While the US economy is set to experience robust growth in 2012, the momentum for growth will slowdown in Brazil, Russia, India and China (the BRIC countries) in 2012, according to the latest findings by professional services firm PricewaterhouseCoopers (PwC). Even though the BRIC economies will continue to drive global economic growth in 2012, the protracted deceleration in their growth, which begun in the second half of 2011, will raise questions about their ability to drive global economic growth in 2012 and their exposure to the eurozone crisis.  

“The first half of [2011] went well for all four BRIC economies, but they witnessed a major slowdown in the second half of the year,” said Himani Gupta, senior associate at PwC. “This was mainly because inflation remained stubbornly high for these economies for the whole year, and the central banks kept the interest rates very high. That affected the industrial sector in India with manufacturing slowing down quite a bit. In Brazil, the capital inflow appreciated the real, and China had other problems such as the property markets that are now falling, while its inflation continues to be high.”

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As a reversal in investor risk appetite is causing capital outflows from the BRICs and other emerging economies to safe havens in developed markets, the US economy appears to be the main beneficiary. Continued improvement in employment figures have been significant in prompting an increase in consumption, which is the foremost driver of economic growth in the US. Coupled with improving business sentiment and the expectation that interest rates will remain low for another two years, PwC reported that private sector demand growth will enable the US economy to gather momentum in 2012.

“In the US, the key thing is the labour market,” says Yael Selfin, head of macro consulting at PwC.  “We have seen very positive news from the labour market throughout... [and] we also expect the US economy to grow by about 2% this year. This is great if you compare it to other developed economies.”

One of the chief risks PwC highlights for economies across the globe is the uncertainty stemming from what it terms as “the unravelling of the eurozone crisis”, which poses a key threat to economic recovery. “We looked at four potential scenarios for the eurozone,” says Ms Selfin. “None [were]... great. The best scenario that we predicted is what we are seeing at the moment. There is still a lot of tension [and] vulnerabilities but it looks as if it is going in a better direction.”

Yet PwC maintained that, despite this, the BRICs will continue to be a significant contributor to global economic growth. “The US will almost always grow at a lower pace than the BRICs,” said Ms Selfin.