>Emerging countries: A recovery that remains to be confirmed (ECLAIRAGES)

■ Emerging market countries: After the shock:
The global crisis has affected all emerging market countries, to different degrees, through the real channel (with lower demand from developed countries and lower commodity prices) and the financial channel (with a freeze or even reversal in capital flows). Economic activity, and industrial production in particular, contracted sharply in late 2008 and Q1 2009. Q2 saw a sometimes sharp rebound, which should continue with support from the reprieve in the developed countries, and from the same technical factors, i.e., inventories and a base effect. In the medium-term, however, despite fundamentals that are sound on the whole, the pace of growth in the emerging market countries will continue to depend on growth in the developed countries, which could remain soft. "They died not all, but all were sick"

■ Asia: On the road to recovery
Asian countries have been able to resist well during the global turmoil. However a complete recovery can only take place in Asia when the US economy fully exits the crisis and job markets return to normal. Beyond that, Indonesia, Philippines and Vietnam will be able to pick up more rapidly due to specific features that will bring further support to the economy. The reaction to the crisis has been the same throughout Asia. Without exception, all countries rapidly shifted towards a pro growth policy. Central Banks made drastic interest rate cuts. And helped by large fiscal leeway, policy makers implemented massive stimulus plans. Supportive measures are bearing fruits. The Chinese economy is recovering and is now expected to reach its growth target of 8% in 2009. In turn, this has led to a revival of Asian countries to a certain extent. The massive stimulus plan in China resulted in increased needs for commodities and intermediate goods which then led to a rise in Asian exports towards China. GDP growth in Asia also stood better than expected in Q2. Business sentiment improved following various signs of an upturn in USA and Europe. Even in Korea, confidence has gradually been restored since March. The won is now strengthening rapidly against the USD (30% appreciation since March 09 after a depreciation of 26% in 2008). These signs of recovery are increasingly fuelling hopes that the worst is over.

To see the full report: EMERGING COUNTRIES