CHALLENGING GLOBAL ECONOMIC ENVIRONMENT IN BRICS

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PROTAGONIST AMONG ALL THE 5 COUNTRIES(BRICS) WE

FIND BRAZIL AS THE PROTAGONIST

Why ???????????

The brazil economy has slowed only marginally over this period by 5% in 2011. During the economic slowdown the growth rate in Brazil dropped from a peak of

7.5% in 2010 to 1.3% in 2012. Brazil’s latest growth slowdown is mild compared to earlier two year’s slowdown. For South Africa the slowdown is smaller than 2/3rd of the earlier slowdown ,

similarly for China’s the slowdown is smaller than the decelerations seen in the late 1980’s and1990’s .

BRIEF DESCRIPTION BRICS is the association of five major emerging national economies: Brazil,

Russia, India , China & South Africa. The BRICS members are all developing or newly industrialized countries , but they

are distinguished by their large fast growing economies and significant influence on regional and global affairs .

According to world economic outlook(WEO) the growth of South Africa , China Russia and India is projected to be 1.5% to 4.5% lower in 2013 than in 2011.

The growth slowdown in China is 10.4 % to be estimated 7.7% in 2012 Over here according to the case given it discusses about the fall in BRICS economic

slowdown . It seem that much of the fall in the growth can be attributed to an un winding of

earlier positive cyclical factors . Potential growth has also detoriated but only China and Russia are expected to have

persistently lower rates of economic growth.

FACTORS FOR ECONOMIC SLOWDOWN OF BRICS

Decline in investment : There has been no investment to generate the revenue , they restrict the

government expenditure which effects the GDP growth leading to the slowdown of economics .

The real state investment that decreased from the current year recorded as 33% .

Secondly: Not only did these economies fail to implement market oriented reforms, they

moved towards a growth regime based on country capitalism, wherein there is an excessive role of country -owned entities in the economy.

Third: The commodity super-cycle is probably over — for a variety of reasons — and

this hurts the BRICS that are commodity exporters like Russia, Brazil and South Africa.

Fourth : In the boom years for BRICS and for emerging markets, macro policies became

too loose, leading to overheating.

Is the slowdown in the BRICS (Brazil, Russia, India, China and South Africa) nations simply a cyclical one, or are

structural factors ?

Conti :

This chart from the International Monetary Fund (IMF) offers a possible explanation through two data points.

One, potential growth—defined as the level of real output consistent with stable inflation—has come down for all BRICS countries. This is that part of the growth slowdown that can be attributed to structural factors such as supply bottlenecks, policy paralysis and so on. India is the worst off in this aspect.

Second, it projects that real growth for India in 2013 will fall below its potential growth.

The difference between the two is the cyclical component of the slowdown. A real growth rate that is below the potential rate is an indication of slack capacity in the economy—a fact supported by falling core inflation.

LESSON LEARNT

With BRICS economies coming off cyclical peaks following their post-2008 financial crisis stimulus, the IMF, not unsurprisingly, finds that there is a cyclical component to the slowdown in all five. It is in the mix with structural factors that the differences between the economies lie. In Russia and South Africa, cyclical factors account “for the bulk of the deceleration;” while in Brazil, India and China it explains “about half” of the slowdown.

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