The Western financial crisis means the fast-growing economies of Brazil, Russia, India and China (BRIC) will grow their share of the world economy even faster than originally forecast, the founder of the four-nation BRIC concept said.
The term BRIC was coined by Wall Street bank Goldman Sachs to describe how the four rising economies are likely to rival and overtake many of the West’s leading economies over the next half century.
Jim O’Neill, the Goldman Sachs economist who originated the term in 2003, said the financial crisis that began in US mortgage security markets was allowing the BRIC countries to take a bigger share of world GDP.
“On a relative basis it definitely allows the BRICs to develop faster as they are going to take an even bigger share of GDP sooner,” O’Neill said in an interview at an economic forum in Russia’s former imperial capital of St Petersburg.
“This is a financial crisis of the West and we must not forget that of the world’s 6 billion people, most of them are not affected by this,” he said. “I was in India four weeks ago and there were no signs of India being affected by all of this.”
O’Neill, head of global economic research at Goldman, said China, India and Russia were actually growing faster than originally predicted by his research.
“Of the four BRICs, Russia, China and India have all grown on average 2 percent more than we suggested,” he said. “It is a hell of a lot so they are now collectively 16 percent of global GDP so it is all happening a lot quicker.”
The four BRIC countries have been seeking to form a political club to convert their growing economic power into greater geopolitical clout.
Last month in the Russian city of Yekaterinburg, the four sought to formalize their club at the first stand-alone meeting of BRIC foreign ministers.
“I would hope that Western leaders take note of that meeting and start to accelerate bringing them into the G8 club and the IMF because the world doesn’t want a separate club just looking after the growing countries the same as it doesn’t need an old club looking after the declining — it needs a better club involving them both,” O’Neill said.
“I think that the lack of progress by the G8 and the Western leaders to change is really bad and is one of the biggest problems in the world today,” he said.
O’Neill says the combined GDP of the BRIC countries could overtake the combined economic might of the G7.
Detractors say optimistic predictions about the BRIC economies ignore major hurdles to their development such as future political instability, rampant corruption and decrepit infrastructure.
Russian President Dmitry Medvedev has said Russia will become one of the top five economies of the world by 2020, but admits the rule of law needs to be strengthened and corruption has to be rooted out.
O’Neill said Russia should speed up some of its infrastructure projects and that corruption could sap Russia’s economic potential.
He said Russia’s economic expansion will slow in the decade from 2010 as gains in the oil price decelerate.
Russia’s GDP, currently the world’s 10th biggest, will grow at 3.3 percent from 2010 to 2015 and 2.9 percent during the following five years, O’Neill said yesterday at the St Petersburg International Economic Forum.
Russia’s GDP will total US$3 trillion in 2020, or 4 percent of the world total, compared with 2 percent now. Russia’s economy will be the world’s eighth biggest in 2020, he said.