If the BRICS countries expand by six, they will account for half of the world's population and 29% of the world's GDP, but they will not be as rich as the G7.
Over the past two decades, the world has witnessed profound global economic and geopolitical changes, with the rise of the BRICS countries (Brazil, Russia, India, China, and South Africa) increasingly as a counterweight to the traditional dominance of the G7 (the United Kingdom, the United States, Germany, Japan, France, Canada, and Italy).
After the 15th BRICS Summit in Johannesburg, South Africa, last week, the balance of economic and geopolitical power between the two blocs began to show new signs of change. The BRICS countries announced their decision to invite six countries, Argentina, Egypt, Iran, Ethiopia, Saudi Arabia and the United Arab Emirates, to join the BRICS. Their membership will be effective on January 1, 2024.
The new bloc will represent 46 percent of the population, 29 percent of world gross domestic product (GDP) in nominal terms and 37 percent of global GDP in purchasing power parity (PPP) terms. This expansion has injected new vitality into the BRICS cooperation and development mechanism.
Some approved members see prospects for growth. Ethiopia is the only low-income country in this group. Prime Minister Abiy Ahmed called it a "great moment" for his country.
Argentina is facing serious economic problems, and joining the organization could be a potential way out of the crisis. President Alberto Fernández said it was a "new scenario" for the country. "We are open to the possibility of entering new markets, strengthening existing ones, increasing investment, creating jobs and increasing imports," he said.
South African President Ramaphosa said the meeting agreed on "guiding principles, standards, criteria and procedures for the BRICS enlargement process." However, these criteria are not explained. For example, Indonesia, an economic powerhouse in Asia with a population of 274 million, applied to participate, but this round was not approved.
Gustavo de Carvalho, a policy analyst and senior fellow at the South African Institute of International Relations, said the new members would not only raise the EU's profile but would also create opportunities for participants to conduct interoperable demo transactions in each other's currencies instead of dollars.
Brazilian President da Silva said that the BRICS countries are continuing to study the possibility of creating a block currency, which could "increase our choice of means of payment and reduce vulnerability."
People walk past the Sandton Convention Centre, home to the BRICS Summit in Bluss, South Africa, on August 19.
For existing members, expansion also brings its own benefits. Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies, said the decision to scale up was a victory for China and Russia, which had been fighting for more than five years.
"This allows China to continue to build a China-centric order." As for Russia, the host country next year, it saw it as a huge opportunity at the time. It's a very isolated point," he said.
Interestingly, the expansion will not have much effect on the current structure of the block. The new BRICS countries continue to be dominated by China and India both demographically and economically. Together, the six new member states will account for about 10 percent of the EU's total GDP, as Saudi Arabia is the only rookie with a trillion-dollar economy.
For too long, the G7 has dominated the management and decision-making power of the global economy. However, with the rapid growth of BRICS membership, the influence and ambitions of the organization began to grow.
In particular, China's astonishing rise to the economy has reshaped global trade, investment, and supply chains. Its manufacturing capacity, vast consumer market and innovation-driven growth have catapulted China's economy to the second largest place in the world.
India is still a few steps behind, but its large population and thriving tech industry make it the second-largest economic superpower among the BRICS countries. On the other hand, however, the share of Russia, Brazil and South Africa in global GDP (in purchasing power parity terms) has declined over the past two decades.
Although growth in these three countries was not as strong as expected, the combined GDP of the five members of the group will exceed that of the G7 in 2020 when measured in purchasing power parity (PPP) adjusted for electricity purchase differentials.
Comparison of GDP share (in purchasing power parity terms) of G7 (blue) and BRICS (red).
According to the International Monetary Fund, the region's GDP will account for 32.1% of global GDP this year. That's up from 16.9% in 1995 and higher than the G7's 29.9%. Despite the challenges and differences within the BRICS, its rise has added voices that differ from the Western-dominated G7 policies.
For example, in the conflict in Ukraine, no member state participated in economic sanctions against Russia. Prime Minister Modi said the expansion and modernization of the BRICS countries sends a message that all institutions in the world need to adjust themselves over time.
Despite the optimism expressed by the new entrants, outside observers remain cautious. They said it was unclear how the expansion would significantly enhance the EU's influence on the international stage. Because it will depend on their ability to act together, as new members deepen internal divisions.
Margaret Myers, director of the Asia and Latin America Program at the Inter-American Dialogue, said it was unclear what the new BRICS members would achieve when they joined. "For now, at least, it's more symbolic. This is a sign of widespread support from developing countries for a realignment of the global order," she said.
The economic benefits will not be immediate, as the new members already have extensive bilateral relations with China. The BRICS New Development Bank is still relatively small. Even so, Myers said the West should not take the move to enlarge the European Union lightly. "With the addition of these new members – especially the major oil producers – the BRICS countries have a much larger share of the global economy and demographics," she noted.
Likewise, Gustavo de Carvalho said that it is not sure what will happen, but it clearly provides new space for trade in developing countries. Most of the statements made after the meeting reflected the need to change the common voice of international institutions, particularly international financial institutions such as the World Bank, the International Monetary Fund and the International Trade Organization.
So far, the BRICS countries have caught up with the G7 in terms of total GDP adjusted for purchasing power parity, but still lag far behind the G7 economies in GDP per capita, a common measure of development and prosperity.
GDP per capita of the G7 and BRICS countries.
According to the International Monetary Fund, none of the BRICS countries has achieved the same per capita GDP as Japan, the lowest among G7 countries. In purchasing power parity-adjusted dollars, the U.S. GDP per capita is $80,035, more than three times China's $23,382.
India is the world's most populous country and the third largest economy in terms of PPP-adjusted GDP, with by far the lowest per capita GDP of the G7 and BRICS 12. However, since the turn of the century, India's per capita GDP has grown nearly fivefold, second only to China's.
So far, 23 economies have formally applied to join the BRICS, but they must be approved by all five members to join.