Why G7 Can't Catch BRICS Now

2020: A historical shift. BRICS overtook G7. In share of world GDP. In purchasing power parity (PPP) terms. For the first time ever.

Raw data source: IMF World Economic Outlook Report Oct 2023.

BRICS had been closing the gap. Without skipping a year. Through the 1997 Asian currency crisis. Through SARS in 2003. Through the 2008 housing crash. Through swine flu in 2009. And through all the wars in between.

The lines crossed during the pandemic. After which, BRICS have been surging ahead.

"Rest of World"

Non-BRICS. Non-G7. Declined in collective share. From 39.4% in 2008. To 37.9% in 2023.

Leaving BRICS as the only rightful growth bloc. Momentum's clearly on their side.

Breaking news ...

"New" BRICS

Jan 1, 2024: Five new members joined BRICS. Iran. Saudi Arabia. Egypt. Ethiopia. UAE. Three of them oil producers.

"First phase of the expansion process, ... further phases will follow.” As per South African President Cyril Ramaphosa.

The same IMF Report projects incremental 4.1% share of world GDP from these five new members. In 2024. Taking New BRICs to 36.6% share. Versus G7's 29.4%.

Under the Hood

Every single G7 member's GDP share has dropped. Over the years. No exception.

Conversely, between 1992 and 2023:

• China's GDP share: 4.4% to 18.8%.

• India's share: 3.3% to 7.5%.

Ageing Workforce

Source: UN World Population Prospects 2022 Revision

In percentage of total population aged 65+:

G7: Japan 29.9%. Italy 24.1%. Germany 22.4%. France 21.7%. UK 19.2%. Canada 19.0%. US 17.1%.

Versus BRICS: Russia 15.8%. China 13.7%. Brazil 9.9%. India 6.9%. South Africa 5.9%.

In this sense, BRICS' "oldest" member is younger than G7's "youngest" member!

Central Government Debt

Source: IMF Global Debt Database Report 2022 

In debt to GDP ratio:

G7: Japan 214%. Italy 141%. US 110%. UK 101%. France 92%. Canada 50%. Germany 46%.

Versus BRICS: Brazil 81%. South Africa 71%. India 55%. No data for China or Russia.

So four G7 members have sovereign borrowings higher than their GDP. Japan being an extreme case!

External Trade Balance

Source: World Bank National Accounts Data 2022

In goods and services balance as percentage of GDP:

G7: France -3.9%. Japan -3.8%. US -3.7%. UK -2.7%. Italy -1.5%. Germany +2.0%. Canada +0.1%.

Versus BRICS: Russia +12.6%. China +3.2%. South Africa +2.0%. Brazil +0.8%. India -3.7%.

So barring Germany and (borderline) Canada, all G7 members are net importers. With a 2022 trade deficit.

And barring India, all BRICS members are net exporters. With a 2022 trade surplus!

To conclude ...

Of course, a dozen other factors shape a country's long-term GDP trajectory. Direct. Indirect. Quantitative. Qualitative. For instance:

• Sectoral mix. Agriculture vs manufacturing vs services.

• Labour productivity. Employment rate. Legal immigration.

• Capital investment. Infrastructure spending. FDI inflows.

• Technology adoption. Research and development spending.

• Natural resources.

• Public education and healthcare spending.

• Political stability.

• Environmental sustainability.

• Taxation.

• Exchange rates. Since we're talking PPP.

... and so on.

Which were all in play. During this unbroken decades-long trend.

No reason BRICS will lose ground to G7. In share of global GDP PPP. Any time soon.

That will be a bridge too far.

Let's have your views. In the comments below.

Until next time! :)