Revista de Economie Mondială (Jan 2013)
Resetting the Growth Engines of the BRICS Countries as a Reaction to the Global Crisis
Abstract
In the present paper, our main objective is to bring to the forefront two notable processes, as a result of the world financial and economic crisis. On the one side, we underline the increasing role of the emerging countries (especially that of China, Brazil, Russia and India) in the world economy and, on the other side, we underscore the remodelling of the patterns of economic growth and development in the case of the BRICS countries. The Russian Federation, Brazil and South Africa rapidly eased out of the recession in 2009, while China and India continued to record robust growth rates. Nevertheless, in 2012, one can remark the precipitate slowdown of the GDP growth in all the five analysed economies. This demonstrates that the emerging economies were not able to “decouple” from the world economy and, on the contrary, they were deeply affected by the adverse economic situation in the USA and the EU (especially the Euro Zone). At the same time, China’s economic slowdown negatively influences Brazil, Russia, India and South Africa, as China represents the largest trading partner for them, after the EU. At the same time, one should not ignore the actual weaknesses of these economies. For instance, inflation represents a “common vulnerability” of the BRICS. In this situation, the selection of the most viable instrument of monetary policy represents a veritable challenge for the authorities in these countries, as the economic growth should be stimulated but, at the same time, inflation has to be tempered. Besides, unemployment rate in South Africa is already at high levels. The fiscal deficit, as a percentage of GDP is excessive in India and South Africa and the public debt to GDP ratio is extremely high in India and Brazil. During the world financial and economic crisis, the authorities and companies, both public and private, concentrated their attention more and more on the internal markets, with a high absorption capacity. Without giving up exports and FDI as engines of economic growth, the administrative bodies at macro and microeconomic levels understood that the internal demand represents a complementary source of growth. In contrast with the most developed countries, which intensely resorted to austerity measures, the BRICS were able to adopt stimulus measures. Such Keynesian moves were possible, as the emerging countries entered the global crisis with strong macroeconomic and financial positions. As a matter of fact, the world financial and economic crisis erupted in a moment considered by the international experts as the “most prosperous” for these countries. The general measures adopted in order to stimulate the economy in the field of fiscal policy and monetary policy were combined with specific, sectoral ones. Such measures managed even to attenuate the negative effects of the global crisis at social level. Infrastructure development though public investment projects is used by the BRICS governments as one of the principal means to stimulate economic growth and jobs creation. Our paper concludes that, for the BRICS countries, the classical engines for economic growth like exports and inward FDI are complemented by additional growth engines: internal demand (spurred by the high level of remittances from abroad), the outward FDI, innovation and infrastructure development.
