The new BRICS+ is not a love marriage

A brief history of BRICS

BRICS is an informal group of countries that convenes on an annual basis, each country taking up a one-year rotating chairmanship of the group. The bloc’s founding members are Brazil, Russia, India and China. The first BRIC summit was held in Russia in 2009, and one year later, South Africa joined and the group became known as BRICS. In the past, the group has discussed politics, as well as trade and development. The group also has a jointly owned development bank valued at USD 100bn (the New Development Bank, NDB).

Not everyone is invited, and not everyone wants to join

This year’s BRICS summit, 15th in order, was held in South Africa. The summit received particular interest, as South Africa who is a member of the ICC that has issued an international arrest warrant on Putin, would have been obliged to arrest Putin if he attended. For that reason, Putin joined this year’s summit remote.

Another area of interest was the group’s potential expansion. Over 40 countries had expressed their interest in joining the forum. Eventually, the group agreed to welcome six new members – Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and United Arab Emirates – starting Jan-2024. Indonesia, whose economy is larger than that of any of the new members now joining, declined the offer, but is still mulling whether to join or not.

A group with diverging future paths?

No doubt, the new BRICS+ with six additional member has the right parameters to become an economic superpower. It represents 1/3 of global GDP and close to half of the world population. Yet, its members face very diverging economic prospects. In all countries but Egypt, the average annual economic growth projected for 2023-2028 is expected to slow down compared to 2000-2010 period. Growth already decelerated in 2010s compared to early 2000s across the board, but even comparing to that period (and excluding years distorted by the pandemic), growth is set to be weaker in most economies going forward.

China, unsurprisingly, was the fastest-growing BRICS+ economy for a long time, but looking forward, growth is set to slow down markedly. It remains by far the largest economy in the new bloc, but Ethiopia and India, with their average expected growth rates above 6% are expected to catch up. Strikingly, in five out of 11 countries, average annual growth is projected at 3% or lower in the next 5 years, which is very modest in EM context.

Also from a layperson perspective, the BRICS+ is not a group of thriving economies only. Real GDP per capita (PPP-adjusted) has increased significantly in China, Ethiopia and in the past decade, while citizens in the UAE, Saudi Arabia and Egypt have seen more modest gains. In Iran, Argentina, and Brazil people are now worse off compared to 10 years ago.

The new group is likely to have diverging economic interests, particularly as the new group hosts several oil-producing countries. These countries have clear incentives to object investments into green transition, something that would (or at least should) be in the interest of all non-oil-producing EMs. Geoeconomic interests are also likely to diverge, with Russia being an international pariah state, and Iran and China already facing sanctions, while others likely want to continue engagement with the West and avoid any risk of sanctions.

Already, as part of a plan to reduce reliance on dollar, the NDB has announced they will start issuing debt in BRICS currencies. Contrast to the traditional approach by multilaterals such as the IMF or World Bank, the NDB loans do not come with conditionality, which makes them attractive to borrowers. However, exposure to Russian assets has already posed problems for the bank (reflected in rating downgrades), and all in all, the BRICS+ has a long way to go to develop a financial infrastructure that could challenge the existing one.

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