World Economy

I got 2 out of 4 countries right, ‘Mr BRIC’ Jim O’Neill says

Surprised by change in mood on BRICs: O'Neill

The BRIC economies of Brazil, Russia, India and China have suffered a rocky ride since renowned economist Jim O'Neill coined the acronym in 2001.

O'Neill, who invented the term as Goldman Sachs' chief economist, told CNBC on Wednesday that China and India were performing as well — or even better — than he forecast in his now-famous report, "Building better global economic BRICs." In this, he predicted the BRICs' importance to the global economy would rapidly increase over the coming decade.

"The most important BRIC, China, despite all its problems and its slowdown, is still, since the decade started, growing by more than I had assumed it would," O'Neill told CNBC.

"So it was pretty obvious China would slow down at some stage significantly. There are lots of challenges, but so far, China is the only of the four (BRICs) that has grown by more than I had assumed."

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In his 2001 report, he forecast China's economy would grow by 7 percent on average per year until 2011. Despite the slowdown and more recent stock market rout, China's growth trumped this every year until 2015.

Last year, China's economy grew by 6.9 percent, according to the country's official data. China's gross domestic product (GDP) figures are viewed by many as inflated, but still indicative of very strong growth compared to developed world peers.

India's GDP growth has since overtaken that of China, with its economy expanding by 7.3 percent in both 2014 and 2015.

"India, the other country of more than a billion people, is seemingly growing by more than China — so some of the BRICs are kind of doing basically what I thought they would do," O'Neill said.

Russia's President Vladimir Putin, right, and his visiting Brazil's counterpart Dilma Rousseff shake hands during their meeting in Moscow.
Alexander Nemenov | AFP | Getty Images

Russia and Brazil, however, are mired in recession with both economies contracting by more than 3 percent last year and forecast to shrink again in 2016 by the International Monetary Fund.

Brazil's economic plight is viewed as particularly challenging, as the country is grappling simultaneously with severe political unrest.

"Brazil and Russia are showing classic signs of the so-called commodities curse and they have got to get through it," O'Neill said.

"What it has demonstrated is that they have been too dependent on commodities and they have got to undertake reforms in order to stop that being the case, or otherwise they won't get to where I and some others once said they could."

People line up before filling out applications at an employment agency in Brasilia, Brazil, in March 2016.
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O'Neill quit Goldman Sachs in 2013 and is now commercial secretary to the U.K. Treasury. He is also on the economic advisory board of the World Bank's investment wing and a visiting research fellow at the Bruegel think tank.

On Wednesday, the English economist said it would be better for the U.K. to remain in the European Union (EU) than vote to quit in its referendum next month.

"I don't think the risk-reward is in our interest to consider leaving the EU. It doesn't make a lot of sense," O'Neill told CNBC .

He hinted at disagreement with some analysts' view that a so-called "Brexit" might herald the end of the 28-country union.

"The EU, I would guess, is probably going to exist, whatever the U.K. votes on June 23 and we (the U.K.) will still be an important country in the world," he told CNBC.

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