IMF Survey: BRICs Drive Global Economic Recovery
IMF News, July 22, 2009
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- Published: July 22, 2009
Shifting global balance and BRICs’ economic weight
- BRICs (Brazil, Russia, India, China) represent 40 percent of the world’s population.
- BRICs account for 25 percent of global GDP.
- BRICs leaders met in Yekaterinburg (Russia) on June 16; meetings included representatives of the Shanghai Cooperation Organization (SCO).
- The Economist noted emerging “decoupling” between emerging markets and advanced Western economies in its June 20 issue.
Structural characteristics bolstering BRICs’ autonomy
- Exports are a relatively smaller share of GDP in some BRICs: in Brazil and India, exports are less than 15 percent of GDP.
- Presence of sizable domestic markets, industrial and technological diversification, major government infrastructure investment programs, and smoother financial liberalization post-1997-98 Asian crisis underpin greater autonomy.
- Trade among BRICs is surging and is often settled in local currencies rather than in dollars.
Country-specific developments and indicators
- China:
- Launched a program involving $600 billion of investment in the sectors of the real economy by November 2008.
- Despite a 25 percent decline in exports, the Chinese economy in the first half of 2009 grew by 6 percent.
- The Chinese automobile market has surpassed the U.S. market; three years earlier it was at 50 percent (relative to U.S. market size).
- India:
- Recorded 4 percent growth.
- Expanding beyond textiles and cheap electronics into shipbuilding, chemicals, steel, and communications.
- Russia:
- Suffered greater fallout from plunging commodity prices.
- Brazil:
- Economy undergoing consolidation.
BRICs’ policy priorities and proposed reforms
- Four-pronged approach to the financial crisis:
- Decisive regulation of global financial markets.
- An orderly move away from the existing global monetary system based solely on the dollar.
- Reorganization of the IMF, including a more important role for Special Drawing Rights as a transitional instrument in international reserve facilities.
- Longer-term creation of a new multipolar monetary system based on a basket of currencies.
Implications and prescriptions
- The BRICs are operating with a high degree of independence, consolidating relationships with one another rather than waiting for the United States to lead.
- Investment in major infrastructure projects, technological innovation, and environmentally conscious execution are identified as engines of growth and development, including for heavily indebted countries.
- The article suggests Europe should take note of the BRICs’ development strategy and potential implications for global economic governance.
Source: IMF Survey: BRICs Drive Global Economic Recovery (July 22, 2009).