Global Economic Tracker - Insights and Trends (GET-IT) - BRICS Q2 2013

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Dec 19, 2013, 03:42 ET

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Global Economic Tracker - Insights and Trends (GET-IT) - BRICS Q2 2013

Brazil, Russia, India, China, and South Africa are expected to register a moderate growth in H2 2013 owing to restrained industrial growth, sluggish recovery in exports and lackluster domestic demand. The competitive advantage of low costs in the BRICS economies will also continue to decline with the rise in labor costs. Increase in interbank borrowing rates to curtail excess credit supply in the Chinese economy is likely to dampen investors' sentiments. Alongside rising inflation, sweeping anti-government demonstrations in Brazil and South Africa will remain a concern in H2 2013. In India, structural reforms have been initiated to reinstate pre-crisis growth levels before the national elections in H1 2014.

Quarterly Economic Growth Trends

A weak recovery in external demand as well as slow growth in domestic consumption due to rising prices of goods and services will continue to strain the growth of BRICS economies in H2 2013. Under such circumstances, BRICS is expected to grow at a rate of X% in 2013, lesser by X%, compared to IMF forecasts.

India's growth in H1 2013 was stalled by a continuous drop in investment, which is likely to gradually pick up by the end of 2013, as the government has implemented various tax-incentives to boost investment in H2 2013.

BRICS Economic Summary

After experiencing robust growth in the past decade, the GDP of the BRICS economies is likely to grow at a slower rate in H2 2013 and 2014 due to various factors such as lack of structural reforms, saturation in the skilled-labour market, and slowdown in industrial growth.

Brazil
The economy is likely to underperform in H2 2013 owing to high levels of inflation and domestic unrest. However, the investor sentiments towards the economy remain strong and growth will pick up eventually in 2014.

South Africa
The economic outlook for H2 2013 seems a little blurred due to unyielding strikes in the mining sector. However, the consumption demand will remain resilient and investors' sentiment is quite optimistic despite the labour unrest. The growth momentum will pick up as soon as the economy settles its internal glitches.

India
Investors are increasingly losing faith in the economy's performance which is leading to unprecedented deflation of currency. The incapability of the Indian Government to address its widening fiscal deficit and structural bottlenecks like delay in policy implementation, power shortages, weak infrastructure, etc., are likely to undermine the country's growth potential further, in H2 2013.

China
Because a robust growth driven by cheap credit is unsustainable in the long-term, China's new growth model emphasizes on boosting private consumption. A timely monetary tightening in H1 2013 is likely to avoid a real estate bubble burst.

Russia
As with mature nations, the growth in Russia will remain sluggish in H2 2013, as the economy continues to operate at full-capacity in terms of usage of resources. Increase in energy exports will depend greatly on global recovery but the government has initiated plans to diversify the industrial sector.

Industry Outlook, BRICS, 2013

•BRICS will continue to drive global industrial growth in H2 2013, albeit at slower pace of around X%. More than X% of the global demand for manufacturing goods, especially, electronics and automobiles, is likely to be met by China, Brazil, and India and the external demand for Russia's oil is likely to remain undeterred.
•Internal factors such as large-scale labour unrest in South Africa's mining sector and protests in Brazil over grievances ranging from price hikes to poor public services, are likely to upset industrial production in H1 2013.
•The industrial growth in South Africa, Brazil, India, and Russia were largely dependent on export demand from China. As the Chinese economy slows down in 2013, largely due to policy shifts, BRICS's industrial growth will continue to decline.

Definitions of Indicators and Measurements

Economic Indicators
•GDP: It is the value of goods and services produced within a country in a year.
•GDP Growth: GDP growth or the real GDP growth is the percentage change in the value added to the GDP at constant prices in the national currency value.
•Foreign Direct Investment (FDI): FDI is the purchase of foreign assets or enterprise in a foreign country and is measured as the flow of funds into the country and net decrease of assets.
•Composite Leading Indicator (CLI): CLI is an aggregate time series displaying a reasonably consistent leading relationship with the reference series for the macroeconomic cycle in a country.
•Index of Industrial Production (IIP): IIP is a measure of change in the volume of production of a fixed set of products at constant price for all producer units and separate subdivisions thereof.
•Trade: It is the overall export and import value of all commodities.

Industry Indicators
•Value Added or Manufacturing Output: It is the output value of industries.
•Oil Production: It refers to the production volume of crude oil and is measured in thousand barrels a day.
•Gas Production: It refers to the production of natural gas and is measured in billion cubic feet.
•IIP: It denotes the index of industry production.
•IIP Growth: It refers to the growth rate of IIP.
•Trade: It refers to the overall export and import value by sector.
•Foreign Direct Investment by sector

Note: This study is accompanied by a data sheet with tracking indicators for all countries

Geographic Coverage

•Geographic Coverage: Asia Pacific

•Countries Covered:
- Brazil
- Russia
- India
- China
- South Africa

•Industries covered:
- Automotive
- Chemicals
- Construction
- Electricity
- Energy
- Food and Beverages
- Healthcare
- Information and Communication services
- Manufacturing
- Mining
- Pharmaceuticals
- Plastics

Study Period: 2008–2015 - Q1 2008–Q4 2013
Forecast Period: 2013-2015 - Q2 2013–Q4 2013
Table of Contents
Executive Summary 4
Definitions 8
Brazil 11
Russia 17
India 23
China 29
South Africa 35
Conclusion and Key Takeaways 41
The Frost & Sullivan Story 44