Loss of momentum in BRIC markets should not deter Midland exporters
GROWTH in the BRIC economies lost momentum in the second half of 2011 and is expected to slow further this year although Midlands companies should not be put off from exporting to the markets, analysts have said.
According to recent PwC economic reports, the slowdown in growth in the BRIC economies during the second half of last year is largely due to their vulnerability to the Eurozone crisis as well as to domestic challenges such as high inflation and a reversal in investor risk appetite, which is causing investors to shift their focus to safe havens like the US.
As a result, the US economy is showing signs of picking up, and looks set to achieve robust growth this year.
Chris Hibbs, partner and export market expert at PwC in the Midlands, said: “This slowdown needs to be put into perspective and Midlands companies should not be put off from exporting to the BRIC economies. These economies are all expected to grow faster than any of the developed economies this year, and the relevant authorities have scope for fiscal and monetary stimulus measures should they need to support a slowdown in private sector growth.
“As a result, the BRIC economies are expected to continue to drive world economic growth in 2012.”
China is expected to remain the best performing of the BRICs, growing at a respectable 8.6% in 2012. PwC said it was expecting a slow start to the year by both Brazil and India, but if they brought forward stimulus measures as expected, then growth is predicted to pick up pace in the second half of 2012, registering 3.3% and 7.5% growth respectively.
Russia is the only economy in the group not to have slowed in the second half of last year, but it is also the most vulnerable to a slowdown in the Eurozone through its trade exposure, and to a possible deterioration in the global economy through lower oil prices. As a consequence, PwC said it expected Russian growth to moderate to 3.7% this year.
In stark contrast to developments in Europe, the US economy appears to be gathering momentum. Unemployment figures are falling and consumer and business sentiment has improved. Meanwhile, interest rates are set to remain low for another two years. These factors will support private sector demand growth in 2012.
Offering advice to businesses on their export strategies, Mr Hibbs added: “The domestic marketplace should not be forgotten as part of a balanced strategy. Significant growth is still possible in some sectors, such as automotive manufacturing, where there are strong opportunities for supply chain businesses.
“However, with UK growth forecasts continuing their low trajectory, Midlands businesses already exporting to the BRIC economies should be considering increasing their activity rather than decreasing it. And companies thinking of exporting to countries like China and India for the first time should be reassured that such markets still present a significant opportunity to boost sales and increase profits.
“The US marketplace has long been a preferred market for risk-conscious corporate investors and this remains the case. However, this marketplace is not immune to the impact of the Eurozone crisis and concerns about US fiscal sustainability are likely to come to the surface at some stage if a credible plan to reduce the deficit is not found.”
