brics monetary_policy_presentation

MACRO-ECONOMICS TERM PROJECT :
BRICS MONETARY POLICY
Presenters : GROUP2
Naveen Malik – 2015SMN6557
Vaibhav Sawhney – 2015SMN6576
Swati Tyagi – 2015SMN6572
Mohit Chaturvedi – 2015SMN6556

 BRICS – AN INTRODUCTION
 BRICS NATION ECONOMY & MONETARY POLICY
BRAZIL
RUSSIA
INDIA
CHINA
SOUTH AFRICA
 BRICS : SWOT ANALYSIS
 CONCLUSION
 REFERENCES

BRICS – An Introduction
History:
 Originally BRIC before inclusion of South Africa in 2010
 BRIC was coined by Jim O Neill, then chairman of Goldman Sachs in 2001.
 Foreign ministers of BRIC met in Sept, 2006 beginning a series of high level meetings,
followed by a full scale diplomatic meeting in June, 2009
 In 2010, South Africa began efforts to join BRIC and the group was then renamed as
BRICS.
“Every nation on the Earth that embraces market economics and the free enterprise
system is pulling millions of its people out of poverty. The free enterprise system
creates prosperity, not denies it.” ~ Marco Rubio, US Senator Florida
BRICS is the acronym for an association of five major emerging national economies:

BRICS vs World(2015)
“Potential of BRIC is such that they could become among the four most dominant economies
by the year 2050” ~ Goldman Sachs in 2001

BRICS Moves Up in USD-Denominated GDP Ranking
BRICS – Growing Size Of economy
1
BRICS Nation Economy (GDP) Ranking improved
4 BRICS nation
to be amongst
top five

The Growing Dominance of BRICS
1
2
BRICS Nation Economy (GDP -PPP) growing dominance over world
Around 40% of
GDP (PPP)
contribution will
be from BRICS

The Growing Dominance of BRICS
1
2
BRICs have become a key player in Global Trade Flows
3 Around 4500bn
USD of Global
trade by BRICS
which is about
15% of total .

BRAZIL: ECONOMY & MONETARY POLICY
ECONOMY MONETARY POLICY CHALLENGES GROWTH PLAN
 Largest Latin American economy.
 From 2000 up to 2012, Brazil was one of the fastest-growing major economies in the
world, with an average annual GDP growth rate of over 5%.
 Brazil's economic growth has decelerated in 2013
 Recorded the sharpest fall in over six years in the second quarter of 2015
 Economic activity contracted in August, 2015 and the manufacturing PMI fell to a six-
year-low in October, 2015
 Investment is declining rapidly in 2015.
2010 2011 2012 2013 2014
Population (million) 195 197 199 201 206
GDP per capita (USD) 11,306 13,240 12,104 11,878 11,567
GDP (USD billion) 2,210 2,614 2,412 2,388 2,346
Economic Growth (GDP,
annual variation in %)
7.6 3.9 1.8 2.7 0.1
Inflation Rate (CPI, annual
variation in %)
5.0 6.6 5.4 6.2 6.3
Policy Interest Rate (%) 10.75 11.00 7.25 10.00 11.75
Exchange Rate (Real vs
USD)
1.66 1.86 2.05 2.36 2.66
Exports (USD billion) 202 256 243 242 225
Imports (USD billion) 182 226 223 240 229
External Debt (% of GDP) 11.6 11.4 13.0 12.9 14.8

BRAZIL : ECONOMY & MONETARY POLICY
Monetary Framework of Brazil
Monetary Policy Committee
Central Bank Central Bank of Brazil
Legal Entity/Committee Monetary Policy Committee, COPOM
Major Mandates
Achievement of inflation targets set by the National Monetary Council
(Government)
Monetary Policy Target indicator, timeframe and style
Point target of 4.5% with tolerance range of 2 percentage points for
headline CPI (the IPCA index). Targets set every year for the following
two years.
System of evaluation Headline CPI
Policy Implementation
Key policy rate
Selic rate – interest rate on overnight interbank loans collateralized on
federal debt instruments.
Standing facility(-ies) Lending and deposit facilities, 2 days
Reserve Ratios
42% on demand deposits.
15% on time deposits
15 to 20% on savings accounts
Rebates on reserve requirements for small and
medium-sized banks
Market Operations
Functions
Adjust market liquidity to maintain the effective overnight interest rate
close to the target.
Types of operations Repurchase agreements, using National Treasury securities as collateral
Maturities of operations
Shorter-term operations: 1 (more frequent) to
30 working days.
Longer-term operations: 5-month and 7-month
repos.

CHALLENGES
INFLATION:
• Consumer prices in October’15
increased 0.82% over the previous
month.
• The print was above the 0.54%
increase recorded in September and
overshot market expectations of a
0.80% rise.
• The monthly result was mainly driven
by higher prices for transportation,
caused by a large increase in fuel
prices, as well as for food and
beverages
TECHNICAL RECESSION :
• GDP fell 1.9% in second quarter of
2015 over the previous quarter in
seasonally-adjusted terms, which was
a deterioration over the 0.7%
decrease seen in the previous quarter.
• Private consumption dropped 2.1%
over the previous quarter, which was
down from the 1.5% decrease seen in
the first quarter.
• Growth in exports of goods and
services dropped from 16.2% in Q1 to
3.4% in Q2.
EXCHANGE RATE:
• Brazilian real’s (BRL) plunged to an
all-time low in September’15
• The real fell to 4.18 BRL per USD,
which represented a sharp 15.4%
depreciation over the same day of
the previous month in Sep’15
• Poor economic data and growing
uncertainty
DECLINING EXPORTS:
• China has lost its growth impetus,
taking with it a lot of the demand for
the commodity-based Brazilian
exports.
• Europe is growing weak as it digests
the endless Greek crisis
• Commodity prices are dropping
globally as China's economy
evolves

External Debt:
• Current account deficit of Brazil
showed signs of improvement
in September’15.
• CAD improved from USD 8.4
billion deficit to USD 3.1 billion.
• The trade balance registered a
surplus of USD 2.9 billion in
September, which was above
August’s 2.7 billion surplus
• Brazil’s economy is in a griming condition with investor
confidence low and declining exports.
• Rising inflation and political disturbances are creating
pressure.
• Central Bank has less space to cut policy interest rate
(SELIC rate).
• Exporters in Brazil, however, should get benefitted because
a weaker local currency makes their products cheaper and
thus more competitive abroad.
Positives Conclusion
Opinion
• The monetary framework should open itself to a more
prudent base than inflation targeting since predicting
inflation is becoming a challenge when the economic
is export oriented and is dependent on the world
economic conditions for its exports..

BRAZIL
RUSSIA
INDIA
CHINA
SOUTH AFRICA
 CONCLUSION

RUSSIA : ECONOMY & MONETARY POLICY
2010 2011 2012 2013 2014
Population (million) 143 143 143 144 144
GDP per capita (USD) 10,673 13,192 14,289 15,340 14,099
GDP (USD bn) 1,525 1,886 2,048 2,204 2,026
Economic Growth (GDP, annual variation in %) 4.5 4.3 3.4 1.3 0.6
Consumption (annual variation in %) 5.5 6.8 7.8 5.0 1.3
Investment (annual variation in %) 5.9 10.2 5.6 0.9 -2.0
Industrial Production (annual variation in %) 7.3 5.1 3.4 0.4 1.6
Retail Sales (annual variation in %) 6.2 6.9 6.5 3.9 2.7
Unemployment Rate 7.5 6.6 5.5 5.5 5.2
Fiscal Balance (% of GDP) -3.9 0.8 0.0 -0.7 -0.6
Public Debt (% of GDP) 9.0 9.5 10.5 11.4 14.4
Money (annual variation in %) 31.1 22.3 11.9 14.6 2.3
Inflation Rate (CPI, annual variation in %, eop) 8.8 6.1 6.5 6.5 11.4
Inflation Rate (CPI, annual variation in %) 6.9 8.4 5.1 6.8 7.8
Inflation (PPI, annual variation in %) 16.7 12.0 5.1 3.7 5.9
Policy Interest Rate (%) 5.00 5.25 5.50 5.50 17.00
Stock Market (annual variation in %) 22.5 -21.9 10.5 -5.5 -45.2
Exchange Rate (vs USD) 30.48 32.02 30.48 32.73 56.26
Exchange Rate (vs USD, aop) 30.36 29.67 30.36 30.03 35.24
Current Account (% of GDP) 4.6 5.2 3.5 1.5 2.9
Current Account Balance (USD bn) 70.3 98.8 71.3 34.1 59.5
Trade Balance (USD billion) 147 197 192 182 190
Exports (USD billion) 393 515 527 523 498
Imports (USD billion) 246 319 336 341 308
Exports (annual variation in %) 32.1 31.3 2.3 -0.8 -4.9
Imports (annual variation in %) 33.6 29.7 5.4 1.7 -9.8
International Reserves (USD) 479 499 538 510 385
External Debt (% of GDP) 32.1 28.9 31.1 33.1 29.5
•Russia contains over 30 percent of the world's natural resources.
•In 2014, Russian economy was the sixth largest in the world by PPP and tenth largest at market
exchange rates.

Monetary policy in Russia in the period 2000-2015 can be divided into several stages.
Monetary policy in this period is characterized by a rapid
increase of money mass and of foreign currency reserves and
high rates of economic growth.
Main efforts of the Bank of Russia and Russian government
had been made to overcome a severe economic crisis.
This phase is characterized as a partial return to the previous
policy but in more moderate scale.
Bank of Russia began to implement the inflation targeting.
External instability forced the Bank of Russia to make some
changes in its current policy.
Until 2008
Q4,2008
-2009
2010-2011
2012
Since Q4
2014

Highlights of first stage until 2008-
•Nominal interest rates of bank loans to businesses decreased four times to 11 % in 2008.
•The bank loans to companies increased sevenfold and reached 29 % of the GDP in 2008.
•Monetization of Russian economy increased to 34 % at the end of 2007.
•Real cash balance increased by 4 times (since 2000 to 2009)
Monetizationof Russianeconomy:moneymassandbankloanstobusinessasa%
toGDP,2000-2014(seasonallyadjusted)
Monetizationof Russianeconomy:real cashbalance andbankloanstobusiness
indexes,Q22000=1(seasonallyadjusted)

Highlights of first stage until 2008-
•Rapid increase of money mass (by 23.5 times or 42 % annually in 2000-2008) led to abnormally high
inflation.
•Average annual increase of the GDP deflator was 18.7 % while that of CPI was 13.9 %.
•Inflation was high in spite of real ruble appreciation and decrease of real prices of ‘tradable’ goods.
•Due to high inflation the real interest rates remained negative.
•Dollar lost 75 % of its real value in Russian market since 1999 to 2008.
Deposit, loans and interbank real interestrates 2000-2014(seasonally adjusted)
Indexes of exportand importreal ruble prices and of real dollarrate, 1999-2014
(seasonally adjusted; Q11999=1)

Highlights of second stage 2008-09 crisis and after-
•GDP decline by 8 % due to 48 % price drop on Russian export goods and ruble devaluation by 45 %.
•Ruble devaluation lead to 30 % jump of (ruble) import prices and external debt increase from 23 %
to 37 % of the GDP.
•Heavy blow to Russian economy - Capital flight equal to $133 billion (5 % of the GDP) in 2008-2009.
International reserves and external debt of Russian Federation, $billion, 2003-
2015(seasonally adjusted)
Trade balance, current account and balance of payments, $million, 1999-2014
(seasonally adjusted)

Highlights after year 2012-
•Bank of Russia began to carry out a restrictive monetary policy to reduce inflation.
•Increased gradually the reserve requirement from 1 % in May 2009 to 4.25 % for all items of
banks’ liabilities in March 2013.
•Reversed its policy on foreign exchange market and started massive sales of foreign currency.
•Introduced a new rate – a “key rate” – in Sept’13 and began to carry out the majority of
operations in accordance with it.
•Results of above steps-
•Annual growth rate of money mass decreased from 22 % in 2009-2011 to 9 % in 2012-2014.
•Real cash balance decreased from 9 % in 2009-11 to 6 % in 2012-14.
•Annual rate of the GDP deflator decreased from 15.0 % in 2010-2011 to 6.4 % in 2012-2014.
•CPI decreased from 7.2 % in 2010-11 to 6.7 % 2012-14.
•Households’ consumption increased by 15.3 % in real terms in 2012-2014.
•Ruble real exchange rate remained stable until the H1 2014.
Major macroeconomic indicators: indexes of real growth, 1999-2014 (seasonally
adjusted; Q1 1999 = 1)
Indexes of export and import real ruble prices and of real dollar rate, 1999-2014
(seasonally adjusted; Q1 1999 = 1)

Highlights after H2 2014-
•Due to political events and sudden drop of export prices (by 43 % in dollar value since Q2 2014 to
Q4 2014)-
•Balance of payment dropped to negative $87 billion in 2014.
•Ruble devaluated by 87 % since 2013 average to Q1 2015.
•International reserves declined by 33 % from $537 billion on the January 1st 2013 to $360 on
the March 1st 2015.
•In December 2014 the Bank of Russia declared a transition to flexible ruble rate and limitation of
foreign currency interventions.
International reserves and external debt of Russian Federation, $billion, 2003-
2015 (seasonally adjusted)

Challenges faced by Russia in -
•Major agencies lowered Russian ratings to non-investment levels.
•Foreign borrowings were reduced to zero by the end of 2014 due to sanctions that limited access
of Russian companies to world financial markets and to oil price decline.
•At Q4 2014 the cost of foreign borrowing increased to prohibitive level.
•Debt refinancing ratio for Russian companies fell from 100 % in H1 2014 to 62 % in Q3 2014.

ECONOMY MONETARY POLICY GROWTH PLANCHALLENGES
Challenges faced by Russia in -
•Major agencies lowered Russian ratings to non-investment levels.
•Foreign borrowings were reduced to zero by the end of 2014 due to sanctions that limited access
of Russian companies to world financial markets and to oil price decline.
•At Q4 2014 the cost of foreign borrowing increased to prohibitive level.
•Debt refinancing ratio for Russian companies fell from 100 % in H1 2014 to 62 % in Q3 2014.
Steps taken by Russia to overcome above challenges-
•Bank of Russia increased the key rate to a record level of 17 % in December 2014.
•This lead to increase in nominal interest rates by two times causing a liquidity shortage
worsened by foreign financial sanctions and panic on foreign currency market.
•Further, In order to avoid the credit crunch the Bank of Russia began to provide banks with
liquidity in growing volumes and was forced to decrease the key rate to 15 % in February and to
14 % in March 2015 and to 12.5 % in May 2015.
•The government issued new bonds on total 1 trillion rubles (1.4 % of the GDP) and allowed to
spend a part on National Welfare Fund reserves for banking system recapitalization.
•Minimum level of deposit insurance was doubled on December 29th 2014 (to 1.4 million of
rubles that is approximately equal to $27500 now).
Conclusion:
Russian economy has some margin of safety to survive in hard times. But it needs deep structural
reforms to avoid such type of problems in future.

BRAZIL
RUSSIA
INDIA
SOUTH AFRICA
CHINA
 CONCLUSION
 REFERENCES

INDIA : ECONOMY & MONETARY POLICY
A legacy of the British
Empire is that India has one
of the largest English
speaking populations in the
world. For labour intensive
industries like call centres
India is an obvious target
for outsourcing. This is an
economic development
likely to continue in the
future.
The infrastructure of India is
so bad in places that even
moderate improvements
could lead to significant
improvements in the
productive capacity of the
economy.
India still has a positive
birth rate meaning that the
size of the workforce will
continue to grow for the
foreseeable future. (unlike
India) A rising workforce
helps to increase saving and
investment. It also enables
increased productivity.
India has the one of fastest
growing service sectors in the
world with annual growth rate of
above 9% since 2001, which
contributed to 57% of GDP in
2012-13. India has capitalized its
economy based on its large
educated English-speaking
population to become a major
exporter
of IT services, BPO services,
and software services with
$167.0 billion worth of service
exports in 2013-14.

INDIA: ECONOMY & MONETARY POLICY
Objective
Primarily price stability, while keeping in
mind the objective of growth.
Inflation targeting framework
The agreement on Monetary Policy Framework between the Government and the
Reserve Bank of India dated February 20, 2015 defines the price stability objective
explicitly in terms of the target for inflation – as measured by the consumer price
index-combined (CPI-C) – in the near to medium-term, i.e., (a) below 6 per cent by
January 2016, and (b) 4 per cent (+/-) 2 per cent for the financial year 2016-17 and
all subsequent years.
MONETARY POLICY

MONETARY POLICY TRANSMISSION MECHANISM
Cash Reserve
Ratio
• The share of net demand and time liabilities (deposits) that banks must
maintain as cash balance with the Reserve Bank.
Statutory
Liquidity Ratio
• The share of net demand and time liabilities (deposits) that banks must
maintain in safe and liquid assets, such as, government securities, cash
and gold. Changes in SLR often influence the availability of resources in
the banking system for lending to the private sector.
Liquidity
Adjustment
Facility
• Consists of overnight and term repo/reverse repo auctions. Progressively,
the Reserve Bank has increased the proportion of liquidity injected in the
LAF through term-repos

INDIA : ECONOMY & MONETARY POLICY
CHALLENGES
EMPLOYMENT & GROWTH:
Although India has benefited from a high
% of English speakers. (important for call
centre industry) there is still high levels of
illiteracy amongst the population. It is
worse in rural areas and amongst women.
Over 50% of Indian women are illiterate.
This limits economic development and a
more skilled workforce.
BOP :
The large deficit caused the depreciation
in the Rupee between 2012 and 2014.
Whilst the deficit remains, there is
always the fear of a further devaluation
in the Rupee. There is a need to
rebalance the economy and improve
competitiveness of exports.
INFLATION :
Fuelled by rising wages, property prices and
food prices inflation in India is an increasing
problem. Inflation is currently between 8-10%.
This inflation has been a problem despite
periods of economic slowdown. For example in
late 2013, Indian inflation reached 11%, despite
growth falling to 4.8%. This suggests that
inflation is not just due to excess demand, but
is also related to cost push inflationary factors.
SLOWDOWN IN GROWTH:
2013/14 has seen a slowdown in the rate
of economic growth to 4-5%. Real GDP
per capita growth is even lower. This is a
cause for concern as India needs a high
growth rate to see rising living standards,
lower unemployment and encouraging
investment. India has fallen behind
China, which is a comparable developing
economy

The proposed interventions aim to eliminate poverty and reduce inequality
by 2020 by expanding economic opportunity for all by:
Increased Domestic and Foreign Investment : Accelerating economic growth
will require jumpstarting India’s investment rate. In order to achieve 10% or higher
growth, India needs to increase investment to 40-45% of GDP from 30% currently and
37% at its height in FY09, through a significant increase in the domestic savings rate,
increased FDI, lower inflation (through monetary policy), and increased financial
intermediation.
Increased Productivity : India’s productivity growth, which has slowed from 5.8%
to 2.4% in the last two to three years (well below the 7-7.5% levels which China was
able to achieve, will need to increase by 5% through a combination of structural
reforms and administrative and executive actions, with priority given to increasing
agricultural productivity and transitioning the workforce into industry and services.
Growing the Labour Force : Most importantly, India needs to create high-quality
jobs for the additional 250m people who will enter the labour force, including 30
million new jobs within the first two years, through investments in manufacturing,
infrastructure and agriculture, with priority given to driving employment for
women, who at 38% labour participation in India are among the most marginalised
of any major country.
GROWTH PLAN

CHINA: ECONOMY & MONETARY POLICY
China is the largest trading
nation in the world and plays
a vital role in international
trade, and has increasingly
engaged in trade
organizations and treaties in
recent years. China became a
member of the World Trade
Organization in 2001.
Until 2015 China was the
world's fastest-growing major
economy, with growth rates
averaging 10% over 30 years.
Due to historical and political
facts of China's developing
economy, China's public
sector accounts for more
share in the national
economy with the burgeoning
private sector.
China is a global hub for
manufacturing, and is the
largest manufacturing
economy in the world as well
as the largest exporter of
goods in the world..
On a per capita income basis,
China ranked 77th by nominal
GDP and 89th by GDP (PPP) in
2014, according to
theInternational Monetary
Fund (IMF).

Objective
Achieve and maintain price
stability in the interest of
sustainable and balanced
economic development and growth
Inflation targeting framework
Insights into the role and activities of the People’s Bank of China (PBoC or
Central Bank) are critical to successfully navigating China’s markets, and
maximizing the opportunities in this relatively new investment landscape.
MONETARY POLICY

CHINA : ECONOMY & MONETARY POLICY
. The PBoC’s policy is evolving in
ways that should reduce the risk of
volatility spikes, including adding
new provisions for lending to banks
in times of stress, similar to the
‘discount window’ facilities offered
by other major central banks.
The Standing Lending Facility (SLF),
introduced last year, offers one- to three-
month loans to banks on request, while
Pledged Supplementary Lending (PSL) can
be initiated by the PBoC, offering funds
over a three-month to five-year horizon.

CHINA : ECONOMY & MONETARY POLICY
CHALLENGESECONOMY & GROWTH:
China's economy is slowing and this
isn't temporary it reflects "the
market's direction". This means that
"companies will face losses to the
point of bankruptcy" and the
pressure on employment will rise.
REBALANCING:
China faces 4 major shifts the shift from external
demand to domestic demand, from investment
driven growth to consumer-led growth, shift from
government investment to private investment, and
finally from "traditional elements of production to
advanced elements of production". China needs to
promote this to maintain the pace of economic
growth. "Japan and Latin America have gone
through this transformation, but they did not do
well and fell into the "middle-income trap" or the
"high-income trap." We also face this challenge."
LONG TERM INFLATION:
Chinese consumer price inflation has
gone from 6.5 percent in 2011, down
to 2.2 percent in June 2012. Inflation is
an intermediate to long-term problem
for China which means the country
needs to increase its "tolerance" for
and "resilience" to inflation.
INTERNATIONAL ENVIRONMENT:
The global economic slowdown is likely to persist
for another two or three years, and will be a blow
to Chinese exports. Moreover, "the international
environment for China's overseas investments is
deteriorating" because countries don't trust the
Chinese and suspect they will steal their
technologies or are doing it to control their
resources. Third, western countries are pushing
to undermine Chinese competitiveness by calling
for renminbi appreciation, which impacts the
international environment for adjusting the
exchange rate.

Central bank action
The People's Bank of China could lower interest rates, making it cheaper to take out loans. It can
also cut the amount that banks are required to keep on reserve.
Infrastructure investment
Despite rapid urbanization, China still needs more infrastructure -- roads, highways, subways,
water supply, healthcare and more."Such infrastructure investment can improve overall returns
to an economy's physical and human capital, and typically happens during -- not after -- a
country's period of rapid development and industrialization”.
Political fireworks
The Chinese Communist Party Central Committee will meet this fall to approve its
five-year plan for 2016 to 2020.If the central government can come up with
effective policy recommendations from the meeting -- or even give the appearance
of doing so -- there's a chance that it will restore confidence in growth.
GROWTH PLAN

SOUTH AFRICA : ECONOMY & MONETARY POLICY
POSITIVE
OUTLOOK
• In its 2012-13 Global Competitiveness report, the World Economic Forum ranked South Africa second in the world for the
accountability of its private institutions, and third for its financial market development
DIVERSITY
& GROWTH
• South Africa has a diverse economy, with key sectors roughly contributing to GDP* as
follows:Agriculture:Mining:Manufacturing:Electricity and water:Construction:Wholesale, retail and motor trade:Transport,
storage and communication:Finance, real estate and business services:Government services:Personal services
GREEN
ECONOMY
• In 2011, the government entered into the Green Economic Accord, which aims to create 300 000 jobs in the next 10 years
through investment in the green economy. In 2012, the Treasury allocated R800-million over two years to the Green Fund,
which aims to provide finance for high-quality, high-impact, job-creating green economy projects around the country.
INFRASTRU
CTURE
• In a massive public-sector investment, South Africa has spent R642-billion on infrastructure development in the past thee
years – and plans to spend more than R827-billion over the next three years to improve access to export markets and reduce
costs in the economy.
INVESTORS
• The overall investment environment remains encouraging. A G20 country, South Africa is considered a low-risk investment
destination for investors looking for a foothold into Africa. As the continent’s largest African investor, South Africa sends more
than 25% of its manufactured products into the continent.
RATINGS
• In January 2013, Fitch, the ratings agency, cut South Africa’s sovereign credit rating by one notch to BBB. It said it had
revised its outlook because of subdued growth prospects, which it believed would affect public spending and exacerbate
social and political tensions.

Objective
achieve and maintain price
stability in the interest of
sustainable and balanced
economic development and
growth
Inflation targeting
framework
central bank announces an
explicit inflation target and
implements policy to achieve
this target directly
Target and Results
the inflation target
,specified as a range or
band of achieving an
average rate of
increase in consumer
prices
MONETARY POLICY

Source: Box 3, Monetary Policy Review, May 2004

CHALLENGES
EMPLOYMENT & GROWTH:
• Growth, Employment and
Redistribution (GEAR) - central
economic programme.
• Growth- a snail's pace compared with
other emerging markets.
•Unemployment 24%, - jobs seen as the
biggest concern among young South
Africans
MINING :
•Strikes on South African mines have
damaged output, particularly in the
platinum sector.
•The inability to resolve the crisis has
reflected poorly on the country.
•South Africa has fallen in the rankings
of gold producers from number one in
the world to number four.
COST OF LIVING :
•Currency, lost 20% of its value, largely
due to the withdrawal of stimulus in the
US.
•Pushing up the price of goods, and
South Africans are now paying much
more for food, housing and transport.
•If the situation worsens the Reserve
Bank will have to hike interest rates in
order to support the currency. In turn
consumer spending will slow down.
DELIVERY SERVICE :
•Fewer than 20 municipalities out of
284 have a clean balance sheet. This
has resulted in failure to provide water,
electricity, housing and schooling in
many areas.
•In recent years, that has spurred on
hundreds of service delivery protests in
townships, where the poor, black
masses live, and where most of the
country's unemployed population are
likely to be found.

The New Growth Plan, launched in
November 2010, builds on plans to
restructure the economy to ensure more
inclusive and sustainable growth – and
sets a target of creating five million new
jobs by 2020.
The road map to do this is provided by
the Industrial Policy Action Plan, which
proposes multisectoral interventions
across agriculture, mining,
manufacturing, tourism and other high-
level services to create substantial
employment.
South Africa’s dream of growing an
inclusive economy by drawing on the
energies of its people is given voice
through the National Development Plan
2030, launched in August 2012.
Investing in and improving infrastructure,
as well as supporting industries such as
mining and agriculture
Enacting reforms to lower the cost of
doing business
Strengthening links to faster-growing
economies
Diversifying exports
Reducing constraints to growth in various
sectors
NEW GROWTH PLAN

STRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
BRICS – SWOT ANALYSIS
• GROWTH STORIES IN
TOUGH TIMES
• INTERNAL PURCHASING
DEMAND WITHIN BRICS
• TENDENCY TO TRADE IN
THEIR NATIONAL
CURRENCIES
• TREATED AS JUNIOR
PARTNERS BY EMERGED
ECONOMIES
• SCARCE OVERLAPPING
AND COLLECTIVE
FOREIGN POLICY
AGENDAS
• GROWING ABILITY TO
ACT ALONE AND
COLLECTIVELY
• AMPLE ROOM TO
RESTRUCTURE THEIR
ECONOMIES TO BE MORE
COMPETITIVE GLOBALLY
• TOOLBOX OF FISCAL
AND MONETARYOPTIONS
UNLIKE THEIR EMERGED
WESTERN PEERS
• WESTERN
MISMANAGEMENT OF
THEIR ECONOMIES
• OBVIOUS POLITICAL
DESIRE OF INDIVIDUAL
BRICS NATION TO ACT OUT
ALONE

CONCLUDING THOUGHT
• The current global economic and financial order is
undergoing irreversible change because it is exhausted and
out of new ideas.
•The BRICS are not forcing this change; they are embracing it
and adapting to this change accordingly.
•The BRICS will rarely act together toward particular foreign
policy goals, but count on them to all collectively demand the
global economy truly serve the interests of consumers in the
global marketplace. Each member of the BRICS have specific
and diverse characteristics, but their interest toward a more
equitable global economic order is all but universal among
them.

REFERENCES
• Brazil’s Economic Indicators, World Bank, http://data.worldbank.org/country/brazil
• Overview of Brazil’s Economy, World Bank,
http://www.worldbank.org/en/country/brazil/overview#1
• Copom Minutes, Central Bank of Brazil, http://www.bcb.gov.br/?COMMITTEE
• Brazil – A summary, The Economist, http://country.eiu.com/brazil
• Monetary Framework of Brazil, Bank of International Settlements,
https://www.bis.org/
• BRICS overview, BRICS official website, http://en.brics2015.ru/
• Bank of Russia, Official Internet Site, http://www.cbr.ru, 2015
• Institute for National Economy Forecasting (RIM group),”
http://www.macroforecast.ru, 2014
• International Energy Agency (2014), Russia 2014
http://www.iea.org/Textbase/npsum/ russia2014sum.pdf
• International Monetary Fund, official site http://www.data.imf.org (2015)
• World Bank (2014), Russian Economic Report N.32, September 2014 https://
www.worldbank.org/en/country/russia/publication/russian-economic-report-32
• World Bank (2015), Russian Economic Report N.33, April 2015
http://www.worldbank.org/ content/dam/Worldbank/document/eca/russia/rer33-
eng.pdf

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