The BRICs Are No Longer Leading The World's Growth
The emerging markets are no longer the lead contributors to growth to the world's GDP, they have been replaced by the developed nations. Japan, the U.S. and the rest of the developed markets are contributing roughly 60% of the $2.4T in new economic growth according to.
says that Japan has finally pulled themselves out of stagnation. The U.S. economy has steadily grown but at a lukewarm pace. Lastly, they forecast that the economy of Europe has already started to improve and that the economic reports released tomorrow will confirm this.
On the flip side, the emerging markets, in particular the BRICs are slowing down. International companies have said they have cut profit and growth forecasts in each country. Brazil, India and Russia have been slowing down due to economic mismanagement and infrastructure issues but Bridgewater places most of the blame falls mainly on China with international demand for Chinese goods and services have fallen recently.
Yet it seems that there is too much focus on the BRICs being part of the emerging markets. I would argue that the BRICs should not even be called an emerging market anymore. The other emerging markets cannot compare to the economic maturity of the BRICs. The BRICs are more economically similar to the developed nations than they are the emerging nations. Additionally, if you remove the BRICs from the rest of the emerging markets, the emerging markets are still showing lots of growth.
This "sudden" slowdown should not be a surprise, it is only natural after a decade of exuberant growth that there is a slowdown. Economies move in cycles, they don't in straight lines. We all know what happened a few years ago here after exuberant growth. It's the same for the BRICs, except I would argue the BRICS are more similar to the U.S. in the 1920s. The U.S. like the BRICs was a country entering the world as a new economic power. The U.S. grew quickly and had a harsh pull back. It makes sense that the BRICs would follow the same path.
Also two of the BRICs, China and Russia, have probably the two most controlling governments and manipulated markets. The two governments have done everything they can in the past years to prop up their respective economies despite their fundamental flaws. Every time a government has tried to prop up their economy (think Indonesia, Thailand, or England and the BOE), the country would eventually enter into a recession. I would predict that China and Russia will not only fall behind in economic growth but enter a prolonged recession.
What do you think of the BRICs vs. the rest of the emerging nations? Do you think the BRICs are closer to the fully developed nations and there should be a new term between emerging and developed? Should the BRICs' growth continue to fall or should they recover?