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Remember Yesterday
BRICs Circling the Drain

The Russian ruble is near its ten-year low, the Chinese economy is having its weakest first quarter in five years, and Brazil has had its long-term foreign currency sovereign credit rating downgraded to BBB- from BBB+ by Standard & Poor’s:

The downgrade comes after growing criticism over Brazil’s handling of its fiscal accounts and its reliance on one-off items and “creative accounting” to meet official fiscal targets.

The agency also cast further doubt over the government’s promises last month to cut $18.5bn in public spending to meet its current target.

“It will be difficult to achieve the formal 1.9 per cent of GDP primary surplus target without recourse to “one-off adjustments,” in our view, given low growth and the continuation of some tax exemptions,” S&P said.

The agency pointed to the country’s recent disappointing economic performance and its “subdued outlook for growth over the next two years”. After expanding 7.5 per cent in 2010, the country only grew 1 per cent in 2012 and 2.3 per cent last year.

Remember when the BRICs were going to rule the world? Well, we suppose Russia has Crimea…

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  • Thirdsyphon

    As it’s often said, “Brazil is the country of the future, and always will be.”

  • Jim__L

    “It will be difficult to achieve the formal 1.9 per cent of GDP primary surplus target without recourse to “one-off adjustments,””

    Wow. So we’re not looking for real growth, just “formal” growth — aka an accountant making the numbers dance?

  • Alex K.

    “The Russian ruble is near its ten-year low”

    Yes, and it may be worth noting that most of the recent slide from 32 to 36 rubles per USD happened before the Crimean invasion. When it threatened to push the ruble further towards 40, Russia’s central bank interfered but there’s no going back to 32 any time soon.

  • Joe Eagar

    This is hardly a good thing. Lower demand in developing countries (especially surplus countries) will mean either wider current account deficits in the developed world, or an overall slowdown in global growth. Given that the ability of developed economies to absorb large capital inflows is very much in question (given the post-crisis financial instability in Europe and the the tightening of fiscal policy in most countries), we could be looking at the latter, not the former.

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