When a Goldman economist coined the term “BRIC economies”—Brazil, Russia, India and China—he argued that their potential could make them the world’s four strongest economies by 2050. A few years ago, this seemed entirely plausible. Today, many have their doubts.
China’s property market is on the brink of collapse. India is dealing with double-digit inflation and stagnant growth. The Brazilian stock market has fallen 25% since March. Russia is doing a little better, its infrastructure is weak and crumbling. Perhaps a slowdown isn’t the worst thing. But what happens if everyone comes to a halt at once?
In 2008, the developing world carried the developed world through the crisis. In 2012, the developed world isn't ready to carry the developing world if they have their own crisis. A shallow recession is probably the best-case scenario in Europe as it continues to flirt with disaster. And growth is still slow in the U.S., with another summer doldrums looking all too possible. Who will save us this time if things get bad?
The global economy needs a new set of countries to step up. Is there a better emerging market out there than the BRIC economies? How do you see these economies faring in the decades to come?
Some say the direct impact of BRIC economies is trivial. Yet together, the BRIC countries’ GDP exceeds that of the euro zone. Brazil has the largest economy in Latin America and is a major energy exporter. Russia is the world’s 6th largest economy. India is a global leader in manufacturing and service-based industries. China is expected to overtake the U.S. as the world’s largest economy by 2016, according to the IMF.
Emerging markets are now the main source of optimism for global markets. If there is no growth in emerging markets, asset prices will sink around the world. This wealth shock may well result in a global slowdown or recession.
I still view the BRIC countries as a great source for foreign expansion and investment. These economies have low labor and production costs, and their growth has resulted in explosive returns for investors. Still, we learned the hard way in 2008 that all good things come to an end, so it’s only logical to prepare for the worst while hoping for the best. Will the BRICs’ rise come to an end within the next decade, or do you agree with the original thesis that Brazil, Russia, India and China will be the four most dominant economies by 2050?
Looks like China will be #1, but I wouldn't take the U.S. out of the top few in 2050. India's GDP growth was 7.8% last year, so I wouldn't count them out either. How about Indonesia as a long shot to replace Brazil or Russia in 40 years?
Indonesia's definitely a good call. I remember reading something a while back about how half their population is under 30, which should give them a pretty productive labor force compared to a country like Russia.
Iraq definately in terms of growth.
Balkan countries in Europe look interesting too.
definitely take a look at this:
http://money.cnn.com/news/economy/world_economies_gdp/?iid=HP_River
Um...China's real estate is not collapsing. The reason why the prices are dropping is due to government policy - Beijing wants the "common citizens" to be able to afford housing, which is why the government is implementing price controls at the moment.
The minute the government lifts those price limits, property prices will shoot right back up and the real estate market will be "fine" again.
I'm about to look at the similarities/differences between China's real estate government policy compared to the George Bush's drive for home ownership policies. Is China being smart about this move? Cause America put itself into the housing bubble.
Personally I think it has a lot to do with politics. The reason why the Chinese government isn't overthrown yet is because they are doing a pretty good job. People are getting richer, the military is getting stronger and the economy is doing very well. That could change, however, if the masses cannot afford to buy a home. If the masses can't afford to have a roof over their heads, there will be social unrest, which means the government's power will be threatened. Beijing cannot govern without the people's support.
great link! The United States has a huge economy! BRIC... my thoughts--> Brazil will continue to grow and I think that the rest of South America will boom soon.. South America will be equivalent to a China investment in 1999.I think that China is almost finished with it's growth spurt in the next 5 years and it will steadily slow down. Russia- Everyone is a lazy alcoholic and has corrupt socialist Vladimir Putin pulling the strings. India- George Soros says that India is a crappy investment- he likes south east Asia better. Iraq seems like it will grow more with more democracy.
OP is a little misinformed, Brazil is the 6th largest economy in the world, and if you factor in Argentina, Mexico, Peru, Colombia and, why not, Venezuela, you are looking at the fourth economy in the world. Problem is that industry is not as developed, but I see nice prospects there.
That's what I was thinking before I wrote this (I remember all the articles from when Brazil passed the UK), but this article from a couple days ago pegged Russia in the 6 spot in terms of PPP GDP. Either way, I agree with your analysis that Latin America is a much better place to invest your money over the next decade compared to Russia or India...China's up in the air.
http://www.therichest.org/world/worlds-largest-economies/
Putin is Darth Vadar. Value trap.
Great articles.... I am of the opinion that there is no substitute to the BRIC group when the developed countries have attained their maturity levels. I think after 90s, the BRIC group came into limelight owing to the domestic developments in those regions. After the fall of USSR, when Russian economy opened up, there was a surge in entrepreneurial activity that was curbed under soviet regime. Similarly when Indian economy was liberalized in early 90s, there was a lot of increase in entrepreneurial activity. Chinese economy as well started getting the boost in 80s as well as 90s. These economies are demand driven. With much needed economic liberalization and globalization, these economies started contributing on a larger scale to the global trade. However the point to be noted is that most of these countries use US dollar as a significant currency in foreign trade. Chinese Yuan even though is robust is not comparable to the US dollar. India emerged as a dollar scarce country in late 80s to a dollar surplus country having US dollar reserves of 100 billion. So it is natural that if the growth in these regions is pegged to dollar, any weak cues in global markets is bound to hamper investment scenario in these regions. Massive outflow of US dollar reserves from Indian economy is responsible of depreciation of domestic currency which hampers its economy since India is one of the largest importers of crude oil. With hike in crude bill, government needs to subsidize the fuel and any hike in fuel increases inflation. There is another interesting point. I compare these economies with mid-cap stocks. Lots of optimism in good times and equally lots of pessimism in bad times. These regions have their share of domestic problems e.g. poor governance, corruption and underdeveloped state of markets. During 2005, these issues were present, but were sidelined because dollar flow was high from developed markets to capture the growth story. Now the growth estimates are being revised to reflect a conservative scenario. The rebound in global scenario after 2009 was led by BRIC group no doubt. However the growth was bound to be short lived since the BRIC group has its own problems and infrastructure bottlenecks. In near terms it is in no position to replace the developed economies, no way in short span like a decade. As of now, the regional growth depends on the policy support & infrastructure of developed world
I am of the firm opinion that it is the developed world that will carry the developing economies this time including the emerging BRIC group.
Turkey and Indonesia have massive growth from a already decent level. And give it ten more years and some countries in Africa might step in to secure the world economy's growth.
However, I believe that in a longer term, countries will stop matter too much. You will have growth regions all over the world and you will have very poor regions all over the world. People who can (educated, wealthy, young) will move to the booming centers while the unfortunate who cant will stay behing and make the wealth gap even worse.
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