The biggest developing nations risk overturning the achievements of the past decade by increasing the state’s role in the economy, according to Nouriel Roubini.
Roubini — dubbed Dr. Doom for predicting hard times before the global financial crisis began in 2008 — said Brazil, Russia, India and China have been moving away from market economies recently.Nouriel Roubini said, “BRICs have been hyped up too much.” Photographer: Simon Dawson/Bloomberg
“BRICs have been hyped up too much,” Roubini said in an interview today at the World Economic Forum’s annual meeting in Davos, Switzerland. “Too much state role in enterprises, banks, resource nationalization, protectionism, lack of structural market-oriented reforms that increase the size of the private sector — this is happening in most of the BRICs.”
China maintained control of its biggest companies, Russian businesses spent shareholder money on projects favored by the government and Brazilian politicians intervened to cut utility rates last year.
State-owned OAO Gazprom (GAZP) may lose its monopoly on natural gas exports as long as the move doesn’t cut prices and damage Russia’s economic interests, Prime Minister Dmitry Medvedev said in a Jan. 23 interview in Davos. Gazprom is using its cash to finance the industry’s largest capital expenditure program, part of which goes to fund projects favored by President Vladimir Putin.
It took the threat of a credit-rating downgrade for Indian Prime Minister Manmohan Singh’s administration to remove barriers on foreign investment in the retail and aviation industries and cut fuel subsidies. Roubini, a professor at New York University, said he favors the Philippines and Indonesia over China and India.
“They are actually doing more in terms of structural reform,” Roubini said. “The economies are growing more than 6 percent.”
Developing economies are set to grow by an average 5 percent worldwide this year, compared with 1 percent for advanced nations, according to Roubini.
In Latin America, Chile and Colombia “have done a lot of things to improve their potential for growth,” he said. “In central Europe, I see success stories like Poland and Czech Republic doing reforms.”