India and China are driving the recovery of the BRICS and the world economy
The BRICS (Brazil, Russia, India, China, South Africa) show economic growth prospects of 4.7% both in 2023 and in 2024, thanks to China's recovery and India's continued robust growth. In the same period, at the level of the global economy, the Intesa Sanpaolo Research Department expects a more limited increase due to the presence of various factors of uncertainty.
The main drivers behind the expansion of the BRICS are China's reopening and the end of the 2022 energy shock thanks to the decline and stabilisation of oil and natural gas prices from last year's peaks. In the first quarter of the year, India, China and Brazil showed GDP growth significantly above both the previous figure and the consensus estimates. The above-mentioned countries grew year-on-year, respectively, by 6.1% (from +5.0%), 4.5% (from +2.9%), and 4.0% (from +1.9%). Conversely, a more fragile scenario is projected for South Africa - due to frequent power outages as a result of failures of the coal-fired power plants of a state-owned utility - and Russia. The latter is continuing its recovery phase following the 2022 recession and in the first three months of the year, the year-on-year decline in GDP decreased from -2.7% to -1.9%.
The progress is set against a backdrop where emerging economies play a leading role with a significant weight on world GDP (equal to 58.2% at the end of 2022 based on IMF calculations). In this context, the incidence of the BRICS is 31.6% and the trend should continue in the next five years, during which its weight is expected to get significantly close to that of the advanced economies as a whole (33.6% vs 38.8%, IMF estimates).
In a nutshell, despite a highly uncertain scenario and heterogeneity between individual areas, the macroeconomic outlook appears favourable. Looking ahead at 2024, compared to current levels, we expect: higher GDP growth rates; lower inflationary pressures; a more limited level of policy rates.
SOURCE Intesa Sanpaolo Research elaborations on Refinitiv data.
Data and estimates as at 26 June 2023.