{
  "title": "The New Frontier: Economies on the Rise",
  "publication": "IMF Blog, May 19, 2014",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2014/05/19/the-new-frontier-economies-on-the-rise",
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  "summary": "Author: Min Zhu",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Author: Min Zhu\n- Date: May 19, 2014\n- Note: (Version in 中文, Français, Português, and Español)\n- Core message: A group of fast-growing low-income \"frontier economies\" are attracting international investor interest; they combine huge potential with significant risks and require tailored policy responses."
    },
    {
      "heading": "Get to know them (definition and examples)",
      "content": "- Broad working definition: fast-growing low-income countries that have been deepening their financial markets; some have moved to the lower-middle income group.\n- Examples of countries deepening financial markets: Bangladesh, Kenya, Nigeria, Mozambique, and Vietnam.\n- Examples of countries tapping international capital markets: Bolivia, Ghana, Honduras, Mongolia, Nigeria, Senegal, Tanzania, Vietnam, and Zambia.\n- Comparative characteristics:\n  - Markets are not as deep and liquid as emerging markets.\n  - Offer higher returns and portfolio diversification benefits relative to emerging markets."
    },
    {
      "heading": "How they got there (drivers and reforms)",
      "content": "- Main drivers:\n  - Fast growth often supported by sustained efforts to achieve macroeconomic stability.\n  - Building business-friendly institutions.\n- Policy and structural reforms cited:\n  - Lowering inflation via prudent fiscal and monetary policy.\n  - Strengthening policymaking apparatus, reducing excessive red tape, lowering trade restrictions.\n  - Reforms shifting economic structures toward services (examples: Tanzania and Kenya).\n- Debt dynamics and investment:\n  - Alleviation of debt burden over the past decade freed resources for physical and human capital investment.\n  - Several countries received debt relief under the Highly Indebted Poor Country Initiative; others reduced debt outside this initiative (examples: Kenya, Mongolia, Nigeria, and Vietnam).\n- Financial market development:\n  - Rapid deepening of domestic financial markets—more domestic financial services and products than peers.\n  - Some countries have attracted international investor interest in domestic bond markets and issued sovereign bonds in international capital markets.\n- Infrastructure financing opportunity:\n  - Access to international capital markets can attract financing to address infrastructure gaps (roads and railways), providing further growth impetus.\n  - But market access also introduces new financial risks that require careful management."
    },
    {
      "heading": "Influences from outside their borders",
      "content": "- Global financial environment:\n  - Low interest rates combined with advanced economies shedding debt pushed investors to seek higher returns, expanding interest in frontier economies.\n- Resource demand:\n  - Emerging economies' quest for resources improved terms of trade and spurred domestic and foreign investment in resource-rich countries (examples: Bolivia, Ghana, Nigeria, and Mongolia).\n- Public investment:\n  - Low debt burden, favorable external borrowing rates, and high commodity prices increased access to private financing sources abroad, raising domestic public investment."
    },
    {
      "heading": "Risks and policy recommendations",
      "content": "- Identified risks:\n  - Greater market scrutiny from external private capital exposes weaknesses in domestic macroeconomic policies (weakening fiscal and external positions).\n  - Potential slowdown in capital flows as U.S. interest rates rise and monetary policy normalizes.\n  - Countries with foreign investor participation in domestic bond markets and significant fiscal and current account imbalances have experienced volatile exchange rates and rising spreads in recent months.\n  - Limited size and liquidity of government bonds in international capital markets mitigates—but does not eliminate—the risk of capital flow reversals; new issuances may face higher spreads and maturing bonds may struggle to find buyers.\n- Policy recommendations and measures:\n  - Preserve macroeconomic stability and fiscal sustainability.\n  - Continue building adequate external reserves.\n  - Bolster economic and institutional fundamentals, including domestic savings.\n  - Further structural reforms (labor, trade, regulation) and higher investment to enhance productivity and help countries move up the value chain.\n  - Deepen domestic bond markets to allow more efficient intermediation of financial flows.\n  - Monitor build-up of risks and preserve fiscal and debt sustainability.\n  - Use proceeds of government bonds for high-yielding projects, whether issued domestically or internationally.\n  - Consider framework in the IMF’s recent paper on managing capital flows to help manage risks associated with these flows."
    },
    {
      "heading": "Concluding assessment",
      "content": "- Frontier economies show great promise but face significant risks from increased capital flow exposure.\n- Continued commitment to macroeconomic stability, fiscal and external sustainability, and investor-friendly institutional improvements is central to continued success.\n- Policymakers should optimize benefits from capital flows while taking actions to address related risks.\n\nSource: The New Frontier: Economies on the Rise, Min Zhu, May 19, 2014.\n\n---\n\n Content in this bundle\n\n- 新前沿：崛起中的经济体;iMFDirect博客； 作者：朱民； 2014年5月19日\n  - 新前沿：崛起中的经济体;iMFDirect博客； 作者：朱民； 2014年5月19日 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 新前沿：崛起中的经济体;iMFDirect博客； 作者：朱民； 2014年5月19日 (PDF){rel=\"external\" type=\"application/pdf\"}\n- A nova fronteira: economias em ascensão; Min Zhu; 20 de maio de 2014\n  - A nova fronteira: economias em ascensão; Min Zhu; 20 de maio de 2014 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - A nova fronteira: economias em ascensão; Min Zhu; 20 de maio de 2014 (PDF){rel=\"external\" type=\"application/pdf\"}\n- New Growth Drivers for Low-Income Countries: The Role of BRICs; IMF Policy Paper, January 12, 2011\n  - New Growth Drivers for Low-Income Countries: The Role of BRICs; IMF Policy Paper, January 12, 2011 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - New Growth Drivers for Low-Income Countries: The Role of BRICs; IMF Policy Paper, January 12, 2011 (PDF){rel=\"external\" type=\"application/pdf\"}\n- The Liberalization and Management of Capital Flows\n  - The Liberalization and Management of Capital Flows (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Liberalization and Management of Capital Flows (PDF){rel=\"external\" type=\"application/pdf\"}\n- Local Currency Bond Market--A Diagnostic Framework; IMF Policy Paper; July 9, 2013\n  - Local Currency Bond Market--A Diagnostic Framework; IMF Policy Paper; July 9, 2013 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Local Currency Bond Market--A Diagnostic Framework; IMF Policy Paper; July 9, 2013 (PDF){rel=\"external\" type=\"application/pdf\"}\n- wp13132\n  - wp13132 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp13132 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- emerging markets\n- https://www.imf.org/wp-content/uploads/2014/05/real-gdp-growth2.jpg\n- https://www.imf.org/wp-content/uploads/2014/05/inflation-percent-change2.jpg\n- greater weight on the services sector\n- Highly Indebted Poor Country Initiative\n- issued sovereign bonds\n- https://www.imf.org/wp-content/uploads/2014/05/trends-in-portfolio-flows1.jpg\n- https://www.imf.org/wp-content/uploads/2014/05/embi-and-index-and-frontier-econ-bond-spreads1.jpg\n- as well as regulation and higher investment\n- debt sustainability\n\nSource: https://www.imf.org/en/blogs/articles/2014/05/19/the-new-frontier-economies-on-the-rise"
    }
  ],
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    "[Markdown version](/en/blogs/articles/2014/05/19/the-new-frontier-economies-on-the-rise/index.md)",
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    "Authors: Min Zhu",
    "Published: May 19, 2014",
    "Author: Min Zhu",
    "Date: May 19, 2014",
    "Note: (Version in 中文, Français, Português, and Español)",
    "Core message: A group of fast-growing low-income \"frontier economies\" are attracting international investor interest; they combine huge potential with significant risks and require tailored policy responses.",
    "Broad working definition: fast-growing low-income countries that have been deepening their financial markets; some have moved to the lower-middle income group.",
    "Examples of countries deepening financial markets: Bangladesh, Kenya, Nigeria, Mozambique, and Vietnam.",
    "Examples of countries tapping international capital markets: Bolivia, Ghana, Honduras, Mongolia, Nigeria, Senegal, Tanzania, Vietnam, and Zambia.",
    "Comparative characteristics:",
    "Main drivers:",
    "Policy and structural reforms cited:",
    "Debt dynamics and investment:",
    "Financial market development:",
    "Infrastructure financing opportunity:",
    "Global financial environment:",
    "Resource demand:",
    "Public investment:",
    "Identified risks:",
    "Policy recommendations and measures:",
    "Frontier economies show great promise but face significant risks from increased capital flow exposure.",
    "Continued commitment to macroeconomic stability, fiscal and external sustainability, and investor-friendly institutional improvements is central to continued success.",
    "Policymakers should optimize benefits from capital flows while taking actions to address related risks.",
    "**新前沿：崛起中的经济体;iMFDirect博客； 作者：朱民； 2014年5月19日**",
    "**A nova fronteira: economias em ascensão; Min Zhu; 20 de maio de 2014**",
    "**New Growth Drivers for Low-Income Countries: The Role of BRICs; IMF Policy Paper, January 12, 2011**",
    "**The Liberalization and Management of Capital Flows**",
    "**Local Currency Bond Market--A Diagnostic Framework; IMF Policy Paper; July 9, 2013**",
    "**wp13132**",
    "[emerging markets](http://blogs.imf.org/2014/01/22/emerging-markets-need-to-do-more-to-remain-engines-of-global-growth/)",
    "[https://www.imf.org/wp-content/uploads/2014/05/real-gdp-growth2.jpg](https://www.imf.org/wp-content/uploads/2014/05/real-gdp-growth2.jpg)",
    "[https://www.imf.org/wp-content/uploads/2014/05/inflation-percent-change2.jpg](https://www.imf.org/wp-content/uploads/2014/05/inflation-percent-change2.jpg)",
    "[greater weight on the services sector](http://www.imf.org/external/pubs/ft/survey/so/2013/POL030413A.htm)",
    "[Highly Indebted Poor Country Initiative](http://www.imf.org/external/np/exr/facts/hipc.htm)",
    "[issued sovereign bonds](https://www.imf.org/external/pubs/ft/reo/2013/afr/eng/sreo0513.htm)",
    "[https://www.imf.org/wp-content/uploads/2014/05/trends-in-portfolio-flows1.jpg](https://www.imf.org/wp-content/uploads/2014/05/trends-in-portfolio-flows1.jpg)",
    "[https://www.imf.org/wp-content/uploads/2014/05/embi-and-index-and-frontier-econ-bond-spreads1.jpg](https://www.imf.org/wp-content/uploads/2014/05/embi-and-index-and-frontier-econ-bond-spreads1.jpg)",
    "[as well as regulation and higher investment](http://www.imf.org/external/pubs/ft/reo/2014/apd/eng/areo0414.htm)",
    "[debt sustainability](http://www.imf.org/external/pubs/ft/dsa/index.htm)"
  ],
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