Brics expansion gains ground with higher growth potential

The world economy is set to rely even more heavily on the Brics group of emerging economies to drive expansion, rather than their wealthier Western peers, according to the International Monetary Fund (IMF)’s latest forecasts.
Compared with its last round of predictions six months ago, the IMF now expects a bigger share of growth over the next five years to come from powerhouse Brics economies like China, India, Russia and Brazil, according to forecasts based on purchasing power parity.
By contrast, the expected contribution of Group of Seven members like the US, Germany and Japan was revised down.
The Brics group of emerging-market powers — the acronym stands for Brazil, Russia, India, China and South Africa — has gone from a slogan dreamed up at an investment bank two decades ago to a real-world club that controls a multilateral lender.
It almost doubled in size in 2024, to include Iran, the United Arab Emirates, Ethiopia and Egypt. Saudi Arabia was also announced as a new member, though the kingdom has yet to take a final decision on whether to join.
Dozens more countries have expressed interest in joining its ranks.
The expansion push has been driven largely by China, now the world’s pre-eminent industrial power, which is trying to boost its global clout by courting nations traditionally allied with the US. South Africa and Russia have backed the expansion.
India was initially hesitant because it was concerned that a bigger Brics would transform the group into a mouthpiece for China, while Brazil was worried about alienating the West — although both governments eventually agreed to an enlargement.
In a global context, the addition of major fossil-fuel producers may give the bloc more scope to challenge the dollar’s dominance in oil and gas trading by switching to other currencies, a concept referred to as de-dollarisation.
However, expansion is “more about politics and less about economics,” according to analysts at Bloomberg Economics.
The biggest achievements of the group have been financial. The countries agreed to pool $100bn of foreign-currency reserves, which they can lend to each other during emergencies. That liquidity facility became operational in 2016.
They founded the New Development Bank — a World Bank-inspired institution that has approved almost $33bn of loans — mainly for water, transport and other infrastructure projects — since it began operations in 2015. By comparison, the World Bank committed $72.8bn to partner countries in fiscal 2023.
Trade among the bloc’s first five members surged 56% to $422bn between 2017 and 2022. The natural resources of Brazil, Russia and Iran make them natural partners for Chinese demand.
India and China have weaker trade connections with each other, partly due to their geopolitical rivalry and an acrimonious border dispute.
There’s still interest in emerging markets. But Brics is largely irrelevant as an investment theme today due to geopolitical changes and the members’ different economic trajectories.
US-led sanctions have put Russia off limits for most foreign investors, and some sectors in China — especially technology companies — have also been sanctioned or face potential investment bans. China also is a maturing economy, increasingly separated from other emerging markets and facing a structural slowdown.
Brazil’s economy slowed markedly following the end of a global commodity boom about a decade ago. South Africa’s economy has been hamstrung by rolling power blackouts and logistics snarls, although it’s recently made some tentative progress in tackling those problems.
India is still a growth story that investment banks compare with China 10 or 15 years ago, though it’s unclear if it can follow China’s manufacturing-led model.
In a wider sense, Brics membership is also a way of signalling increasing frustration with the US-led international order and key institutions that remain firmly in the control of Western powers, like the World Bank and International Monetary Fund.