Ten largest economies in the world

Escrito el 22 octubre 2007 por Gonzalo Garland en Economía Mundial

Just last Friday, October 19th, the World Development Report 2008 was published by the World Bank. This is the most reliable and extensively used source of economic data of all the countries, and as such, receives a lot of attention not only from economists worldwide but also from other analists that track the evolution of the world economy throughout time. The report always includes as Table 1 the “Key indicators of development” that provides the basic data on most countries of the world. Its fifth column refers to Gross National Income (GNI) measured by the World Bank Atlas method, the most extensively used way of measuring the size of the different economies of the world. This is a close approximation to the GDP’s of each country, although there are small differences due to income from foreign sources, and income of your factors of production abroad. For the purposes of this post we can think of GNI as a very close estimate of GDP measured at current exchange rates. There is an alternative way of measuring GDP’s which is based on Purchasing Power Parity (PPP), but we will leave that forr another post.

Tthe new numbers show no changes on the ten largest economies of the world, although there may be some changes coming in the next couple of years. The largest economy in the world is the United States, which is no surprise. At 13.4 trillion (official numbers for year 2006), the US represents by itself 28% of total GDP of the world. This is a growing number but a slightly decreasing percentage due to the fast growth of emerging countries. At a still significant distance we have Japan, as the second largest economy of the world, with a GDP of 4.9 trillion US dollars (11% of the world’s GDP).

The third largest economy continues to be Germany, but it is not clear whether it will be able to maintain this position in 2 or 3 years. Its GDP is 3.0 trillion, while China consolidates its fourth place for the second year in a row with a GDP of 2.6 trillion. The distance between Germany and China seems still large, but with growth rates of more than 10% and a slowly appreciating yuan (which makes Chinese production represent more US dollars), the Chinese are catching up at a fast pace.

After China are Great Britain, with a GDP of 2.4 trillion, and France, with 2.3 trillion, maintaining the fifth and sixth positions of the previous year. Italy, with 1.9 trillion is seventh, and Spain and Canada also keep the same places they held last year with 1.2 and 1.1 trillion respectively. The tenth economy in the world is India, also in this position for the second year in a row, with 906 billion US dollars.

But we should keep an eye on the next group. Brazil, with 892 billion, Korea, with 856 billion, and Russia with 822 billion occupy positions 11 to 13, and complete the inclusion of all the BRIC countries (Brazil, Russia, India and China). Right after Russia are Mexico (820 billion) and Australia (739 billion), to complete the list of the 15 largest economies of the world. But the trend is clear. There are already 2 emerging economies among the largest 10 of the world, and even though there is still some distance, it is very likely that in a few years there may be four, in particular if Russia maintains its growth rates and Brazil continues to increase its growth while reducing inflation. But as always, only time will tell whether these trends continue or there are changes that modify this forecast.


Miguel Burguet 24 octubre 2007 - 02:03

I think during the XXIth century the majority of the European countries among the top ten will fall from the list, surpassed by countries with large populations and growing economies, such as India or Mexico.
Relating the US, I disagree with some of the voices that speak about a “relative” decline of its economy and thus its political power. Last year, in a report at “The Economist” the cause of a rising US on the XXIth century was embraced. The main argument was that many of the analysis which predicted the decline of the US were based on a stable or slightly growing population due to the moderate birth rate of the Americans. But taking into account a rising flow of immigrants and the employment needs of the American economy if current development rate is sustained, the report calculated that during the XXIth century the US population could arrive to 450 million; American economy would keep a slightly minor rate of the world product than current one.
Relating South American countries, I do not see clear the case of Brazil on the medium term. From my point of view, Brazil is a growing but fragile economy, still very dependant of regional and world stability to keep its own equilibrium. Of course the country has good fundamentals right now, and the macroeconomic imbalances seem under control after following the appropriate economic policy; but due to the lack of infrastructure, extreme economic disequilibrium and the need of a sound fiscal policy maybe the history of the country will repeat itself and make true the sentence of De Gaulle: “Brazil has a great potential to develop, and it will have it forever”.
In any case, this report draws a situation concordant with the spreading of capitalist development through those cultures more able to develop it, such as the Asian.
Far away from the pure economic development, this “multipolar” economic world will have enormous consequences in the geopolitical distribution of power (i.e. rise of China and India as natural foes, fears of Japan, relative decline of Europe) and will probably cause the main conflicts among nations of the XXIth century (i.e. natural resources allocation, renewed rivalry origined in historic resentments, trade wars).

Esteban 25 octubre 2007 - 15:57

What I’ve found very interesting in this issue is the position of Spain and other EU countries in the list of the 15 largest economies of the world. We must consider the fact that there are only five EU countries in this list, and Spain is one of them. Our economy is at the premium league of world economies, but seems to me that many of our politicians haven’t realized of this fact by now…

Roque Calvo 25 octubre 2007 - 16:39

The World Development Report 2008 tables and any other mega compilation of data could become a black hole of statistics for students. Once opened the document, we could pay attention to many other interesting data in this remarkable report. A simple reading of life expectancy or adults literacy indexes brings us to the aggregated HDI (UN, Human Development Index) where those top emerging countries in the GNI-league are bad positioned, in a phase gap between goods accounting and population development. Hopefully, the convergence in the ranking of these two indexes would make lighter the report tables and simplify us the interpretation of data in the future.

Jesús M. Rodríguez 25 octubre 2007 - 18:55

A la luz de los resultados podemos sacar algunas conclusiones que resultan interesantes. En primer lugar constatar la posición hegemónica de EE.UU. en la economía mundial. A pesar de los constantes anuncios de recesión y de problemas económicos diversos que parecen aflorar en la economía americana, ésta se mantiene en una posición de privilegio de la que los datos revelados no parece que vaya a desaparecer. En segundo lugar, se intensifica el triángulo de la economía con tres vértices principales: EE.EE., Europa y Paises Emergentes. Entre los paises emergentes resulta interesante comprobar cómo hay 4 paises asiáticos (Japón, China, India y Corea)entre las 15 mayores economías y que representan ya casi el 19% de la economía mundial. Y confirmando, además, que mantienen unas tasas de crecimiento cercanas a los dos dígitos (cuando no los supera en algunos casos). Esto da a entender que, en breve, podrán superar la aportación de los paises Europeos incluidos en la lista, que aún representan el 24% del GDP total.
En tercer lugar, hay que constatar cómo algunas regiones del globo (America del Sur -excepto Brasil-, Africa y Oriente Medio) parecen haber perdido definitivamente el tren de la economía y no parecen que, en breve tiempo, estén en situación de situarse en cotas económicas que, por población y recursos, podrían alcanzar.

antoni 25 octubre 2007 - 20:18

Situaciones en las que un grupo de países aparentemente “retrasados” o en ruinas crecían a ritmos vertiginosos hasta alcanzar el nivel de otros más avanzados ya se dieron en el siglo pasado, y tal vez sea adecuado recordarlo aquí. Así, inmediatamente después de la segunda guerra mundial Alemania y Japón estaban en ruinas, con todo su capital de producción completamente destruido y sin embargo sus economías empezaron a crecer a ritmos del 8% mientras que USA crecía a ritmos del 2%. La razón está muy bien explicada en el libro de macroeconomía de Mankiw (que por cierto recomendaba Rafael Pampillón en este blog). Cuanto más desarrollada está una economía, más stock de capital tiene, y más inversión tiene que dedicar a compensar las pérdidas por depreciación de capital. A igualdad de tecnología, los paises jóvenes pueden dedicar su ímpetu más a crecer que a conservar lo que tienen.
Y eso creo que es una de las lecturas que podemos extraer de ese informe. Las economías dominantes lo siguen siendo, y lo seguirán siendo por mucho tiempo, pero hay un grupo de ellas (los países emergentes) que parecen haber transpasado un cierto umbral y haber alcanzado un nivel de desarrollo social, civil y tecnológico crítico, y por ello, como Alemania y Japón en la posguerra, tendrán índices de crecimiento espectaculares.

antoni 25 octubre 2007 - 20:27

Añadir a lo anterior que ese umbral crítico viene dado por la tasa de ahorro destinada a inversión. Paises como Brasil y Rusia parecen haber alcanzado cierta estabilidad política y social (por muy frágil que sea) que les permiten generar dicho ahorro e invertirlo.

Javier Tomás 27 octubre 2007 - 01:07

I used to travel to Russia a lot on my previous job. It´s a country where you can check as things are moving continually. Economically, business, culturally, night life, people, construction…Everything is in movement now. It is always nice to travel to Russia.

There were three particular points that use to impress me a lot:
1) Even if Russia starts to have demographic problems, what´s true is that people is quite young there.
2) I have been always shocked about the Human Capital. People under 40 are quite competitive and, each time, better prepared.
3) The cash volume that Russian people take in their pockets.

On “Análisis Económico de Países” class, we were discussing about Acemoglu´s article, published by The Economist in November 2002, where the role of the institutions is considered indispensable for a country´s development.

As we all know, Russia is historically used to be commanded by a “strong hand”; Czars till 1917, Soviets till 1991 and Yelstin and Putin on Democracy times. It is not really sure that they will achieve a pure Democracy, under our occidental standards.

In one of my lasts travels, September 2006, the Central Russia Bank´s Vice-president, Andrei Kozlov, was murdered. By other side, Anna Politkovskaya´s affair is quite known everywhere, Putin´s opposition is prosecuted as Alexander Jodorowsky, Boris Berezowsky or Garry Kasparov cases shown and many people are asking about what´s really happening in Chechen War.

Will Russia able to get an occidental standard Democracy in spite its population and extension? How can affect the existence of an obscure Government and the Mafia´s power on their development? Are Russian institutions prepared to be transparent enough? Is all this really necessary for their evolution?

Luis M.Alonso 28 octubre 2007 - 19:09

China prosigue lo que parece su camino imparable para superar, a Alemania como tercera economía del mundo, detrás de Estados Unidos y Japón.
El valor de la producción china ascendió a 2,7 billones de dólares en 2006, frente a tres billones la alemana; pero se estima que la primera subirá un 11,5% en 2007, mientras la segunda lo hará un 2,3%. Sin embargo, China aún está muy lejos en PIB per cápita.
La inversión y las exportaciones siguen siendo el principal motor del país asiático, riesgo que el Gobierno intenta modificar vía la reestructuración del modelo económico y así intentar limitar la dependencia del exterior e impulsar el consumo interno.
Sin embargo, creo que los dirigentes chinos tienen que resolver año tras año una difícil ecuación: mantener en marcha a buen ritmo la máquina para reducir la pobreza, y, al mismo tiempo, evitar que se embale y se produzcan un sobrecalentamiento y una crisis financiera.
Recordar que aún estando dentro de las cuatro potencias mundiales a efectos de PIB a paridad poder adquisitivo, la Renta per Capita es hasta cinco veces menor que en Alemania.

Pablo Font 31 octubre 2007 - 17:59

Centrándome en los países emergentes, especialmente los BRIC comentados, creo que siguen sin resolver varios problemas que amenazan a su espectacular crecimiento de los últimos años y a su ascenso en las listas de las economías más poderosas del mundo. Entre estos problemas destaco tres: Sus fuertes desigualdades que derivan en datos comprobados por diversos informes acreditados, en los que se resaltan por ejemplo que gran parte de la población de estos países continua viviendo en condiciones de extrema pobreza, que existen grandes carencias en las infraestructuras que impiden por ejemplo la llegada de agua potable a un porcentaje muy amplio de sus habitantes o que aún hay grandes tasas de analfabetismo o de mortalidad infantil; su poca o nula atención a los derechos humanos y democráticos y finalmente sus inestabilidades derivadas de conflictos con países fronterizos.

En las mejoras en estos aspectos, en mi opinión encontraremos la clave para su ascenso futuro en esta lista elaborada por el Banco Mundial.

Felix Martin 2 noviembre 2007 - 11:52

It’s very illustrating the differences there are in our world. Using dollars to Purchase Power Parity (PPP dollars) is very important if we want to see the true standard of living for the population.

There are a Human Development Index PNUD that uses this metric, jointly with the life expectancy and scholarship level. If you are interesting in this index, you can consult http://hdr.undp.org

The Commitment to Development Report, that appears in a link in this blog http://economy.blogs.ie.edu/archives/2007/10/indice_de_compr.php, is also very interesting. Spain will climb posts in the following years, since there will have into account numbers from 2006 and 2007, that are much better in the Security and Development.

Carmen Gonzalez Alemany 19 noviembre 2007 - 18:10

A pesar del vertiginoso aumento del GDP chino, el peso del consumo privado en ese aumento, va en descenso, aunque el consumo en si mismo vaya en aumento. Esto es debido entre otras causas al aumento del ahorro por parte de la población China para poder acceder a servicios básicos como son la sanidad o la educación. Así mismo este hecho está generando un exceso de capacidad que produce un aumento de las necesidades de exportación,lo que provoca entre otras las tensiones internacionales hacia China, la cual debido a su bajo nivel de salarios, y su cada vez creciente tecnología es altamente competitiva en sus costes.
Hace unos meses el consejero delegado de mi compañía viajo a China, y vino impresionado, por la excelente preparación de los chinos sobre todo en las multinacionales. Si a esto le unimos los bajísimos salarios en comparación con Europa, podemos ponenos todos a temblar…

A. A. Khan 26 noviembre 2007 - 19:35

You have used nominal figures which is clearly flawed when comparing economies … PPP should of been used for SIZES in comparison …

How can China with it’s 1.4 billion peoples, Massive production, and weak Yuan be just ahead of UK .. again, figures are mirepresented when in nominal terms …

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