This short report looks at the rise of the BRIC economies, their growing importance to the global economy and the trends that will shape their performance. It draws upon the International Business Report (IBR) – a quarterly survey of business leaders, covering 11,500 businesses in 40 economies on an annual basis – as well as forecast data from leading global economists.

1. GRANT THORNTON INTERNATIONAL BUSINESS REPORT 2012
The BRICs: propping up the global
economy
This short report looks at the rise of the
BRIC economies, their growing importance
to the global economy and the trends that
will shape their performance. It draws
upon the International Business Report
(IBR) – a quarterly survey of business
leaders, covering 11,500 businesses in
40 economies on an annual basis – as
well as forecast data from leading
global economists.

2. No longer emerging?
The collective strength of the BRIC economies Of course, when measured on a per capita basis,
(Brazil, Russia, India and China) is of ever the GDP of these economies still lags behind that of
increasing importance to the strength of the global the G7. However, on an absolute basis, they are
economy. Whilst mature economies across the catching up fast. The BRICs are forecast to account
globe grapple with towering budget deficits, for 37% of global growth in the period 2011-16,
anaemic growth and rising unemployment, the with China alone contributing 22%. This will
BRICs are expanding rapidly, lifting people out of increase the BRIC share of global output from 19%
poverty and driving the global economy. The to 23%. Meanwhile, the proportion of global
manner in which leaders in the troubled eurozone output produced by the traditional powerhouses in
recently pleaded with these markets for funds to the G7 economies will fall from 48% to 44% over
help alleviate the sovereign debt crisis marks yet the same period. 2
another definitive step in the transition of economic
power from ‘west’ to ‘east’.
FIGURE 1: BRICS BUILDING MOMENTUM
Indeed, at a recent high-growth markets GDP PERCENTAGE GROWTH RATES
conference run by the The Economist, the man
who first coined the BRICs acronym around a
decade ago, Jim O’Neill, now chairman of
2.3 2.1
Goldman Sachs Asset Management, described as
Canada
“idiotic and insulting” the use of emerging markets
in relation to the BRICs. He argues that these
economies are “increasingly the driver of
everything positive in the world economy” and that
0.8 1.5
they should be grouped alongside Indonesia, United
Mexico, South Korea and Turkey as “growth Kingdom
markets”.1 1.7 2.0
United States 1.6 1.3
eurozone
3.0 4.4
Brazil
2011 – mature economies
2011 – BRIC economies
1
Source: GTUK International Markets 2012-16
http://www.grant-thornton.co.uk/thinking/emergingmarkets/
2
Source: IMF 2011 SOURCE: ECONOMIST INTELLIGENCE UNIT 2011
2 The BRICs: propping up the global economy

3. FIGURE 2: BRICS TAKING A LARGER SLICE OF THE GLOBAL ECONOMY
PERCENTAGE OF GLOBAL OUTPUT
Other: 33% BRIC: 19%
2011
G7: 48%
4.0 4.0
Russia
Other: 33% BRIC: 23%
2016
G7: 44%
0.2 1.5
Japan
9.8 8.0
China
7.6 8.3
India
SOURCE: IMF 2011
The BRICs: propping up the global economy 3

4. Business confidence
Against this backdrop of rapid economic growth,
business leaders in the BRIC economies remain
more optimistic about the outlook for their
respective economies compared with peers in
mature markets. The latest IBR quarterly results
show net 34% of business leaders indicating
optimism over pessimism for the next
12 months, compared with -12% in the G7.
Business leaders in mature markets remained
cautiously optimistic about their economies up
until Q2 of this year. However, by Q3 the
slowdown in the United States economy, the fallout
from the tsunami in Japan and the sovereign debt
crisis in the eurozone saw optimism slide. Whilst
BRIC business confidence ticked downwards in FIGURE 3: BRICS BUOYANT
both Q2 and Q3, it recovered again in Q4 to stand NET PERCENTAGE OF BUSINESSES INDICATING OPTIMISM LESS THOSE INDICATING PESSIMISM
fully 46 percentage points higher than in the G7. 60
Clearly there are a number of issues facing the 50
BRIC economies. In Russia, oil and gas make up 40
30
two-thirds of exports and the price of oil will need
20
to be US$120 a barrel if the budget is to balance. 10
In Brazil, the strong real has hurt exporters and 0
growth was flat in the third quarter of 2011. In -10
-20
China housing sales, construction and exports have
Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011
all slowed significantly in recent months. Whilst in BRIC 54 57 44 25 34
India corruption, inflation and an unwillingness G7 11 27 27 -8 -12
to let foreign investment in are all threats to Global 23 34 31 3 0
growth prospects. SOURCE: GRANT THORNTON IBR 2012
Further, these markets are now ever more
dependent on the global economy with India
FIGURE 4: WORRIED ABOUT ANOTHER RECESSION?
recently warning that growth was beginning to PERCENTAGE OF BUSINESSES WORRIED THAT THE GLOBAL ECONOMY WILL GO BACK INTO RECESSION
falter, and top Chinese policymakers describing the India 96
outlook as “extremely grim and complicated.”3 As
a result, three-quarters of BRIC business leaders
are concerned that the global economy will go back Russia 87
into recession over the next 12 months. Business
leaders in India are the most concerned (96%),
Brazil 76
followed by Russia (87%) and Brazil (76%) with
China the least concerned (66%).
BRICs 75
China 66
SOURCE: GRANT THORNTON IBR 2012
3
Source: Financial Times “India and China voice growth fears” 16/12/2011
4 The BRICs: propping up the global economy

5. “Economies such as China are catching up fast.
With growth rates in mature markets not
expected to reach pre-recession levels anytime
soon, a rebalancing of global economic power
is well underway.”
XU HUA
GRANT THORNTON CHINA
Operations FIGURE 5: BRIC BUSINESS BOOMING
NET PERCENTAGE OF BUSINESSES EXPECTING AN INCREASE LESS THOSE EXPECTING A DECREASE
Business confidence in the BRIC economies
extends to their expectations for boosting business 80
performance over the next 12 months. Net 72% of 70
60
BRIC businesses leaders expect revenues to rise in
50
2012, compared with 37% in the G7 and 43% 40
globally. Similarly, 58% of those in the BRICs 30
expect to see their profits rise, well above the G7 20
10
(26%) and global average (31%). Meanwhile,
0
expectations for exports in the BRICs stand at 24%, 72 37 43 58 26 31 24 17 18
slightly above the G7 (17%).
Revenue Profitability Exports
Businesses in India are the most bullish in terms
of increasing revenues in 2012; net 82% expect to BRIC G7 Global
see an increase, ahead of Brazil (78%), China (74%) SOURCE: GRANT THORNTON IBR 2012
and Russia (43%). In terms of profitability, China
leads the way with net 61% expecting to see a rise
in 2012, slightly ahead of Brazil (60%), India (57%)
and Russia (42%). Meanwhile export prospects are
far higher in India (36%) and China (28%) than in
Brazil (16%) and Russia (6%).
The BRICs: propping up the global economy 5

6. “Finding the right workers is a serious issue for
businesses amid near record low unemployment.
Businesses urgently require more skilled workers
to fuel growth.”
MADELEINE BLANKENSTEIN
GRANT THORNTON BRAZIL
Employment FIGURE 6: HIRING PLANS STRONG, BUT WHERE ARE THE SKILLED WORKERS?
1
NET PERCENTAGE OF BUSINESSES EXPECTING AN INCREASE
Employment prospects in the BRIC economies 2
NET PERCENTAGE OF BUSINESSES REPORTING AN INCREASE
3
as a whole remain robust; net 45% of businesses PERCENTAGE OF BUSINESSES CITING A LACK OF SKILLED WORKERS AS A CONSTRAINT ON GROWTH
increased staff levels in 2011 and a further 41% 45
expect to do so again in 2012. By contrast, even as 40
jobs were shed in the public sectors just 22% of 35
30
business leaders in the G7 boosted staff levels over
25
the past 12 months, whilst 26% expect to do so in 20
2012. 15
Rather than the challenge of unemployment 10
5
which many mature governments are grappling
0
with, businesses in the BRIC economies are faced 45 22 25 41 26 27 36 26 28
with a shortage of skilled workers; 36% of these
Employment – past Employment – next A lack of skilled
businesses believe an inability to find the right 12 months1 12 months2 workers3
workers will act as a constraint on expansion plans
over the next 12 months, well above the level BRIC G7 Global
observed in the G7 (26%). SOURCE: GRANT THORNTON IBR 2012
6 The BRICs: propping up the global economy

7. Inflation FIGURE 7: INFLATION REMAINS A CONCERN
HOW WORRIED ARE BUSINESSES ABOUT EFFECT OF INFLATION ON GROWTH; LAST REPORTED OFFICIAL
Inflation remains a key challenge for the BRIC INFLATION RATE
economies. In India the central bank has raised
100
interest rates 13 times in 19 months to try and curb
90
double-digit rises in consumer prices. In Brazil, 80
despite recent easing, the rate inflation remains at 70
6.6% well above the target of 4.5%. In China, 60
50
inflation peaked at 6.4% in June but has since
40
dropped to 4.2%, although the expected loosening 30
of monetary policy may see this climb again. In 20
Russia, heavy fiscal spending ahead of the elections 10
0
next year is likely to keep the rate well above 6%.4
94 9.3 80 6.0 68 – 66 6.5 58 4.1
The majority of business leaders in the BRIC
economies are concerned about the impact of India Russia BRICs Brazil China
inflation on their respective economies. 68% cite it Worried about inflation Official inflation rates
as a concern across all four countries, but this
SOURCE: GRANT THORNTON IBR 2012/EIU 2011
ranges from 94% in India to 58% in China.
These figures are supported by the IBR which
suggests that net 38% of businesses expect to FIGURE 8: WAGE-PRICE SPIRAL DANGERS
NET PERCENTAGE OF BUSINESSES EXPECTING TO INCREASE SELLING PRICES/RAISE SALARIES OVER
increase selling prices over the next 12 months, NEXT 12 MONTHS
compared with just 18% globally. In India (60%)
40
and Brazil (44%) especially prices are expected
35
to climb. 30
A further 21% of businesses expect to increase 25
salaries above the rate of inflation, compared to 20
14% globally. However, there are big variations 15
10
between Brazil (40%) and India (35%), compared
5
with China (15%) and Russia (4%) on this 0
measure. 38 11 18 21 10 14
Selling prices Salaries above inflation
BRIC G7 Global
SOURCE: GRANT THORNTON IBR 2012
“Inflation is perhaps the key issue the Central
Bank of India is dealing with right now. With
salaries expected to rise over the next 12 months,
businesses will be forced to raise prices to
maintain real profits.”
VISHESH CHANDIOK
GRANT THORNTON INDIA
4
Source: Economist Intelligence Unit
The BRICs: propping up the global economy 7

8. FIGURE 9: RISE OF THE REDBACK?
PERCENTAGE OF BUSINESSES THAT SUPPORT THE US$ AS THE GLOBAL RESERVE CURRENCY
Brazil India China Russia BRICs
Yes, completely 38 38 13 13 22
Yes, but I would like to see greater diversification 40 41 30 46 35
No 22 14 41 35 33
SOURCE: GRANT THORNTON IBR 2012
Finance FIGURE 10: STRUGGLING FOR FUNDS
PERCENTAGE OF BUSINESSES CITING FINANCE AS A CONSTRAINT ON GROWTH
Access to finance is an area in which businesses in
the BRIC economies struggle more than their peers 40
in the G7. Globally, around a quarter of business 35
30
leaders cite each of the cost of finance, access to
25
long-term finance and a shortage of working capital 20
as constraints on their ability to grow their 15
business. 10
5
However, in the BRIC economies, 33% of
0
business leaders cite a shortage of working capital 30 19 23 32 24 26 33 19 24
compared with 19% in the G7. Similarly 32% cite a
Cost of finance Shortage of long Shortage of working
shortage of long-term finance and 30% the cost of term finance capital
finance in the BRICs, well above levels observed in
BRIC G7 Global
the G7.
Further, businesses in mature markets feel much SOURCE: GRANT THORNTON IBR 2012
better supported by their lenders. Whilst 78% of
G7 businesses feel that their lender is supportive of
their business, this drops to 66% in the BRIC
economies. The global average is 74%.
Interestingly, at a time of such economic
volatility, 35% of BRIC businesses say they
support the US dollar as the global reserve currency
but would like to see further diversification. A
further 33% say they do not support the US$ as the
global reserve currency, with 22% supporting it
completely.
Full support is strongest in Brazil and India
(both 38%) and weakest in China and Russia (both
13%). At least two in five businesses in Brazil, India
and Russia support the US dollar but would like to
see further diversification. In China, more than two
in five businesses do not support the US dollar as
the global reserve currency (35%).
8 The BRICs: propping up the global economy

9. Investment FIGURE 11: INVESTING FOR FUTURE GROWTH
NET PERCENTAGE OF BUSINESSES EXPECTING AN INCREASE LESS THOSE EXPECTING A DECREASE
Investment activity in the BRIC economies looks
robust for the next 12 months; net 47% expect to 45
increase investment in plant and machinery in 2012, 40
35
and a further net 46% plan to expand their R&D
30
activity. Across the G7, investment activity looks 25
slower with net 31% and net 17% planning to 20
increase investment in plant and machinery and 15
10
R&D respectively.
5
However, there is evidence that businesses in 0
the BRIC economies would like to see their 47 31 35 46 17 25 25 16 17
respective governments do more to alleviate the Plant & machinery R&D New building
challenges they face in terms of key infrastructure.
18% of business leaders cite the poor quality of BRIC G7 Global
transport infrastructure as a major constraint on SOURCE: GRANT THORNTON IBR 2012
their ability to grow their operations, compared to
just 8% in the G7, and 11% globally. A further
FIGURE 12: BUSINESS EXPANSION CHOKED
17% of BRIC businesses leaders cite information PERCENTAGE OF BUSINESSES CITING INFRASTRUCTURE AS A CONSTRAINT ON GROWTH
communications technology as a constraint,
15
compared with 11% in the G7 and 14% globally.
10
An area in which BRIC governments have been 5
investing recently is the bidding for and hosting of 0
major sporting events such as the Olympic Games 18 8 11 17 11 14
and the FIFA World Cup. Overall 51% of BRIC Transport Information
businesses believe these events are important in communications technology
terms of attracting investment. BRIC G7 Global
In Brazil, which is to host both the FIFA World
SOURCE: GRANT THORNTON IBR 2012
Cup in 2014 and the Olympic Games in 2016, 84%
of businesses believe such events are an important
draw for investment. In Russia, which will host the FIGURE 13: TURNING THE EYES OF THE WORLD TOWARDS YOU*
PERCENTAGE OF BUSINESSES CITING MAJOR SPORTING EVENTS AS IMPORTANT TOOL TO ATTRACT INVESTMENT
FIFA World Cup in 2018, 52% of businesses
believe these events are important, but in China, Brazil 84
which hosted the Olympic Games in 2008 support Russia 52
falls to just 39%.
BRICs 51
China 39
*this question was not asked in India
SOURCE: GRANT THORNTON IBR 2012
“While energy prices will stay consistently high for a long period of time, we hope
that in the meantime Russia will be able to lessen the economy’s dependence on raw
materials by boosting the export of deeper conversion products instead. Although
such reorientation would demand considerable infrastructure investments, it would
make the Russian economy more competitive in the long run.”
IVAN SAPAROV
GRANT THORNTON RUSSIA
The BRICs: propping up the global economy 9

10. The Grant Thornton International Business Report (IBR) is a quarterly survey of around 2,800 senior executives in
privately-held and listed businesses all over the world. Launched in 1992 in nine European countries the report now surveys
more than 11,500 business leaders in 40 economies on an annual basis providing insights on the economic and commercial
issues affecting companies globally.
The data in this report are drawn from interviews conducted with businesses in November/December 2011.
IBR 2012 METHODOLOGY
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