It has been nine years since I coined the acronym “BRIC,” which has become synonymous with the rise of Brazil, Russia, India and China. It has been more than seven years since my colleagues at Goldman Sachs and I first published an outlook to 2050 in which we suggested that the four BRIC economies could emerge bigger than the G7 economies, and, together with the US, would constitute the world’s five largest.
It has also been more than five years since the expression “Next Eleven,” or “N-11,” first appeared. That term bracketed the next 11 largest countries by population, and sought to determine their BRIC-like potential.
These 15 countries drive most of the positive momentum behind the world economy nowadays. China has overtaken Japan as the world’s second-largest economy, with output roughly equal to that of the other three BRIC countries combined. Their aggregate GDP stands at about US$11 trillion, or about 80 percent of the US level.
Domestic demand in the BRIC countries is even more impressive. The collective dollar value of BRIC consumers is estimated conservatively at just over US$4 trillion, possibly US$4.5 trillion. The US consumer market is worth more than double that — about US$10.5 trillion — but BRIC consumer power is currently growing at an annual rate in dollar terms of about 15 percent, which means an annual rate of roughly US$600 billion.
If this pace is maintained, BRIC consumers will be adding another US$1 trillion to the global economy by the middle of this decade. By the end of the decade, they will be worth more than US consumers.
Indeed, at some point during this decade, the BRIC economies combined will become as big as the US economy, with China’s GDP alone reaching about two-thirds that of the US. The four countries will be responsible for at least one-half of real GDP growth in the world, and possibly as much as 70 percent.
Beyond the BRICs, among the likely top 10 contributors to global GDP growth this decade are South Korea, Mexico and Turkey. From the so-called developed world, only the US is guaranteed a place on this list — and the top 20 could include Iran, Nigeria, the Philippines and Vietnam.
So how should we now think about the term “emerging markets?”
A few weeks ago, I decided with my colleagues to pursue the term “growth economies,” which Goldman Sachs adopted last year to describe how we treat many of the world’s most dynamic markets. At its simplest, a growth economy should be regarded as one that is likely to experience rising productivity, which, together with favorable demographics, points to economic growth that outpaces the global average.
However, an economy also needs sufficient size and depth in order to allow investors not only to invest, but also to exit when appropriate. So we opted for the following: Any economy outside the so-called developed world that accounts for at least 1 percent of current global GDP should be defined as a growth economy.
At this size, currently about US$600 billion, an economy should be large enough to allow investors and businesses to operate as they do in advanced countries, yet also be likely to grow faster. All other economies should continue to be defined as emerging markets. According to this definition, eight countries currently qualify: the BRIC countries, along with South Korea, Indonesia, Mexico and Turkey, while others — including Saudi Arabia, Iran, Nigeria and the Philippines — could join the list in the next 20 years.