Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20
QE4EVER! - 9th Sep 20
AMD Ryzen Zen 3 4800x 10 Core 5ghz CPU, Cinebench Benchmark Scores (Est.) - 9th Sep 20
Stock Traders’ Dreams Come True – Big Technical Price Swings Pending on SP500 - 9th Sep 20
Should You Be Concerned About The Stock Market Big Downside Rotation? - 9th Sep 20
Options Traders Keep "Opting" for Even Higher Stock Market Prices - 8th Sep 20
Gold Stocks in Correction Mode - 8th Sep 20
The law of long-term time preference and Gold ownership - 8th Sep 20
Gold Bull Markets: History and Prospects Ahead - 8th Sep 20
Sheffield City Centre Coronavirus Shopping Opera Ahead of Second Covid-19 Peak - 8th Sep 20
Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
From Trump’s TikTok Mess to US Tech Cold War against China - 7th Sep 20
The Federal Reserve vs. Judy Shelton And Gold - 7th Sep 20
Fed Dials Up Inflation Target…Own Gold - 7th Sep 20
Does Gold Still Have Plenty of Potential? - 7th Sep 20
CDC Shock Admission - THERE IS NO PANDEMIC! Over 90% of Deaths NOT From COVID19 - 7th Sep 20
Stock Market SPX to Gold/Silver Ratios Explored – What To Expect Next - 7th Sep 20
Is the Precious Metals Market really Overwhelmed and Chaotic - 7th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Towards a Diverging BRIC Future

Economics / Emerging Markets Nov 11, 2019 - 09:51 PM GMT

By: Dan_Steinbock

Economics Two decades ago, the BRIC economies were projected to surpass the advanced G6 economies by the early 2030s. Today, the huge potential of the BRICs prevails, but the pace has slowed and country trajectories have diverged. China and India are on track, Brazil and Russia are not, thanks to geopolitics.

In the early 2000s, Goldman Sachs projected that the four largest emerging economies – Brazil, Russia, India and China, or the BRICs – would surpass the major advanced economies by the early 2030s.



When the first BRICS Summit took place in Yekaterinburg, Russia in 2009, the combined economic power of the BRIC countries amounted to barely 12 percent of the collective economic power of the major advanced economies, the Group of Six (G6); the US, Western Europe (Germany, UK, France, Italy), and Japan.

At the time, the US economy was some 2.5 times bigger than that of China but amid the worst asset-bubble burst since the Great Depression. Japan, the world's second-largest economy, was coping with a second lost decade. Chancellor Merkel’s Germany and President Sarkozy’s France still led the ailing Europe, where the global recession would soon morph into a series of sovereign debt crises. In Brazil, President Lula drove a dramatic growth 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 more than five-fold in one decade, thanks to rising energy prices.

But where are the BRICs today?

Projected Versus Actual Growth

To gain a better understanding of what has happened in the past two decades, let’s compare Goldman Sachs’s original BRIC projections in the 2000s, which rested on the economic development in the 1980s and 1990s, with the actual BRIC prospects today, which are the net effect of the past two decades.

What Goldman Sachs projected was a dramatic expansion of China whose GDP was anticipated to grow more than 14-fold between 2000 and 2025. At the same time, India’s economy would increase by almost tenfold and was projected to grow relatively faster than China in the late 2010s. Brazil was expected to expand fivefold and Russia more than tenfold. In light of the fact that, in the same time period, the US, the largest advanced economy, was projected to expand more than twofold, these were stunning projections indicating solid catch-up growth in the largest emerging economies.

So what happened? Here’s the bottom line: If peaceful conditions prevail and trade protectionism can be kept in check, China could deliver more than expected, while India is on track as well. However, the potential of Brazil and Russia, respectively, has been undermined by geopolitics (Figure 1).

Figure 1       Expansion by BRIC Economies, 2000-2024



Sources: IMF; Difference Group.

After China joined the World Trade Organization (WTO) in 2001, its economic expansion intensified dramatically, fueled by the export-led growth model. Since the early 2010s, that model has been morphing toward consumption and innovation. By the mid-2020s – again, assuming peaceful conditions and managed trade tensions - China’s economy could expand more than 17 times, relative to its size in 2000. It is set to surpass the size of the US economy in the 2030s, which may well be the key to the Obama military pivot to Asia in the early 2010s and to Trump tariff wars more recently.

While India’s growth trajectory has periodically slipped, it has been pushed harder by Prime Minister Narendra Modi, despite recent growth pains. If things go right, India’s economy could expand the projected tenfold by the mid-2020s. New Delhi is engaged in a cautious balancing act between economic development and rising prosperity, which is what the country needs, and geopolitics and rearmament, which is what Washington would prefer.

Under President Lula’s leadership, Brazil’s GDP grew even faster than expected by the original BRIC projection. But since the mid-2010s, the contested impeachment of President Rousseff and particularly the imprisonment of Lula, Brazil’s growth trajectory has plunged. The geopolitical soft coup, which critics claim paved the way to radical right’s President Bolsonaro and the dreams of a new military dictatorship, could result in a lost decade. By the mid-2020s, Brazil’s GDP may reach the level where it first was at the end of the Lula era, already in the early 2010s.

Instead of being almost a fifth of the US GDP by the mid-2020s, Brazil’s economy may prove to be less than 9 percent of the US (over half smaller than originally projected). The dreams of tens of millions of Brazilians of a better future have been undermined.

In Russia, President Putin was able to reverse the economy’s drastic fall in the 1990s and restore the growth trajectory in the 2000s, when Russian economic prospects were in line with the BRIC projections. As Stephen F. Cohen has argued, Washington initiated a “new Cold War” against Russia before the 2008 global crisis. Due to the continued softness in oil prices and particularly the still ongoing sanctions, the Russian economy could have been almost a fifth of the U.S. economy by 2025. Thanks to the new Cold War, the Russian economy could prove to be less than a tenth of the US GDP in the period. Thanks to the new Cold War, Russian economy could prove to be less than a tenth of the US GDP in the period.

Russian economy could increase by six to seven times, but it cannot deliver its full potential.

BRICs positioned to surpass G6 in early 2030s

The peak of the advanced economies’ global power was in the 1980s and ‘90s. In 2000, the economies of the major advanced nations of the “West,” as reflected by the G6, were still almost ten times bigger than the BRICs. But increasing debt, military overstretch and aging populations have hit hard the advanced West.

In 2010, the BRICs accounted for more than a third of the G6; and in the mid-2020s, that figure will be two-thirds of G6. The original Goldman Sachs projections suggested the BRICs would catch up with G6 by the late 2020s. Thanks to geopolitical interventions, the actual convergence is likely to take a 5-10 years longer (Figure 2).

Figure 2       G6 Economies and the BRICs’ Catch-Up, 2000-2024



Sources: IMF; Difference Group.

Of course, if the six G6 countries would be compared with the six largest emerging economies – not just the four BRICs – Indonesia and Mexico could be added to the group. In that case, convergence would happen a few years earlier.

As International Monetary Fund reported in 2007, the large emerging economies have fueled global economic prospects since the 2000s. Recent efforts to undermine their economic potential reflect efforts at destabilization and regime change, critics argue.  In the absence of significant policy U-turn, collateral damage is spreading.

As US pivot to Asia is promoting competition rather than cooperation, the economic promise of the Asian Century is threatened. The Trump tariff wars have played a key role in the plunge of world trade, the fall of world investment and rising migration barriers, which have caused the number of the globally displaced to soar to more than 70 million; far higher than they were after World War II. At the same time, global economic prospects continue to diminish in a way that could push major advanced economies into secular stagnation earlier than anticipated.

Spearheading the world’s largest emerging and developing economies, China, India, Brazil and Russia together pace global economic prospects. And as they go, so will the world economy.

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/  

© 2019 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dan Steinbock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules