## Jim O’Neill revisits BRICs and emerging markets

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### Overview and retrospective
- The year 2021 marks the 20th anniversary of coining the acronym “BRICs” (Brazil, Russia, India, China).
- Without COVID-19, GDP growth in the past decade would have been about 3.6 percent—just below the 3.7 percent experienced in 2000–09.
- Each decade since the 1980s has had stronger economic growth than the 1980s and 1990s, each about 3.3 percent.
- Hundreds of millions of people have been taken out of absolute poverty in part because of growth led by emerging markets, with the BRICs front and center.

### BRICs performance and interpretation
- Original aim (2001): argue for changing the framework for global economic governance, not to assert persistent growth at potential levels.
- Potential growth framework: real economic growth determined by workforce size and productivity; large populations and scope for productivity catch-up implied higher potential growth for BRICs.
- Country outcomes 2010–20:
  - India: broadly developing along envisioned path but has notably disappointed in recent years.
  - Brazil and Russia: economic performance in 2010–20 was very disappointing; both have suffered from the commodity curse and overdependence on the world commodity cycle; need to diversify away from commodities and grow the private sector.
  - China: ongoing strength suggests it is fully achieving its potential; China’s GDP, in excess of $14 trillion (as of 2019), is more than twice that of the other BRICs in aggregate. The BRIC economies combined are now larger than that of the European Union and are approaching the size of the United States.

### Global growth prospects and key determinants
- Even with China’s slowing real GDP growth beginning in 2021 (due to demographic challenges), China may still overtake the United States as the world’s biggest economy.
- Difficulty of reaching higher global growth:
  - It will be very hard for the world to get to a real GDP growth rate of 4 percent; even the 3.7 percent of the past two decades could be challenging.
- Four factors determining global growth prospects:
  - Productivity in developed economies.
  - How quickly China’s growth trend slows.
  - The success of India.
  - Whether other highly populated emerging markets (examples: Indonesia, Mexico, Nigeria, Vietnam, and others) get close to their long-term potential.
- If those emerging markets achieve near-potential growth, world real GDP growth could better emulate the past decade.

### COVID-19, health investment, and the IMF’s role
- Immediate strong post–COVID-19 recovery depends on developing and distributing vaccines and treatments to eradicate the pandemic.
- Estimated external funding need: $20–$30 billion from donors for vaccine/treatment efforts; described as a “no-brainer” economic stimulus with multiplier benefits dwarfing potential benefits of 2008–09.
- Recommended IMF actions:
  - Play an active role in encouraging this stimulus.
  - Integrate analysis of health spending into its surveillance work.
  - Align with finance ministers to support the Access to COVID-19 Tools (ACT) Accelerator.
- Broader health threats:
  - Antimicrobial Resistance (AMR) could cause as many as 10 million deaths annually by 2050 and, as a result, a cumulative $100 trillion in lost economic opportunity.
  - Strengthening links between economics, finance, and health should be central to emerging ideas.

### Fiscal policy, investment, and monetary system implications
- Post–COVID-19 recommendation for emerging markets (especially larger ones): adopt smart fiscal policies that prioritize public investment.
- Need to distinguish between government investment spending and consumption spending:
  - Government investment spending likely has a positive multiplier effect and should not be treated the same as consumption spending from an accounting perspective.
  - Investment is key to tackling climate change and future health threats and is arguably more important for economic growth than financial conditions.
- Domestic financial systems:
  - Smarter fiscal frameworks will almost definitely require stronger domestic financial systems.
  - Continued dependence on a monetary system based on the US dollar complicates domestic policy space.
  - The dollar-based monetary system remains broadly as dominant as in 1982, resulting in emerging markets riding the cyclical effects of the Federal Reserve’s monetary policy:
    - As the Fed tightens, financial conditions for emerging markets tend to tighten—often chaotically.
    - As the Fed eases, the reverse happens.
  - The monetary system needs to evolve to reflect changing global dynamics; until it does, reaching growth potential will remain challenging.

### Policy priorities and concluding points
- Emerging market nations need to be bolder and smarter on:
  - Diversification away from commodity dependence (Brazil, Russia).
  - Deepening private sector roles.
  - Prioritizing public investment (health, climate, education).
  - Strengthening domestic financial systems and reducing vulnerability to dollar-cycle shocks.
- The IMF should support these efforts through surveillance that integrates health spending and by encouraging donor-funded vaccine/treatment initiatives.
- Jim O’Neill notes the IMF “will be there to help them.”

*Source: “Is the Emerging World Still Emerging? Two decades on, the BRICs promise lingers,” Jim O’Neill, Finance & Development, June 2021.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2021/june/jim-oneill-revisits-brics-emerging-markets.pdf_