Most economists are making hyped predictions about across-the-board growth of BRIC nations (Brazil, Russia, India and China) through 2050. The common prediction is that the next century is poised to bring “Asian greatness”; and East will rise again in its glory which existed many centuries back. The general trends of the decade preceding the 2008-2009 financial crisis, point toward some degree of “convergence” trend showing that the emerging economies (BRIC in particular) are catching up fast with the developed economies. This momentum may not continue with the same thrust as predicted by vast majority of economic and financial analysts due to the following reasons:
(1)-The World economy and the stock markets are highly globalized and integrated. At the best, the general trend will be sluggish growth, due to emerging Sovereign debt crisis, and sideways markets. This trend will keep under check the growth of most emerging economies.
(2)-The growth of BRIC economies is driven by divergent factors. For example Brazil and Russia are exporters of energy (Oil, Gas) while China boosts its growth from exports to Europe and the US. India is mainly exporter of Information Technology. The trends witnessed during the decade of great growth 1998-2008 may not repeat. For example, Chinese exports may decline due to cooling economies of Europe; the Oil exporting economies of Russia and Brazil might find hard time due to rising costs and lowering price (profits); and India may face some shift of its Information Technology exports to Philippines, Malaysia and Indonesia.
(3)-The predictions for time period exceeding ten years are like fairy tales. It is not possible to make good predictions beyond one business cycle, typically five years or two business cycles at the most. Reports like Global Trends 2050 are less realistic.
(4)-Some breakout economies with promising track-record, often ignored by economists, may show double-digit growth in the next decade: Nigeria, Bangladesh, South Korea, Czech Republic, Poland, Thailand and Philippines.
Overall, the growth of emerging economies will be uneven, unpredictable and in line with key macroeconomic trends; deviating substantially from the current predictions of majority of economists and financial analysts.
DISCLAIMER: The views expressed in this Blog are my personal views/analysis. It does not represent views of any organization or group, for which I am doing consulting or employment. The purpose of this blog is academic and informative; and is not sale of any product or service. The author does not own responsibility (liability) for any information presented in this blog; as investment information tends to change rapidly.