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Bumpy Road Ahead for BRICS (and the World)?

First Russia and India reported disappointing growth numbers. Now add China to the list of BRICS that are slowing down. The Wall Street Journal has the figures:

Gross domestic product grew 7.7% on a year-to-year basis in the first quarter, down from 7.9% in the fourth quarter of 2012 and lower than many economists forecast, according to Chinese official data released on Monday. The median GDP forecast of 14 analysts polled by The Wall Street Journal was 8%. […]

The economy showed further signs of slowing at the end of the quarter. Industrial output growth decelerated to 8.9% year-on-year in March, down from 9.9% in February. Retail sales also disappointed, with growth at 12.6% year-on-year in March, suggesting cautious households are being slow to support the government’s goal of raising domestic consumption.

And in Brazil, the price of tomatoes has skyrocketed, which is symptomatic of some deeper issues in the economy:

Brazil’s inflation rate remains well below that of other emerging nations, such as neighbouring Argentina, where it is more than 24 per cent. But last month it hit 6.59 per cent, breaching the top of the central bank’s target range of 4.5 per cent plus or minus 2 percentage points, and provoking concern in a society with a low tolerance for price rises.

Although analysts expect it to moderate later in the year, it will continue to pose challenges for Ms Rousseff as she tries to kick start an economy that grew less than 1 per cent last year.

With the possible exception of Russia, none of the BRICS are in recession yet, and the slowdowns are mostly problems for the incumbent politicians. But smart investors should keep an eye on the bigger picture: the world economy is not out of the woods yet, and the BRICS, darlings of the commentariat not too long ago, are vulnerable to reversals too.

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  • ojfl

    What seems to be evading people is that for five years we have had activist governments worldwide trying to make things better and “grow their economies” through “smart investments” and “austerity” based on tax increases. No one seems to be making the connection that maybe the malaise we are facing on a planetary scale is precisely because of all of this activism.

  • Atanu Maulik

    One thing I never understood, how did a term coined by an investment guy as a guide for investors, assumed such geopolitical significance ?

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