Goldman Sachs Says BRICs ‘Halcyon Days’ Consigned to History

Updated on
  • Slowing China will have far-reaching impact on emerging growth
  • Investment case for developing assets improving with economies

A recovery in BRIC countries won’t recapture growth rates that brought them to prominence a decade ago, according to the chief emerging-market macro strategist at Goldman Sachs Group Inc., the bank which coined the term.

Kamakshya Trivedi said slowing demand in China, the world’s largest consumer of commodities, will continue to encroach on growth throughout the developing world. The country is responsible for about 40 percent of emerging-market output, according to Goldman Sachs.

"I’m not expecting a return to those halcyon days," said London-based Trivedi, who was part of the team that made Goldman’s projections for Brazil, Russia, India and China, the so-called BRICs. "In a world where China is slowing, it is going to be hard for the aggregate to go back to the kind of growth rates of 2005 to 2007."

The slowdown and a collapse in commodity prices that has knocked one-third off their value in the past two years marks the end of an era of rapid expansion for BRICs. The nations were tipped as a global economic engine at the start of the century and by 2010, China’s economy was expanding at an annual rate of 10.6 percent. This year, growth in the world’s second-largest economy is forecast at 6.5 percent.

Still, while trend growth is lower than a decade ago, emerging markets are starting to accelerate again, Trivedi said. He cited "significant easing of financial conditions" in developing nations that will help alleviate economic slumps in Brazil and Russia.

The MSCI BRIC Index has climbed 12.7 percent this year, compared with a 12.3 percent gain in the broader MSCI Emerging Markets Index and a 3.4 percent advance for peers in developed countries.

"To really make a much more bang-the-table, bullish argument for emerging markets, you need that growth side of things to come back,” he said. “You are seeing the first signs of that."

(Adds chart, updates with index performance in 6th paragraph.)
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