Changes in demographics and sluggish investment flows will check the fast economic growth in the Bric countries over 2010-20. Slower growth will impact the global economy, says Legal & General.

Demographic changes and a slowdown in investment flows into commodities and capital goods will hit gross domestic product (GDP) growth in the Bric countries (Brazil, Russia, India and China) over the next few years. Consumer spending will be the main catalyst for growth, according to Legal & General Investment Management's emerging market strategist Brian Coulton.

Chinese GDP growth in China is expected to fall to an average of 7.7% a year this decade. Over the last 10 years the country had average GDP growth of 10.5%.

Growth in India between 2010 and 2020 will marginally fall to an average of 7.3% a year from 7.4%. Russia will remain the laggard, averaging only 2.8% growth while Brazil's pace will pick up to 4% a year compared with an average 3.6% over 2000-10.

Current investment levels, particularly those in India and China, are unsustainable over the longer term, says Coulton, and risk overheating both economies unless growth slows.

Although investment levels are set to decline, consumer spending in China and India is expected to account for an increasing share of GDP growth in future.

In China consumption is expected to account for 8.6% of GDP over the period 2010 to 2020 compared with 7.4% between 2000 and 2010. Investment will slow from 13.9% to 6.5%, according to Legal & General.

Consumption in India over 2000-10 accounted for 6% of GDP, this is forecast to be 7.5% for the period 2010-2020. Investment will slow from 13.7% to 6.3%.

Bric GDP per capita still lags behind developed economies. For example, US GDP per capita is $48,147 compared with $1,500 in India, according to International Monetary Fund statistics. This leaves a lot of room for growth.

Changing demographics will also impact growth in the Brics. Citing a United Nations projection, Coulton says India has the best outlook with increases in the growth or the working-age population.  It is expected to grow around 1.5% over the period. This compares starkly with Russia where the working-age population is expected to decrease by 1% over the same period, explains Coulton.

"China and India have seen strong population growth over the last 10 to 20 years. That will carry on in India but not in China," Coulton notes. "The unintended consequence of the one-child policy is that while population growth is slowing, the ratio of old-age pensioners to the working-age population will be going up."

Coulton also says slowing Bric growth will impact the global economy, especially in the commodities markets which have become accustomed to double-digit growth in recent years.

He has a bearish outlook for the Bric currencies due to government intervention to stop appreciation, particularly in China. A near-term drop in interest rates will also be less supportive of the currencies in all four countries.

He concludes that a more open approach to foreign investment will help the economies grow faster but this is unlikely to happen in the near future.