The World's Top 10 Largest Economies
When it comes to the top national economies globally, although the order may shift around slightly from one year to the next, the key players are usually the same. At the top of the list is the United States of America, which according to Investopedia, has been at the head of the table going all the way back to 1871. However, as has been the case for a good few years now, China is gaining on the U.S., with some even claiming that China has already overtaken the U.S. as the world’s Number 1 economy.
Nonetheless, going by nominal GDP measured in U.S. dollars alone, the U.S. maintains its spot followed by China and Japan. In this post we take a look at the world’s top economies according to our Consensus Forecasts for 2018 nominal GDP. We also discuss how the top economies change when looking at GDP per capita along with a highlight on emerging markets and their potential to catch up to the big players in the not too distant future.
Click to view larger version
1. United States
Despite facing challenges at the domestic level along with a rapidly transforming global landscape, the U.S. economy is still the largest in the world with a nominal GDP forecast to exceed USD 20 trillion in 2018. The U.S. economy represents about 20% of total global output, and is still larger than that of China. The U.S. economy features a highly-developed and technologically-advanced services sector, which accounts for about 80% of its output. The U.S. economy is dominated by services-oriented companies in areas such as technology, financial services, healthcare and retail. Large U.S. corporations also play a major role on the global stage, with more than a fifth of companies on the Fortune Global 500 coming from the United States.
The U.S. economy is projected to grow 2.4% in 2018 and 2.0% in 2019.
The Chinese economy experienced astonishing growth in the last few decades that catapulted the country to become the world's second largest economy. In 1978—when China started the program of economic reforms—the country ranked ninth in nominal gross domestic product (GDP) with USD 214 billion; 35 years later it jumped up to second place with a nominal GDP of USD 9.2 trillion.
Since the introduction of the economic reforms in 1978, China has become the world’s manufacturing hub, where the secondary sector (comprising industry and construction) represented the largest share of GDP. However, in recent years, China’s modernization propelled the tertiary sector, and in 2013, it became the largest category of GDP with a share of 46.1%, while the secondary sector still accounted for a sizeable 45.0% of the country’s total output. Meanwhile, the primary sector’s weight in GDP has shrunk dramatically since the country opened to the world.
Today the Chinese economy is the second largest in the world and although it experienced massive growth in that 35-year span, authorities have taken a new approach to the economy called the “new normal.” To avoid overheating the economy, authorities are conducting a managed slowdown, which has seen growth gradually slow year after year since 2010. The economy is projected to grow 6.4% in 2018, which is nothing to sniff at, but is a far cry from the over 10% annual growth seen no too long ago.
The Japanese economy currently ranks third in terms of nominal GDP forecast to come in at USD 5.0 trillion in 2018.
Before the 1990s, Japan was the equivalent of today’s China, growing rapidly during the 1960s, 70s and 80s. However, since then, Japan’s economy has not been quite as impressive.
During the 1990s, also termed the Lost Decade, growth slowed significantly, largely due to the burst of the Japanese asset price bubble. In response, authorities ran massive budget deficits to finance large public works projects, however, this did not seem to get the economy out of its rut. A number of structural reforms were then enacted by the Japanese government designed to reduce speculative excesses from financial markets, however, this led the economy into deflation on numerous occasions between 1999 and 2004.
The next measure taken was Quantitative Easing, which saw interest rates go zero and an expansion of the money supply to raise inflation expectations. After a period of not-so-positive results from QE, the economy finally appeared to respond. In late 2005, it outperformed both the U.S. economy and the European Union in terms of economic growth.
Despite what appeared to be a comeback, the economy has largely fallen on hard times since 2008, when it began to show signs of recession for the first time during the financial crisis. Japan’s issues stem largely from unconventional stimulus packages along with subzero bond yields and a fairly weak currency. Economic growth will once again be positive in 2018, however, it is forecasted to stay at or below 1% from 2019-2022. For 2018 we project 1.2% percent growth and 1.0% for 2019.
In the ten years before the great recession, from 1999 to 2008, Germany’s GDP grew 1.6% on average per year. Owing to Germany’s dependence on capital goods exports, the German economy plummeted 5.2% in 2009, as companies around the world scaled back their investment projects in the wake of the financial crisis. The following year, Germany’s economy bounced back with a strong 4.0% expansion. The next years were overshadowed by the persistent Eurozone crisis, which dented demand in Europe’s southern countries. As a result, Germany’s economy grew at a lackluster pace annually between 2011 and 2013. The economy has since bounced back, as has the Eurozone economy, and it’ll keep its spot at 4th on the list of largest economies with a nominal GDP of USD 4.0 trillion according to our forecasts for 2018. Analysts see Germany growing 2.0% in 2018, coming in just below 2017’s forecast of 2.1%.
India is projected to overtake both the UK and French economies in 2018 to become the fifth largest economy in the world with a nominal GDP of USD 2.9 trillion.
From 2003 to 2007, India experienced high growth rates of around 9% annually before moderating in 2008 as a result of the global financial crisis. In the following years, India began to see growth slow due to a plunging rupee, a persistently high current account balance and slow industry growth. This was exacerbated by the U.S.’ decision to cut back on quantitative easing, as investors began to rapidly pull money out of India. However, the economy has since bounced back as the stock market has boomed and the current account deficit has decreased. India’s economy recently surpassed China's to become the world’s fastest growing large economy. We forecast India’s growth at 7.4% FY 2018.
6. United Kingdom
In the 10 years before the Great Recession, from 1999 to 2008, the UK’s gross domestic product grew 2.8% on average per year. As a consequence of overinvestment in the housing market and consumer’s strong dependence on credit, the economy was hit very hard by the financial crisis and the credit crunch. In 2009, GDP fell 5.2%, mainly due to plummeting private fixed investment. However, GDP rebounded in 2010 to a 1.7% expansion. In the three subsequent years, however, growth did not post figures as strong as those before the crisis; average GDP growth was 1.0% in the 2011–2013 period. Since then growth has largely bounced back, however, Brexit is threatening the economy.
Before the referendum many economists and financial institutions projected that the economy would take a hit if the UK voted to leave the EU. Since the Brexit referendum in June 2016, prospects for the UK economy have become highly uncertain, however, the economic Armageddon that was predicted by some has yet to come to fruition. Nevertheless, growth has stuttered and lagged significantly behind the EU average since the start of 2017.
Brexit negotiations between the UK and the EU are yet to be finalized and there is precious little time left to get it done. Growth is likely to slow next year, as private consumption growth dips and fixed investment is dampened by pervasive uncertainty generated by Brexit. However, a stronger external sector and resilient global demand should cushion the slowdown.
The UK will fall out of the top 5 on the list of largest economies in 2018, with a nominal GDP of USD 2.8 trillion. Our panelists estimate GDP growth of 1.3% in 2018 and 1.4% in 2019.
France’s economy will be the seventh largest in the world in 2018, representing around one-fifth of the Euro area gross domestic product (GDP) at USD 2.8 trillion. Currently, services are the main contributor to the country’s economy, with over 70% of GDP stemming from this sector. In manufacturing, France is one of the global leaders in the automotive, aerospace and railway sectors as well as in cosmetics and luxury goods. Furthermore, France has a highly educated labor force and the highest number of science graduates per thousand workers in Europe.
Compared to its peers, the French economy endured the economic crisis relatively well. Protected, in part, by low reliance on external trade and stable private consumption rates, France’s GDP only contracted in 2009. However, recovery has been rather slow and high unemployment rates, especially among youth, remain a growing concern for policymakers.
After a period of volatile growth readings in recent years, growth appears to be finally on a steady track, having expanded 0.5% on a quarter-on-quarter basis in Q3 2017. That marks the fourth consecutive quarter where quarter-on-quarter growth came in at or exceeded 0.5%. FocusEconomics Consensus Forecast expect GDP to grow 1.8% in 2018 and 1.6% in 2019.
In the 10 years before the global economic crisis, from 1999 to 2008, Brazil’s GDP grew 3.4% on average per year. This growth was driven, in part, by global demand for Brazilian commodities. After experiencing formidable growth in 2007 and 2008, Brazil’s economy shrank 0.3% in 2009 as demand for Brazil’s commodity-based exports fell and foreign credit waned. However, Brazil rebounded strongly the following year, growing 7.5%-the highest growth rate Brazil had experienced in 25 years. Since then, growth has slowed-partially due to rising inflation-and Brazil’s economy grew an average of 2.1% annually from 2011 to 2013.
Since then a combination of the ending of the commodities super cycle, tight credit conditions and political turmoil due to various corruption scandals have kept Brazil’s economy down. However, Brazil keeps its spot in the top 10 with the economy having turned a corner early in 2017 and is expected to grow 2.4% in 2018 after contracting by over 3.0% in both 2015 and 2016. Brazil is forecast to have a nominal GDP of USD 2.1 trillion in 2018.
Italy is the world’s ninth-largest economy, however, the country suffers from political instability, economic stagnation and lack of structural reforms, which are holding it back. Prior to the 2008 financial crisis, the country was already idling in low gear. In fact, Italy grew an average of 1.2% between 2001 and 2007. The global crisis had a deteriorating effect on the already fragile Italian economy. In 2009, the economy suffered a hefty 5.5% contraction—the strongest GDP drop in decades. In 2012 and 2013 the economy recorded contractions of 2.4% and 1.8% respectively, however, the economy has gradually improved in recent years. Nonetheless, it continues to be burdened by numerous long-standing structural problems, including a rigid labor market; stagnant productivity; high tax rates; a large, albeit declining, volume of non-performing loans in the banking sector; and high public debt. These weaknesses restrain the country’s growth potential, keeping its growth outlook below that of its European peers.
FocusEconomics panelists see nominal GDP coming in at USD 2.1 trillion in 2018, increasing 1.3% annually.
Last but not least we have Canada, the 10th largest economy in the world, just ahead of Russia. From 1999 to 2008, Canada posted strong economic growth and GDP expanded 2.9% annually on average. Due to its close economic ties to the United States, in the crisis-year 2009 Canada’s economy contracted 2.7% over the previous year. Canada did manage to recover quickly from the impact of the crisis, however, thanks to sound pre-crisis fiscal policy, a solid financial system, a relatively robust external sector and the economic strength of its resource-rich western provinces. Since 2010, growth has picked up again and between 2010 and 2013 Canada’s economy expanded 1.4% per year on average. After the end of the commodities super cycle, the Canadian economy took a hit, but it has slowly recovered in recent years, growing faster then all of the G7 countries in Q2 2017. FocusEconomics panelists expect GDP to come in at USD 1.8 trillion with am annual growth rate of 2.2% in 2018.
The Trillion Dollar Club
Going forward what other countries could join what is called the Trillion Dollar Club and possibly crack the top 10?
The Trillion Dollar Club is an unofficial classification of the largest economies in the world with nominal GDP of more than, yup, you guessed it, one trillion U.S. dollars. Currently there are 15 economies that make up the Trillion Dollar Club with a 16th projected to join the club once 2017 growth figures are released in early 2018, that being Indonesia. Turkey and the Netherlands are the 17th and 18th largest economies in the world and are projected to join the Trillion Dollar Club in 2020 and 2021 respectively. After that it’ll be some time before a new economy joins the club.
In terms of other countries that could crack the top 10, Russia and Korea are right behind Canada in 11th and 12th place respectively, while Australia, Spain and Mexico aren’t too far behind, rounding out the top 15.
What about GDP per capita?
The top 10 economies in the world account for about 70% of the world’s GDP, which is pretty staggering. But does a large economy necessarily mean that the average person is having a good time? Well, not necessarily. If we look at GDP per capita, which generally gives us an idea of the living standards and quality of life of a country’s residents, the list changes up quite a bit.
The U.S. moves down to sixth on the list, while the rest of the top 10 largest economies fall substantially. Canada is next on the list of top GDP per capita economies at number 17 directly followed by Germany while China moves all the way down to number 62.
Here are the top 10 projected economies in terms of GDP per capita in 2018 according to the FocusEconomics Consensus Forecast:
What can we expect 5 years from now in 2022 and beyond?
Regarding the largest economies, as you might expect it’ll still be the same players in 2022, however, after overtaking the UK and France by 2018, India will also be gaining on Germany by 2022 to take that fourth spot behind Japan.
Apart from the top economies, everyone’s favorite topic, the emerging markets, will become vitally important to the global economy in the next five years. Although you can expect per capita GDP to still be the highest in the developed world by 2022, the fastest growth in GDP per capita will indeed come from the emerging markets. According to our forecasts, the highest per capita growth from 2016–2022 will be in Myanmar with an 80% increase in that time span, followed by Azerbaijan, Bangladesh, Ukraine and the Democratic Republic of Congo with 78%, 73%, 68%, and 64% growth in per capita GDP, respectively.
Emerging markets are certainly catching up with the progress of the developed economies and according to many analysts they will catch up to many developed economies by 2020. This of course will cause a significant shift in the balance of power across the global economy and will represent vast new opportunities for domestic and international businesses.
With higher GDP growth in emerging markets will come higher household incomes and with generally younger populations, these economies will begin to play an ever more important role in the global economy. Services and consumer goods companies will have a tremendous opportunity to expand into these markets, and luxury goods will finally become available as more people become part of the middle class. Emerging markets are also likely to become more important foreign investors, rather than just being invested in. Investments into these nations will increase, furthering their economic growth, however, their own investments will only serve to enhance their position in the global economy.
As mentioned previously, by some calculations China is already the largest economy in the world, however, it appears that the new golden child is India. It is thought to be closer to usurping third placed Japan than China is likely to overtake the U.S. in the near future. It is believed by some that India and China may actually push the U.S. down to third place during the next decade citing in India’s case that its young and faster-growing population will be the likely key drivers of growth. This would be quite the feat considering, as mentioned previously, the U.S. economy has held the number 1 spot since 1871.
With commodities prices coming back and expected to increase in 2018, countries like Brazil and Russia, rich in natural resources, are also tipped to come up in the world rankings of top economies. Mexico, on the other hand, which is last in the 1 trillion club, is in a bit of an uncertain situation with Donald J. Trump in the White House and the future of NAFTA up in the air.
2018-2019 Outlook for Emerging Economies
A variety of different scenarios could play out by 2022, but for next year the global economy is likely to continue to benefit from loose financial conditions and supportive fiscal policies. The strengthening is expected to be broad-based and extend to both developed and emerging economies. That said, while the economic recovery will gather steam in Brazil and Russia, and India should continue its positive growth trend, China’s economy will continue its managed slowdown. Analysts expect the global economy to grow 3.2% in 2018, while in 2019, the global economy is seen decelerating slightly, to 3.1% growth, as tailwinds start to wane.
Among those famous emerging markets, an improved economic outlook for India and resilient growth projections for China continue to shore up panelists’ view on the Asia (ex-Japan) region. Eastern Europe is in a sweet spot as Russia’s economy recovers, while the Euro area is firing on all cylinders. Although higher commodities prices are supporting the outlook for the Middle East and North Africa economies, ongoing political unrest is putting a dent in any sharp economic improvement. Sub-Saharan Africa’s economic outlook remains jeopardized by security threats and domestic imbalances. In Latin America, political uncertainties are plaguing the outlook as elections are set to take place in Brazil, Colombia, Mexico and Paraguay.
If you’d like more projections, historical data, and analysis, download one of our free sample reports by clicking on the button below.
5-year economic forecasts on 30+ economic indicators for 127 countries & 33 commodities.
Date: December 19, 2017
TagsEnergy Commodities IMF Company News Fed NAFTA Brazil Latin America Venezuela South Africa Japan Latin America Euro Area NAFTA Portugal Investment Inflation Exchange Rate oil prices European Union Forex Emerging Markets Housing Market Italy Turkey Major Economies Asia Iran Spain MENA Canada OPEC Eastern Europe Precious Metals Commodities Trade Gold Industrial Metals Commodities Ukraine Tunisia Russia Banking Sector Infographic Mexico Germany Australia Unemployment rate Vietnam Commodities UK France Colombia India Consensus Forecast Oil G7 Brexit Panelists Sub-Saharan Africa precious metals Agricultural Commodities Economic Growth (GDP) Africa Nordic Economies Greece Base Metals Commodities Argentina USA United Kingdom China Euro Area
45 minutes ago
1 hour ago
18 hours ago
Economic activity is expected to increase in many emerging markets this year, however, the improvement won't be fel… https://t.co/HNQBZZZO56
19 hours ago
19 hours ago
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- What will be the most miserable economies in 2018?
- The World's Top 10 Largest Economies
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will emerging market economies perform in 2017?
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- Gold: The Most Precious of Metals (Part 3)
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- FocusEconomics Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 100-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- 2017 & 2018 Economic Outlook for the Top Oil Producing Countries
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit