By Weihua

Can we learn from the ten worst countries in emerging markets who can learn a lot.

First of all, the problem was just in Eastern Europe. I listed 50 major emerging market countries, according to the global crisis of economic growth performance from low to high rank, you will see the largest fall in output the whole nine countries in Eastern Europe. The worst economic performance in the ten countries, the only country in Eastern Europe is not part of Venezuela, the ten countries, more than two years cumulative growth rate is still negative.

In contrast, the performance of emerging countries in Latin America and East Asia is pretty remarkable. Particularly in Asia, they are all successfully weathered the financial crisis. In other words, only the Eastern European emerging market countries suffered severe economic recession comparable to developed countries.

Second, the culprit is highly leveraged. Eastern European countries, why do highly leveraged? In short, the current round of the 15 years before the crisis, the three major emerging market regions, Eastern Europe is not only a comprehensive crisis by region (except Russia). Therefore, the Eastern European countries, damage to the balance sheet is relatively small, so in the next period of global prosperity, Eastern European countries, the highest rate of natural leverage.

Over the past decade, the 10 emerging market countries, the worst performance of the credit and loan activities, have happened in a dramatic acceleration of growth. From 2001 to 2008, the “bottom ten countries,” the private sector, the loan growth rate is the average of other emerging market countries, a full 3 times. GDP of these countries, the ratio of credit and a steep rise. In contrast, the best economic performance over the past two years is the minimum leverage ratio, the cumulative growth rate in the front rank of the eight countries.

Eastern European countries, the net external borrowing is also great. In the five years before the crisis, the Baltic and Balkan countries, the average current account deficit accounts for about 12% of GDP; Hungary and Croatia not far off. One can imagine, these rely on loans to promote economic growth, once the global capital dried up, only collapses.

Third, Eastern Europe, the strong rebound of economic hopelessness. At present, the global venture capital and capital flows may indeed restored, but the “bottom ten countries” is not the case. Since last year, “bottom ten countries,” the credit growth without change, without any signs of recovery.

In the beginning of a global recession for two years, these Eastern European economies, domestic demand is still way down. At present the only real growth is to increase support for the net trade surplus, but it is the collapse of the region, a reflection of the import expenditure only.

Fourth, the typical “emerging market” crisis does not appear. “Typical” emerging market crises of the development process: policy failures in emerging market countries over the years, the economic collapse following night, rapid retracement of short-term foreign capital; domestic investors have fled from the financial system; currency devaluation multiplied; public and private debt large-scale real-time default. Usually in the “systematic liquidation” after one or two years, the economy rebounded strongly.

Throughout the past two years, “bottom ten countries” economic performance, no doubt, declining economic activity, asset prices decline in violent; but the general stability of its currency, interest rates are relatively low, and no real signs of capital flight; Bank gradually reduced credit risk and so on. 90 on the last century in Eastern Europe, “come” and, even now suffering the worst hit by the crisis, also seem unusually calm.

Today’s crisis and the last century 90’s different? Most of the difference is the structure of external financing. 90’s of last century, the typical case is due to a national crisis in the shorter term debt market, a lot of debt. Therefore, when the outcome is inevitable, the crisis soon.

However, entering the 21st century, Eastern European countries, many borrowers are non-liquidity of mortgage loans, for 5 years to 30 years, Yi Ban Doushihaiwai head office branch transfer to the Bende, even those who had Xiwangxunsu divestment of Jigou , in order to implement a simple exit strategy, is almost nowhere to go.

If the “real” crisis not occurred, it probably will not anytime soon (although this does not mean that the crisis will not occur). For investors, this is good news, because the country’s financial collapse will not come at once. But it is also bad news, because when a large number of Eastern European countries to gradually solve the immediate problem, the economy is likely to occur many years of relative stagnation.

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