The BRICS countries, led by China, now make up a larger portion of the global GDP than the industrialised G7.
According to the World Bank’s Global Economic Prospects report, global growth is slowing rapidly due to soaring inflation, higher interest rates, less investment, and disruptions created by Russia's invasion of Ukraine.
Global economic growth is expected to be 1,7% in 2023 and 2,7% in 2024. Growth predictions for 2023 have been revised downward for 95% of advanced economies and roughly 70% of emerging markets and developing nations.
The Word Bank anticipates per capita income growth in emerging market and developing nations is expected to average 2,8% over the next two years, a full percentage point lower than the 2010-2019 average.
In Sub-Saharan Africa, which accounts for over 60% of the world's extreme poor, per capita income growth is predicted to average just 1,2% between 2023 and 2024, a rate that might lead poverty rates to rise rather than decline.
In terms of purchasing power parity (PPP), data reveal that, beginning in 2020, the BRICS nations together contribute more to global GDP than the G7 industrialised nations.
The BRICS countries are Brazil, Russia, India, China, and South Africa, and they represent the world's largest developing economies. The G7 countries are the United States, the United Kingdom, Germany, France, Japan, Italy, and Canada. While the G7 countries have historically been among the world's largest economies, the BRICS nations, particularly China and India, have been and continue to be the most populous.
According to the International Monetary Fund's (IMF) GDP data across countries throughout time, there has been a continuous reduction in the G7's share of global GDP since 1992, and an equally consistent growth in the contributions of the BRICS nations.
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A country's GDP can be described in numerous ways, each of which is predicated on the yardstick used to measure it. Nominal GDP growth estimates the worth of an economy's goods and services at a specific point in time. That is, at the "current prices". Real GDP growth considers the value of GDP at a "constant price" to account for inflation. It is necessary to make modifications depending on currency exchange rates when making cross-country comparisons. This is exactly what the PPP model does.
It calculates a fictitious exchange rate at which the same number of products and services may be purchased in other nations. This theoretical exchange rate is then used to calculate GDP at PPP. However, the G7-BRICS dynamic changed in 2020, when the BRICS (31,4%) overtook the G7 (30%), indicating that the global economic power dynamic shifted in favour of developing countries.
This marked a significant turning point in the ongoing waning of the developed countries' economic power.
Since 1978, when China began to open up and reform its economy, GDP growth has averaged more than 9% per year, and more than 800 million people have been pulled out of poverty.
Over the same time span, there have also been considerable gains in access to health, education, and other services. China is presently a country with an upper-middle-income. Despite the fact that China has eradicated extreme poverty, a considerable number of individuals remain vulnerable, with incomes below a threshold more commonly used to define poverty in upper-middle-income countries.
The IMF data also offers estimates through 2027, and these show the BRICS and the G7 dividing again, but this time with the developing countries extending their lead over the industrialised ones. China and India have mostly reaped the benefits for developing countries. According to the data, China dominated the decade 2000-2010.
During this time, it quickly caught up with the US in terms of global GDP share (almost doubling its contribution to 14,6% in 2010 from 7,6% in 2010), and by 2013, had surpassed it to become the world's largest economy in PPP terms. According to figures from the World Bank's WDI (2013–2021), China provided 38,6% of global economic growth, compared to the G7's 25,7%.
Together, China and India currently account for close to 27% of global GDP. This is anticipated to increase to over 29% by 2027. However, it is anticipated that even then, the two Asian nations' relations will still be quite unequal, with China accounting for more than 20% of global GDP.
According to the January 2023 World Economic Outlook Update, global growth would slow to 2,9% in 2023 before rising to 3,1% in 2024.
The prediction for 2023 is 0,2 percentage point higher than in the October 2022 World Economic Outlook, but it is lower below the historical average of 3,8%. Rising interest rates and the conflict in Ukraine continue to weigh on the economy. The recent reopening of China has prepared the door for a quicker-than-expected rebound.
Global inflation is forecast to fall to 6,6% in 2023 and 4,3% in 2024, both of which are still higher than pre-pandemic levels.
- Denhere is a freelance journalist based in Zimbabwe. [email protected].