Infrastructure concerns could dampen growth in the BRICs

New research from Grant Thornton’s International Business Report (IBR) reveals that businesses in the fast-growing BRIC economies increasingly view under-investment in national infrastructure as a major constraint on their ability to grow. Further, the data reveals that for the first time, the top five most optimistic economies include no BRIC nations.

45% of BRIC businesses cite transport infrastructure as a major constraint on their ability to grow, up from 21% this time last year and well above the global average of just 12%. The figure is particularly high in Russia (74%) and India (59%).

In addition, 47% of BRIC businesses cited ICT  infrastructure as a growth constraint. This compares to the 19% figure recorded 12 months ago and the global average of just 14%. Again, India (64%) and Russia (63%) are most concerned.

Ed Nusbaum, global CEO of Grant Thornton, commented: “Growth in the BRIC economies over the past decade has been incredible: these four economies have accounted for more than 30% of global economic growth since 2002. However, the IBR results reveal that they are now facing capacity issues. Investment in infrastructure appears to have lagged behind growth, leaving unsatisfied business demand for better connectivity.

"The BRIC share of global economic growth is set to rise to 37%  over the next five years, so these connectivity issues represent a major risk not just for the individual economies but the world as a whole."

At a summit last month, the leaders of the four BRIC economies announced that they would, together with South Africa, be setting up a new development bank based on their “considerable infrastructure needs”. Whilst stifling Indian bureaucracy and the 'Brazil cost' take a lot of headlines, infrastructure issues are often brought into sharper focus when countries host major sporting events. Brazil (2014 FIFA World Cup and 2016 Olympic Games) and Russia (2014 Winter Olympic Games and 2018 FIFA World Cup) will host major events over the next few years, whilst China (2008 Olympic Games) and India (2010 Commonwealth Games) have done so in the recent past.

Opportunities for frontier economies

For the first time in Q1-2013, no BRIC economy makes it into the top five for business optimism. Top of the list is Peru, followed by the Philippines, United Arab Emirates, Mexico and Chile.

Ed Nusbaum added: “Investment in infrastructure is a sign that governments are serious about facilitating business growth. This in turn breeds confidence. Last month’s announcement in South Africa indicates that the BRIC infrastructure concerns highlighted in the research are not temporary blips. They represent long-term problems which need to be addressed if growth is to be maintained in the coming years.

“However, whilst the BRIC economies overcome their growing pains, the next wave of emerging markets – such as rapidly reforming Mexico and the other rising Latin American stars, Peru and Chile –  look ready to take up the mantle. There is no doubt that holes in output left by the BRICs offer opportunities for these frontier economies.”

- ends - 

John Vita, Director, public relations and external affairs, +1 312 602 8955