OECD sees BRIC economies powering ahead in 2010-11

PARIS, May 26 (BestGrowthStock) – China, India, Brazil and Russia are powering
ahead, the Organisation for Economic Cooperation and Development said on
Wednesday, revising upwards its growth outlook for all four largest emerging
economies.

The Paris-based OECD said overheating was becoming a problem in China and
called for some increase in interest rates and “ideally” a greater exchange rate
flexibility.

With the expected rebound of agricultural output in India, growth should be
strong in the near term while inflationary pressures would also remain high amid
strong outlook for demand.

Russia should use windfall oil revenues to eliminate fiscal deficits more
quickly but if oil prices and capital inflows continue to increase rapidly the
country would face another boom-and-bust cycle.

In Brazil, infrastructure investment will help lift growth again despite
tighter monetary policies and the beginning of spending cuts.

Following is a summary of what the OECD said about non-members Brazil,
India, China and Russia in its latest Economic Outlook released on Wednesday.

CHINA

2008 2009 2010 2011
GDP 9.6 8.7 11.1 9.7
INFLATION (CPI) 5.9 -0.7 2.5 2.5
CURRENT ACCOUNT (pct of GDP) 9.4 6.1 2.8 3.4
FISCAL BALANCE (pct of GDP) 1.0 -0.9 1.0 1.6

In its previous forecast in November, the OECD had projected GDP growth of
10.2 percent this year and 9.3 percent in 2011

It said growth would slow slightly next year as the impact of the stimulus
package diminishes.

“With the terms of trade deteriorating and domestic demand remaining strong,
the current account surplus may continue to fall sharply in 2010… With food
prices easing, inflationary pressures are likely to remain subdued,” it said.

“Overheating has recently started to become more of a risk. Measures have
been taken to cool the property market but it is important to continue to move
towards a more neutral monetary policy stance.

“This would involve some increase in interest rates and, ideally, greater
flexibility in the exchange rate regime in order to allow a gradual appreciation
of the renminbi against a basket of currencies,” the report said.

INDIA

2008 2009 2010 2011
GDP (calendar year basis) 6.2 5.6 8.2 8.5
INFLATION (WPI) 8.4 4.0 8.1 6.3
CURRENT ACCOUNT (pct of GDP) -2.4 -3.0 -2.3 -2.8
FISCAL BALANCE (pct of GDP) -7.3 -11.4 -10.8 -9.5

The OECD had forecast growth of 7.3 percent this year and 7.6 percent in
2011 in its previous report.

“With agricultural output expected to rebound sharply, economic growth
should be strong in the near term before moderating to around trend rates,” it
said.

“The expected rebound in agricultural activity should help limit further
increases in food prices, which have been a major contributor to recent high
inflation.”

But it said that underlying inflationary pressures are likely to persist
given the strong outlook for demand.

BRAZIL

2008 2009 2010 2011
GDP 5.1 -0.2 6.5 5.0
INFLATION (WPI) 5.9 4.3 6.2 5.0
CURRENT ACCOUNT (pct of GDP) -1.7 -1.5 -2.8 -2.6
FISCAL BALANCE (pct of GDP) -1.9 -3.3 -0.8 -0.9

The OECD had been forecasting GDP growth of 4.8 percent in 2010 and 4.5
percent for 2011 for Brazil in its previous report.

“Domestic demand could slow somewhat in coming quarters given a tighter
monetary stance,” it said. “Subsequently, infrastructure investment will help
lift growth anew.”

“The remaining monetary stimulus injected during the global
crisis should now be rapidly withdrawn”

“Withdrawal of fiscal stimulus as soon as possible would be
advisable, the recent announcement of spending cuts to the 2010 budget is a
welcome move in this direction”.

RUSSIA

2008 2009 2010 2011
GDP 5.6 -7.9 5.5 5.1
INFLATION (WPI) 14.1 11.7 6.5 7.1
CURRENT ACCOUNT (pct of GDP) 6.0 3.8 7.0 5.3
FISCAL BALANCE (pct of GDP) 4.8 -6.2 -5.1 -2.2

The OECD had forecast Russia’s GDP growth at 4.9 percent in 2010 and 4.2 in
2011 and said the growth had been aided by the rise in oil prices since early
2009.

“The unexpectedly strong recovery should be used to eliminate the fiscal
deficit more quickly than previously planned.

“Windfall revenues should be saved and fiscal measures to support demand
phased out more quickly. As the effects of the crisis fade, longer-term policy
priorities should be
brought to the fore.”

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(Reporting by Dmitry Zhdannikov and Lidia Kelly; editing by Patrick Graham)

OECD sees BRIC economies powering ahead in 2010-11