The BRICS - A decade on, the economies are no longer the reliable powerhouses of growth they once were
The BRICS - A decade on, the economies are no longer the reliable powerhouses of growth they once were
SUMMARY
The BRICS economies were touted as the leading new countries for growth and the primary shift towards these countries and away from the traditional affluent countries was said to be beginning. To an extent this has happened and countries like China and India have been potent engines for world economic growth over the last decade. However, in 2017 the five economies of the BRICS are starting to look run down and some serious cracks have appeared in the theory that all these countries will come to dominate world economics. All five have begun to slow down and some have even dropped into recession in recent years. There are some problems which have affected all five, such as scandal and corruption, and some conclusions can be drawn about the future of other emerging economies as they try to develop into western style democratic economies and shed the traditions of old. We look at the economies of Brazil, Russia, India, China and South Africa to examine just what the problems are and if there are resolutions to be found.
KEY HIGHLIGHTS
SUMMARY
The BRICS economies were touted as the leading new countries for growth and the primary shift towards these countries and away from the traditional affluent countries was said to be beginning. To an extent this has happened and countries like China and India have been potent engines for world economic growth over the last decade. However, in 2017 the five economies of the BRICS are starting to look run down and some serious cracks have appeared in the theory that all these countries will come to dominate world economics. All five have begun to slow down and some have even dropped into recession in recent years. There are some problems which have affected all five, such as scandal and corruption, and some conclusions can be drawn about the future of other emerging economies as they try to develop into western style democratic economies and shed the traditions of old. We look at the economies of Brazil, Russia, India, China and South Africa to examine just what the problems are and if there are resolutions to be found.
KEY HIGHLIGHTS
- Both Brazil and India brought some comfort to the success of the BRIC acronym: both are democracies which have embraced the virtues of western style capitalism rather than the government controlled model pursued by Russia and China. Yet over recent years the luster has gone.
- China is the world’s second largest economy and the world’s most populous country. Ever since the country started to liberalize its economy, there have been astonishing levels of growth which have pushed the country to ever greater heights, with many expecting the eventual “catching” of the US economy in GDP terms within the century. However, the slow down experienced in China and the government's push to try and maintain high levels of growth is looking like an increasingly uphill struggle.
- After the collapse of the Soviet Union, Russia was supposed to reform and become a major, market led, economic power. Only with the election of Vladimir Putin as president did economic fortunes for the beleaguered nation improve. Yet improving prosperity and rising living standards ceased some time ago. No longer is the average Russian gaining wealth – indeed, most are poorer now than several years ago.
- Looking at the key economies of the BRICS and seeing why their economies are faltering
- What has caused these slow downs and are they preventable
- What does this mean for the future of the global economy
- Is there anything that can be done to solve these problems
- Why is Brazil suddenly unable to produce the growth it has achieved in the past?
- What is the nature of Russian economic problems and are they systemic?
- Is the future positive for India and can it escape its huge debt burden?
- Can China effectively transition to a consumer economy and if it could is that even desirable?
- Why is the South African economy unable to take advatange of good potential for growth?
Executive summary
Brazil: A faded success story striving to recover
Russia: Threatened by endemic economic problems
India: Massive debt & public bankruptcy have restricted economic growth
China: The world's growth engine begins to stall
South Africa: The late BRIC entrant with multiple economic issues
Brazil: A faded success story striving to recover
Recession has shaken faith in Brazilian progress, but some bright signs have emerged
Poor governance resulted in high inflation, high debt and high interest rates – instability must not be allowed to repeat it
Petrobras scandal still lingers on, but government action is positive and could have wider impact
Major reforms to spending have occurred due to recession, but tax reform must also follow
Russia: threatened by endemic economic problems
Corruption is rife and hampers the ability of the Russian economy to function
Economically, oil and gas dominate, creating a need for diversification
Living standards are falling for most, leaving Russia struggling to fulfill early BRIC predictions
Sanctions still hurt, highlighting the need for change post-recession
India: Massive Debt & Public bankruptcy has Restricted Economic Growth
India's debt is still sizeable when compared with neighboring economies
Government spending could be much more generous
India’s government spending is low in comparison to the rest of the BRICS nations
Tax revenues are being spent on paying back debt as opposed to developing key sectors
Tax receipts are used to subsidize many industries to push for better living standards in India
Less room for the public sector, more room for private
State-owned-firms are left with losses larger than Zimbabwe’s GDP
Some firms do not comply with regulations breeding governance issues internally
China: The world's growth engine begins to stall
Current Chinese growth targets are the lowest for a quarter of a century
Demand and production between the west and China is crucial
China has been trying to move to a consumer based model
The west should be cautious about urging China to move to a consumer economy
China has learned from the recession of 2008 systemic risks
Too much reliance on surging economies worldwide
Supplier economies are particularly hard hit by this over reliance on Chinese growth
Trump’s protectionist threats are not helpful for the BRICS or US
China needs to make some crucial changes but not in a western model
South Africa: The late BRIC entrant with multiple economic issues
Mining economy problem is reducing but not being replaced
Cut in interest rates to desperately avoid a recession
Downgrades from the ratings agencies as a result of instability
Solutions to the problem require long term investment in people
Political instability is a further risk in the country
Unemployment needs addressing to help improve consumption and spending
Points of interest
Appendix
Further Reading
Ask the analyst
About MarketLine
Disclaimer
Brazil: A faded success story striving to recover
Russia: Threatened by endemic economic problems
India: Massive debt & public bankruptcy have restricted economic growth
China: The world's growth engine begins to stall
South Africa: The late BRIC entrant with multiple economic issues
Brazil: A faded success story striving to recover
Recession has shaken faith in Brazilian progress, but some bright signs have emerged
Poor governance resulted in high inflation, high debt and high interest rates – instability must not be allowed to repeat it
Petrobras scandal still lingers on, but government action is positive and could have wider impact
Major reforms to spending have occurred due to recession, but tax reform must also follow
Russia: threatened by endemic economic problems
Corruption is rife and hampers the ability of the Russian economy to function
Economically, oil and gas dominate, creating a need for diversification
Living standards are falling for most, leaving Russia struggling to fulfill early BRIC predictions
Sanctions still hurt, highlighting the need for change post-recession
India: Massive Debt & Public bankruptcy has Restricted Economic Growth
India's debt is still sizeable when compared with neighboring economies
Government spending could be much more generous
India’s government spending is low in comparison to the rest of the BRICS nations
Tax revenues are being spent on paying back debt as opposed to developing key sectors
Tax receipts are used to subsidize many industries to push for better living standards in India
Less room for the public sector, more room for private
State-owned-firms are left with losses larger than Zimbabwe’s GDP
Some firms do not comply with regulations breeding governance issues internally
China: The world's growth engine begins to stall
Current Chinese growth targets are the lowest for a quarter of a century
Demand and production between the west and China is crucial
China has been trying to move to a consumer based model
The west should be cautious about urging China to move to a consumer economy
China has learned from the recession of 2008 systemic risks
Too much reliance on surging economies worldwide
Supplier economies are particularly hard hit by this over reliance on Chinese growth
Trump’s protectionist threats are not helpful for the BRICS or US
China needs to make some crucial changes but not in a western model
South Africa: The late BRIC entrant with multiple economic issues
Mining economy problem is reducing but not being replaced
Cut in interest rates to desperately avoid a recession
Downgrades from the ratings agencies as a result of instability
Solutions to the problem require long term investment in people
Political instability is a further risk in the country
Unemployment needs addressing to help improve consumption and spending
Points of interest
Appendix
Further Reading
Ask the analyst
About MarketLine
Disclaimer
LIST OF TABLES
Table 1: South African credit rating from Moody’s, Fitch & S&P
Table 1: South African credit rating from Moody’s, Fitch & S&P
LIST OF FIGURES
Figure 1: Brazil GDP 2001-2016 ($tn)
Figure 2: Brazilian public debt 2001-2015 ($bn)
Figure 3: Brazilian exports of petroleum oils and oils obtained from bituminous minerals, crude ($bn)
Figure 4: Brazil public expenditure 2001-2016 ($bn)
Figure 5: Transparency International Corruption Index Rankings, 2016, G20 Countries
Figure 6: Millions of Barrels of Oil Equivalent (oil and gas combined) produced by Russia, 2006-2016
Figure 7: Average wages in Russia ($000’s)
Figure 8: GDP per capita in Russia, 2006-2016 ($000’s)
Figure 9: India’s Debt to GDP % has been falling over the years
Figure 10: India’s neighboring countries debt to GDP ratio (%)
Figure 11: BRICS government spending in 2016 % of GDP
Figure 12: BRICS Interest payments as a (%) of revenue
Figure 13: Interest, Subsidies and Defense Expenditure of Indian Government (INR ten million)
Figure 14: Thousands of miles of agricultural land in India is available for farmers to produce
Figure 15: Air India is still very popular domestically, not so much internationally
Figure 16: Qingdao Port, China
Figure 17: Chinese GDP annual growth (%) 1984-2016
Figure 18: US trade with China, 2010-2016, $bn
Figure 19: Private consumption versus investment GDP Growth 2000-2030
Figure 20: China debt to GDP ratio 2003-2014
Figure 21: Leading African economies by GDP 2016 ($m)
Figure 22: South African GDP 2004-2016
Figure 23: South African unemployment and poverty rates 2017
Figure 1: Brazil GDP 2001-2016 ($tn)
Figure 2: Brazilian public debt 2001-2015 ($bn)
Figure 3: Brazilian exports of petroleum oils and oils obtained from bituminous minerals, crude ($bn)
Figure 4: Brazil public expenditure 2001-2016 ($bn)
Figure 5: Transparency International Corruption Index Rankings, 2016, G20 Countries
Figure 6: Millions of Barrels of Oil Equivalent (oil and gas combined) produced by Russia, 2006-2016
Figure 7: Average wages in Russia ($000’s)
Figure 8: GDP per capita in Russia, 2006-2016 ($000’s)
Figure 9: India’s Debt to GDP % has been falling over the years
Figure 10: India’s neighboring countries debt to GDP ratio (%)
Figure 11: BRICS government spending in 2016 % of GDP
Figure 12: BRICS Interest payments as a (%) of revenue
Figure 13: Interest, Subsidies and Defense Expenditure of Indian Government (INR ten million)
Figure 14: Thousands of miles of agricultural land in India is available for farmers to produce
Figure 15: Air India is still very popular domestically, not so much internationally
Figure 16: Qingdao Port, China
Figure 17: Chinese GDP annual growth (%) 1984-2016
Figure 18: US trade with China, 2010-2016, $bn
Figure 19: Private consumption versus investment GDP Growth 2000-2030
Figure 20: China debt to GDP ratio 2003-2014
Figure 21: Leading African economies by GDP 2016 ($m)
Figure 22: South African GDP 2004-2016
Figure 23: South African unemployment and poverty rates 2017
