Comparative analysis of economic growth and development of Brazil and Russian Federation. Period 2000-2010
Информация - Экономика
Другие материалы по предмету Экономика
ices1,8%Hotels and restaurants1,0%GROSS VALUE ADDED BY ECONOMICAL ACTIVITY, 2008, BRAZIL (% of total GDP)Other Activities37,3%Mining, Manufacturing, Utilities23,4%Wholesale, retail trade, restaurants and hotels19,3%Manufacturing17,3%Transport, storage and communication9,1%Agriculture, hunting, forestry, fishing5,8%Construction5,1%of gross value added by economical activity in 2008 was added by mining, manufacturing and utilities in Russia (28 %), in Brazil this category added 23,4 % when in US 16,7 %. In this category the difference between countries is the greatest. In all three countries around 5 % of GVA (gross value added) was created by construction. GVA in agriculture in US is just 1 % in Brazil 5,8 % and in Russia 4,5 %. What is not surprising, because Brazils agricultural sector operates on a grand scale. Brazil is responsible for 80 % production of the worlds orange juice, 25 % of the worlds exported sugar and has the worlds highest sales figures per country for chicken and beef, and is the world leader in soybean export. When we look data for industrial value added in Russia in year 2000 (WB adjusted weights), we can see that 49 % of total industrial value added in Russia is dedicated to fuel. What shows on resource based growth of Russia. Brazil and Russia have very similar GVA, this is due to their similar economical development (low/high middle income countries).
3.2Growth accounting
=F(A,K,L) Q=AK?L(1-?) 0???1 gY=gA+ ?gK+(1- ?)gL
? (capital share) for Russian Federation and Brazil is 0,35 and labor share is 0,65calculations I will use time period from 2002 till 2008 due to lack in data. (data in appendix)
3: Growth accounting (average 2002-2008)
Growth accounting (average 2002-2008)BrazilRussian FederationContribution of capital2,0059107754,178386849Contribution of labor0,0233412720,004889742Contribution of total factor productivity (technology)1,955097482,606455718largest contribution to growth in both countries had capital growth. 50,3 % of all economic growth in Brazil is dedicated to growth of capital, only 0,6 % to growth of labour and 49,1 % to total factor productivity. In Russia 62,5 % of total economic growth is dedicated to growth of capital, 0,1 % to labour growth and 38 % to total factor productivity (technology). The Brazilian growth is more technology driven than Russians, but they both still grow on capital accumulation.
3.3Consumption side of GDP structure (expenditures)
= Household consumption + Gross investments + Government consumption + Net export (Export - Import)= C + I + G + NX
development economic export consumption
Graph 3: GDP structure in % by type of expenditures Russia (constant prices 2008)
Russian economy is mostly driven by household consumption (average 44,5 %) , which is growing form year 2004, when total convertibility of rule was introduced and Russia was declared as market economy and there was increase in wages and pensions too. The second most important growth driver is export (average 32,5 % of GDP). Export importance in Russians GDP is stable over time. With large share of export in GDP Russian economy is exposed to international aggregate demand shocks, what caused also - 7,8 % growth in year 2009. Average value of government consumption is 19,8 %. The movement of Gross investments mimics the GDP movement. High economic growth increases expected revenues and optimistic investment environment. At time of the crisis the share of investments dropped by 9,2 percentage points. Investment share was on average 20,5 %, what is tuned with economic theory suggestion. Import is moving similarly to gross investments, because higher domestic income increases import and its share in GDP, the opposite effect is visible in the time of economic crisis 2009, when import importance fall. Russia constantly experiences positive net export (current account surplus). Average share of import in GDP is 16,9 %.poor economic performance in year 2009 was responsible negative growth of investment, which was the third most important part of GDP in year 2008, for 41 %. Drop in import was 30,4 %. It is interesting that Russia hasnt increased government spending, it was decreased by - 0,6 %. The 2009 Anti-Crisis Programme amounted to approximately 2 trillion rubles (62.5 billion $), but overall G compared to 2008 has decreased.
4: GDP structure in % by type of expenditures Brazil (constant prices 2005)
The most important component of GDP in Brazil is Household consumption, with an average value 61,5 %. Export on the other hand on average contributes 14,32 % to GDP. Both indicators show that Brazil is mostly closed economy, larger share of Brazils production is consumed at home and they are using their huge domestic market to sell their products. Net export was positive till 2008, than it became negative and it is getting larger (current account deficit). Before the crisis global economic forces have served Brazil well. As a leading exporter of raw materials (soya and iron ore), Brazil has benefited from Chinese boom. Export served for massive inflow of dollars and made real more expensive, what undermines competitiveness of manufacturing. Imported machinery has increased its market share from 15 % to 50 % since 2006. This movement is showed in negative net export.
The second most important component of GDP are gross investments (on average 19,72 %). Investments share reaches maximum value in 2008 (20,8 %). Investments are going to increase due to Olympic Games in Rio de Janeiro in 2016. Government consumption share is on average 19,2 % and is relative stable over time.period form 2008 and 2009 Brazil experienced negative economic growth - 0,6 %. This was mostly due to decrease in gross investments (-16,2 %) and drop in export ( - 10,2 %). Public consumption has increased by 4,2 %. Stimulus package amounted to a 20,4 billion $ injection into the economy (1,2 % GDP in 2009) was part of contra cyclical policy. It impacted economic activity through additional government spending (3,9 % increase), tax cuts and subsidies. They created nominal deficit estimated at 3.2 per cent of GDP in 2009.
3.4Export structure
Graph 5 Export Brazil by category in US $ (2000, 2009)
: Selected classification: SITC Rev.3: 0 (Food and live animals), 1 Beverages and tobacco, 2 (Crude materials, inedible, except fuels), 3 (Mineral fuels, lubricants and related materials), 4 Animal and vegetable oils, fats and waxes, 5 (Chemicals and related products), 6 (Manufactured goods), 7 (Machinery and transport equipment), 8 (Miscellaneous manufactured articles), 9 (Other)
Brazil export represents 14,32 % of GDP on average in years 2003-2010. The total export more than doubled in 9 years. All selected commodities export have increased from year 2003 till 2010. The largest jumps in export experienced commodities: Food and live animals, Mineral fuels and Crude materials export (form almost 0 value to fifth most important export commodity); on the other hand the smallest increase in export experienced: Manufactured goods, Chemicals and related products and Machinery and transport equipment. Other four commodities groups are not very important for Brazil.
Graph 6:Brazilian export of primary and manufactured goods and % of Brazilian export to China (2000-2011)
Brazils export earnings from manufactured goods continue to fall while those from primary goods continue to rise. In year 2009 export earnings from primary goods has taken over manufacturing goods earnings. Despite of political struggle to support manufactured goods export, they failed to do so. More than half of the $33bn year-on-year increase in Brazilian exports in the first three quarters of 2010 came from primary products. This was mainly driven by a sharp rise in the value of exports of iron ore and crude oil, which almost doubled from the same period last year. The main reason for this change is China, which became Brazils largest trading partner, overtaking the US. Iron ore is now the biggest Brazilian export product (17 % of total export, more than half goes to China). Analysts say Brazil must decide soon whether it is happy to be an exporter of low value-added goods or whether it wants to compete in markets for higher value goods.
7: Russian export
: A: food, raw materials except petroleum and gas; B: Crude materials, inedible, except fuels; C: Petroleum; D: Gas; E: Manufactured goods without steel and iron; F: steel and iron; G: Other
Russian export tippled in nine years. The most important Russian export commodities are represented in graph. The leading export commodity is fuel, followed by gas. Mineral fuels, lubricants and related materials export has increased the most, from 13 % of total export in 2000 to 46 % in 2009. The largest share of this increase goes to petroleum and gas export. In 2009 chemicals and related products, manufactured goods, machinery and transport equipment and miscellaneous manufactured articles represented 13,5 % of total export. Data suggest that Russian export is very dependent on primary goods export. Politics is trying to avoid all negative impacts of resource based economy, including Dutch disease, but they are not successful in diversifying Russians economy. They are struggling to make their oligarchs owned industry more efficient, but distortions are too large.
4.Concluding comparison
Brazil and Russian Federation are both middle income countries. They have gained international