Stumble or fall?

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: to climb (see chart 2).

Gerard Lyons, chief economist at Standard Chartered, argues that most emerging economies are not plagued by America’s deep structural problems, such as an overhang of debt, which could cramp growth for several years. Although 2009 will be a painful year for poorer countries, those with high savings and modest debt could recover fairly quickly. On many measures, such as government and external balances, emerging economies look much sounder than the big rich ones.

Unfortunately, aggregate numbers conceal many horrors, most notably in eastern Europe. Countries such as Hungary, Estonia, Latvia and Turkey have huge current-account deficits and foreign debts. Between 2000 and 2008, the ratio of foreign debt to GDP dropped from 37% to 20% in Latin America and from 28% to 17% in emerging Asia, but jumped from 45% to 51% in central and eastern Europe.

As foreign capital dried up, GDP fell by 4.6% in Latvia and by 3.5% in Estonia in the year to the third quarter of 2008. Capital Economics, a research consultancy, expects another 5% drop this year. Hungary’s economy is expected to contract in 2009. Turkey may also be heading for trouble. Its debt-service payments due in 2009 amount to 80% of its foreign reserves, the highest ratio of any big emerging economy.

Russia has run current-account surpluses for many years, yet it has also been badly hit by an outflow of capital and a credit freeze. Banks and companies are finding it hard to roll over their foreign debt. Official reserves have fallen by $160 billion, or 25%, since August. As a result of lower oil prices, Russia is likely to run its first current-account and budget deficits in a decade, and its economy may well contract in 2009.