World Economy

BRICS GDP Exceeds $32t

BRICS GDP Exceeds $32tBRICS GDP Exceeds $32t

Trade between BRICS countries has increased 70% since the group was established in 2009, according to South African President Jacob Zuma. The economies of the five BRICS nations account for almost 30% of global GDP.

“BRICS presents an aggregate GDP exceeding $32 trillion. This marks a 60% growth since the formation of the grouping,” Zuma told reporters on Thursday in Cape Town.

BRICS countries (Russia, Brazil, India, China and South Africa) produce a third of the world’s industrial products and half of all agricultural goods, RT reported.

They attracted 20.5% of total global direct investment in 2014, an increase of 3.5% over 5 years. “The share of BRICS capital investment on the global markets has also increased significantly from 9.7% to 14% since 2009,” Zuma said.

The group is ready to expand its economic cooperation with partners in key areas such as food production, power generation, the petro-chemical industry, mining, tourism, renewable and nuclear energy, trade, transportation, communications and training, he said.

The seventh BRICS summit, held last month in Russian city Ufa, reaffirmed the importance of BRICS in the global arena, Jacob Zuma said. He added that the summit’s key achievement was the “entry into force of the New Development Bank (NDB) and the Contingent Reserve Arrangement.”

The NDB opened for operations in Shanghai on July 21 with a view to deploying $50 billion in initial capital to fund infrastructure and sustainable development projects. The world’s major banks “see the BRICS bank as an important additional factor in global financial transactions,” said Zuma. The establishment of NDB’s African Regional Center in Johannesburg is among the group’s plans for the near future, he added.

  Currency Reserve Pool

At the end of July, the BRICS members kick started a $100-billion currency reserve pool. It aims to protect their national currencies from volatility in global markets.

“The arrangement is important not only because it provides the possibility to quickly obtain additional liquidity, but its very existence has a positive, stabilizing effect on the market. Similar agreements created by other countries (for example, the European Stability Mechanism) continue to be in force and fulfill their functions,” Russia’s BRICS group representative told TASS on July 30.

  Replacing the Dollar

BRICS members hope to move the world away from the US dollar and western-dominated financial institutions, which they say do not meet the needs of emerging economies.

But steep drops in recent weeks in the currencies of the five countries, which account for 40% of the world’s population and about one-fifth of global economic output, underscore how difficult it would be for any of them to take the dollar’s place.

In July, the Russian ruble fell to 60 to the dollar on sagging oil prices, canceling most of the partial rebound it had made since the end of last year, when it sank as low as 80 to the dollar due to low oil prices and western financial sanctions over Moscow’s interference in Ukraine. The ruble dropped to 64.4 per dollar on August 6, its weakest since February.

China’s renminbi also fell against the dollar in July as China’s stock market suddenly lost 30% of its value in a spectacular crash following a half-year of frantic, speculative growth.

Analysts say that an even bigger problem for all of the BRICS’ currencies may be the way the countries’ jittery, politically beholden central banks over-manage them in crises. That makes it difficult for investors to anticipate what will happen, further diminishing their attractiveness as a medium for global trade and investment.

China has long dreamed of internationalizing its currency, and later this year the International Monetary Fund is expected to consider whether to add the renminbi to its basket of reserve currencies (US dollar, euro, Japanese yen, and British pound) that countries may use for depositing to, or borrowing from, the global lending institution.