Capital Economics’ Williams: ‘Excitement About Growth in BRICs Will Fade’

Friday, 15 Mar 2013 09:15 AM

By Dan Weil

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The BRIC nations – Brazil, Russia, India, and China – have been all the rage since Goldman Sachs economist Jim O’Neill coined the term in 2001.

But their luster has dulled a bit recently.

"The BRIC economies have been the brightest stars of the emerging world since the year 2000, contributing nearly two-fifths of global growth,” Mark Williams, chief Asia economist at Capital Economics, writes in a report obtained by CNBC.

Editor's Note:
 
'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

“More recently, they have been sources of disappointment.”

Capital Economics estimates that the four countries will decrease global growth by about half a percentage point from the International Monetary Fund’s projection of 4.1 percent.

Each country is enduring some economic sluggishness, Williams notes.

Brazil faces a heavy debt burden, weak business investment is curbing Russia’s commodities boom, India is making only slow progress in its efforts for economic modernization and reform, and China hasn’t yet been able to transform into an economy predicated on consumers.

It’s not that these countries are about to enter a recession, but their growth “is unlikely to rebound to anything like the rates seen in recent years,” Williams says, adding, “Much of the excitement about growth in the BRICs will fade.”

Capital Economics recommends that investors consider sub-Saharan Africa, Southeast Asia, Mexico, Poland and Turkey instead.

Clearly investors haven’t given up on emerging markets. The Commonfund Investor Outlook Survey shows that institutional investors expect their portfolios to grow an average of 7.6 percent this year partly by increasing their investments in emerging markets, Reuters reports.

They also expect to make money in venture capital, real estate and natural resources.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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