Welcome to BURK, Europe's new economic power

3rd February 2011, Comments 0 comments

You may not have heard of it and the acronym may sound a touch odd, but analysts at Russia's largest bank are convinced that a new economic power is rising in Europe -- BURK.

The peculiar acronym is an invention of Sberbank, which has decided to lump Belarus, Ukraine, Russia and Kazakhstan into an informal alliance of ex-Soviet heavyweights rivalling the BRIC nations of Brazil, Russia, India and China.

The state-run institution admits that BURK's combined markets account for little more than three percent of the world's gross domestic product and that its transparency record is not great.

But it argues that the vast region shares similar problems and could follow the same prescriptions to achieve growth similar to what Asia and Latin America have been witnessing for much of the past decade.

And to that end, the 170-year-old bank issued a novel report entitled "The BURK Countries. 2010 Results and 2011 Prospects."

The report's authors conceded that their term may not have the same ring as the BRIC acronym coined in 2001 by a Goldman Sachs analyst.

But the authors brushed aside the snickering comments and argued that the English word actually means "a very firm lump of solid ore."

"By this, we mean to say that we do not expect the necessary reforms in these four countries to follow a smooth course," said the study.

"Quite the contrary, these reforms will encounter significant resistance -- both political as well as administrative," it said.

The report went on to admit that the group of nations that Russia is hoping to bring into a closer union faces an uncertain future whose outlook is only "moderately optimistic".

The four countries find themselves in the odd position of brandishing respectable growth numbers that are still too small to let them catch up with the other three BRICs or South Africa, which join the group in December.

Russia's GDP grew by 4.0 percent last year, with Sberbank predicting the same level of growth through 2013 -- very good for an economic superpower like the United States, but not good enough for Russia.

Sberbank also envisioned 5.0 percent growth in Ukraine, 6.9 percent growth in Kazakhstan, and 9.9 percent growth in Belarus, an authoritarian country whose statistics are matter of some dispute.

Unfortunately, the report was not received in Moscow with the level of seriousness its authors might have expected.

Some of the criticism was obvious. After all, there is little disputing that BURK sounds disturbingly similar to the British English word "berk" -- slang for a fool.

"This is amusing, but in the wrong sense," ING Wholesale Bank chief economist Rob Carnell told the Vedomosti business daily.

"I doubt that you would really want the term BURK to become too popular," he added.

Others saw the wrong kind of economics behind Sberbank's decision to invent a new term.

"Sberbank has already made acquisitions in Belarus and is preparing to make more in Kazakhstan," said Renaissance Capital economist Ovanes Oganisyan.

"I think that this will be their strategy -- coining this term before continuing their expansion into Eastern Europe."

The Russian bank essentially admitted as much by noting that it picked the three other nations because they "have a Sberbank presence."

Yet analysts agreed that despite its connotations, the term actually makes some economic sense.

Its creation coincides with a new round of calls to expel Russia from BRIC because of its much smaller economy and overwhelming reliance on energy and raw material exports.

In that sense, Russia has more in common with the three nations than it does with anyone else in BRIC, analysts said.

"When investors and economists look at this region, they look at Russia and the CIS (Commonwealth of Independent States) as one," said Oganisyan.

© 2011 AFP

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