Dr Gerard Lyons is chief economist with Standard Chartered Bank. Any opinions expressed are his own.

2008 was the year of financial crisis. 2009 will be the year of global recession. 2010 is likely to be a year of stagnation in the West and recovery in the East. The legacy of the debt-driven boom in the West will take some time to work its way through the financial system and world economy. As it does, causing havoc, the casualty list will be high. Already we have seen clear evidence of this. We are in both a financial crisis and an economic crisis. And whilst both are different they are clearly interlinked.

The speed at which confidence has slumped and at which financial interactions have allowed problems to spread is a worry, and the scale of deleveraging that needs to takes place is still huge.

The origins of the financial problems are complex. There was systemic failure across the financial sector, driven by a lack of risk management, inappropriate liquidity management particularly in stressed conditions and by pro-cyclical policies that added fuel to the fire.

The imbalanced global economy also contributed to present problems. Savings flowed uphill from emerging economies to the debt-driven countries in the developed world. The need for a more balanced global economy is clearly a future need, with countries like the US and UK spending less and saving more, whilst regions like Asia and the Middle-East need to save less and spend more. Currency adjustment is also part of the solution, with the need for a weaker dollar and stronger yuan.

In this environment, the case for policymakers to stimulate their economies is clear. This, plus lower oil prices, may not prevent recession but will ease some of the pain.

What of the emerging world? In the past it was the emerging world that was often the culprit, being the source of the crisis. This time, much of the emerging world is the victim, being hit by events external to their shores. Some countries, with high currency reserves, sizeable savings and healthy fiscal stances, are in a position to be able to cope. But not all are this fortunate.

There is a need to differentiate. Countries with high current account deficits, high leverage and debt are those most exposed. Central and eastern Europe is in terrible shape. Latin America will suffer, with Mexico hit by the US recession and much of the rest of the region impacted by falling commodity prices.

The recent boom saw Africa enjoy strong growth and whilst this region may prove more resilient than others there will still be an impact from falling commodity prices and the difficulty of obtaining finance for investment.

The Middle-East will be impacted, but having learnt from the previous booms this time many of the countries have not spent all their oil price gains, and thus the region should be better able to weather the recession. Abu Dhabi’s wealth will allow it to come to Dubai’s rescue. And there is still a drive to diversify across many parts of the region.

Across Asia, recent data has been very poor. In looking at the region, there is a need to differentiate between south Asia, where India will slow sharply despite interest rate cuts and between the open versus domestically driven economies of East Asia such as Indonesia and China. The most vulnerable will be the small open economies such as Singapore, Hong Kong, Taiwan, Malaysia and Vietnam. A number will see outright recessions, despite policy easing.

China will set the tone, both because of its increasing size, but also because of its impact on confidence. China is already slowing sharply, as exports and investment fall. In this environment, the policy response will be huge, with a fiscal package kicking in before this summer. In addition, monetary stimulus is already triggering a rebound in lending. The business cycle clearly exists in China.

Overall, even emerging economies that have positive fundamentals such as Asia, will suffer as the global recession spreads, with trade, commodity prices and confidence all falling and credit tightening. But this cyclical set-back should not divert attention from their structural positives.