Brazil moves up a place in GDP

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It’s another milestone – an emerging economy overtakes a developed one in terms of GDP.

Earlier this year it was China overtaking Japan. This time, Brazil has moved ahead of the UK as the 6th biggest economy in the world. The question is: who’s next? And does it matter?

The estimate that Brazil is now ahead of the UK in GDP was made by the Centre for Economics and Business Research, a UK-based economic forecaster. Given Brazil’s growth rate of over 7 per cent for the last year, it has been predicted by others, including the IMF, that it would overtake the UK at some point in 2011.

So who is next? Well, Russia and India are set to move up from 9th and 10th respectively, with Italy at 8th in their sights. The CEBR predicts that by 2020, the four Brics will be the 2nd (China), 4th (Russia), 5th (India) and 6th (Brazil) largest economies, with only the US (1st) and Japan (3rd) ahead.

While this all sounds very good for EMs as the European economies of Germany, France, UK and Italy are overtaken, in reality there is still much work to be done. All four Brics still lag far behind in GDP per capita. According to the World Bank, Brazil and Russia are around 50th in the world (both may be slightly higher using 2011 data). China is 84th; India is 123rd.

And the announcement comes on the same day that economists have trimmed Brazil’s forecasts for growth and inflation – according to Reuters, GDP is forecast at 2.9 per cent and inflation at 5.33 per cent. Even high-growth economies will feel the chill in 2012.

Nevertheless, a change in the world order is worth noting. With economic size comes bargaining clout and soft power. As CEBR chief executive Douglas McWilliams said: “Brazil has beaten the European countries at soccer for a long time, but beating them at economics is a new phenomenon.”