“I still believe that the BRICS will continue to lead the global economy,” said Guido Mantega, the Brazilian finance minister, while discussing the state of the world’s emerging powerhouses at the Davos World Economic Forum.
BRICS is the acronym used to group the emerging players Brazil, Russia, India, China and South Africa. Their economies were thrown into disarray last May when the US Federal Reserve warned it may turn off the taps of easy money that had shifted foreign investment to the developing world in search for better returns.
Talk in Washington of stimulus “tapering” moved investment back to the richer countries, sending currencies plummeting in most BRICS economies and sparking talk that the emerging world may have replaced the eurozone as the world’s biggest headache.
But South Africa’s Finance Minister Pravin Gordhan said that though “there are going to be some shifts” due to tapering, hopefully those shifts were not going to be shocks. And after last year’s scare, governments had this time prepared the ground to anticipate the slowing of easy cash, he added.
Rather than a change in monetary policy, Russia’s Deputy Prime Minister Arkady Dvorkovich said the eurozone, Russia’s biggest trading partner, remained the big problem as it continued to grow far too slowly.
“The business environment isn’t good enough in both Russia and the world,” he said. “If Europe is almost in recession and China is slowing down a little bit, it’s natural we will slow down a little bit,” he said.
Liu Mingkang, a former Chinese central bank deputy governor, said a slowdown in China and fears of financial shocks there should not be underestimated. “The growth pace is slowing down, that’s the fact,” he said, noting that growth rates had gone from double digits only a few years ago, to this year’s expected 7.7 per cent.
But Liu explained that China was changing its export-driven growth model to a demand-based one and these lower growth figures should be expected from now on.