l The Economist Intelligence Unit forecasts that growth in the BRICs (Brazil, Russia, India, China)
will continue to outpace that of the biggest economies in the developed world in the coming quarters.
However, the outlook for the G3 (US, Japan, Germany) suggests that a double-dip recession is now a
the full document here: G3_BRICs_ChartBook
l The G3 is expected to avoid outright deflation as exceptionally loose monetary policy offsets
downward pressure on prices from deleveraging and sluggish labour markets. The BRICs will
experience higher inflation, as capacity constraints emerge in some sectors. In addition, the BRICs are
more exposed to increased raw material costs, which have a higher weighting in their consumer price
indices. The combination of free money in the West and stronger growth in the BRICs will attract capital
inflows into emerging markets and create the risk of asset price bubbles.
l We expect money market rates in the BRICS to tick up gradually in 2011-12 as robust demand creates
inflationary pressures. The Federal Reserve (Fed, the central bank) and its European counterpart, the
European Central Bank (ECB), are expected to keep short-term rates at current levels until the second
half of 2012. This underpins our forecast of elevated term spreads over the next two years.