- The five largest economies contribute a whopping 55 percent to the world’s GDP in terms of nominal GDP including the US, China, Japan, Germany & India.
Approximately 78 percent of the $86.31 billion global GDP is due to the sixteen economies in the trillion-dollar community, based on 2019 estimates. When we look, even more, the top five countries contribute a whopping 55 percent to the world’s GDP in terms of nominal GDP— the US, China, Japan, Germany, and India.
Here we look at the top 5 countries and their latest financial reports-
The United States
The United States, the world’s largest economy with $21.44 trillion in nominal GDP, makes up one-fourth of the world economy. The U.S. economy is predominantly a service-oriented economy contributing 77 percent of GDP. With the unemployment rate hitting record lows at 3.5 percent, the contribution to GDP from a number of industry groups (17 out of 22) and stock markets increasing at all-time highs, this was a great time for the U.S. economy. Problems persist, however, with respect to its trading partners and the trade wars of Trump, rising debt rates, and industrial output, among other issues.
The trade dispute between the U.S. and China is having a negative impact not only on these two countries but also on many others. A UNCTAD study concluded that “U.S. customers bear the worst burden of U.S. tariffs on China since their associated costs were mostly passed on to them and imported companies in the form of higher prices.” In 2018, the U.S. trade deficit with China stood at $419.52 billion, while it stood at $320.82 billion in the first 11 months of 2019. Moreover, the U.S. current account deficit, “which represents the aggregate trade balances of goods and services and income flows between U.S. citizens and residents of other countries,” was $124.1 billion during the third quarter of 2019 (or 2.3% of U.S. GDP).
China is the world’s second-largest economy and the fastest-growing trillion-dollar economy. This accounts for 16.38 percent of the global economy with a GDP of $14.14 trillion in 2019. Based on a purchasing power parity (PPP) basis, China is the largest economy with $27.31 trillion of GDP (PPP). Based on 2019 figures, the size of China’s nominal GDP by about $7.3 trillion was smaller than that of the U.S., the difference is projected to be narrowed by 2024 to about $4.5 trillion. China is well on its way to becoming a $20 trillion economy by 2024.
On the trade front, China has had problems with the US; a series of tariffs and counter-retaliatory tariffs, among other restrictions, have culminated in a trade war being the two biggest economies. To prevent further escalation, in early 2020, the US and China entered into a trade deal involving a partial rollback of past tariffs and a delay in the first step of further tariff hikes. While the trade deal has alleviated the cyclical short-term weakness, unresolved disputes over broader China –U.S. economic relations and ongoing structural showdown are likely to weigh on China’s growth. China is projected to grow at 6% in 2020, and 5.8% in 2021.
Japan, the world’s third-largest economy, contributes about 6 percent of global GDP. The 2008-09 financial crisis took a toll on the Japanese economy; it was the only big advanced economy witnessing negative economic growth in 2008 and beginning to decline sharply in 2009. The impact on the Japanese economy of the sub-prime crisis arising in the US was largely due to the severe impact on Japan’s exports. Ever since then the economy has been weak.
One of his priorities, when Prime Minister Shinzo Abe came to power in 2012, was to end deflation while ensuring fiscal discipline. The economic stimulus policies became popularly known as the Abenomics. Japan’s GDP in 2019 hit $5 trillion and is expected to grow to 0.7 percent by 2020. This is an upgrade from previous estimates, which comes on the back of the $122 billion fiscal packages announced in December 2019. Based on current growth estimates, Japan’s economy is set to expand to $6.26 billion by 2024. Japan has a healthy per capita GDP of $40,846, expected to rise to $50,637 by 2024.
With $3.86 trillion in GDP, Germany is the world’s fourth-largest economy and Europe’s largest economy. The World Bank estimates that around 47.4 percent of its GDP is dependent on goods and services exports, making it vulnerable to external shocks. This became apparent during the 2008-09 financial crisis when the economy contracted by 5.7 percent (2009). Nonetheless, since it has evolved amid multiple challenges in each of the last ten years. The economy has been affected in recent times by weak global trade, declines in export orders and industrial production. The ongoing trade tensions and Brexit uncertainties which have weighed the confidence of business and investment scenario have further compounded the problems.
It is projected that Germany will rise at 1.1 percent in 2020 and 1.4 percent in 2021, higher than 0.5 percent in 2019. By 2023-24 Germany and India would be very close to each other in terms of nominal GDP scale, making it a strong competition for the fourth-largest global economy position. While Germany ($46,563) is well ahead of India ($2,171) with respect to GDP per capita.
India also referred to as the fifth-largest economy as the’ bright spot in the global economy,’ has seen a significant decline in the IMF’s growth forecast. India’s growth has been affected by country-specific issues such as non-bank financial sector stress, declining credit growth, cooling private consumption, slowing industrial activity and sluggish investment. Steps are being taken, such as imposing a tax on goods and services, insolvency and bankruptcy, and steps are being taken to recapitalize public sector banks.
Nonetheless, much needs to be done to revive its economy, particularly in areas such as labor reforms and infrastructure to ensure that India is recognized in the global supply chain as a strong contender.
A 4.8% rise in 2019 led the IMF to “re-evaluate growth prospects over the next two years,” which underpins India’s contribution to global growth. After a sluggish 2019, the IMF forecasts India’s GDP to increase by 5.8% in 2020 and 6.5% in 2021, on the assumption of sufficient monetary and fiscal support as well as low oil prices.