BRICS Summit 2023:What to expect on the economic front?
Ira Singh
22 Aug’23
As the BRICS Summit 2023 kicks off in Johannesburg, South Africa,economic cooperation takes center stage as leaders from Brazil, Russia, India, China, and South Africa gather to address shared challenges and explore avenues for sustainable growth. With global economic uncertainties and evolving trade dynamics, the discussions on the economic front are expected to be crucial in shaping the future course of the BRICS partnership.
The leaders of India, China, Brazil and South Africa will be attending the meeting, while Russia will be represented by its foreign minister.
This year’s BRICS Summit is taking place amid tectonic geopolitical shifts, in which two key member states – Russia and China – are playing a starring role. Western sanctions against Russia have started to hurt the economy, with the rouble weakening due to fall in exports and a flight of capital. China, on the other hand, is locked in an economic tussle with the United States while facing its worst downturn in four decades.
There are several indications that the upcoming BRICS summit may focus on greater economic co-operation to navigate the uncertainties arising out of the Ukraine War and the global economic slowdown. Perhaps, the Johannesburg summit is a great opportunity for the five-member grouping of emerging economies to break the long-held view about its ‘irrelevance’.
BRICS expansion
All eyes are now whether the grouping will expand to add 40 more countries, including Argentina, Iran and Saudi Arabia. Many argue that the expansion of the grouping will help in counter-balancing the US-led Group of Seven’s influence on the global economy. This will not only help the BRICS remain relevant in the global order but also provide an alternate source of financing for the developing world. Any expansion in BRICS’ membership will also be seen as China’s attempt to emerge as the leader of the developing world, much to the chagrin of rival India.
China’s De-Dollarisation Move and the BRICS Perspective
The BRICS Summit 2023 takes on an intricate character as leaders navigate discussions on both expansion and de-dollarisation. The interplay between these two agendas holds the potential to reshape the economic landscape, encourage diversified trade, and underscore the growing influence of emerging economies in global affairs.China’s ambitious move to de-dollarise the global trade system has been gaining momentum, as it seeks to reduce its reliance on the U.S. dollar for international transactions.But with China locked in a fierce economic ‘cold war’ with the US, there are already indications that Beijing intends to push yuan as an alternative to the US dollar. Two member countries, Brazil and Russia, are already paying for Chinese goods in yuan. However, the US dollar continues to remain the global reserve currency, accounting for about 80 per cent of the global trade.
However, China’s ambitions for the yuan are likely to hit a roadblock. India, China’s regional rival which harbours ambitions of making the rupee a dominant global player, will not like the yuan becoming a major reserve currency. Given the complicated political relations between the two neighbours, it is not very difficult to understand India’s concerns. Nevertheless, the grouping has been stressing on the need to reduce the dependence on the US dollar. But reports suggest that a framework for a common ‘BRICS currency’, first mooted by Russia and Brazil, is unlikely to be discussed at the upcoming summit.
Strengthening Economic Ties with Africa Tops Agenda for Greater Trade
The intensified economic collaboration between BRICS countries and Africa holds broader geo- economic significance. As emerging economies work together to establish stronger trade links, they also contribute to reshaping global trade dynamics and shifting the balance of economic power towards the developing world.
The grouping is all set to explore greater opportunities in the continent, which is considered a largely untapped market, through the African Continental Free Trade Area. The BRICS, China in particular, is already Africa’s biggest trading partner, with trade expected to reach more than $500 billion by 2030.
BRICS economic potential
Constituting over 40 per cent of the world population, the BRICS is a huge unexplored market. The five member countries together account for over one-fourth of the global Gross Domestic Product. As per a UN report, foreign investments into the five-member BRICS quadrupled between 2001 and 2021, helping ignite economic growth.
The BRICS economies represent 18 per cent of global exports, with a huge potential for more exports between the member countries. Moreover, an expansion of the BRICS is likely to not only boost global trade but also the grouping’s economic relevance. One estimate suggests that an expanded BRICS can contribute over 50 per cent of global GDP by 2030.
As the world watches, the outcomes of these discussions could reverberate far beyond the BRICS bloc, impacting the broader international economic order.