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Brics economies split down the middle

Launching its flagship "Global Economic Prospects" report, the World Bank has warned that 2016 could be the year of a "perfect storm" for the world economy. In particular, it held out concerns that a simultaneous slowdown in the five big emerging-markets economies - Brazil, Russia, India, China and South Africa, or the Brics countries - was likely, and could be intensified by a new round of stress in the financial markets. The World Bank predicts that China will see relatively modest growth, and that recessions in Russia and Brazil will continue. Only India will continue to expand at a robust pace. "If, in 2016, Brics growth slows further, by as much as the average growth disappointment over 2010-14, then growth in other emerging markets could fall short of expectations by about one percentage point, and global growth by 0.7 percentage point," warned the Bank.

Certainly, for the other Brics economies, the numbers are bad. The South African rand just hit record lows, following a disastrous 2015 in which it fell 25 per cent against the dollar. The year ended with a political crisis centring on the post of finance minister - at one point, the country had three finance ministers within a single week. Russia's economy shrank 3.8 per cent in 2015, and the World Bank expects it to contract 0.7 per cent in the current year. The country continues to deal with the after-effects of Western sanctions. In Brazil, political unrest is fuelled by the fact that real per capita income may decrease by more than eight per cent between 2014 and 2016. Nor does the government have room to adjust spending to deal with the crisis, given that more than 90 per cent of expenditure is ring-fenced by the Constitution or specific legislation, according to The Economist. But, for all these three economies, the real problem is the end of the commodity boom. Russia, a major gas exporter, is struggling with lower prices for petroleum products. Brazil exports minerals and agri-products, and has become quite dependent on Chinese demand; South African prosperity, too, has long been linked to commodity exports. The end of the Chinese manufacturing boom and the beginning of the slow rebalancing of that economy mean that it is no longer carrying Brazil, Russia, and South Africa with it.

The truth is that the Brics concept was always slightly incoherent. It was imagined originally, in 2001, as Bric, a set of four economies that would soon outweigh the Western economies in terms of cumulative growth - but that assumption had obvious flaws. In fact, the Brics economies are split down the middle - India and China are commodity importers, and the others are commodity exporters. It stands to reason that they do not necessarily rise and fall in unison. If India is a growth stand-out right now, it is entirely thanks to commodity prices - the inverse of its struggles between 2011 and 2013. As a component of economic analysis, Brics has therefore not been very useful. China's slowing growth and the consequent commodity crisis has only underlined the already understood gaps in Brics as an economic unit. But its political salience, as an alternative geo-political pole is, of course, another matter entirely.