BRICS Go From Hope to Risk

Remember the Brics – Brazil, Russia, India, China and South Africa, the nations that were set to reshape the world economy?

Two of them, China and Russia have the potential to cause some serious and rather unwelcome reshaping in the near future.

In China’s case it’s the risk that an economic slowdown could turn into something more damaging.

With Russia, it’s the possible economic fallout from the conflict in Ukraine.

Four of these five countries – South Africa is the exception – were identified in 2001 as large and fast-growing economies that would have increasingly influential global roles in the future.

Today it’s China and Russia that are potentially the most troubling for the rest of the world in the near term.

China’s story is one that we would inevitably have had to face sooner or later. Indeed you might say it is remarkable that it hasn’t come sooner.

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The Brics and how they perform matter for the rest of the world”

China has recorded extraordinary rates of economic growth for a very long time – an average of 10% a year for three decades.

But there are weaknesses. It’s based on very high rates of investment, currently running at 48% of national income or GDP.

When it’s so high there’s always a danger that many projects will turn out to be wasteful or unprofitable, undermining the finances of the investors themselves and anybody who has lent them money.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza