Creators of BRIC and N11 re-define Emerging Markets

This will be the tenth year since the acronym BRIC came into existence. It has become synonymous with the remarkable rise of those four countries—Brazil, Russia, India and China—as well as some others, and their influence on the world economy. It is almost 8 years since GS Global ECS Research first published an outlook to 2050 which suggested that these four economies could collectively be bigger than the US and, along with the US, could become the five biggest in the world based on their likely USD value of gross domestic product.

In 2005, GS introduced the concept of the “Next 11” or the “N-11” as it has become known. This was a simple description to bracket the eleven most populous countries and to see if they, collectively or individually, might have BRIC-like potential.

A few years after the inception of the two acronyms most of the positive momentum behind the world economy is being driven by the majority of these 15 countries. Their success extends beyond their borders and is affecting the lives of all the world’s 6.5 billion citizens. As a result of this, many profound changes are occurring, not least of which is that we are probably seeing the largest and fastest rise of people out of poverty globally in many generations. Therefore, to describe many of these countries as “Emerging Markets” no longer seems appropriate.

Goldman Sachs Asset Management (GSAM) have now decided to adopt the term “Growth Markets” to describe how they view some of the world’s most dynamic economies.

Given the rising importance of some of these economies, GSAM thinks that the traditional Developed/Emerging country divide no longer reflects the fundamental nature of the global economy today.

GSAM separated out some countries from the traditional Emerging Markets universe—those that are at least 1% of global GDP—and call them “Growth Markets”.

Eight countries currently satisfy this criterion: each of the BRIC countries (Brazil, Russia, India and China), as well as the four largest “Next 11” (N-11) countries: Mexico, Korea, Turkey and Indonesia.

These are the economies that are most likely to experience rising productivity coupled with favourable demographics and, therefore, a faster growth rate than the world average going forward.

Additional characteristics that GSAM implicitly uses to distinguish Growth Markets from Emerging Markets include their growth environment, as well as the level of financial development and accessibility to investors.

Other countries could achieve Growth Market status over time—these include some of the other N-11 countries, namely Nigeria and the Philippines, and possibly Egypt. For now, however, they remain in the Emerging Markets group.