On the rate of economic growth in BRIC

This post extends our previous analysis of the long term GDP growth in developed countries with BRIC.

Table 1 lists average annual increment of GDP per capita (1990 USD) in developed countries. The best countries demonstrated increments above $350 per year. Many European countries are between $300 and $350 per year. It is possible to conclude that intertial economic growth is somewhere between $320 and $390 per year (in PPP 1990 US dollars). Some European countries demonstrate poor performance, e.g. Italy, France, Portugal, Greece.

The long term annual increment for a given country completely defines the rate of economic growth. According to their GDP per capita levels, all developed countries are characterized by the rate of inertial growth within the range between 1.5% per year and 2.5% per year. One should not expect higher rates, with a low probability of short term fluctuations.

Let’s apply the notation of inertial economic growth to BRIC countries and assess their performance in terms of their potential rate of inertial growth. Table 2 lists mean annual increment in GDP per capita in four BRIC countries, which are rather low:  from $64 in India to $114 in China over the same period between 1960 and 2015. This is three to four times smaller than that in developed countires. Hence, BRIC countries demonstrate poor performance over longer period.

However, China figures look much better at a shorter interval of the past 20 years. The annul increment is $242, i.e. approximately 70% of that in Austria and at the level of France. Since the level of GDP per capita in China is extremely small by European standards, the rate of growth is much  higher – between 3% and 10% per year. (Here we use data for China, not China-old, from the Total Economy Database.)  

The current rate of 3% to 4% per year is much smaller than  one could expect when China would grow along intertial trajectory of European countries. Figures 1 thru 4 depict various versions of growth trajectories for BRIC countries.

Table 1. Mean annual increment of GDP per capita

	Mean, 1960-2015
Austria	340
Belgium	326
Denmark	282
Finland	320
France	274
Germany	281
Greece	159
Ireland	357
Italy	212
Netherlands	304
Norway	363
Portugal	191
Spain	240
Sweden	313
Switzerland	262
United Kingdom	286
Canada	323
United States	387
Australia	338
New Zealand	203
Japan	345

Table 2. Annual GDP per capita increment in BRIC countries

	1960-2015	1995-2015
China	114	242
India	64	134
Brazil	83	82
Russia	105	201

Fig. 1. The evolution of real GDP per capita in China from 1960 to 2015. Three graphs demonstrate annual increment as a function of GDP per capita, annual increment as a function of time, and the growth rate (1/year) as a function of GDP per capita.

Fig. 2. The evolution of real GDP per capita in India from 1960 to 2015. Three graphs demonstrate annual increment as a function of GDP per capita, annual increment as a function of time, and the growth rate (1/year) as a function of GDP per capita.

Fig. 3. The evolution of real GDP per capita in Brazil from 1960 to 2015. Three graphs demonstrate annual increment as a function of GDP per capita, annual increment as a function of time, and the growth rate (1/year) as a function of GDP per capita.

Fig. 4. The evolution of real GDP per capita in Russia from 1960 to 2015. Three graphs demonstrate annual increment as a function of GDP per capita, annual increment as a function of time, and the growth rate (1/year) as a function of GDP per capita.