In a new report, Bloomberg concludes the global economy is being transformed by the rapid rise of the BRICS alliance of developing nations, as the group’s share of the world GDP in terms of purchasing power parity (PPP) is poised to surge far beyond that of the Group of Seven (G7) advanced economies.
The BRICS alliance is presently composed of Brazil, Russia, India, China, and South Africa. However in January, Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE will all be welcomed into the group.
The G7 group of advanced economies is composed of the US, Canada, the UK, France, Italy, Germany, and Japan.
The report indicated that already the expanded BRICS has eclipsed the G7. As of 2022, the BRICS group was responsible for 36% of the global economy, compared to 30% for the advanced economy group.
Bloomberg wrote, “Our forecasts suggest an expanding workforce and ample room for technological catch-up will boost the BRICS+ share to 45% by 2040, compared with 21% for G7 economies. In effect, BRICS+ and the G7 will have swapped places in relative size between 2001 and 2040.”
Bloomberg noted that accentuating the effect was the fact that after the expansion of the BRICS alliance, the economic group will contain some of the largest oil exporters in the world, including Saudi Arabia, Russia, the UAE and Iran. It will also contain some of the largest importers as well, in China and India.
The report added, “If it [BRICS] succeeds in shifting some settlement of oil transactions toward other currencies, that could have a knock-on effect on the share of the dollar in international trade and global foreign exchange reserves.” In addition, the analysts noted that the BRICS alliance has been pushing strongly to de-dollarize its trade, especially between members.
The report noted that although the BRICS alliance has a tremendous number of advantages, such as its size, diversity, and ambitions, it also faces several challenges, including the economic slowdown in China, its inability to rapidly transition away from the petrodollar, as well as a “reluctance” among members of the group to promote a single alternative.
The report concluded that “The BRICS will change the world, but perhaps more because of their rising share of GDP and divergent political and economic systems than through the realization of policymakers’ grand plans.”
