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Growth among the emerging economic powers of Brazil, Russia, India and China is slowing fast, dashing hopes that they will become much-needed drivers of the world’s fragile recovery.
Brazil on Wednesday slashed its benchmark lending rate by 0.75 percentage points to 9 per cent – marking the sixth cut in the past eight months – in an effort to strengthen an economy that is seeing its growth decelerate at an alarming pace. The country grew 2.7 per cent last year, compared with 7.5 per cent in 2010.
The Reserve Bank of India cut its rate a day earlier, as policy makers struggle to prop up an economy that is no longer growing fast enough keep up with its exploding population.
And in China, central bankers are loosening lending requirements in an attempt to keep the economy flush with credit to avert a hard landing.
The sudden slowdown in those countries comes as the European debt crisis and the United States’ halting recovery continues to weigh on global financial markets. The threat the BRIC deceleration poses to the global economy underscores just how reliant it has become on the vibrancy of those countries since the market meltdown in 2008 – driving demand for commodities such as oil and copper.
Brazil’s growth of 2.7 per cent last year was the slowest pace in Latin America. India is growing at roughly 6 per cent a year – well shy of the 9 per cent target set by the government. And China’s GDP growth slowed to an annual rate of 8.1 per cent in the first quarter. That was the slackest pace since 2009, when the world was still in the grips of the financial crisis.
Now, while Mark Carney and the Bank of Canada ponder eventual rate hikes to deal with an improving economy here, policy makers in the BRIC countries are making a different calculation: How to keep their economies from stalling.
“It’s a bad sign for the global economy,” said Badye Essid, an economist at the Centre for International Governance Innovation in Waterloo, Ont. “These countries have been playing an important role while Europe is in crisis and the U.S. recovery halting.”
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