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Frontier markets represent some of the most dynamic regions in the global economy, ripe for transformative growth. With nearly half the world’s population projected to reside in these areas by mid-century, their evolution holds profound implications for global prosperity.
Often described as a great untapped opportunity, frontier markets encompass a diverse set of economies at an early stage of capital market development. Together, they represent approximately 36% of the world’s population and contribute around 15% of global GDP. Characteristics such as younger populations and lower costs set the stage for rapid expansion when coupled with strategic investments.
While emerging markets lead current growth projections, frontier markets form a critical part of the high-growth cluster poised to redefine the global economic landscape. Understanding their unique profile is the first step towards leveraging their potential.
Emerging Asia is predicted to drive global GDP growth at around 5.2% annually through 2025, while frontier markets, though harder to isolate in statistics, share in this momentum. Analyses forecast that emerging markets overall will average approximately 4.06% annual growth through 2035, compared to 1.59% for developed economies. These figures underscore an era where technology plays a pivotal role in sculpting tomorrow’s winners.
Frontier technologies—ranging from artificial intelligence to advanced manufacturing—offer a pathway for these economies to leapfrog traditional development stages. Key areas include:
The global market for these innovations is expanding sixfold by 2033, expected to reach $16.4 trillion. Within this surge, AI alone may account for $4.8 trillion, or 30% of the frontier technology market, while IoT could contribute $3.1 trillion by the same year.
Investment in cutting-edge technologies can unlock exponential productivity gains. According to McKinsey Global Institute, AI could generate up to $13 trillion in additional economic activity by 2030, adding roughly 1.2% to annual global GDP growth. In frontier markets, these gains often manifest swiftly thanks to the low baseline of existing infrastructure.
In agriculture, smart sensors and data analytics boost yields, optimize resource use, and reduce waste. In manufacturing, automation and robotics elevate quality, lower costs, and speed time-to-market. These advances can dramatically increase value-added output and forge new export pathways for countries that adopt them early.
Despite the promise of high returns, frontier markets face tangible obstacles in capturing technology’s full impact. A variety of challenges must be addressed:
Countries scoring high on the Frontier Technology Readiness Index show greater capacity to absorb innovations. Bridging divides in education, internet access, and policy clarity is critical to harnessing the full potential of frontier technologies.
To ensure that technology investment delivers broad-based benefits, stakeholders can pursue measures that foster competitiveness and equity:
By crafting a supportive ecosystem, governments can channel innovation toward sectors where it yields the highest social and economic returns.
Frontier markets have historically attracted limited foreign capital, creating pockets of untapped value. When investors commit resources—particularly to digital infrastructure and innovation—they often experience diversification benefits for global investors as these markets exhibit low correlation with developed markets.
In 2021, the MSCI Frontier Markets Index delivered a 20% return, outperforming the MSCI Emerging Markets Index by more than 20 percentage points. Such performance underscores the potential for outsized gains when risks are managed through careful selection and local partnerships.
Additionally, technology-driven climate adaptation represents a compelling investment frontier. With annual adaptation needs ranging from $215 billion to $387 billion, reasonable investments can protect agriculture, strengthen infrastructure, and safeguard communities. Aligning financial flows with climate resilience objectives multiplies social impact and financial returns.
As we look toward mid-century, frontier markets are positioned to host nearly half of the global population. By coupling their youthful demographics with forward-looking technology investments, these countries can leapfrog traditional development hurdles and forge new paths to shared prosperity.
Success will require collaboration among governments, multilateral institutions, private investors, and entrepreneurs. When aligned around the principles of equity, sustainability, and innovation, these stakeholders can unlock prosperity at a scale never seen before.
Ultimately, technology offers more than just economic growth—it provides a vehicle for building resilience through sustainable innovation that touches every corner of society. By embracing this opportunity, frontier markets can write the next chapter of global development, one defined by creativity, inclusion, and enduring progress.
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