The fourth quarter of 2008 and the first quarter of 2009 saw a collapse in industrial production and GDP that was just as violent in developing countries as it was in the advanced economies. In China, India, northern Africa and the Middle East, this meant merely a slowing of growth, but in the small and medium-sized highly industrialised economies of Asia and in Central Europe and the CIS states it translated into a deep recession. For most of these countries economic activity probably hit its low point during the first quarter. A technical recovery seems to be under way, the consolidation of which is by no means certain. The recession has increased credit and market risk significantly, but in a way that differs widely between countries and regions. There has been only a slight increase in transfer and sovereign debt risk, as most of the large emerging economies have cut back public sector debt over the last decade and have managed over the past year to protect the foreign currency reserves built up in previous years. The deterioration of country risk is particularly severe in Central Europe and the CIS states, where it focuses mainly on credit risk. It is also significant for highly-indebted poorer countries, notably through the political component of country risk. The first section of this report analyses the situation and economic prospects of emerging economies in an attempt to identify those that stand the best chance of making an early exit from recession. The second section looks at trends in each of the main components of country risk.