The Investment Professional - Regional Breakdown of the Global Crisis

Relatively low levels of foreign debt, higher levels of reserves, and falling inflation present Latin America, Central America, and the Caribbean with an opportunity to avoid the hard landing that much of the world is experiencing in the wake of the global financial crisis. Central American and Caribbean countries, due to their proximity to the US, have been affected more severely than Latin America through early 2009. Despite the fact that the region is in better shape than during previous slowdowns, sharply lower commodities prices, currency devaluations, and the potential halt in capital flows present risk, especially if the global downturn persists into 2010.

Statistical Snapshot: Real GDP
	2008	2009*	2010*
World	1.9%	-1.7%	2.3%
Region	4.3%	-0.6%	2.2%
Brazil	5.1%	0.5%	3.2%
Mexico	1.4%	-2.0%	1.8%
Argentina	6.8%	-1.8%	1.9%
Source: World Bank
*Projections

Economic Spotlights: Brazil and Mexico

Brazil: As one of the most stable economies in the region, Brazil’s future economic growth is likely to be fueled by increased internal consumption, trade with other emerging market countries, and an economic stimulus package focused on infrastructure investment.

Mexico: Economic problems in the US, particularly in the industrial sector, continue to bedevil Mexico just as demand for exports is plunging. Interest rate cuts and economic stimulus measures, however, should set the stage for growth in 2010.

| Back to Top |

Commonwealth of Independent States

When the financial crisis hit the 12-member CIS, the first casualty was foreign investment. As capital flows dry up, governments face a catch-22: drawing down their reserves or depreciating their currencies, both unpalatable options. As in other areas of the world, the net energy exporters are in better shape than the net energy importers, but all 12 countries in the CIS are suffering from a lack of confidence in their banking systems, with several already receiving—or negotiating to receive—loans from the IMF.

Statistical Snapshot: Real GDP
	2008	2009*	2010*
Commonwealth of Independent States	5.5%	-5.1%	1.2%
Low-Income CIS Countries	8.8%	2.7%	7.2%
Net Energy Exporters	5.8%	-4.9%	1.2%
Net Energy Importers	4.3%	-6.1%	1.2%
Russia	5.6%	-6.0%	0.5%
Azerbaijan	11.6%	2.5%	12.3%
Source: International Monetary Fund
*Projections

Economic Spotlights: Azerbaijan and Russia

Azerbaijan: This oil-rich nation is expected to return to double-digit growth in 2010, with moderate growth expected in 2009. As trade with CIS partners falls, trade with Europe, Turkey, and the West is rising.

Russia: The fall in commodities prices and shrinking foreign demand and investment have led the government to allow considerable depreciation in the ruble and caused a significant rise in unemployment. The expected anemic pace of growth in 2010 may create more challenges for the Putin government.

| Back to Top |

East Asia (excluding India and China)

Sharp cutbacks in trade and capital flow out of and into the developed and developing economies of East Asia have severely impacted this region. Short-term growth rates are dropping by double digits. The good news is that lower inflation, coupled with a number of fundamentally sound individual economies, will help the region weather a slump that isn’t overly long. On the downside, a more protracted downturn could further expose the economic weaknesses of a region overly dependent on global trade demand and capital.

Statistical Snapshot: Real GDP
	2008	2009*	2010*
Emerging Asia	6.8%	3.3%	5.3%
South Asia	7.0%	4.3%	5.3%
ASEAN-5 (Association of Southeast Asian Nations: Indonesia, Malaysia, Philippines, Singapore, and Thailand)	4.9%	0.0%	2.3%
Newly Industrialized Asian Economies	1.5%	-5.6%	0.8%
South Korea	2.2%	-4.0%	1.5%
Vietnam	6.2%	3.3%	4.0%
Source: International Monetary Fund
*Projections

Economic Spotlights: Vietnam and South Korea

Vietnam: Falling commodities prices have reduced inflation in Vietnam, improving prospects for the poor as well as reducing corporate costs. With lower costs of production than China, Vietnam has the potential to benefit from an economic recovery.

South Korea: The country’s exposure to global financial markets and its heavy dependence on trade to more developed economies has trampled growth rates. Internal fiscal stimulus, coupled with a hoped-for global economic recovery in late 2009, should bring back positive GDP growth in 2010.

| Back to Top |

Africa

Because Africa is so poorly integrated into the global economy, the continent hasn’t suffered from the financial crisis as overtly as many other developing regions. However, the crisis is affecting Africa—potentially severely—in terms of slowing investment inflows, falling demand for exports, declining remittances, and shrinking foreign aid. The gains the continent has made in terms of smaller deficits, rising exports and wages, and lower inflation are being threatened. Those losses will inevitably have the biggest impact on Africa’s most vulnerable populations.

Statistical Snapshot: Real GDP
	2008	2009*	2010*
Advanced Economies	0.9%	-3.8%	0.0%
Africa	5.2%	2.0%	3.9%
North Africa	4.0%	3.0%	4.0%
Sub-Saharan Africa	5.5%	1.7%	3.8%
Oil Importers	4.7%	2.1%	3.7%
Oil Exporters	5.9%	1.8%	4.2%
Source: International Monetary Fund
*Projections

Economic Spotlights: South Africa and Nigeria

South Africa: As the continent’s most developed economy, South Africa was initially the African nation hit hardest in the global economic crisis. Unemployment, already high, is rising as output is falling. But the financial sector is in relatively good shape.

Nigeria: The steep plunge in oil prices will continue to sting the Nigerian economy at least through 2010, barring a steep rise in commodities prices. Inflation is predicted to be moderate, but to stay in the double-digit range. With rampant corruption, it’s unlikely the economy will turn around any time soon.

| Back to Top |