Emerging, if they can

17 September 2009 By Martin Hutchinson

Their tight finances helped many avoid overdoing economic stimulus, and they now enjoy relatively cheap money and reviving trade. Risks include a renewed credit crunch and creeping protectionism elsewhere. They need to watch for these dangers as well as do the right thing.

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In a study published on September 16 in anticipation of the Pittsburgh G20 meeting, the World Bank states that 43 lowincome countries are likely to participate only slowly in the global economic recovery. It points out that the generally have not had the fiscal means to engage in stimulus programmes. It believes the financing gap for the poorest countries to cover their basic needs of health, education, safety nets and infrastructure is about $11.6bn.

The JPMorgan EMBI+ emerging market bond index shows that spreads on emerging bonds, which peaked at about 850 basis points over Treasuries in October 2008, have narrowed to about 300bp currently, but not yet to the levels around 200bp that prevailed in late 2007 or their record lows around 170bp at the end of 2006.

World Bank release

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