S&P Global Ratings expects a limited near-term economic boost for member countries from the planned expansion of BRICS next year, which could include among others Saudi Arabia and the UAE, according to a new report. “We do not currently forecast any changes to our sovereign ratings from the group's expansion,” said S&P.

 

While the new BRICS group (assuming all invited countries join) would comprise about 30% of the world's GDP and 45% of its population, few factors unite the members economically or politically.

 

"We base our view on the experience of the original BRICS group to date, the very different economic structures and financial systems among members, and their lack of political cohesion," said S&P Global Ratings credit analyst Zahabia Gupta in the "Broadening BRICS May Have Limited Economic Benefits" report, published on RatingsDirect.

 

Global attention

"That said, BRICS membership could provide global attention for participants' agendas, perhaps reduce existing tensions between them, and increase bilateral cooperation."

 

On August 24, 2023, the original BRICS countries--Brazil, Russia, India, China, and South Africa--invited Saudi Arabia, the UAE, Iran, Egypt, Argentina and Ethiopia to join the group.

 

S&P’s foreign currency sovereign ratings on members range from high investment grade to 'CCC'. The prospective new members are at varying developmental levels and face different economic challenges as indicated by their GDP per capita, which ranges from $1,220 in Ethiopia to $51,456 in the UAE. Moreover, the economy of one member state, China, is larger than those of all the other members combined, highlighting potential differences in the power to influence policy within the group.

 

Higher trade and investment unlikely

Absent new trade agreements and based on the track record of economic relationships between existing BRICS countries, S&P does not expect materially higher trade and investment flows for new joiners. The ambition to increase transactions in non-US-dollar currencies will probably benefit the Chinese yuan most, albeit with overall volumes remaining small. 

 

However, access to new sources of concessional funding from the New Development Bank (NDB; AA+/A-1+/Stable) could provide some relief to countries with high external vulnerabilities like Egypt, Ethiopia, and Argentina.-- TradeArabia News Service