A New World Emerges
Who’s up, who’s down: How much do you know about the global economy?
- Indonesia’s GDP last year was $2.39 trillion, just slightly higher than the United Kingdom’s $2.32 trillion.
- Brazil’s economy surpassed France’s back in 2007 — and the GDP gap has increased in every year since.
- In 2013, the Indian economy was 45% larger than Japan’s (measured in terms of purchasing power parity).
The world that we are all so familiar with is rapidly changing before our eyes. It’s no longer the case that the richest countries have the largest economies.
To see how much the world is changing, ask yourself which of the following statements is true:
A. Indonesia’s economy is larger than the UK’s?
B. Brazil’s economy is larger than France’s?
C. India’s economy is larger than Japan’s?
D. Russia’s economy is larger than Germany’s?
A. Indonesia’s economy is larger than the UK’s is correct.
Indonesia inaugurated a new president, Joko Widodo, in October 2014. Since Jokowi (as he is commonly known) is the first president not to have ties to the country’s political and military elites, many Indonesians have pinned their hopes of economic betterment on him.
Jokowi is taking office at a momentous time. In 2013, for the first time ever, Indonesia’s economy surpassed the United Kingdom to become the world’s ninth-largest.
According to the IMF, Indonesia’s GDP last year was $2.39 trillion (measured in terms of purchasing power parity), just slightly higher than the United Kingdom’s $2.32 trillion. Purchasing power parity is a way of factoring in the differences in the costs of goods and services that exist between countries.
Covering 1.9 million sq. km of land rich in timber, minerals and oil, Indonesia is about eight times larger than the UK. Its population, at 250 million, is more than four times larger than the UK’s.
But Indonesia lags far behind the UK in some other important areas. This includes the overall quality of its infrastructure, the health and education of its workforce, and the bureaucratic hurdles that businesses face.
B. Brazil’s economy is larger than France’s is correct.
Brazil is holding a presidential run-off election on October 26, 2014. Incumbent President Dilma Rousseff, the first woman to hold the office, is running for a second term against challenger Aécio Neves.
As of 2013, Brazil’s GDP (measured at purchasing power parity) was just over $3 trillion, compared to France’s $2.53 trillion. The two countries are the world’s seventh-largest and eighth-largest economies, respectively.
Brazil’s economy surpassed France’s for the first time back in 2007 — and the GDP gap has increased in every year since. Like Indonesia, Brazil enjoys two huge economic advantages: abundant natural resources and a large population.
Encompassing the resource-rich Amazon river system and rain forest, Brazil covers 8.5 million sq. kilometers and is more than 15 times the size of France. Brazil’s population (200 million) is nearly three times larger than France’s (66 million).
C. India’s economy is larger than Japan’s is correct.
India, too, inaugurated a new leader in 2014: Prime Minister Narendra Modi, who took office in May.
In 2008, India moved ahead of Japan to become the third-largest economy in the world, according to IMF data. By 2013, the Indian economy was 45% larger than Japan’s (measured in terms of purchasing power parity).
However, while many emerging markets are catching up to — or surpassing — Western economies in overall size, they still lag far behind in terms of per capita incomes and living standards.
In fact, none of the five largest emerging market economies — China, India, Russia, Brazil and Indonesia — have a higher per capita GDP than any of the five largest industrial economies (the United States, Japan, Germany, France and the UK). Indeed, the gap is still huge.
Per capita GDP in the largest industrial economies ranges from a low of $36,200 in the United Kingdom to a high of $53,000 in the United States. By contrast, per capita GDP in the richest emerging market nation, Russia, is $24,300 — about two-thirds the level of the UK.
Russia is followed by Brazil ($15,000), China ($11,900), Indonesia ($9,600) and India ($5,450).
D. Russia’s economy is larger than Germany’s is not correct.
Only a very thin margin separates the world’s fifth- and sixth-largest economies, Germany and Russia. At $3.51 trillion (measured in terms of purchasing power parity), Germany’s economy was just 0.6% larger than Russia’s ($3.49 trillion) in 2013, according to IMF data.
It is an open question as to whether Russia’s economy will be able to move ahead of Germany’s soon. The Russian economy is currently being pinched by Western sanctions over its involvement in Ukraine and by the falling price of oil, its main export.
Looking at the global rankings, the world’s ten largest economies are equally divided between five advanced Western economies and five emerging markets. At the top of list are the United States and China.
As of 2013, there was just a 4% difference in the size of the U.S. and Chinese economies — $16.77 trillion to $16.15 trillion. According to some estimates, the Chinese economy will overtake the U.S. economy as the world’s largest as soon as this year.