Britain's financial wellbeing could come under threat from global economic shocks, chancellor George Osborne will say today.
“Last year was the worst for global growth since the crash and this year opens with a dangerous cocktail of new threats,” he will tell business leaders in Cardiff. Slowdowns in Brazil, Russia and China pose a major economic threat, he will say.
“For Britain, the only antidote to that is confronting complacency and sticking to the course we’ve charted.”
“Today I want to issue this warning: unless we finish the job of fixing the public finances, to get Britain back into the black by finally spending less than we borrow, all of the progress we have made together could still easily be reversed.”
Brazil and Russia will stay in recession this year after sharp contractions last year, the World Bank, a state-backed financial institution that provides support to developing countries, said last night. China’s growth will also slow.
World Bank chief economist Kaushik Basu warned “risks have increased, particularly those associated with the possibility of a disorderly slowdown in a major emerging economy.”
A one percentage point decline in the so-called BRICS’ – Brazil, Russia, India, China and South Africa – collective economic growth could, over the next two years, knock 0.4 percentage points of global growth – a loss of about $300bn (£205bn).
Investors see an emerging market threat as the biggest threat they face, above a black swan event, a Eurozone crisis and the US Federal Reserve tightening interest rates.
Survey figures published yesterday by NN Investment Partners found that 33 per cent of 104 institutional investors saw an emerging market crisis as the biggest threat to their portfolios.
"The deterioration in Emerging Markets has been seen across the board in recent months, with Russia, South Africa and Brazil standing out. The ongoing correction in Chinese demand and the resulting decline in commodity prices remain a major drag,” said Maarten-Jan Bakkum, senior emerging markets strategist at NN Investment Partners.