Edited by Christopher J. Green, Eric J. Pentecost and Tom Weyman-Jones
Chapter 3: An Emerging Markets Perspective on the Recent Crisis
Geoffrey Dennis1,2 ‘A GOOD CRISIS’ The global economy is likely to suffer its worst downturn of the post-war period in 2009 with, on current Citigroup estimates, real global GDP contracting by 2.5–3 per cent. World trade is also likely to fall sharply with the deviation of global exports from trend in 2009 likely to be the most severe by far since 1945. This has been (and remains) a severe financial and economic crisis of the developed world. Beginning with the first hint of the sub-prime crisis in the US in early 2007, the current episode has led to the collapse of major US investment banks (Bear Stearns in March 2008 and Lehman Brothers in September 2008), the complete restructuring of the financial system in the US (and elsewhere, such as the UK) and has culminated in the worst global recession since the 1930s. And yet, the emerging markets have held up relatively well during this crisis, despite its depth and longevity. Most powerfully, with global emerging markets (GEMs) as a group still expected to grow in 2009 (albeit very slowly), even as the global economy contracts sharply, GEMs are expected to account for more than 100 per cent of global growth in 2009 for the first time ever; we have not been able to find a year previously when the emerging markets have shown positive growth while the global economy as a whole (and, therefore, developed economies) has contracted. Citi’s forecast is that industrialized world GDP will contract...
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