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23-Feb-2010

Confidence in real estate as an investment vehicle is high this year, particularly from institutional investors.

Still Building BRICs

23 June 2009

Tipped to become the four driving engines behind the global economy in 2050, the four BRIC (Brazil, Russia, India and China) nations recently celebrated the inaugural BRIC summit in Yekaterinburg, Russia. While the summit was high-profile, BRIC meetings have a long way to go before they reach G8 echelons. However, the summit did, according to The Economist, "reflect growing self-confidence" among the BRIC quartet.

Under discussion were topics such as reform of the International Monetary Fund (IMF), the BRIC demand for more say in world policy (a favourite petition from Brazil) and a plan to transfer some of the huge BRIC foreign-currency reserves from dollars into IMF bonds. Brazil recently became a creditor with the IMF - a radical change from just four years ago when the South American giant was an IMF debtor.

According to The Economist, the BRIC countries, the world's largest emerging markets, are recovering from the global slowdown fast and considerably more quickly than many experts anticipated. Year-on-year GDP growth increased by 6% in March in both China and India, and although Brazil's GDP slowed in the first quarter of this year, it is still growing faster than the Latin American average. Furthermore, the consensus among economists is that Brazil's GDP growth will be back to the pre-global recession levels by early 2010.

With the vast majority of advanced economies deep in recession and unlikely to emerge before early 2010, this year could be the year of the BRIC economies. At the beginning of this decade, developing countries accounted for just over a third (37%) of the world's output. By 2008, this relatively small percentage had risen to 45%, an extraordinary increase in less than ten years.

Even more extraordinary is the BRIC's share - around 30% of the world's output between 2000 and 2008 came from the BRIC four. What is more, as economists analyse the current global situation, it is becoming clearer that when it comes to economic recovery, the BRICs are going it alone.

There are several fundamental reasons for this. BRIC nations tend to rely far less on exports than many other countries. In Brazil and India, the export market accounts for just 15% of the countries' GDP. All four countries have conservative financial systems, which have shielded them from the devastating effects of toxic mortgages.

In addition, the BRICs are all huge countries with large populations - the perfect market when foreign markets slow down. Big domestic markets provide ideal selling grounds for national companies meaning they remain competitive.

Recent economic developments in the BRIC nations, particularly Brazil and China, are a welcome breath of fresh air, particularly when many western economies are still struggling to see the light at the end of the tunnel. It is also excellent news for investment in these countries, including property investment. No wonder the BRIC quartet is feeling confident.

The full article from The Economist can be read here.

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