According to Fitch Ratings, frontier market nations that are significant net importers of fossil fuels, such as Sri Lanka, will experience heightened pressure on their balance of payments due to increasing energy prices. In contrast, countries that are net exporters of energy are expected to gain relatively from this situation.
The rise in energy prices is also likely to contribute to inflationary pressures. Before this surge in energy costs, many frontier markets had managed to keep inflation levels stable, allowing central banks to either maintain or reduce policy interest rates, as noted by the global ratings agency. It highlighted that real policy rates in these markets tend to be higher compared to those in developed countries.
Fitch’s quarterly report, the Frontier Markets Economic Monitor, provides an analysis of high-frequency macroeconomic indicators for nations included in the J.P. Morgan Next Generation Markets (NEXGEM) Index, reflecting the most recent adjustments in its composition. This index features countries from various regions, including sub-Saharan Africa, Latin America and the Caribbean, the Middle East and North Africa, Europe, and parts of Asia.
During its recent Spring Meetings in Washington, the International Monetary Fund cautioned that emerging market and developing economies (EMDE) that import commodities are likely to bear the brunt of the ongoing conflict in West Asia.
