It would be an understatement to suggest that 2008 has been a disastrous year for financial markets in the region. Currencies are down by as much as 40% against the dollar, equities have plunged and bond yields have soared. Those countries with the largest current account deficits have been hit hardest, although no one has escaped unscathed. The good news is that, for now at least, swift intervention by the IMF has calmed the worst fears of investors. The bad news is that the impact on the real economy has yet to be fully felt. Industrial production has collapsed across the region but as external financing conditions deteriorate and external demand weakens yet further, we now expect most countries to enter recession in 2009. This year’s Christmas hangover will be long and painful.