Paris: Brazil, Russia, India and China (Bric) are powering ahead, the Organization for Economic Cooperation and Development (OECD) said on Wednesday, revising upwards its growth outlook for all four largest emerging economies.
The Paris-based OECD said overheating was becoming a problem in China and called for some increase in interest rates and “ideally” a greater exchange rate flexibility.
With the expected rebound of agricultural output in India, growth should be strong in the near term while inflationary pressures would also remain high amid strong outlook for demand.
Russia should use windfall oil revenues to eliminate fiscal deficits more quickly but if oil prices and capital inflows continue to increase rapidly the country would face another boom-and-bust cycle.
In Brazil, infrastructure investment will help lift growth again despite tighter monetary policies and the beginning of spending cuts.
Following is a summary of what the OECD said about non-members Brazil, India, China and Russia in its latest Economic Outlook released on Wednesday.
2008 — GDP 9.6
Inflation (CPI) 5.9
Current Account (percent of GDP) 9.4
Fiscal Balance (percent of GDP) 1.0
2009 — GDP 8.7
Inflation (CPI) -0.7
Current Account 6.1
Fiscal Balance -0.9,
2010 — GDP 11.1
Inflation (CPI) 2.5
Current Account 2.8
Fiscal Balance 1.0
2011 — GDP 9.7
Inflation (CPI) 2.5
Current Account 3.4
Fiscal Balance 1.6
In its previous forecast in November, the OECD had projected GDP growth of 10.2% this year and 9.3% in 2011
It said growth would slow slightly next year as the impact of the stimulus package diminishes.
“With the terms of trade deteriorating and domestic demand remaining strong, the current account surplus may continue to fall sharply in 2010... With food prices easing, inflationary pressures are likely to remain subdued,” it said.
“Overheating has recently started to become more of a risk. Measures have been taken to cool the property market but it is important to continue to move towards a more neutral monetary policy stance.
“This would involve some increase in interest rates and, ideally, greater flexibility in the exchange rate regime in order to allow a gradual appreciation of the renminbi against a basket of currencies,” the report said.
2008 — GDP (calendar year basis) 6.2
Inflation (WPI) 8.4
Current Account (percent of GDP) -2.4
Fiscal Balance (percent of GDP) -7.3
2009 — GDP 5.6
Current Account -3.0
Fiscal Balance -11.4
2010 — GDP 8.2
Current Account -2.3
Fiscal Balance -10.8
2011 — GDP 8.5
Current Account -2.8
Fiscal Balance -9.5
The OECD had forecast growth of 7.3% this year and 7.6% in 2011 in its previous report.
“With agricultural output expected to rebound sharply, economic growth should be strong in the near term before moderating to around trend rates,” it said.
“The expected rebound in agricultural activity should help limit further increases in food prices, which have been a major contributor to recent high inflation.”
But it said that underlying inflationary pressures are likely to persist given the strong outlook for demand.
2008 — GDP 5.1
Inflation (WPI) 5.9
Current Account (percent of GDP) -1.7
Fiscal Balance (percent of GDP) -1.9
2009 — GDP -0.2
Current Account -1.5
Fiscal Balance -3.3
2010 — GDP 6.5
Current Account -2.8
Fiscal Balance -0.8
2011 — GDP 5.0
Current Account -2.6
Fiscal Balance -0.9
The OECD had been forecasting GDP growth of 4.8% in 2010 and 4.5% for 2011 for Brazil in its previous report.
“Domestic demand could slow somewhat in coming quarters given a tighter monetary stance,” it said. “Subsequently, infrastructure investment will help lift growth anew.”
“The remaining monetary stimulus injected during the global crisis should now be rapidly withdrawn.”
“Withdrawal of fiscal stimulus as soon as possible would be advisable, the recent announcement of spending cuts to the 2010 budget is a welcome move in this direction.”
2008 — GDP 5.6
Inflation (WPI) 14.1
Current Account (percent of GDP) 6.0
Fiscal Balance (percent of GDP) 4.8
2009 — GDP -7.9
Current Account 3.8
Fiscal Balance -6.2
2010 — GDP 5.5
Current Account 7.0
Fiscal Balance -5.1
2011— GDP 5.1
Current Account 5.3
Fiscal Balance -2.2
The OECD had forecast Russia’s GDP growth at 4.9% in 2010 and 4.2% in 2011 and said the growth had been aided by the rise in oil prices since early 2009.
“The unexpectedly strong recovery should be used to eliminate the fiscal deficit more quickly than previously planned.
“Windfall revenues should be saved and fiscal measures to support demand phased out more quickly. As the effects of the crisis fade, longer-term policy priorities should be brought to the fore.”