Who Will Replace the BRIC?

Written by | Tuesday, October 22nd, 2013

Brazil, Russia, India and China were coined ‘BRIC’ only a few years ago, but the ‘group’ might be already falling apart. According to international observers, investors have grown picky and started assessing particular economies rather than groups or regions. More emphasis is currently being put on the particular conditions and circumstances in individual BRIC countries. Behind this choosiness is a focus on current account deficits and structural robustness gauged by the amount of stimulus from the Fed.
The Federal Reserve plays an important role in breaking-up this ‘exclusive coalition’ of emerging economies. The FED has recently announced that it would continue to buy assets. Analysts estimate that the former BRIC countries, including India and Brazil, will experience considerable capital outflows over the next six to twelve months. According to the Institute of International Finance based in Washington, private capital flows into emerging markets will fall 153 billion USD to 1.1 trillion USD in 2013.
The issue of differentiation within the group of emerging and developing countries is being reinforced by new analyses of the International Monetary Fund (IMF) that projects slower pace of economic growth in these economies. The estimated slowdown might be to a large extent the result of fighting against the financial crisis, which was proved very costly for most emerging countries.
While developing countries are losing their attractiveness for international investors, advanced countries are gaining on popularity. South Korea or the Czech Republic, for example, have been positively evaluated with regard to their reliance on foreign finance and the Fed cash stimulus. Moreover, the currencies of both economies have been on rise. Korea’s won rose by 3.8 percent and the Czech koruna by 3.5 percent. On the contrary, BRIC’s currencies have been declining – Indian rupiah by 11 percent, Brazilian real by 8 percent and Mexican peso by 5 percent.

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