BRIC is a term used by Goldman Sachs (GS) in 2003 refering to Brazil, Russia, India and China. Goldman Sachs is a leading global investment banking, securities and investment management firm. It argued that the economies of the BRICs are rapidly developing and by the year 2050 will eclipse most of the current richest countries of the world. It further projected that the BRIC countries will account for 30% of the world economy. In plain and simple english, BRIC are emerging markets more like that of the so-called Tiger economies pre-Asia crisis.
For all countries, similar to BRIC or not, it stated that, “the key to converting potential into reality continues to be progress in strengthening key long-term conditions for growth [macroeconomic stability, political institutional development, trade and investment openness, and education].” GS further introduced a Growth Environment Score (GES), which aims to summarize the overall structural conditions and policy settings for countries globally. The BRICs are all in the top half of the rankings for developing countries. Proof of which are as follows:
1. China would now overtake the US by 2040 (slightly ahead of 2003 projections)
2. India would overtake Japan by 2033 (slightly later than earlier projections, due to the recent improvements in Japan’s economic performance).
China would become the largest economy, followed by the US, India, Japan and Brazil. Mexico will be the sixth-largest economy, slightly ahead of Russia, though Russia still emerges as the wealthiest BRIC nation in terms of GDP per capita. Indonesia, Nigeria and Korea could overtake Italy and Canada by 2050, but the other N-11 members may not be able to “catch up” with the current G7 group. GS has identified 11 BRIC-like countries labeled as the "Next Eleven or N-11". These are: Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey, Vietnam.
Between 2000 and 2005, the BRICs contributed roughly 28 percent of global growth in US dollar terms, and 55 percent in purchasing power parity (PPP) terms. Their share of global trade continues to climb at a rapid rate. At close to 15 percent currently, it is now double its level in 2001. Trade among the BRICs has also accelerated, with intra-BRICs trade now nearly 8 percent of their total trade compared with 5 percent in 2000.
Since GS first published its BRICs 2050 scenarios, the BRICs have grown significantly better than it was initially assumed. Each of the BRICs exceeded its growth path in 2004 by at least a percentage point, and all but Brazil are expected to do so in 2005.
The BRICs’ impact on the global economy has continued to grow over the last few years, through a wide range of different dimensions. Latest estimates suggest that the BRICs now hold more than 30 percent of world reserves. China is the dominant contributor, but Russia, India and Brazil have all accumulated substantial reserves also. BRICs’ share as a destination for global FDI also continues to rise (now 15 percent of the global total, nearly three times higher than in 2000). More striking is that BRICs’ FDI outflows have also picked up (to more than 3 percent of the global total, a sixfold increase since 2000) as BRICs companies expand their own global presence. Markets BRICs’ share of oil demand is moving steadily higher, with an estimated 18-percent share, projected to rise further this year and next.
This dynamic still has a long way to run, with the next decade in particular the likely point of maximum pressure on energy and other natural resources. BRICs stock markets have also generally performed very strongly since 2003, with Brazilian, Russian and Indian indices all up by around 150 percent over that period. China is the one exception, where the idiosyncrasies of the local market have seen very lackluster performance continue into this year. China provides a warning that the local market may not be the best investment vehicle for the local growth story. BRICs market capitalization continues to climb, currently at close to 4 percent of the global total, a story we described in our report last year.
Two themes that have come up repeatedly since GS introduced its BRICs 2050 scenarios are: Will the BRICs make it? And who else might join them? GS opined that the key to turning one into the other is on the BRICs finding and keeping in place the conditions for growth. Without these improvements, the BRICs’ potential will not be fulfilled. Demographic advantage is not sufficient.
So, is the Philippines learning from any of these?
