Jim O’Neill: From BRICs with LUV
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November 9th, 2009 by AdvisorAnalyst
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Jim O’Neill, Goldman’s Chief Global Strategist, and coiner of the BRIC acronym, appears on FT.com’s Future of Finance to discuss his views and outlook for BRICs, emerging markets, and about the long term effects of the financial crisis.
In the segment, O’Neill forecasts 9% GDP growth for the BRICs and 1.9% for the developed countries. O’Neill says that the economic decoupling of BRIC was far more than the notional concept that many thought of it. The BRIC are being driven by the growth of domestic consumption versus the deleveraging of over-indebted consumers, companies and governments in the developed world.
O’Neill discusses China and Goldman’s forecast of 11.9% GDP growth for 2010, and says that in order for China not to come in at that forecast it would have to slow down from what its at now. O’Neill says that by his account, China’s momentum has it coming in at 13% GDP growth and the insitutional outlook elsewhere for more conservative growth is due to rigidity.
Chinese consumers are now buying 1,000,000 cars, and 15 million mobile phones monthly.
O’Neill says that China is more likely to print closer to the 11.9% GDP growth forecast than the 8% forecast consensus from other institutions.
The crisis has been good for China, because it has taken them off the exports drug. Export growth would have been unsustainable. It would have been difficult for China to stop it themselves. In many ways, O’Neill says, this global financial crisis was like an “act of God.”
The Chinese have responded to it.
O’Neill says its likely the Chinese will tighten up lending to cool things down a little, and counters that they have proven that they are able to massage things well after having gone through several crises now.
Also discussed are Sir Martin Sorrell’s LUV concept - his idea that Europe will experience an L-shaped recovery, the US will have a U-shaped recovery and Emerging Markets will have a V-shaped recovery.
The interview is compelling and enlightening, as O’Neill is one of the brightest minds in global finance. I recall earlier this year when O’Neill was opposite Nouriel Roubini for an interview at Lake Como in Switzerland, thinking that he was refreshingly optimistic at a time when things were so gloomy.
Read more from the author/contributor here.
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