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30 Aug 2023

Econ Digest

BRICS pursues a bigger role in the global economy amid intensified geopolitical tensions


        The so-called BRICS countries – Brazil, Russia, India, China and South Africa – held their annual summit on August 22-24, 2023 in South Africa. This was another economic forum in 2023, following the G7 and South American summits. These informal gatherings were aimed at discussing cooperation in various aspects, including geopolitical tensions.

        The BRICS summit discussed three main issues on August 22-24, 2023, namely:
  1. The BRICS nations’ stance on geopolitics clearly indicates that the group’s relations with Western countries will become more complex. The role of BRICS on the world stage is significantly strengthened due to its economic scale and growing number of members.
  2. Promoting local currency transactions to reduce reliance on the US Dollar. This plan has become more concrete since Western nations have imposed sanctions on Russia. Moreover, many emerging countries are interested in becoming members of the New Development Bank (NDB) or BRICS Bank, as well as the Contingent Reserve Arrangement (CRA), which play similar roles to those of the World Bank and the International Monetary Fund (IMF), respectively. The NDB and CRA’s terms and conditions are more flexible and beneficial to the emerging countries, allowing members to borrow in local currencies. Regarding trade and investment relations, the BRICS members are becoming more economically connected. However, the US and the EU remain their major export markets.
  3. The admission of new members indicates that the group will serve as an interesting alternative economic and geopolitical pillar for emerging economies. Saudi Arabia, the United Arab Emirates, Iran, Egypt, Ethiopia and Argentina will officially become new members on January 1, 2024.

        KResearch holds the view that the three major summits – namely the G7, South American, and BRICS – signal their stance on exploring alternatives to reduce reliance on Western nations. In particular, the aspect of de-dollarization has been discussed across all forums. This reflects the diversification of economic risks from traditional economies towards a varied range of alternatives.

        Thailand formally applied to join the BRICS bloc at the beginning of 2023 and is awaiting consideration. The key focus of becoming a BRICS member is to maintain the balance of economic power among emerging and developed countries. The advantage for Thailand is seen as an opportunity to access major economies across all continents. However, the Thai authorities must adopt a prudent approach in accepting new agreements that could be a point of contention with its trading partners in Western countries, which may lead to additional trade protectionism measures going forward.

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