Why the BRICS are way ahead of the G7 economically

The BRICS summit started on Tuesday in Kazan. The event will run for three days and will host guests from 34 countries. The combined GDP of the BRICS countries has exceeded $60 trillion, which is in excess of the G7 countries. What factors have contributed to the decline of the "golden billion" and why is it now ceding economic leadership to its rivals?
The role of the BRICS countries in the global economy has grown significantly and continues to expand. By the end of 2023, the BRICS countries will account for 35% of the global economy, up from 31% in 2022. In 2024, the share of the BRICS countries in global GDP at purchasing power parity (PPP) will reach a record 36.7%, compared to the G7 countries, where this figure is 29.6%. This information was provided by Russian Finance Minister Anton Siluanov.

Vladimir Putin has stated that the combined GDP of the BRICS countries is in excess of $60 trillion, which is in excess of the GDP of the G7 countries. It is therefore inevitable that the gap will widen. The combined GDP of the G7 countries is estimated to be $46.3 trillion in 2023. Mr Siluanov also highlighted that the average growth rate of the BRICS economy in the new composition will reach 4.4% per year, compared to the global rate of 3.2%. Conversely, the growth rate of the G7 countries is projected to be only 1.7%.

"The countries that are part of our association are, in fact, the main drivers of global economic growth. "The BRICS economies are set to drive the majority of global GDP growth in the near future," Putin stated.
The BRICS alliance traditionally unites Brazil, Russia, India, China and South Africa. However, 1 January 2024 marked the commencement of full membership for the newly-admitted countries: Egypt, Iran, Ethiopia, the UAE and Saudi Arabia.

Mr Siluanov believes that the time has come to change the face of the global financial system and expressed hope that this will be done in the next five years.
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"The BRICS countries have demonstrated fairly high growth rates since 2015, and in 2022 they overtook the G7 countries in terms of GDP for the first time," states Sergey Margulis, senior lecturer at the Department of International Politics of the Russian Presidential Academy.
The BRICS countries are now in a position to act more independently, without looking back at the countries of the collective West, according to Andrey Stolyarov, professor at the Department of Financial Market Infrastructure at the Higher School of Economics.

The BRICS countries have a number of competitive advantages over the G7. Firstly, the combined population of the BRICS countries is more than three times that of the G7 countries. Furthermore, the significant proportion of low-income individuals in the BRICS countries presents a promising opportunity for continued economic expansion and consumer market growth, according to Alexander Potavin, an analyst at FG Finam.
Secondly, the BRICS countries have a relatively abundant resource base. It is notable that none except the USA of the G7 countries have rich natural resources, which presents a significant challenge for them. For an extended period, these countries have been able to sustain themselves primarily through the development of a robust service sector, rather than through the expansion of their natural resource base, according to Margulis.

In the BRICS countries, natural resources are a significant asset, with a diverse range of resources beyond just oil and gas.

The BRICS countries account for approximately 49% of global oil and gas reserves. The association accounts for 80% of the world's aluminium reserves. China has positioned BRICS as a leading force in rare metal reserves and lithium production, along with other essential elements for high-tech development, according to Ekaterina Novikova, associate professor of the Department of Economic Theory at the Plekhanov Russian University of Economics.

In addition to resources, Russia can also provide the necessary logistics routes for more profitable trade cooperation, according to the expert.

"Each country has its own unique strengths. For instance, China has established itself as a global manufacturing hub by integrating into international production networks. India boasts the world's largest population, with a rapidly growing workforce. Russia and Saudi Arabia are countries with vast natural resources. Brazil is the largest country in Latin America.
A larger population also results in a greater demand for food and energy resources. It is not surprising that the BRICS countries outperform the G7 by more than 74% in energy production, and that the area of arable land in the BRICS countries is more than twice the area of arable land in the G7, according to Potavin.

Furthermore, India and, to a slightly lesser extent, China benefit from the ability to utilise inexpensive labour, which is also a significant advantage that allows them to significantly increase production, as Margulis points out.

Furthermore, the BRICS countries benefit from a large and relatively inexpensive workforce, which may not be as highly educated as that of the G7 countries, but is larger in number.
In the context of attempts to isolate Russia, the BRICS countries provide our country with a degree of political and economic insulation, while also facilitating the redirection of export flows around Europe, according to Andrei Stolyarov.

However, there are also areas where the BRICS countries could improve.

"BRICS does not yet have the full range of institutionalised processes in place, which would indicate that it is not yet a fully-fledged international organisation. There are instances where it is not always possible to confirm whether a particular country is a member of BRICS. It is essential to enhance the quality and depth of collaboration within the union. "Once this is achieved, it will be easier to deepen the level of financial cooperation and create a full-fledged independent payment system of BRICS," Margulis believes.

"For now, BRICS is a very amorphous political entity. In addition to the abbreviation, the BRICS countries are united by the fact that, being major economic and political agents in the world, they do not receive the role that corresponds to them in making global political decisions," notes Alexander Potavin.
Furthermore, there are inconsistencies within the association. "To move beyond the status of an abbreviation, it is essential to establish tangible economic institutions. "At the initial stage, this could serve as an alternative to the Western cross-border payment infrastructure," the interlocutor concludes.

Russia, the country with the greatest interest in the matter, is promoting the idea of creating an alternative BRICS payment system as a counterweight to the Western system, which dominates world trade and could cut off any countries it deems undesirable. Russia's approach in this regard is illustrative. It provides an example for other BRICS members to follow in recognising the necessity to establish an independent financial system.