Thanks to the continued high growth of India and China, emerging market economies have managed to outshine those of the developed countries in 2009. But for India and China, the emerging market economies would contract this year, according to a report titled ‘Survive and prosper: emerging markets in the global recession’.

The U.K. trade and investment report was prepared in collaboration with the Economist Intelligence unit.

With the exception of Eastern Europe, the emerging market economies would still fare less badly than the developed economies, the report said.

The report found China, India and other Asian markets to be the preferred destinations over the next year and next five years. “Asian markets now dominate the top-ten list of non-BRIC (Brazil, Russia, India and China) future investment destinations to the detriment of markets in Eastern Europe,” the report said. The relatively strong show by China and India could, according to the survey, point to “a degree of independence from western economic performance”. However, the gross domestic product growth gap in recent years between the developed and emerging markets had remained at 5-6 percentage points. “This indicated a continuing linkage,” it said.

The survey -- held between July and August -- covered 540 companies from across 19 business sectors.

Significantly enough, the survey found “the emerging markets to support global profitability”. Forty per cent of surveyed companies headquartered in developed countries, which had over five per cent revenue exposure to emerging markets, said that their financial performance was better than that of their peers. This clearly indicated that the emerging markets remained attractive even though the global financial meltdown “has hurt business everywhere”.

Foreign direct investment (FDI) into emerging markets withstood the global downturn in 2008. Yet, the survey found FDI flow into the emerging economies plummeted by 37 per cent in the first quarter of 2009, with the sharpest fall happening in Eastern Europe. “The collapse in FDI, however, will have more of an impact on developed markets in 2009,” the survey said. It predicted that FDI inflows into developed markets would dip, albeit temporarily, below those to emerging markets. The survey found that investors were generally prepared to ‘stay the course’ and still believed that returns from emerging markets over the long-term would be worth the investment.

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