Goldman Sachs Group Inc. (GS) Chief Executive Officer Lloyd Blankfein said the firm will rely on the biggest emerging markets for most of its growth even amid increasing concern economic expansion in Brazil, Russia, India and China may be slowing.
“Eighty percent of the growth of our business is going to come from high-growth areas identified as BRICs,” Blankfein, 57, said at the St. Petersburg International Economic Forum in Russia’s second-largest city today. “Our footprint will correlate with the ring of growth in various places around the world, providing they have good open markets.”
Blankfein, who began cutting costs in 2011 as revenue fell for the second straight year, is betting on international expansion and a market rebound to restore profit growth. The world’s emerging economies will drive growth this year and next as the euro area’s debt crisis weighs down richer nations, the International Monetary Fund said in a report yesterday.
Still, Jim O’Neill, who as Goldman Sachs’s chief economist coined the BRICs term in 2001, this month warned that growth in the four countries may be slowing. O’Neill, now chairman of Goldman Sachs Asset Management, said his thesis that Brazil, Russia, India and China would buoy the global economy faces “a more challenging test” as investors dump the countries’ stocks.
China pared its growth target to the lowest since 2004, Standard & Poor’s may cut India’s investment-grade credit rating, Brazil is on pace to expand less than 3 percent for a second straight year and falling oil prices may hurt Russia.
“The crisis we are going through, while severe, is a temporary phenomenon,” Blankfein said, referring to Europe’s sovereign debt crisis. “The commitment to the euro is total.”
Blankfein said policy makers should do everything possible to keep Greece in the euro. Greek political parties supporting a European bailout and austerity plan won elections on June 17, trumping calls for the country to exit the 17-nation currency.
“People should work hard on keeping Greece in the euro,” he said. “The consequences of this not working are generational,” Blankfein added, referring to the euro zone.
The MSCI All-Country World Index fell 0.2 percent by 10:25 a.m. in London as the Stoxx Europe 600 Index lost 0.7 percent. Oil dropped as much as 1.9 percent to the lowest since October and copper slid about 1.5 percent.
Blankfein has been pushing to win mandates from the Kremlin’s $30 billion privatization program and was appointed to an advisory committee for turning Moscow into a financial center. The firm scaled back its operations in Moscow soon after opening an office in 1994 amid a worldwide retrenchment and returned in 1998, weeks before Russia defaulted on domestic debt, prompting it to withdraw almost entirely before ramping up again in 2006.
In China, Goldman Sachs became the first Wall Street bank to form a local securities venture with management control. The nation last month agreed to let foreign banks raise their stakes in domestic securities firms to as much as 49 percent from 33 percent.