may be tempered by potential job losses, especially among small businesses, and could accelerate the growth of the informal sector, which already accounts for 55% of Colombia’s workforce. 

Milei shakes up Argentina businesses with tariffs changes and a start to privatizations 

Argentine President Javier Milei’s administration has begun moving to dismantle protectionist measures established by his predecessors, slashing import tariffs and removing regulatory barriers that have historically inflated consumer prices. The reforms include eliminating a 7.5% blanket tax on imports, tripling the personal import allowance to $3,000, and streamlining customs procedures, leading to the introduction of international products from Amazon deliveries to Ecuadorean tinned tuna. 

The measures aim to combat the country’s triple-digit inflation, although domestic manufacturers warn the policy shift could devastate an industry already grappling with a 12.7% decline in activity through 2024, the FT reports.

• Half of Argentines expect economy to improve. (BA Times)

• Guest post: Argentina’s bet on itself pays off for investors (FMN Archive) 

Also this week, Milei fired the starting gun on his plan to privatize some of the 40 remaining state-owned enterprises, transferring metallurgical firm IMPSA to a U.S.-based acquisition fund in return for a promise to inject $27 million and restructure the company’s debt.

Frontier Markets Macro

Frontier markets outperform EMs in Asia

Frontier markets in Asia Pacific have emerged as the surprise outperformers of 2024, delivering returns that have left their larger emerging market peers in the dust. Pakistan’s benchmark index soared 72%, while Sri Lanka’s surged almost 50%, as both markets benefitted from aggressive monetary easing and structural improvements.

Pakistan’s 900 basis point rate cut has been particularly significant in restoring investor confidence, while Sri Lanka’s tourism recovery has helped drive corporate earnings growth, the Daily FT reports.

The performance gap with emerging markets has been stark. Even Asia’s strongest EM performers—Taiwan and China, up 28.47% and 13.59% respectively—have failed to match frontier market returns. Traditional EM powerhouses have struggled, with Korea dropping 9.63% and Indonesia declining 3.07%, as higher interest rates in developed markets triggered capital outflows from EMs.

The unexpected outperformance of frontier markets suggests investors are increasingly willing to accept higher political and economic risks in exchange for stronger growth potential. However, Bangladesh’s 16.5% decline, driven by political instability and currency weakness, serves as a reminder of the inherent volatility in individual frontier markets.

Guest Post: Opportunities abound for active bond investors

Global policy uncertainty and the changing contours of globalization are creating fertile ground for active emerging- and frontier-market bond investors, senior strategist at impact-focused EM and FM fund manager, Global Evolution Witold Bahrke writes in a guest post on FMN this week.

Bahrke says a global rate-cutting cycle and resilient growth in frontier and emerging markets should support bond returns over the coming year.

“We are particularly optimistic about emerging market countries showing decisive fiscal and monetary reform momentum,” Bahrke says. Turkey, Ecuador and Argentina look particularly promising, he adds.

What We’re Reading

Nigeria remittance inflows surge by 63.7% in nine months (Naira Metrics)

Cocoa farmers in Ghana and Côte d’Ivoire uproot their plants despite record prices (WSJ)

Liberia and Panama back a proposed tax on shipping emissions (FT)

Namibia seeks investment in nuclear power from China (Bloomberg)

China’s top diplomat heads to Africa as West’s attention dwindles (Reuters)

Bangladesh garment workers chafe against ‘unachievable’ targets (Fortune)

Bangladesh probes UK minister—and niece of ousted PM Hasina—in corruption investigation (FT)

Sri Lanka central bank governor says deflation to provide ‘some respite’ (Bloomberg)

Foreign investors’ net sales of Vietnamese stocks hit record (Tuoi Tre News)

Philippines deploys maritime and air assets to monitor China’s ‘monster ship’ (Reuters)

Easier visa rules propel Thai tourism to near pre-Covid levels (Bloomberg)

Malaysia-Singapore economic zone to focus on aerospace and medical devices (Nikkei)

US shifts over $100M in military aid from Israel, Egypt to Lebanon (Defense News)

World Cup award adds pressure to Saudi Arabia’s construction challenge (FT)

Saudi Arabia hit by unprecedented torrential rains and severe floods (Anadolu Agency)

Saudi Arabia hikes domestic fuel prices by 44% (Enterprise News)

Serbia explores oil and gas supply options amid US sanction threats (Offshore Technology)

Clouds gather over boom created by Russia’s wartime government stimulus (Bloomberg)

Venezuela’s dissidents plot comeback after months in hiding, exile or jail (WSJ)

Guyana oil exports jump (Reuters)

Bolivian inflation soars amid political unrest and poor weather (Mercopress)

Leading risk agency raises Paraguay’s ratings (Mercopress)

Smaller countries must ‘double down on being open and neutral’ (Fortune)

We are committed to providing FMN readers with a free weekly digest of politically unbiased, succinct and clear news and information from frontier and small emerging markets.

Please consider becoming a paid supporter to help cover some of our costs and support our continued development of sharp markets-focused coverage and new informational products. Paid subscribers will also gain exclusive access to our quarterly EM/FM report that aggregates EM insights from 25 major banks, international institutions and consultancies.