Patel warns of risks from Brexit, US polls

The growth rate for BRICS nations at 5.1 per cent will overtake the 3.1 per cent growth rate of world economy this year

Reserve Bank of India (RBI) Governor Urjit Patel on Thursday said BRICS (Brazil, Russia, India, China and South Africa) central banks would have to deal with political risks from events like Britain leaving the Europeon Union (EU) and the United Nations presidential election.

BRICS nations stood on a better footing in terms of economic growth, yet they would have to energise investments against global headwinds and face the effects of policies of central banks and political risks, Patel said at the bloc’s seminar on investment flows.

He said the challenge that had entered the lexicon was that of political risk. “The potential unconventional sources are black swan type of events like the Brexit vote and the US presidential election. These have blipped on our radars and affect our policies,” he added.

Monetary authorities in the BRICS are particularly besieged with inflation, interest and exchange rates, and levels of reserves. These had influence on the country allocation for investor portfolio decisions, the governor said. Even though the sensitivity to spillover had waned, managing them continued to receive policy attention, he added.

Dwelling on the other two big challenges facing BRICS, Patel said these were energising investments against global headwinds and managing the effects of an uncertain business climate and bouts of financial turbulence on account of policies of central banks.

The growth rate for BRICS nations at 5.1 per cent will overtake the 3.1 per cent growth rate of the world economy this year. The BRICS nations are expected to enlarge their current accounts deficits or reduce surpluses and will provide vital support to aggregate global demand.