June 29, 2010World Economyby EconomyWatch

The World’s Largest Economies

Emerging economies are smaller than the developed countries - but they are growing faster and opening up, leading to greater investment opportunities than ever before.

There are two methods of GDP calculation: nominal GDP attempts to compare countries using current exchange rates to give an assessment of their clout within the global market. This naturally biases countries with stronger currencies.

Purchasing Power Parity or PPP GDP, on the other hand, tries to take into account that one dollar can buy more in some countries and less in others. It is a better gauge of the internal size of each market.

In the nominal GDP method, we can see that the developed world leads the pack, but that China has already broken into this exclusive club, and is now the second largest economy in the world by both measures.

When we look at PPP GDP, all of the BRIC countries (China, India, Brazil and Russia) are all within the top 10.

Here is the Top 10, as listed by PPP GDP, using 2010 GDP figures:

Ranking Country Approximate GDP- Purchasing Power Parity
1 United States of America $14,624,180,000,000 (that is $14.6 trillion dollars if you are trying to count zeros)
2 China $10,084,370,000,000
3 Japan $4,308,630,000,000
4 India $4,001,100,000,000
5 Germany $2,932,040,000,000
6 Russia $2,218,760,000,000
7 Brazil $2,181,680,000,000
8 United Kingdom $2,181,070,000,000
9 France $2,146,280,000,000
10 Italy $1,771,140,000,000

While the US is still the world's dominant economy, and central to the global economic system thanks to the simple fact that the US dollar is the world's reserve currency (ie the currency that we all need in order to trade), we can clearly see that China's clout is rapidly growing. The numbers tell the story not just of the BRIC, but also the G2 or Chamerica, as some are calling the US/ China combo.

blog comments powered by Disqus