Publications
Partners
Cape Town - The election of Donald Trump as US president potentially provides the Brics block - Brazil, Russia, India, China and South Africa - with a new lease on life, allowing it to assume a role in championing the initiatives that the traditional leaders of multilateralism are now threatening to undermine.
This is the view of Simon Freemantle, senior political economist at Standard Bank.
The 9th annual Brics Summit took place in China this week.
"Recent political shifts in the advanced world have created a clear opening for the Brics to offer leadership on issues currently being abandoned by the US," said Freemantle.
"By keeping the faith in key multilateral global achievements - most notably the collective advance of security, ameliorating the effects of climate change, and preserving the structural integrity of international trade agreements - the BRICS will increase its relevance as both leader of the emerging world - and torchbearer of the kind of multilateral engagement that has defined the post-war global order."
Economic globalisation stands at a crossroads, in the view of Freemantle. The multilateral trading system lacks progress, and economic cooperation becomes more regionally fragmented. Global trade and investment remains sluggish and less effective in spurring growth.
"Under such circumstances, the Brics need to work together for an open world economy. It is important to firmly uphold the role of the multilateral trading system as the main channel, keep pushing forward the WTO Doha Round negotiations, oppose all forms of protectionism and ensure that all countries enjoy equal rights and opportunities and follow the same set of rules in development," he said.
Internal headwinds
Freemantle pointed out that BRICS countries have been facing some internal headwinds. Since its inception in 2009 much of the economic rationale, as well as some of the domestic political support, underpinning the Brics optimism has "evaporated", in his view.
Over the past two years the gross domestic product (GDP) growth of the Brics averaged just 1.9% - down from 4.4% in preceding years. Furthermore, in some instances political shifts within individual BRICS economies (most notably Brazil) have altered the levels of commitment of some of the member states.
"There is also ideological divergence. For example, India and Brazil are less aligned to the Russian view, to some extent supported by South Africa under President Jacob Zuma, that the grouping stands against the interests and dominance of the US and ‘the West.’ In addition, significant bilateral political tensions exist within the Brics," said Freemantle.
Border tensions between India and China, as well as India’s broader objections to China’s Belt and Road Initiative are just two examples of such tensions.
African trade
For Africa, the days of 20% year-on-year growth in trade with the Brics economies have tailed off, replaced by an increasingly imbalanced relationship characterised by a widening trade deficit with the Brics. In 2016 total Brics-Africa trade amounted to $248bn, down from a peak of $366bn in 2014.
Notably, Africa’s exports to China have declined from a 2013 peak of $113bn to $55bn in 2016. Brazil’s recent economic recession has seen a 70% decline in the value of its imports from Africa since 2013.
"Despite these headwinds, the Brics economies have likely reached a cyclical bottom in their respective cycles, meaning that it is fair to expect a slight recovery in the overall economic performance of the Brics this year and in 2018," said Freemantle.
"Specifically, it is expected that stable and medium-to-high growth in China and India will underpin improved economic performance by the Brics. Along with stable commodity prices this year this growth is expected to aid the stabilisation of Brics-Africa trade flows."
The IMF expects India’s economy to expand by 7.2% in 2017, up from 6.8% in 2016. Russia and Brazil are also expected to record positive output after two years of protracted recession.
"While SA’s growth at around 0.8% this year remains anaemic, the country’s diminutive economic status (38 times smaller than China) reduces its impact on the grouping," said Freemantle.
Collectively, the IMF expects the Brics average GDP growth to reach 3.2% this year.
SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.
Read Fin24's top stories trending on Twitter: Fin24’s top stories
