Photo: Goldman Sachs
Jim O’Neill, the chairman of Goldman Sachs Asset Management who is famous for coining the term “BRICs,” has some bad news for investors who are optimistic on China and India: those economies are slowing quickly.O’Neill calls China’s slowing economic growth “arguably the greatest global risk today.”
In his latest Monthly Insights, O’Neill said his team is cutting its 2012 China growth estimate by 0.8 per cent and is lowering its 2012 India growth forecast by a full percentage point:
We made two downward revisions in the BRICs. For China, we reduced our 2012 growth forecast to 7.4% from 8.2%. This is now below the consensus of 7.9%, and means that China will need to achieve a 7.2% yoy growth, on average, in H2 of this year. While this growth rate is just below the government’s 2012 target, the degree of policy response has been less than envisaged. We also downgraded India, to 6.2% from 7.2%, reflecting the weakness in H1 and the difficult environment ahead. Despite the recent moderation, inflationary pressures persist, restricting monetary policy options.
The call largely reflects the weakening global growth environment as the eurozone plunges deeper into recession and Asia feels the effects of the contraction through reduced European demand for Asian exports.
O’Neill writes, “As we approach the end of Q3, global growth remains sluggish and the H2 pick-up in momentum we expected earlier in the year has yet to materialise.”
Here is a table showing O’Neill’s forecasts versus consensus expectations:
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