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“BRICS will continue to lead the global economy,” said Brazilian Finance Minister Guido Mantega on Thursday.
The BRICS group of influential emerging countries should not be counted out as dynamic forces in the global economy, panelists argued during a special session at the World Economic Forum’s (WEF’s) 2014 annual conference.
A group of more than 2500 politicians, business leaders and academics are gathering to discuss the state of global economy for five days that opened on Wednesday at the World Economic Forum’s annual gathering in the Swiss ski resort of Davos.
The BRICS have said their economies are now much better prepared for the US Federal Reserve tapering its stimulus program. The warnings by the Fed in May last year had adversely hit the BRICS.
Indian Finance Minister Palaniappan Chidambaram said at the Davos meet that New Delhi is in a more confident position compared to May owing to stronger fiscal consolidation.
“We have done a lot of preparatory work. There will be some consequences on emerging economies but I think we are better prepared now to face the taper,” asserted the Indian Finance Minister.
The Federal Reserve has announced trimming of its $85 billion monthly stimulus after US economic indicators improved.
“In the short term, tapering of quantitative easing will create huge volatility in capital flow. We will certainly be hit by this volatility but, hopefully, not shocked,” argued Liu Mingkang, distinguished fellow at the Fung Global Institute in Hong Kong.
Concerns that China’s economy will run out of steam are unfounded, Liu said.
According to Mingkang, the new government’s focus is on three priorities: reducing overcapacity, notably in heavy industry; lowering borrowing by provincial governments and increasing transparency in the markets for their debt; and reducing China’s dependence on export markets by stimulating internal demand.
Meanwhile, Finance Minister Guido Mantega said the Rousseff administration is counting on infrastructure auctions to boost economic growth. Brazil plans to attract investments of $250 billion through road, power plants, railroad auctions in the next five years.
Admitting that Brazil would not return to its pre-crisis growth levels soon, Mantega also said Brazil has successfully lifted 3.5 million people out of poverty and more than a million out of extreme poverty in 2012.
Russian Deputy Prime Minister Arkady Dvorkovich blamed the slowdown in Europe and worries over the Chinese economy as reason for flattening growth rates in Russia.
“If Europe is almost in recession and China is slowing down a little bit, it’s natural we will slow down a little bit,” he said.
He also pointed out that massive red tape was holding up projects in Russia.
“The business environment is not good enough. There is too much red tape and bureaucracy, and insufficient support for SMEs and other enterprises that will provide the high-tech jobs of the future.”
South African Pravin Gordhan also said that emerging economies like BRICS have had to bear the burden of slowing growth in the developed world.
“It came from the financial centres of the world, and particularly in the United States,” he said.
On the growing divide between the rich and the poor, a challenge common to the five BRICS nations, Gordhan said they were battling it consistently.
“After overcoming three hundred years of apartheid and colonialism, a lot has been done in the past 20 years… inequality doesn’t mean we haven’t raised millions of people above the poverty line. China has lifted about 500 million people above the poverty line. India has raised 150 million above the poverty line,” he said.
Incidentally, a new Oxfam report on the widening disparities between the rich and poor, released ahead of the 2014 Davos meet has criticized the “global elite” which includes many from the developed world attending the WEF conference.
The report suggests extreme inequality to have been borne out of “financial deregulation, tax havens and secrecy, anti-competitive business practice, lower tax rates on high incomes and investments and cuts or underinvestment in public services for the majority”.
TBP and Agencies