Here Are 15 Frontier Markets Offering Huge Returns For Adventurous Investors

lewis clark sacagaweaLewis & Clark & Sacagawea

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Investing in emerging markets, such as the BRIC economies, have been all the rave as investors seek growth while developed markets slow.But even the emerging markets have become less attractive.  China faces a decelerating economy, India lacks the flexibility to stimulate its economy, Russia will have potentially destabilizing presidential elections this year, and Brazil is wrestling with inflation.

Before an economy is categorized as an “emerging market,” it is usually considered a “frontier market.”  Frontier markets are often characterised by underdeveloped infrastructures, weak legal systems, and illiquid capital markets.  As such, they are considered much riskier than than most investment classes. However, they often offer extraordinary growth opportunities that eclipse those offered by the more developed EMs.

In a recent report, Citi’s Andrew Howell identifies 15 “Frontier” markets that will provide big returns for investors for decades.  Some, like Argentina and Venezuela, are well known.  But, others, like Ghana and Kazakhstan, often go overlooked.


Long-term GDP growth rate: 4.1%

GDP per capita: $10,675

GDP: $435.2 billion

Population: 40.8 million

Adult literacy rate: 98%

What's doing well: Argentina's infrastructure is better than other frontier markets and it has a strong agricultural sector. Domestic consumption has been strong spurring economic growth.

Risks: Inflation is a huge risk and with capital flight on the rise, the Argentinian peso is likely to lose value. Policy-related concerns have affected stock market performance.

Source: Citigroup


Long-term GDP growth rate: 7.5%

GDP per capita: $764

GDP: $115.0 billion

Population: 150.5 million

Adult literacy rate: 56%

What's doing well: Bangladesh is poised to do well in large part because its low starting point leaves it with a lot of room to grow. It also has a young, rapidly growing, cheap labour force. Bangladesh's stock market is larger and more liquid than other frontier markets.

Risks: Limited employment opportunities are pushing more Bangaldeshi's abroad in search of work, and the country's infrastructure needs to be developed. The lack of regulation and supervision poses a risk to its financial sector.

Source: Citigroup


Long-term GDP growth rate: 6.3%

GDP per capita: $2,810

GDP: $231.9 billion

Population: 82.5 million

Adult literacy rate: 66%

What's doing well: Egypt's rapidly growing population is better educated than the population of many neighbouring countries. Energy, trade, transportation and tourism are all doing well in large part because of its key geographical location.

Risks: In the wake of the Arab spring economic and political risks remain high, and many foreign investors have pulled their investments from the country. Youth unemployment is also an issue its new government will have to contend with.

Source: Citigroup


Long-term GDP growth rate: N/A

GDP per capita: $1,546

GDP: $38.6 billion

Population: 25.0 million

Adult literacy rate: 67%

What's doing well: Ghana's offshore Jubilee field has made the country the newest oil producer in the world. It is already rich in commodities like gold, cocoa, diamonds and manganese. And unlike many of its neighbours has a functioning democracy.

Risks: Ghana needs to avoid the resource curse / paradox of plenty in which countries rich in natural resources have weaker growth than economies with fewer natural resources. Moreover elections in Ghana have been followed by fiscal crises.

Source: Citigroup


Long-term GDP growth rate: 7.6%

GDP per capita: $3,325

GDP: $108.6 billion

Population: 32.7 million

Adult literacy rate: 78%

What's doing well: Iraq's oil production is set to rise more than any other country in the next decade.

Risks: The Kurdish Regional Government (KRG) and the federal government continue to disagree on oil laws. Security continues to be a major risk, the presence of U.S. troops increases the risk of domestic turmoil while its withdrawal could see a surge in violence which local security forces are unprepared for.

Source: Citigroup


Long-term GDP growth rate: 4.5%

GDP per capita: $11,115

GDP: $180.1 billion

Population: 16.2 million

Adult literacy rate: 100%

What's doing well: Kazakhstan's rich in natural resources like oil and minerals like gold, copper, zinc and uranium

Risks: Political succession is an issue with elections in mid-January 2012. The domestic banking sector is still trying to recover from bad debts.

Source: Citigroup


Long-term GDP growth rate: N/A

GDP per capita: $868

GDP: $36.1 billion

Population: 41.6 million

Adult literacy rate: 87%

What's doing well: Offshore natural gas deposits have been discovered close to the Ethiopian border and telecommunications industry is growing rapidly. It also functions as a business and manufacturing hub in East Africa.

Risks: Ethnic tensions persist and unrest in Somalia has seen military intervention by Kenyan troops. At 15%, inflation is high driven by rising food prices because of a drought in the horn of Africa.

Source: Citigroup


Long-term GDP growth rate: 6.9%

GDP per capita: $3,127

GDP: $8.8 billion

Population: 2.8 million

Adult literacy rate: 97%

What's doing well: Mongolia is rich in natural resources, specially copper and coking coal which are crucial for neighbouring China. It has a young, growing population and a high domestic savings rate compared with other frontier markets.

Risks: Mongolia, like other resource rich nations, needs to avoid the resource curse.

Source: Citigroup


Long-term GDP growth rate: 8.4%

GDP per capita: $1,521

GDP: $247.1 billion

Population: 162.5 million

Adult literacy rate: 61%

What's doing well: Nigeria's banking sector is doing well, reporting strong earnings and inflation seems to have peaked.

Risks: Religious tensions are on the rise with a few attacks by militant Islamist group Boko Haram in the north-east this year. Poor infrastructure is also dragging overall growth.

Source: Citigroup


Long-term GDP growth rate: 4.9%

GDP per capita: $1,155

GDP: $204.1 billion

Population: 176.7 million

Adult literacy rate: 56%

What's doing well: Pakistan has a large, young and growing population and it is well diversified among its sectors.

Risks: Pakistan's population however needs adequate education to prevent it from weighing on the economy. Political and security risks remain high, with governance showing no signs of improvement.

Source: Citigroup


Long-term GDP growth rate: 3.5%

GDP per capita: $8,645

GDP: $185.3 billion

Population: 21.4 million

Adult literacy rate: 98%

What's doing well: Exports have recovered.

Risks: The Romanian banking sector is 75% owned by European banks, and it faces contagion risks from Europe. The country's GDP growth has also been under risk from austerity.

Source: Citigroup

Sri Lanka

Long-term GDP growth rate: 6.6%

GDP per capita: $2,795

GDP: $58.8 billion

Population: 21.0 million

Adult literacy rate: 91%

What's doing well: Foreign investments to Sri Lanka have surged since the end of conflict between the terrorist group LTTE and the Sri Lankan government. Exports have picked up especially in textile manufacturing, and agricultural products.

Risks: The government's Asset Acquisition Act which allows the state to acquire assets once owned by the government but sold at a discount poses a risk to foreign investment.

Source: Citigroup


Long-term GDP growth rate: 3.7%

GDP per capita: $3,604

GDP: $162.9 billion

Population: 45.2 million

Adult literacy rate: 100%

What's doing well: Ukraine's agricultural sector is one of the best in Europe. It also has a well educated workforce that can help drive manufacturing.

Risks: Corruption poses a risk to businesses and eurozone issues have hurt its banking sector. Currency devaluation is also an immediate risk. Ukraine is also too dependent on Russia for energy.

Source: Citigroup


Long-term GDP growth rate: 4.3%

GDP per capita: $10,525

GDP: $309.8 billion

Population: 29.4 million

Adult literacy rate: 95%

What's doing well: Venezuela has one of the largest oil reserves in the world, and is a major oil exporter.

Risks: Half of government revenues depend on oil exports so the economy is always at risk from oil prices. President Hugo Chavez's decision to nationalize oil, cement, steel sectors and supermarkets led to a drop in foreign investment.

Source: Citigroup


Long-term GDP growth rate: 7.4%

GDP per capita: $1,370

GDP: $121.6 billion

Population: 88.8 million

Adult literacy rate: 93%

What's doing well: Vietnam has competitive advantages in labour-intensive manufacturing. Its agricultural exports have also done well.

Risks: In an effort to drive GDP growth Vietnam has ended up with a 22.4% inflation rate. Moreover Vietnam has a weak banking sector

Source: Citigroup

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