Executive Summary: Growth and Sustainability in Brazil, China, India, Indonesia and South Africa


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This volume is based on the proceedings of a conference organised by the Economics Department of the OECD on the growth experiences of large emerging-market economies, with a focus on Brazil, China, India, Indonesia and South Africa. The OECD launched in May 2007 a programme of Enhanced Engagement (EE) with these five countries. The conference, held at the OECD Headquarters in Paris on 24 September 2009, brought together analysts and practitioners from the EE and OECD Member countries.

 Brazil’s growth experience

Ms. Eliana Cardoso and Mr. Vladimir Kuhl Teles focus on the Brazilian growth experience from the country’s discovery in 1500 to the 19th century. Using a methodology to identify structural breaks in Brazil’s GDP growth rate between 1900 and 2008, the authors split the country’s growth history into four periods, based on regime changes in 1918, 1967 and 1980. A growth accounting methodology is subsequently used to analyse the behaviour of productivity in the post World War II period. The authors show that high inflation might have been a reason for a decline in productivity between 1980 and the mid 1990s. They also show that changes in the terms of trade have played a significant effect on economic growth and on fluctuations in output. Other factors (such as fiscal stimuli or easy access to foreign finance) also matter for output growth in the short run. From 2004 to 2008, improvements in the terms of trade and a reduction in government indebtedness underpinned economic growth. The authors conclude that the emergence of a new era in the 2000s will depend on continued efforts to consolidate fiscal adjustment.

 The main drivers of China’s growth

Mr. Gang Fan and Mr. Xiaolu Wang evaluate the main drivers of China’s growth over the last 30 years based on a comprehensive econometric growth accounting exercise. They argue that, although China’s growth has been predominantly input driven, productivity gains have contributed to more than 40% of output growth in recent years. The authors identify a number of policy challenges for sustaining high growth in the future, including a need to reduce social disparities and preserve the environment. They conclude that China will be able to sustain high growth through 2020 if further structural reforms are implemented.

 India’s renewed growth momentum

Mr. Arvind Virmani and Mr. Rajeev Malhotra discuss India’s long term growth prospects. Following structural breaks in GDP growth in 1979 80 and 2003 04, the authors contend that the Indian economy is now on a high growth path. The chapter identifies the main drivers of strong growth, the components of aggregate demand, the sectoral composition of growth and its spatial distribution across the country’s different regions. The authors also discuss India’s economic policy management in the wake of the global crisis and conclude that the economy responded well to the fiscal and monetary measures taken in response to the global slowdown and that the pre crisis growth momentum is set to be regained. However, an uncertain external environment calls for a continued focus on the domestic growth drivers. To sustain high growth over an extended period, the authors argue that it will be vital to pursue reforms to make the economy more competitive and the economic regulatory and oversight systems more efficient and sensitive to new developments, as well as delivering fiscal consolidation.

 Indonesia’s increased reliance on domestic demand

Mr. M. Chatib Basri and Mr. Sjamsu Rahardja discuss the effects of the global crisis on Indonesia and concluded that the country was affected less severely than regional peers. Although Indonesian exports have been hit hard by the collapse of commodity prices and falling demand for manufacturing products, GDP growth remained surprisingly buoyant during the global slowdown. The authors argue that the strength of domestic demand has been an important driver of growth during the crisis. They conclude that, given Indonesia’s reliance on exports for sustaining economic growth, it is important to deepen integration within the domestic economy and to improve the country’s trade competitiveness. To this end, the authors argue that Indonesia has to invest massively in both its physical and ‘soft’ infrastructures to reduce domestic transactions costs.


 South Africa’s longer term policy challenges

Mr. Johannes Fedderke reviews a broad literature on the drivers of growth in South Africa. He recognises that, while growth has recovered since the mid 1990s, a number of constraints continue to restrain the level and sustainability of growth, including uncertainty surrounding physical capital investment, concerns about property rights, distortions in product markets and an excessively rigid labour code. In addition, human capital, credit and R&D activity remain low, and the fiscal space for more aggressive growth promoting public expenditure has been reduced by an expansion of welfare payments. Policy implications include a need for macroeconomic stability and for addressing economic and social infrastructure bottlenecks, as well as for pro competition reform in product and labour markets.

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