Emerging economies such as China and India are growing faster than the rest of the world, but still lack the firepower to offset weaker growth in the US and the EU, Fitch Ratings said yesterday.
The main emerging markets commonly known as BRIC — Brazil, Russia, India, and China — remain very dependent on exports to the industrialized economies with a combined trade surplus of US$500 billion, said James McCormack, head of sovereign ratings in Asia for Fitch.
“The trade flows do not support the emerging markets contributing to offset a recession in the US and weakness elsewhere,” McCormack said at a Fitch conference in Singapore.
Many economists say the US, the world’s largest economy, is effectively in recession.
Some analysts have seen the rapid economic expansion in India and China as reasons for optimism even if the US and other advanced economies weaken.
But Fitch Ratings argues otherwise.
“They [BRIC economies] are running very large combined trade surpluses in the order of US$500 billion ... so if there’s weakness in the advanced economies, you are going to see weakness in the emerging markets,” McCormack said.
“The trade flows are going the other way, so the conclusion that we reached is that strong growth in the emerging markets is not really going to help offset weakness in the advanced economies,” he said.
India and China still account for a relatively small portion of global imports, which means their economies’ influence on global growth is limited, the US ratings agency said.
India only accounts for 2 percent of the world’s GDP, McCormack said.
“So in some sense, it doesn’t matter how fast India grows and it’s not a very open economy,” he said.
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