24 January 2014
The BRICS group of influential emerging countries should not be counted out as dynamic forces in the global economy, panelists argued during a special session at the World Economic Forum’s (WEF’s) annual meeting in Davos, Switzerland on Thursday.
While Brazil, Russia, India, China and South Africa have all been hit to varying degrees by fallout from the global financial crisis, the leaders responsible for economic management in these countries predicted on Thursday that they will rebound over the next few years.
Concerns that China’s economy will run out of steam are unfounded, Liu Mingkang, distinguished fellow at the Fung Global Institute in Hong Kong, said. Growth rates have come down 30% over the past three years, but the authorities are confident that the country will maintain its economic momentum on a more sustainable course at a rate of 6% to 7% through to 2020. China’s breakneck growth in the past came at significant environmental cost.
According to Mingkang, the new government’s focus is on three priorities: reducing overcapacity, notably in heavy industry; lowering borrowing by provincial governments and increasing transparency in the markets for their debt; and reducing China’s dependence on export markets by stimulating internal demand.
“In the short term, tapering of quantitative easing will create huge volatility in capital flows,” Mingkang said. “We will certainly be hit by this volatility but, hopefully, not shocked.”
Brazilian Finance Minister Guido Mantega said the country would not return to its pre-crisis growth levels soon, but that it was already consolidating reforms introduced over the past decade that have raised the incomes of the poorest people in society. Efforts to promote private investment would also continue, with licences worth US$250-billion about to go for auction, Mantega said. These cover railways, ports and airports, motorways and other infrastructure.
Indian Finance Minister Palaniappan Chidambaram attributed his country’s growth decline over recent years to “the adverse external environment and … some decisions we took.” He was confident, however, that India would grow at 6% this year, 7% in 2015 and 8% in 2016.
Questioned about the role of the state in the Indian economy, Chidambaram said: “New space in the economy is reserved substantially for the private sector, but state enterprises cannot be dismantled overnight or simply wished away. As long as the public sector is competitive and run on commercial terms, there is no reason to take state enterprises apart.”
Russian Deputy Prime Minister Arkady Dvorkovich said his country’s slow rate of growth was partly due to the economic conditions of its main trading partners, Europe and the China. He added that internal constraints were the main impediments to progress. “The business environment is not good enough. There is too much red tape and bureaucracy, and insufficient support for SMEs and other enterprises that will provide the high-tech jobs of the future.”
South African Finance Minister Pravin Gordhan said his country had achieved a lot in the past two decades and was now headed towards “the new normal”. The global financial crisis, “which was not of our making, did huge damage,” Gordhan said. “We now need to enhance the skills of our citizens and improve our infrastructure to take advantage of the opportunities ahead.”
Source: World Economic Forum