>Emerging countries: a multispeed recovery

Drawn into the same depressive spiral as the developed economies in fall-winter 2008-09, the
emerging economies(1) recovered more quickly and robustly. As of Q2 2009, real GDP growth rates had returned to about 10% qoq annualised. The ones of advanced economies did not return in positive territory until Q3 2009, with real GDP growth rates of less than 2%.

Within the emerging economies, Asian countries have already completed the catch-up phase. With the exception of Argentina and Venezuela, Latin American countries are about to follow in the second half of 2010. Eastern Europe will probably continue to lag behind, hampered by sluggish growth in Western Europe coupled with financial instability within the Euro Zone since the beginning of the year.

Looking beyond these divergent paths, it is worth asking whether the emerging regions, including Asia, have the capacity to fuel world growth over the long term if the recovery were to falter in the main advanced economies.

In this overview, we will first examine the cyclical situation and prospects of the emerging countries (Part I), before reviewing the main risk factors for our central scenario for these countries (Part II). In a future issue of Conjuncture, we will look at the preliminary lessons that
can be drawn from the impact of the crisis on country risk.

Cyclical situation and prospects for the emerging countries

Still driven by Asia, the recovery is consolidating

Since spring 2009, trends in the emerging countries have begun to decouple again from those
in the developed countries. The emerging countries returned to growth rates of over 10% qoq annualised as of Q2 2009, while the developed countries did not begin to recover until Q3, with growth rates of less than 2% (see Table 1).

Based on partial data, industrial growth slowed in Q4 2009, as was to be expected after the strong rebound in Q2 and Q3, although the growth differential was maintained between the emerging and developed countries. At year-end 2009, industrial production in the advanced countries was still 14% below spring 2008 levels, whereas even excluding China, production had declined only 3% in the emerging countries (see Chart 1). In early 2010, Asia is the only region that is no longer formally in a catch-up phase (see Chart 2). Catch-up phases are likely to last through mid 2010 in Latin America, and at best through the end of 2010 or early 2011 in Eastern Europe.

To read the full report: MULTISPEED RECOVERY