Emerging economies have clawed their way back from the brink of financial collapse.

growth and consequently enhanced returns. But it is understandable that investors might be nervous about these markets; they are usually much more volatile than established markets and their performance over the last five years has left much to be desired. During the mid to late 1990s, emerging markets had a very difficult time. A series of crises, including the Mexican crisis of 1994/5, the Asian currency crisis of 1997/8 and the Russian debt crisis of 1998 caused them to lose all of the impressive success they had achieved in the first half of the decade. But already now emerging markets are on the way to economic recovery. Their better performance of late is partially explained by such factors as safer currencies, reforms and more independence, which are the consequences of the crises. In the wake of the currency devaluations of 1997-1998, many emerging markets have reformed their currency regimes so that now many of pegged systems have been replaced by floating regimes. This helps them to prevent a repeat of the build-up of huge current account deficits and capital imbalances which were the root cause of the wave of devaluations. Furthermore, it has greatly enhanced the competitiveness of emerging market goods and services in world markets. As a result of other structural reforms implemented in response to the crises many emerging markets are now enjoying a virtuous circle of increasing investment and growth that is transforming their economic and business landscape. Korea, Mexico and Russia which have all, amazingly, produced positive returns in their equity markets last year, are examples of emerging markets which have learnt from their past difficulties and are now implementing business and market-friendly reforms. Reduced current account deficits mean that many markets are less dependent on foreign capital inflows than they have been in the past. We have already seen a number of emerging markets show an unprecedented level of robustness in the face of the US slowdown, while means that they are less dependent on foreign economies. So, there is plenty of positive signs of emerging economies’ recovery, such as: rising current account surpluses and a build-up of reserves; the easing of inflationary pressures; the recovery in stock markets; the substantial decline in domestic interest rates; the improvement in consumer sentiment; the return of stability in the foreign exchange markets; and the levelling off in the contraction of industrial production. However, even if we see many encouraging features of economic situation in these countries, we should understand that there is still much to be done. I suppose that the pace of this recovery depends on the further conscientious implementation of national economic and financial reforms, the development in the economies of their major partners, and the support of international financial and development institutions. Emerging economies should also manage the inflows and outflows of capital, recurring even to currency controls or partial foreign investments regulations. Emerging markets economies should continue with their liberalization of trade and financial policies, but they should also take the right measures to boost liquidity, such as: reducing short-term foreign debt and accumulating liquid reserves. I guess that economic isolation is not a rational option for emerging economies; they should insert themselves to the global system. Besides, emerging economies should get rid of bad economic habits: exorbitant current account deficits, excessive short-term foreign currency borrowing, and shaky banking systems. Thus, I consider, that sticking to these measures, will greatly help emerging economies to escape recessions and to resist to foreign attacks in future.