Emerging economies pace recovery

Fuelled by rising exports to China and strong consumer demand, Brazil roared out of recession in the second quarter of the year, as emerging economies of the so-called BRIC countries shook off the doldrums that still grip the developed world.

With Russia trailing significantly behind, Brazil, India and China have shown signs of increasing economic momentum, and expect to post solid growth rates for 2009. All three countries released positive economic indicators yesterday, showing rising industrial activity and climbing growth rates.

Unlike India and China, Brazil did enter recession with two quarters of economic contraction in late 2008 and early 2009. But it bounced back with growth at an annualized rate of 7.8 per cent in the second quarter.

Brazilian Finance Minister Guido Mantega said the South American giant will post the strongest growth in the Americas this year, and is one of the world’s healthiest economies.

We were one of the last countries to experience negative growth, and one of the first to bounce back with positive growth, Mr. Mantega told international reporters yesterday.But with the exception of Brazil, most emerging economies remain heavily dependent on massive stimulus programs for their resurgence and will eventually require re-energized consumers in developed countries to sustain their recoveries.

And the current rebound in the BRIC nations will do little to spur global growth other than provide some price support for key commodities produced in Canada like crude oil and base metals.

I don’t get wildly excited about the BRIC recovery, said Peter Hall, chief economist with Export Development Canada. We’re not going to get a global recovery until we see Western consumers spending again. Still, the emerging markets do appear to be leading the global economy out of its year-long slump.China which has stimulus programs worth 13 per cent of its GDP saw its growth accelerate to 7.9 per cent annualized in the second quarter, compared with 6.1 per cent in the first quarter.

Economists worry that China’s exports remained mired in recession, down 20 per cent in August from the same period last year.India’s industrial output climbed 6.8 per cent in July following an 8.2-per-cent increase in June, and economists expect Asia’s third-largest economy to grow by 6 per cent this year.

Mr. Hall said India’s trade sector also remains in a slump, adding that the growth in industrial output may reflect temporary inventory rebuilding.

Russia remains the outlier in the group its economy contracted by 10.9 per cent annualized in the second quarter, and is forecast to shrink by 7 per cent on the year before recovering in 2010.

In contrast to many emerging economies, Canada is expected to post growth of only 2 per cent next year, which is still expected to lead the industrialized world, CIBC World Markets Inc. said in a forecast released yesterday.

This year, CIBC said, Canada’s economy would shrink 2.3 per cent.Emerging-economy stock markets have also rebounded smartly, with the trendsetting MSCI emerging-market index posting its biggest weekly gain since July.

The New York-based MSCI gained 4.6 per cent this week, approaching levels not seen since before the market meltdown that began last September.

- Courtesy: Internet