Firtch has cut its outlook on all BRICS countries and predicts a downturn for the emerging economies. At once, the agency's analysts feel that American and European economies have recovered from recession and will become growing.
In a study note sent to the press, Fitch explained the rationale behind the outlook cut:
“Many of the biggest emerging markets are experiencing strains from spillovers from advanced economies and China, difficult policy tradeoffs, a declining impact from credit growth and structural bottlenecks.”
There are several problems with this forecast.
First and foremost, Fitch has lost its credibility following a big amount of securities rated “triple A” by this agency went to zero throughout the financial crisis. Therefore, any rating distributed by Fitch should be taken with a grain of salt.
First and foremost, Fitch has lost its credibility following a big amount of securities rated “triple A” by this agency went to zero throughout the financial crisis. Therefore, any rating distributed by Fitch should be taken with a grain of salt.
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Moreover, the reasons for the outlook cut presented by Fitch are self-contradictory. If the growth of the BRICS countries is afflicted with a “spillover” from the issues of American and European economies, then just how can Fitch justify its forecast that the US and EU may have higher rates of economic growth? If American and European economies have recovered from the crisis and start growing fast then the BRICS economies will not experience any kind of “spillover&rdquo ;.
The announcement produced by Fitch appears like an attempt to discredit the emerging markets and scare investors far from BRICS countries.
Investors should consider the fact that Fitch never had the opportunity to issue accurate economic predictions. The International Monetary Fund and the World Bank both predict that the “bulk” of the world's economic growth should come from emerging economies and that BRICS countries could be the countries with the highest growth levels for the next several years. Even the European Commission predicts that European economic growth will remain anemic at the least for just two years. The downgrade of BRICS isn't justified by economic data or common sense. It is likely that the agency's ratings are driven by a political agenda
Investors should consider the fact that Fitch never had the opportunity to issue accurate economic predictions. The International Monetary Fund and the World Bank both predict that the “bulk” of the world's economic growth should come from emerging economies and that BRICS countries could be the countries with the highest growth levels for the next several years. Even the European Commission predicts that European economic growth will remain anemic at the least for just two years. The downgrade of BRICS isn't justified by economic data or common sense. It is likely that the agency's ratings are driven by a political agenda
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