The term BRIC was coined by Goldman Sachs more than a decade ago as a collective term for the great economic potential of Brazil, Russia, India and China. It has become the most influential word symbolising the shift in global economic power to emerging markets. It has also become widely used in investment, in particular referring to emerging market bonds.

As the prediction that the BRIC countries would become global economic powers is being realised, much recent debate has centred on which countries will become the next BRICs.


The BRIC economies have become leading economic powers in an increasingly multi-polar global economy. They are all in the top 10 largest economies in the world, and they are expected to be among the top six largest economies globally by 2030.

Why finding the next BRICs is important?

While analysis conducted by Wavteq reveals that in the next decade no other country will transform the global economic map in the way that the BRICs have, why is it important to identify the next group? The reason for this is that for policymakers, companies and financial markets, it essential to know which countries are likely to become of global economic importance and which will play a major role in the international political economy. Moreover it is essential to consider which countries will become major markets for goods and services, offering new trade and investment opportunities. Also, it is important to ascertain which countries will experience rapid economic growth and, through the increase in corporate earnings potential, which will offer strong stock market opportunities.

Finding the next BRICs

The year 2020 was used by Wavteq as the benchmark when we examined the forecasts for the next BRICs. While the absolute gap between the BRICs and Australia, South Korea, Mexico, Indonesia and Turkey will continue to grow, in terms of global rankings, India and Brazil will overtake France in economic importance by 2020 – with Germany in their sights – and Russia will not be far behind France.

In 2011, Australia, South Korea and Mexico had GDPs of more than $1000bn, thus Wavteq considers them countries of global economic importance. Indonesia and Turkey will be the only two countries joining the elite group of $1000bn economies by 2020. Other countries will also put in impressive growth performances, but will be far off from becoming $1000bn economies, with the exception of Saudi Arabia, which is likely to become a $1000bn economy in 2025.

Major consumer markets

When considering the absolute increase in GDP and population from 2012 to 2020, looking first at the BRIC contenders, Indonesia, Australia, South Korea, Mexico and Turkey are expected to contribute the most to world economic growth, as these countries will reach the $1000bn economy mark by 2020.

Indonesia will contribute more to world growth than Japan, Germany or France, fuelled by a 20 million increase in population. Australia will contribute more to world growth than Germany, and will be 60% more wealthy than Germany by 2020. South Korea and Mexico will contribute more to growth than France, with strong population growth of more than 10 million in Mexico and a near doubling of per capita income in South Korea. Turkey’s contribution is based on both strong population and income growth.

Nonetheless, the BRIC economies will be the main drivers of global economic growth. China will account for nearly one-third more of world growth than the US, Germany, Japan and France combined. Thus the BRIC economies will contribute nearly $10,000bn to world economic growth between 2012 and 2020.

Stock market opportunities

Stock market performance will be driven by many factors. Macroeconomic policy and regulatory and institutional factors have a major influence on the functioning of stock markets, such as policy certainty on interest and exchange rates, shareholder protection, and entry and exit restrictions. Many emerging market companies cross-list on international exchanges, reducing financial activity in the home market.

Taking into consideration all the factors which influence stock markets, there is a link between economic growth and stock market performance. The stock price is the discounted present value of the firm’s payout, and the payout should be positively related to economic growth.

When considering the ratio of stock market capitalisation to GDP as an indicator of how liquid the stock market is, the higher the ratio, the stronger the link we would expect between a country’s economic growth and stock prices.

When examining economic growth and stock market capitalisation, India and China are forecast to lead economic growth. Both countries have a stock market capitalisation relative to GDP around the Organisation for Economic Co-operation and Development (OECD) average of 90%, and therefore we might expect the rapid economic growth to be linked to stock market performance.

The other top-performing countries to watch as future contenders to the BRICs, with the exception of Indonesia, are mainly the least developed countries of Bangladesh, Vietnam, Egypt and Pakistan. Each will achieve economic growth of more than 50% by 2020. Most of these countries currently have underdeveloped stock markets. Out of the 15 fastest growing economies, only India’s stock market exceeds OECD levels of size relative to GDP. The link between economic growth and stock market performance in the fastest growing economies may therefore be weak, unless other factors change to improve the functioning of the stock market.

Implications for who’s after the BRICs?

Wavteq’s analysis has re-confirmed the importance of the BRIC group in terms of their global economic importance, major consumer markets and growth potential. No other countries will be close to joining this group by 2020. Contributing nearly $10,000bn to the world economy between 2012 and 2020, the BRIC economies will be the drivers of world growth. Our analysis also demonstrates that Russia should remain part of this group, as it continues to close the gap with the largest developed economies and with its contribution to world growth above that of every other country bar US and the other BRICs.

Australia, Indonesia, Mexico, South Korea and Turkey are the only emerging countries that will have over $1000bn GDP by 2020. (Due to the huge growth in per-capita income, Australia and South Korea can be considered emerging markets despite being advanced economies.)

Since none of the current acronyms already suggested capture this group of countries, we suggest that IMAST (Indonesia, Mexico, Australia, South Korea and Turkey) accurately reflects this group of emerging markets.

Implications for policy and economics

The BRIC economies will become more influential in the world economy. Wavteq expects them to dominate growth in trade and investment. They will increasingly be able to insist on more influence in international institutions governing the world economy. The rest of world will become more dependent on the BRICs for their economic growth. The US will still be extremely important, and the only economic superpower, but the growth opportunities will be far higher in the BRICs.

The economies of the IMAST countries will all be worth between $1000bn to $2000bn by 2020, and they will command a much more important position in the world economy as they rapidly catch up with the largest developed economies.

Implications for investment

The BRIC economies will be highly attractive for both greenfield FDI and M&A. With rapid economic growth, we also expect their domestic companies to accelerate FDI overseas. With FDI closely correlated to economic growth, India and China in particular are likely to see the fastest increase in overseas FDI out of every major economy.

The IMAST countries will also become much more important players in trade and investment, as we expect a particularly strong growth in inward FDI to all of these countries, although for South Korea we expect outward FDI to accelerate much more rapidly.

As other countries will be achieving faster economic growth than the IMAST countries – albeit from much lower levels – FDI in countries such as Bangladesh, Vietnam, Nigeria and Egypt is expected to increase rapidly.

The impact of economic growth in the BRIC, IMAST, and other emerging markets on stock market performance is likely to vary considerably depending on regulatory and institutional factors and current liquidity of the stock markets. The fundamentals for stock market investment appear strongest in India, China, Australia, the US, South Africa, Taiwan, South Korea, Thailand, Saudi Arabia and the Philippines, although much depends on progress made with regulatory and institutional reform.

Dr Henry Loewendahl is managing director of consultancy Wavteq Ltd and senior adviser for fDi Intelligence.