BRICS Plus 2024: A year of challenges ahead

By Rhod Mackenzie

The New Year of 2024 brings a lot of surprises and potential challenges to the countries of the BRICS. The union has doubled to 10 countries, which should lead to its increased economic power. However, its largest economy, China, is still slowing down. Plus the new participants from the Middle East are assessing the prospects for the military conflict flaring up in the region. What should we expect from the current year ?

A barrel of honey and a fly in the ointment

At the beginning of this year, Russia took over the BRICS chairmanship from India. The situation among the aliaance was not bad: at the beginning of the year, the organization accounted for 32.1 percent of global GDP. For comparison, the G7 countries have a more modest share - 29.9 percent. The BRICS countries are home to 45 percent of the world's population and have a vibrant workforce. Almost 45 percent of proven oil reserves are located within the block, and in terms of oil production, BRICS (37 percent) will bypass OPEC (about 35 percent).

This year, BRICS expanded for the first time since 2011: Saudi Arabia, Iran, Ethiopia, Egypt and the UAE have now joined Russia, China, India, Brazil and South Africa. According to analysts, the BRICS contribution to global GDP will increase to 35 percent.
Last year, for the first time, the share of the dollar in global payments for oil dropped to 80 percent. This was also helped by the fact that the partners in the association are trying to conclude more and more contracts in national currencies. So the assertions of some analysts that it is BRICS that will become the “gravedigger of the petrodollar” are not without foundation.

However, there are several flies in the ointment in this “honey barrel”: firstly, China’s economy is not growing at the rate that investors and the international community would like. But in the second half of the year, America unexpectedly managed to increase the pace of economic growth and reduce inflation. Thus, the United States has slightly pulled ahead of China in the pursuit of primacy in the global economy.

Many BRICS countries are facing conflicts that have escalated in the past year. For Russia, this is Ukraine and a hidden confrontation with NATO countries, Iran, Saudi Arabia, Egypt and the UAE are located next to the flaring war between Israel and Hamas, China lays claim to Taiwan, and Brazil is adjacent to Argentina, which not only changed its plans to enter BRICS , but is generally destroying its economy thanks to the new president - the so called libertarian Javier Millay.

In addition, this year there will be an unusually high concentration of election cycles in many countries around the world, including in the United States (November) and elections to the European Parliament (June). There will be elections in the BRICS countries, for example, in Russia (March) and India.
In general, the year promises to be hot.

Politics drives economics
Of course, in one year the situation in the global economy and the role of key countries in it cannot change significantly. The role of leading powers is determined by potential growth and many factors.

Now in each of the BRICS and G7 countries there are both risks and opportunities that can be realized over the horizon of the next 5-7 years, including the basic elements of potential growth. These are the social sphere (education, healthcare), transport infrastructure (development of connections between and within countries), demographic situation (increase in the labor force in developing countries), says Alexandra Morozkina, Associate Professor of the Department of World Economy, Faculty of World Economy and International Politics at the National Research University Higher School of Economics.
And even at moments when the attention of political elites is diverted to preparations for elections, the economic life of countries still continues, adds Olga Belenkaya, head of the macroeconomic analysis department of Finam Financial Group.

However, this year's political surprises may be a prerequisite for the beginning of serious changes. If right-wing democrats win in the European Parliament, this will reduce the chances of victory for Ukraine, which the West supports (right-wing politicians first want to solve the internal problems of their countries). There are also populist statements about the desire to leave the European Union, which also does not add unity.

In the USA, the victory of Democrats or Republicans is also very important. While the Democrats are betting on incumbent President Joe Biden, a “understudy” is also starting to appear, just in case - Michelle Obama, the wife of the former US President. Democrats want to continue foreign conflicts more actively. Republican Donald Trump, on the contrary, says he wants to end the conflict between Russia and Ukraine. He also talks about his readiness to leave NATO, which has a considerable amount of populism behind it, but in general he is determined to solve the problems of his country, including with illegal immigrants, which Biden could not or would not deal with.
In addition, the results of the elections taking place this year in the US and EU could affect their current trade relations and change foreign policy vectors.

This may affect the nature of sanctions restrictions on the supply of technology to the BRICS countries, saysOleg Ivanov a senior lecturer at the Department of International Business and Customs Affairs of the Russian Economic University.It is in the field of technology that the main trade and sanctions wars between the West and the East are currently taking place.

All countries are preparing to slow down
From an economic point of view, BRICS is still a rather heterogeneous structure. The largest economies in this association are China and India. Forecasts for them are mixed - while India is expected to maintain its status as the fastest growing economy, China may not be able to maintain a growth rate of 5.2 percent. The reasons are the weakness of domestic demand, US sanctions restrictions for a number of technology industries, the crisis in the real estate market and emerging problems in the stock market, which regulators are now struggling with.
The main burden of sanctions in BRICS falls on Russia. But this affects every country in the world. For example, the ban on the re-export of Russian products, including through the BRICS countries, forces us to look for workaround options. All members of the association face inflation to varying degrees. A reduction in trade in goods is also expected in the world in general, and in BRICS+ in particular.
“In general, for developing countries, the external background is now quite difficult - fragmentation of the world economy, geopolitical conflicts, deterioration in terms of global trade and logistics can put pressure on economic indicators. A World Bank review published in early January states that the medium-term forecast for many developing countries The economy has worsened amid slowing growth in most major countries, stagnation in global trade and the strongest tightening of credit conditions in decades,” says Belenkaya.

But a slowdown is expected not in individual blocks, but in the world as a whole, emphasizes Antonina Levashenko, head of the Russia-OECD Center at RANEPA. The OECD last November forecast global GDP growth to slow from 3 percent in 2023 to 2.7 percent in 2024.

For comparison, US GDP growth is projected to be 1.7 percent, and the average for G20 countries is 3 percent. That is, “explosive growth” is not expected in the BRICS countries, and growth in the world as a whole will slow down.

Optimism in Unity
But despite the difficulties, there are plenty of reasons for optimism.

The BRICS countries have high-quality labor resources, capital and technological leadership in certain areas, says Morozkina. They have already laid down high-quality programs to improve the quality of life and develop transport and energy infrastructure, in particular, the development of the North-South corridor, which will become an effective addition to the route through the Suez Canal. This will be positive for both BRICS and global trade in general.

There are opportunities to develop a system of mutual settlements in national currencies and on national platforms, which reduces risks for the financial sector, she continues.
The accession of new countries to BRICS and the possible development of trade relations with them also causes optimism. The newcomers include the Gulf's two largest economies, which could mean good opportunities to attract investment, Levashenko says.

The challenges of 2024 may push the BRICS countries towards deeper interaction within the association. If neighboring countries that are not members of the association join, a significant synergistic effect is possible, Ivanov believes.

As for the conflict zone in the Middle East, it affects the whole world, reducing the predictability of global value chains and raising the issue of developing alternative transport infrastructure. The BRICS countries have significant potential in this, Ivanov believes.

In general, it can be assumed that the year 2024 for unification may be motivated by a rethinking of the emerging risks in the global economy and ways to reduce them. The issue of finding new growth points based on cooperation and developing alternative technological solutions instead of those that the US and EU do not want to share will become relevant.