Can BRICS+ play a key role in shaping future global economic policy? 

The macro-stabilization role of G7 and BRICS+ will be key in combating global recessions.

In brief

• In 2024, G7 nations hold a larger global GDP share (44.4%) in MX terms, while BRICS+ countries dominate (36.7%) in PPP terms.
• Government indebtedness of G7 group is estimated to be significantly high at 126.5% of GDP while in the case of BRICS+ it is at 78.2% in 2024. 
• BRICS+ and G7 are evolving into cohesive economic groups with distinct fiscal strategies and growth dynamics.

The G7 group comprises seven member countries, namely Canada, France, Germany, Italy, Japan, the UK and the US. In the BRICS+ group, there are 10 countries, with the first five constituting the original BRIC members- namely Brazil, Russia, India, China and South Africa, and the extended group including Egypt, Ethiopia, Iran, Saudi Arabia and the UAE. Nearly three-fourth of the global GDP measured in market exchange rate (MX) terms was accounted for by countries in these two groups in 2024. In the event of any global economic slowdown or recession in the future, the role of policies followed by, and the economic influence of G7 and BRICS+ countries may prove critical for the global economy. 

Relative shares in the global economy: MX and PPP terms

The relative impact of policies followed by these two groups would depend, among other factors, on their relative economic size. The measurement of relative size of an economy/group of economies depends on the type of exchange rate, namely current market exchange rates (MX) or international dollars based on purchasing power parity (PPP), used for the conversion of GDPs measured in domestic currencies of different countries to a common platform.

As per the IMF data, measured in MX terms, the share of the G7 group in world GDP has fallen by 20% points to 44.4% in 2024 from 64.4% in 2002. The share of BRICS+ group, on the other hand, increased from 10.1% in 2002 to 27.3% in 2024, an increase of 17.2% points. The size of G7 countries is projected to fall further to 42.4% while that of the BRICS+ group is projected to increase to 29.2% by 2029.  

Measured in PPP terms, the share of G7 group, which accounted for 42.1% in 2002, fell to 29.6% in 2024, a fall of 12.5% points. In the case of BRICS+ group, their share in global GDP increased from 24.1% in 2002 to 36.7% in 2024, an increase of 12.6% points. The share of G7 group is projected to fall further to 27.5% while that of BRICS+ group is projected to increase to 38.3% by 2029. The share of the BRICS+ group in global GDP overtook that of the G7 group way back in 2012. Thus, BRICS+ group has a much larger share of global GDP measured in PPP terms and this difference is progressively increasing (Chart 2). Going forward, the BRICS+ group, including countries such as India and UAE, may have a larger and more active role to play in global economic affairs.

Government indebtedness: G7 vs. BRICS+

The capacity to fiscally intervene in the presence of an economic slowdown or recession of these groups largely depends on the indebtedness of governments in these countries. The general trend over the period 2002 to 2024 in government indebtedness is that of deterioration reflected in their increasing debt-GDP ratios. Table 1 shows that the weighted average debt-GDP ratio for G7 countries deteriorated from 76.7% in 2002 to a peak of nearly 140% in the COVID affected year of 2020. It is estimated at 126.5% in 2024. In the case of BRICS+ group, the weighted average debt-GDP ratio was 78.2% in 2024, increasing by 62.7% from its 2002 level of 48.1%. 

Government debt is the outcome of an accumulation of annual fiscal deficits moderated by the excess of nominal GDP growth over effective interest rate¹. The weighted average fiscal deficit to GDP ratio for the BRICS+ group was quite high at 8.4% in 2024, while for the G7 group it was slightly lower at 6.3%. A higher fiscal deficit relative to GDP may lead to a higher level of debt-GDP ratio, implying a higher level of interest payment to service this debt. This would lower the capacity of an economy/ group to stimulate the economy based on increased borrowing. In the presence of a slowdown/recession, revenue receipts also go down and the burden of interest payments relative to revenue receipts of a government increases further. 

For the BRICS+ group, in 2024, the weighted average interest payment to GDP ratio was 2.1%, lower than the corresponding ratio of 2.6% in 2002. In contrast, for the G7 group, the interest payment to GDP ratio was higher at 2.5% in 2024, increasing from its 2002 level of 2.2%. Thus, in terms of the interest payment to GDP burden, the BRICS+ group is relatively better off.

Fiscal policy and macro stabilization: relative role

Chart 3 shows three important parameters that determine a country’s or a country group’s capacity to fiscally stimulate an economy in the presence of a crisis.  These parameters are fiscal deficit to GDP ratio (FD), primary deficit² to GDP ratio (PD) and excess of nominal GDP growth (GR) over effective interest rate (IR). The higher the sustainable level of fiscal deficit relative to GDP of a country or a country group and the lower the interest payment to GDP ratio, the higher would be its primary deficit. The higher is the primary deficit and the higher is the excess of growth over interest rate, the higher would be a country/country group’s capacity to fiscally intervene. The G7 group was able to access a lower level of primary deficit relative to GDP as compared to that for the BRICS+ group. Thus, the BRICS+ group can contribute more in terms of neutralizing a global slowdown/recession.