A few years ago the BRICS nations seemed ready to move into the first ranks of the world economy. Today the economies of Brazil, Russia, India, China and South Africa are having their problems. What happened to the BRICS? Radio Free Europe reports on BRICS woes.
Brazil, Russia, India, China, and South Africa — the BRICS — hope to move the world away from the U.S. dollar and Western-dominated financial institutions, which they say do not meet the needs of emerging economies.
But steep drops in recent weeks in the currencies of the five countries, which account for 40 percent of the world’s population and about one-fifth of global economic output, underscore how difficult it would be for any of them to take the dollar’s place.
The problems of the BRICS nations vary case by case but the global economic slowdown is a culprit for all of them. Russia is hurt by low oil prices, which help the others to greater or lesser degrees. Brazil is hurt by slowing demand for raw materials from China which in turn is seeing its economy slow down due to decreasing demand from Europe especially. What happened to the BRICS is a case by case story.
In response to the Russian annexation of Crimea and support of separatists in Ukraine the USA and EU imposed economic sanctions on Russia. CNN Money writes about how badly sanctions have hurt Russia.
Collapsing oil prices and Western sanctions on big banks and energy companies tipped Russia into a financial crisis at the end of 2014. The ruble plunged and inflation soared. Russia jacked up interest rates in response, sold dollars and euros to defend its currency, pumped money into the banks and slashed government spending. The situation has stabilized this year, although the ruble has come under pressure again recently, but the economy is already deep in recession.
The IMF expects Russian GDP to shrink by 3.4% this year, as falling real wages, the higher cost of borrowing and shattered confidence hit domestic demand. And western sanctions, and Russia’s retaliatory ban on imports of food and agricultural products, could be responsible for nearly half that decline.
What happened to the BRICS in the Russian case has partly to do with Russian adventurism. The other part is that oil prices have fallen by more than half.
The End of the Chinese Economic Miracle
We asked if the signs of the slowing Chinese economy are temporary or permanent in our article, Is This End of the Chinese Economic Miracle?
The bosses of the managed capitalism economy have often seemed infallible as cheap labor attracted foreign investment and produced cheap and profitable exports for decades. However, we have often compared China to Japan of the 1980’s when the Japanese seemed ready to take over the world. A glut of hidden debt took down the Japanese economy and sent it into two decades of deflation. If this is the death of the Chinese economic miracle hidden debt may be the culprit for China as it was for Japan.
And economic slowdowns in China hurt raw material suppliers from South Africa to economy is bringing on a corruption related witch hunt that could bring down the president.
How is India Doing?
What happened to the BRICs in the case of India is not so grim. Forbes looks at India and economic growth.
Using International Monetary Fund data, India is now growing at 7.46 percent. Last year the World Bank assessed that the Indian economy had become the world’s third largest in purchasing power parity terms. This year, the U.S. Department of Agriculture estimated that in real terms, the Indian economy-today the eighth largest by this measure-would become the world’s third largest by 2030. And this year, China’s growth has slowed, making India now the fastest-growing major economy, while other BRICS like Brazil and Russia have slowed, too. These external developments have made India look brighter by contrast.
Out of the four BRICs, India is the bright spot despite the usual economic concerns.