What Next for the Commodity Economies?

Brazil, Russia and Australia are heavily dependent on mining and natural resources companies to thrive, what does 2014 hold for these commodity economies?

Coutts 1 November, 2013 | 12:32PM
Facebook Twitter LinkedIn

This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Mark McFarland, Global Chief Economist at Coutts gives his outlook for the commodity economies.


Brazil was one of the major beneficiaries of global capital flows over 2010-12. The Brazilian real’s rise prompted the central bank to impose capital controls to stem its appreciation. As investors began anticipating tighter US monetary policy in 2013, Brazil’s twin fiscal and trade deficits (3% of GDP) left it exposed to outflows. It is unfortunate that this has coincided with an improvement in the country’s household and corporate debt profile. If commodity prices remain subdued, the central bank may not have to raise rates much above 9% and GDP growth may increase from under 1% in 2012 to 3% in 2015.


We expect Russia’s GDP growth rate to recover from around 2% this year to just over 3% in 2015. Russia needs the oil price to stay above $110 per barrel to help it balance its budget. If oil prices were to decline substantially, Russia’s ability to embark on much-needed public infrastructure projects would be impeded and the ruble would come under selling pressure. This is not our expectation as geopolitical risk remains high in the Middle East and North Africa (MENA), and the country’s current account surplus (3% of GDP) makes the ruble fairly resilient. This currency resilience potentially makes Russia’s shorter-dated local currency bonds attractive as the central bank is not expected to start raising interest rates until well into 2015.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Coutts  Coutts provides customised solutions for clients private banking and wealth management needs.

Audience Confirmation

By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement