Frontier Markets Tackle Inflation with Higher Interest Rates
Central banks in Frontier Markets (FMs) have stepped up their efforts to contain rising inflation caused by ongoing supply-chain disruptions, logistical issues and soaring commodity prices, as shown in Fitch Ratings’ latest ‘Frontier Vision’ chart pack.
While a number of central bankers continue to view the pickup in inflation as short lived, many are tightening monetary policy to reduce the risk of transitory increases becoming more permanent. Interest rates have already risen in Angola, Armenia, Azerbaijan, Belarus, Georgia, Pakistan, Paraguay, Sri Lanka and Tajikistan, among others.
Domestic economic activity has also recovered strongly in many FMs, including Georgia, Costa Rica and Belize, although this trend has not been uniform across all FMs. At the same time, labour markets have had rapid annual employment growth increases in 2Q21 in many FMs, such as in Azerbaijan, Belize, Costa Rica, Georgia and Senegal.
Fitch’s quarterly ‘Frontier Vision’ chart pack tracks high-frequency macroeconomic data for the countries included in J.P. Morgan’s Next Generation Markets (NEXGEM) Index. The charts cover five years of historical data and the choice of data series has been harmonised as far as possible across all countries to facilitate comparisons. The index comprises countries representing subSaharan Africa, Latin America and the Caribbean, the Middle East and North Africa, Europe, Asia and Oceania.