ST PETERSBURG, Russia (Reuters) - The Western financial crisis means the fast-growing economies of Brazil, Russia, India and China will grow their share of the world economy even faster than originally forecast, the founder of the four-nation BRIC concept told Reuters.
The term BRIC was coined by Wall Street bank Goldman Sachs to describe how the four rising economies are likely to rival and overtake many of the West’s leading economies over the next half century.
Jim O’Neill, the Goldman Sachs economist who originated the term in 2003, said the financial crisis that began in U.S. mortgage security markets was allowing the BRIC countries to take a bigger share of world gross domestic product.
“On a relative basis it definitely allows the BRICs to develop faster as they are going to take an even bigger share of GDP sooner,” O’Neill told Reuters in an interview at an economic forum in Russia’s former imperial capital of St Petersburg.
“This is a financial crisis of the West and we must not forget that of the world’s 6 billion people most of them are not affected by this,” he said. “I was in India four weeks ago and there were no signs of India being affected by all of this.”
O’Neill, head of global economic research at Goldman, said China, India and Russia were actually growing faster than originally predicted by his research.
“Of the four BRICs, Russia, China and India have all grown on average 2 percent more than we suggested,” he said. “It is a hell of a lot so they are now collectively 16 percent of global GDP so it is all happening a lot quicker.”
The four BRIC countries have been seeking to form a political club to convert their growing economic power into greater geopolitical clout.
Last month in the Russian city of Yekaterinburg, the four sought to formalize their club at the first stand-alone meeting of BRIC foreign ministers.
“I would hope that Western leaders take note of that meeting and start to accelerate bringing them into the G8 club and the IMF because the world doesn’t want a separate club just looking after the growing countries the same as it doesn’t need an old club looking after the declining — it needs a better club involving them both,” O’Neill said.
“I think that the lack of progress by the G8 and the Western leaders to change is really bad and is one of the biggest problems in the world today,” he said.
O’Neill says the combined GDP of the BRIC countries could overtake the combined economic might of the G7.
Detractors say optimistic predictions about the BRIC economies ignore major hurdles to their development such as future political instability, rampant corruption and decrepit infrastructure.
Economists repeatedly forecast in the 1950s and 1960s that Brazil would become one of the world’s top economic powers, only for its once-rapid growth to stall dramatically in the debt crisis of the 1980s and to stagnate throughout the 1990s.
Russian President Dmitry Medvedev has said Russia will become one of the top five economies of the world by 2020, but admits the rule of law needs to be strengthened and corruption has to be rooted out.
O’Neill said Russia should speed up some of its infrastructure projects and that corruption could sap Russia’s economic potential.
“At the core of it is a stronger self-confidence in a rule of law that everybody likes,” he said. “In some ways Russia enjoys stability almost too much.
“The Russian people like stability which given Russia’s history is very understandable and admirable but it should not come at the expense of things which are needed for private sector risk-taking, which are stronger property rights and a stronger rule of law.”
Editing by Michael Stott and Matthew Jones