This post is part of an INET series on BRICS and the global economy. The series is written by authors of the New Development Bank’s report, “The Role of BRICS in the World Economy & International Development.”
The BRICS countries (Brazil, Russia, India, China, and South Africa) are projected to remain the main drivers of growth in the world economy by 2030. But they will have to lead coordinated international efforts to boost financing of lagging productive investment in other emerging economies and developing economies.
For our research in the New Development Bank’s report on BRICS and the world economy, my co-author Francis Cripps and I used an innovative global macro-econometric model, the CAM (the Cambridge-Alphametrics Model), to project the relative future medium-term importance of the BRICS within the global economy.
For simplification of presentation, we have divided the world into eight blocs: three developed-economy blocs, the BRICS, Other Emerging Economies, and poorer Developing Economies.
Since the Global Financial Crisis, 2008-2017, the annual growth rate of GNP per capita at the global level has dropped to an average of only 1.7% (measured in 2005 $PPPs). But the BRICS have been the main drivers of global per capita growth during this historical period, averaging 5.4% (see Table 1). As a result, they currently account for 30.4% of world GNP.
Chapter 1 uses the CAM model to determine whether the BRICS are likely to continue this dynamic role through 2030. This is based on implementing a ‘Baseline Scenario’ that assumes no significant changes in economic policies. During the projected period of 2023-2030, for example, the annual growth rate of GNP per capita of the world economy would rise to 2.5%, mainly because of modest increases in growth from relatively low levels among the Developed Economies.
During 2023-2030, the BRICS’ annual growth rate of GNP per capita would still be 4.5%, much higher than that of any bloc of Developed Economies or even of other Emerging Economies. As a result, the BRICS’ projected share of World GNP would rise to 37.7%.
Table 1: Historical and Projected Annual Growth Rates
of GNP per capita (% per annum) (2005 $PPP)
2008-2017 | 2018-2022 | 2023-2030 | |
World | 1.7 | 2.4 | 2.5 |
USA | 0.7 | 1.4 | 1.3 |
Europe | 0.6 | 1.5 | 1.8 |
Other Developed Economies | 0.8 | 1.2 | 1.4 |
BRICS | 5.4 | 4.7 | 4.5 |
Other Emerging Economies | 1.1 | 2.8 | 2.8 |
Developing Economies | 2.6 | 2.5 | 2.9 |
Data Source: CAM World Databank (WD) and Baseline Scenario
Investment spending by the BRICS would continue to be a major driver of its economic growth—even though this bloc is projected to modestly lower its investment spending (as a ratio to GDP) from about 33% in 2017 to about 30% in 2030 (Table 2). In contrast, Developed Economies are projected to significantly raise their investment to GDP ratios—albeit from relatively low levels in 2017.
Disappointingly, Other Emerging Economies as well as poorer Developing Economies would also experience lower investment to GDP ratios over the whole period 2018-2030. For example, investment spending in Developing Economies would decline from 20.7% of GDP in 2017 to 18.8% in 2030.
Table 2: Projected Investment Spending (% of GDP)
2017 | 2022 | 2030 | |
World | 23.9 | 24.6 | 24.8 |
USA | 17.7 | 19.0 | 20.1 |
Europe | 18.4 | 20.4 | 22.1 |
Other Developed Economies | 21.6 | 23.0 | 24.4 |
BRICS | 33.2 | 31.9 | 29.9 |
Other Emerging Economies | 22.2 | 22.5 | 22.4 |
Developing Economies | 20.7 | 19.5 | 18.8 |
Note: Non-Governmental Investment. Data Source: CAM Baseline Scenario
The projected lack of progress among Other Emerging Economies and Developing Economies is the motivation for designing an Alternative Policy Scenario. This scenario is based on assuming that the BRICS would motivate a coordinated international effort to boost the long-term financing of infrastructure development—targeting, in particular, Other Emerging Economies and Developing Economies. Such an effort would include eliciting the support of commercial banks and international institutions as well as strategically important development banks, especially the New Development Bank itself and the Asian Infrastructure Investment Bank.
Table 3: Projected Growth Rates of GNP per capita
(% per annum, 2005 $PPP)
2023-2030 Baseline | 2023-2030 Alternative | Difference % Points | |
World | 2.5 | 2.8 | 0.3 |
USA | 1.3 | 1.4 | 0.1 |
Europe | 1.8 | 2.0 | 0.2 |
Other Developed Economies | 1.4 | 1.5 | 0.1 |
BRICS | 4.5 | 5.1 | 0.6 |
Other Emerging Economies | 2.8 | 3.1 | 0.3 |
Developing Economies | 2.9 | 3.2 | 0.3 |
Data Source: CAM Baseline Scenario and Alternative Policy Scenario
The resulting growth rates of GNP per capita are shown in Table 3. The table highlights the contrasts between the results for the Baseline Scenario and those for the Alternative Policy Scenario (which assumes the described investment boost).
The growth in GNP per capita in the BRICS themselves would rise significantly, i.e., to 5.1%, in contrast to its projected growth of 4.5% under the Baseline Scenario. But, more importantly, the projected growth rates of GNP per capita among Other Emerging Economies and Developing Economies would rise to 3.1% and 3.2% respectively. This result would represent a gain of 0.3 percentage point in both cases. Though appearing small, this gain would represent a significant improvement.
