The global financial crisis, which has plagued the world economy for two years, is nowhere near an end. Though a double-dip recession is unlikely, a fast and sound economic recovery is still out of reach. The latest Standard Chartered Global Focus, a monthly analysis of economic and financial market developments, said developed countries are now counting on emerging economies for growth. Edited excerpts follow:

Normally, at this stage of a recovery, confidence would be rising and economic momentum would be gathering. But this is not proving to be the case in most Western economies. In particular, the United States looks weak, and the UK, while a bit stronger, is fragile. Meanwhile, a number of the European economies face tough times as fiscal policies are tightened. In contrast, the eurozone's core economy, Germany, is in much better shape, benefiting from an export-led recovery driven by China.

This last point is crucial. It is necessary to differentiate between the West and the East since their underlying dynamics are different. But at the same time, it is important to appreciate the inter-connectedness of advanced, emerging and frontier economies. Most of the advanced economies face only a modest recovery. The recovery in emerging economies is stronger, and the more it is driven by domestic demand, the stronger it will be. Meanwhile, the frontier economies still possess the greatest catch-up potential, which should be seen in even stronger rates of growth than current levels.

None of these groups is fully independent from the others—indeed, quite the opposite is true. The crisis showed that emerging economies were not decoupled, just better insulated. The same line of reasoning is valid now. With the West accounting for two thirds of the world economy, and given the export-focused nature of many economies across Asia and emerging regions, it is still important to recognize these inter-connections. That being said, the emerging economies are becoming more dominant and more important, as well as more resilient. In fact, with China leading the pack, they are driving more of global growth.

Although we are very upbeat about prospects for the emerging economies, and expect them to eventually pull Western economies up, the near-term outlook for the West is still rough. The scale of de-leveraging still points to a sluggish recovery in the United States and the UK, as well as parts of the eurozone. This is despite the scale of the policy stimulus, which has included fiscal boosts, low interest rates, liquidity provisions, national bailouts, and weak currencies, the euro in particular. Policymakers did a good job bringing economies back from the brink, but as the policy stimulus wears off, the extent to which the private sector can take up the slack has been constrained, given the overhang of debt from the crisis.

The policy stimulus is providing for a recovery. But given the scale of the recession and the extent of the stimulus provided in the West, it is a weak recovery, and output has not returned to its pre-crisis level.

In recent weeks China finally overtook Japan as the world's second largest economy. We continue to be optimistic about China's prospects. This is significant for many other countries, both directly in terms of trade and indirectly in terms of the impact on confidence.