Published on 26.09.2012

Are BRICs Hitting a Growth Wall?

A global pattern of easing economic growth in the first half of 2012 has impacted the “BRIC” nations – Brazil, Russia, India and China. However, I don’t think the BRIC economies have hit a brick wall. While some market participants have been waiting impatiently for governments to undertake further stimulus measures, others have wondered whether something more fundamental—and less within governmental control—might be at work.

One theory in play is the concept of a “middle income trap.” The premise is that emerging countries can find it hard to sustain high per-capita growth rates beyond a certain point since benefits from technology, low labor costs and easy productivity gains run out before the accumulation of technological capital permits a transition to a higher-wage, higher-productivity economic model. Our team is not convinced that this argument holds muster for the BRIC economies—or emerging markets as a whole.

Full article at mobius.blog.franklintempleton.com