Is the BRIC future on track?
Amidtradewarsanderodingglobalgrowthprospects,theBRICeconomiescouldsurpassthemajoradvancedeconomies inabout15years.Nevertheless,theBRICsareatacriticalcrossroads.
ED by Brazil, Russia, India, China and South Africa, the recent
10th BRICS Summit highlighted the rising power of large emerging economies in the world economy. (The
LAfrica joined in 2010.)
place in 2009 in Yekaterinburg, Russia after the global crisis, the combined economic power of the major BRIC countries amounted to only $10 trillion, a third of the largest economies
core European countries (Germany, UK, France, Italy), and Japan—that is, the Group of Six (G6).
At the time, the US economy was still more than twice as large as that of China but Japan’s growth had been penalized by stagnation. Chancellor Merkel’s Germany and President Sarkozy’s France led the ailing Europe. In Brazil, the Lula era brought about a dramatic catch-up, while reducing historical income polarization. In Manmohan Singh’s India, growth was accelerating. In Russia, President Putin had multiplied the size of the economy by almost six-fold.
But what about today? Is the world economy’s structural transformation on track? The short answer is an emphatic yes, but there historically, in the course of the 2000s, when its share of the US economy more than tripled from 12 percent to 40 percent. The original BRIC estimate was that China would surpass the US in the late 2020s; and that remains the case under Xi Jinping’s leadership.
If current trends prevail, Chinese economy would be 13 percent larger than that of the US by 2030 (only 1 percent less than the original BRIC projection).
While India’s growth trajectory slipped in the past, it has been largely restored by Prime Minister Narendra Modi. If things go right, India’s economy could double relative to the US in the next decade. It could also soar to about a third of the US by 2030 (4 percent higher than the original BRIC projection).
However, Brazil and Russia have slipped significantly from the original projections.
Under Lula’s visionary leadership, Brazil’s GDP grew even faster than expected by the original BRIC pro- Sources: Goldman Sachs; IMF; Difference Group.
In Russia, President Putin was able to reverse the economy’s drastic fall in the 1990s and restore the growth trajectory in the 2000s. For all practical purposes, Russian economic prospects are very much in line with the original BRIC projection; it is the sanctions by the West that account for the negative difference. Without the controversial sanctions, the Russian economy
Today, their edge has shrunk to about 30 percent.
Despite the US trade war against China, India’s struggle against poverty, Brazil’s internal turmoil and sanctions against Russia, the BRICs could still surpass the major advanced economies by around the early 2030s. By 2030, the G6 economies will be about 5 percent behind the original estimate; the BRICs a bit more, about 7 percent.
However, if G6 were to be balanced with six other large emerging economies – rather than just four BRIC nations – by including Indonesia, Mexico or Turkey, or Nigeria or South Africa, the trend line would prove even more prominent.
While advanced economies have been penalized by their sovereign debt crises, large emerging economies have been harmed by political turmoil in Brazil and sanctions against Russia. In other words, the challenges in these two countries are political by nature and both have had to cope with efforts at external interventions.
In contrast, as advanced economies have not even begun to reduce their debt burden, their economic leverage may decline relatively faster sometime in the future. In other words, their challenges are largely economic by nature.
In the long term, negative turns— including trade wars and consequent global collateral damage—can slow the relative rise of the large emerging economies. If trade risks grow elevated, secular stagnation in advanced economies will deepen as well.
Amid the 2008 global crisis, China accounted for almost 50 percent of global growth and continues to account for some 30 percent of global prospects today. The implication is that how China goes, so will the world go. http://www.differencegroup.net/