How will emerging economies feel the crisis?
Problems within the OECD countries are making financial investors all over the world more risk-averse. Expect them to withdraw investments from emerging markets, and in particular from Eastern Europe and Central Asia, where high current account deficits are being financed with short-term capital injections. However, other countries are also affected, especially if current account deficits are high. A few Latin American countries – Mexico, for example – are closely interlinked with the US. And in many countries, speculative bubbles have built up in the stock or real estate markets. When the stock market dropped in early October in New York, London and Frankfurt, the knock-on effect was felt in Shanghai, Jakarta and elsewhere. And all this will affect the real economy? Yes, it will. The biggest danger is that developing countries will be infected by the possible recession in OECD countries. And that will be particularly tough for the poorest nations. Exports by developing countries to Eu
