Thursday, January 13, 2011

Brazil, India, and China Account for 50% of World's Growth; Food Price Pressures

Emerging countries, including Brazil, China and India will account for almost half of world economic growth in 2011, according to estimates by World Bank released on Wednesday.

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It is anticipated that these nations represent 46% of growth in Gross Domestic Product (GDP) worldwide this year.

The bank's estimate represents a reduction in the pace of global growth in 2011 after expanding by 3.9% in 2010. The bank predicts growth of 3.3% in 2011 and 3.6% in 2012.

For Brazil, the report forecasts a real GDP growth of 4.5% in 2011 and 4.1% in 2012.

The average economic growth between rich countries should be at 2.4% in 2011. Among developing countries, the expected average is 6%.

"It's an encouraging sign, not only the health of these economies, but also the growing role they are playing in the global economy," said Andrew Burns, manager of the Global Macroeconomics Group Perspective of Development Economics World Bank.

Burns warns, however, that the positive scenario could change if there is a worsening fiscal situation in some European countries.

"This can not only reduce the growth potential of the European economy, but also could result in negative consequences in emerging countries," he says.

The study argues that in general the world economy is experiencing "a stage of post-crisis growth to a slower but still solid growth this year and next."

Marked improvement

The study points to a considerable improvement in the economic environment in Latin America and the Caribbean. The report said the region could leave the global crisis in a positive way, both in comparison with the previous year's performance as with the recovery of other parts of the world.

For 2010, the World Bank predicts that regional GDP has grown 5.7%, "similar to the average recorded in the growth spurt of the 2004-2009 period."

The report said the slight slowdown in regional growth in 2011 (to around 4%) will be due to weaknesses in the economic situation in other parts of the world.

The Bank also draws attention to regional countries that are vulnerable to capital flows that can destabilize the economy. Economic activity in the region began to recover in the second goal of 2009, with industrial production growing by 10% during the fourth quarter.

With the exception of Chile, the region's aggregate industrial growth remained high in 2010 and grew 9% in the first quarter. The earthquake in Chile in February triggered a fall of 30% of the country's growth in the period.


The report points to the inflationary pressures faced by the BRIC nations, especially China and India. The exception in the block would be Russia, where the strengthening of the ruble has contributed to the decline in inflation.

The situation of commodities has also won a separate chapter in the report, which states that the price recovery began in 2009 remained in 2010.

Current prices of foods - considered relatively high, according to the bank - are having different impacts in each region.

In some economies, "the devaluation of the dollar, improving local economic conditions and rising prices of goods and services means that the real price of food has not increased in proportion to the dollar for basic food products are marketed internationally.

Burden of poverty

Burns, however, followed by a warning: "double-digit increases in prices of basic foodstuffs in recent months are exerting pressure on some countries, especially in parts of the population already suffering a heavy burden of poverty and malnutrition. "

"And if the global food prices rise further, along with the price of other essentials, one can not exclude a repetition of the conditions prevailing in 2008."

The World Bank concludes his report saying that the strong recovery that has marked the latest monthly analysis should be losing steam in coming months. However, the expectation is that growth rates will follow strengthening, especially in developing countries.

The study also concludes that the intense participation of these countries is a trend that should continue in the coming years and decades, but warns of the "significant challenges ahead that continue to exist as an obstacle to a peaceful recovery."

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