Top 10 Largest Economies in the World
Reading time: 9 minutes
Economies are complex, with various economic systems, such as command, mixed, and market economies. Albeit not a perfect measure, how we determine the size of an economy usually falls under a country’s GDP, or Gross Domestic Product. GDP can be measured in three different ways and is often also used as a measure of success for a country: the output method, the expenditure method and the income method.
This article will focus on the selected nations' Real GDP, or Constant GDP, measured in US dollars (which makes it more straightforward for comparison purposes), and also nominal GDP, or Current GDP, measured using current prices.
Real GDP is computed through a price index that uses a deflator to convert nominal values to real. A deflator makes it possible to compare the values of a variable at different points in time as if prices have not changed (that is, without the influence of inflation). Real GDP measures the total economic output of a country and is adjusted for price changes. The terms ‘real’, ‘constant prices’ and ‘deflated’ all mean the same thing and are used interchangeably.
This article will also use the World Bank as the main source (2021).
It will not come as much of a shock to understand that the United States takes a pole position in terms of the largest economy in the world.
The country has a real GDP of US$20.53 trillion and a nominal GDP of US$23.32 trillion. The US economy is the largest in total output and is one of the world’s most powerful economic engines. A large, diverse population, productive workforce, and abundant natural resources drive the economy. It is also one of the world’s most technologically advanced economies.
China is the second-largest economy in the world; the country has a real GDP of US$15.8 trillion and a nominal GDP of US$17.73 trillion. China experienced rapid economic growth over the years; according to the World Bank, China’s GDP growth has averaged over 9% per year, driven by an export-oriented economic strategy, increased foreign investment, and a focus on developing the country’s infrastructure.
Japan is the world’s third-largest economy, with a real GDP of US$4.44 trillion and a nominal GDP of US$4.94 trillion. The country is one of the world's most technologically advanced market economies, boasting a steady history of economic stability and is a leader in the export of goods and services.
You will also notice that before 2010, Japan was the second-largest economy in the world, based on current GDP (see Chart 1 below); based on real GDP, Chine overtook Japan in 2005 (Chart 2).
According to the World Bank’s data, Germany stands tall as the fourth-largest economy in the world, boasting a real GDP of US$3.55 trillion and a nominal GDP of US$4.26 trillion. The country is a powerhouse and, as per KMPG, is the third-largest exporter in the world. It is also a major player in the automotive, engineering, and technology sectors and one of the leaders in renewable energy.
With a real GDP of US$2.73 trillion and a nominal GDP of US$3.18 trillion, India represents the fifth largest economy in the world. Behind China, India is the second most populous country, with more than 1.2 billion people living there.
India is a key player and is one of the fastest-growing economies, as of writing. It is also home to some of the largest companies, such as Reliance Industries, Tata Group and Infosys.
The United Kingdom falls just behind India (in current dollars) and is the world’s sixth-largest economy, with a real GDP of US$3.04 trillion and a nominal GDP of approximately US$3.1 trillion. Comprising four major countries: England, Scotland, Wales and Northern Ireland, the UK is a diversified nation and houses some of the world’s largest companies, like HSBC and GlaxoSmithKline. Large GDP-contributing sectors within the UK’s economy are services and manufacturing.
Functioning as the second-largest economy in the Eurozone, France is also the world’s seventh-largest economy. Interestingly, Germany, France and Italy account for over 50% of Europe’s total economic output. France has a real GDP of US$2.58 trillion and a nominal GDP of approximately US$2.96 trillion.
France is a major luxury goods exporter and home to some of the world’s largest companies, such as L’Oreal, Axa and TotalEnergies.
Italy is the world’s eighth-largest economy, with a real GDP of US$1.86 trillion and a nominal GDP of US$2.1 trillion. Like France, Italy is a major exporter of luxury goods and is the third-largest European economy, with a population of approximately 60 million.
Canada is the world’s ninth-largest economy and has a real GDP of US$1.68 trillion and a nominal GDP of US$1.99 trillion.
The country has a close relationship with the US and is one of the richest nations in the world. Canada is a major oil exporter and home to major companies, such as Magna International Inc, TD Bank and Enbridge.
South Korea is the world’s tenth-largest economy. Although the real GDP of South Korea (US$1.69 trillion) is slightly higher than Canada, South Korea’s nominal GDP of US$1.81 trillion is lower. The country is also the fourth-largest economy in Asia, behind India, Japan and China. According to the World Bank, real GDP growth has averaged 5.45% annually between the late 1980s to 2019, underpinned by strong export growth, which averaged more than 9.0% over the same period.
Real GDP Projections Courtesy of the IMF:
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