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BofA’s Beker Says Inflation Is ‘Big Risk’ for Emerging Markets

David Beker, chief Latin America strategist at Bank of America Corp., comments on inflation and growth in emerging markets as well as controls implemented by China to stem price increases.

Beker spoke at a conference hosted by information technologies company iGlobal Forum in New York.

On inflation and capital controls:

“With growth comes inflation and that’s a big risk right now. We have inflation pressures coming from emerging markets. Our perception is that there’s more inflation tolerance across the board.”

Developing nations are “getting tired of accumulating reserves. I’d expect a slowdown in reserves accumulation. On one side, countries don’t want currency appreciation but on the other side they want to keep investors to finance their infrastructure so there are some inconsistencies in policies.”

On economic growth:

“Share of gross domestic product is going to increase and that’s why we should focus on the growth differential we have between developed and emerging markets. That’s something that’s here to stay and I don’t expect it to change.”

“Emerging markets entered into the crisis in much better shape on the current account side. We see current account deterioration in the next two or three years. That’s the only way Brazil will sustain the amount of growth they’ve had.”

On China’s economic expansion:

“Potential GDP has been increasing. The question is: Where is China growing and what rate of growth is sustainable? The market is not prepared for China to slow to 7 percent, which is probably what we’ll see in the next five years.”

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