The Hindu Business Line : Goldman Sachs is sanguine about world economy

Global demand
In the last eight years 35 per cent came from the US.
The BRIC countries accounted for 30 per cent.
India alone contributed five per cent in the same period.

Our Bureau

Mumbai, May 1

The US may be on the brink of a recession casting a shadow on the global economy but not everything is lost and there is still a lot to look forward to with optimism, says the man who first coined the acronym, BRICs, in 2001.

Mr Jim O’Neill, Managing Director and Head of Global Economic Research, Goldman Sachs, London, says that projected global GDP growth of 3.7 per cent in 2008 might be the lowest in the last few years but it is still higher than the 3.2 per cent average growth of the last 25 years. “This is an exciting time for the world economy. The US is slowing down and possibly heading for recession but India is growing at 8 per cent. Who could have imagined this a few years ago?” said Mr O’Neill. Together, the BRIC economies contributed more than the US to world economic growth in 2006 and 2007.

Mr O’Neill was of the view that China might slow down a little after the Olympics this year “but not much”.

Talking of the US, he said: “Not everything going on in the US is ill. The credit spread between investment grade bonds and high yield bonds has narrowed which means that we’ve seen the worst of the credit market crisis.”

While 35 per cent of global demand in the last 8 years came from the US, the BRIC countries accounted for 30 per cent. India alone contributed 5 per cent to global demand in the same period, according to Goldman Sachs’ research.

Mr O’Neill pointed to how the markets are valuing India and China higher than the G-7 countries and said that in 30 years India’s working population will be equal to that of China and the US put together.

He was of the view that we are just half way through the commodity cycle and the demand for commodities will remain strong.

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