Tags: Roubini | emerging | markets | BRICS

Roubini: BRICS, Other Emerging Markets 'May Hit a Thick Wall'

By    |   Wednesday, 24 July 2013 08:07 AM

Emerging markets have sailed into a perfect storm of barriers to economic growth, and heated expansion for most of them is gone for the next decade, according to a gloomy assessment by economist Nouriel Roubini.

To some extent, the BRICS (Brazil, Russia, India, China and South Africa) and other emerging economies face a tough comparison going forward with their go-go success of recent years.

According to Roubini, many emerging market's growth rates may be headed lower "as may the outsize returns that investors realized from these economies' financial assets," such as their stocks, bonds and commodities.

Editor’s Note:
Put the World’s Top Financial Minds to Work for You


In a column for Project Syndicate, Roubini wrote that there are a variety of reasons for the emerging markets' slowdown.

For instance, many of them faced tightened monetary policy in 2011 because they were overheating, he noted, and the growth consequences are still being felt. At the same time, the idea that emerging economies could decouple from weakness in the developed nations was "far-fetched."

In addition, most BRICS and a few other emerging nations are starting to lean toward "state capitalism," Roubini said.

"This implies a slowdown in reforms that increase the private sector's productivity and economic share, together with a greater economic role for state-owned enterprises," trade protectionism, capital controls and other drawbacks, he explained.

Also, the commodity supercycle that helped Brazil, Russia, South Africa and other commodity exporters may be over. The U.S. Federal Reserve's signals that it might taper its ultra-loose monetary policy are playing havoc with emerging markets' currencies and bonds. And a growing number of emerging nations, including Turkey, South Africa, Brazil and India, are now running deficits instead of current account surpluses, Roubini noted.

As a result, "many of the BRICS, along with some other emerging economies, may hit a thick wall, with growth and financial markets taking a serious beating," Roubini predicted.

Some emerging markets face an end to abundant liquidity of capital. In the eight weeks through July 17, investors yanked $40.3 billion from emerging-market bond and equity funds after the Fed hinted at reducing stimulus programs, Bloomberg reported.

Nomura International suggested a threat of civil unrest exists in a dozen nations — including China, India, Russia, Brazil — in the short-term and medium-term because of financial conditions there, according to Bloomberg.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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Emerging markets have sailed into a perfect storm of barriers to economic growth, and heated expansion for most of them is gone for the next decade, according to a gloomy assessment by economist Nouriel Roubini.
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2013-07-24
Wednesday, 24 July 2013 08:07 AM
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