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Tough BRICS

October 24, 2011

Brazil, Russia, India and China are set to develop massive buying power over the next few years and become the new engines of the global economy. They've already surpassed Western nations by some benchmarks.

Russia's Medwedew and China's Hu Jintao shake hands
Russia and China are growing as world economic powersImage: Picture-Alliance /dpa

With the world's economic system seemingly adrift on perilous seas, positive economic prognoses are hard to come by. As capital markets sink or soar unpredictably, many key Western economies are weighed down by large public debts.

While some analysts say a second recession is about to take place as the eurozone wallows in debt and the United States grapples with its recent credit rating downgrade, others argue that recent data shows the "real economy" is becoming more robust.

According to Michael Hüther, director of the Cologne Institute for Economic Research, things could go either way, depending on the performance of the emerging BRIC economies: Brazil, Russia, India and China.

"If those countries are spared national upheaval and crises, then they will be tomorrow's trading giants," he told Deutsche Welle. "They'll do so in the relatively near future."

Economists believe the BRIC nations will deliver nearly 30 percent of the world's economic output as soon as 2015, putting them ahead of the eurozone by a significant margin.

"(The eurozone) will only be at 13 percent at that point," Hüther said. "In 1995 we were at 20 percent."

If China avoids internal strife, cities like Shanghai should continue to prosperImage: picture-alliance/ dpa

Engines of growth

As the BRIC nations prosper, they could become the new engines of economic growth worldwide. Already their citizens' newfound wealth is leading to increased consumption, as governments and corporations invest heavily in infrastructure.

From 2002 to 2010, the BRIC nations contributed between 12 and 21 percent of the global increase in imported goods. That means they outpaced the United States, with the exception of 2004 and 2005.

China played a leading role, claiming more than 60 percent of the BRIC states' growth in imports.

"Still, it's important to note that the percentage in the other three BRIC nations is constantly increasing," Hüther said. "India and Russia are pushing ahead in particular."

In the coming year, BRIC nations will come close to matching industrialized nations when it comes to infrastructure investments. It's a stark contrast from just 10 years ago, when industrialized nations' infrastructure investments were more than four times higher than their BRIC counterparts.

German exports to BRIC nations are rising rapidlyImage: AP

German strong suit

Germany's export-oriented economy is already profiting from these developments. While overall German exports rose 21 percent from 2005 to 2010, exports to Brazil, Russia, India and China leapt a full 107 percent.

"About 30 percent of the goods BRIC nations get from Germany are in the machine building sector," Hüther said. "Twenty-two percent are automotive, 17 percent are electrical, and 15 percent are chemical."

Last year German companies sold roughly 100 billion euros worth of goods to the BRIC nations. That's one third more than the value of exports to the United States.

A survey conducted early this year by the Cologne Institute for Economic Research shows an increasing number of German companies want to invest in the BRIC nations. Data shows they plan to pour more than a quarter of their overall foreign investment into these nations through 2015.

Author: Sabine Kinkartz (gps)
Editor: Sam Edmonds

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