If you went for an interview today and asked what the largest economies in the world are, what answer could you give?
I know many people have different options and their arguments, some would say the United States economy is the largest of all in the whole world while others will argue that it is China that has the largest economy.
In this post, we take a short drive into the world’s largest economies and the tangible facts that will support the arguments.
Some of you will be surprised while others will not believe it.
In 2018, China was the world’s largest economy for the fourth year in a row It produced $25.3 trillion in the economic output according to the estimates by the international monetary fund.
It contributed 19% of the world’s total gross produced of $135.2 trillion.
The European Union was in the second position generating $22 trillion. Together China and the EU generate 35% of the world’s economic output.
The United States remained in the third position producing $20.5 trillion.
The world’s three largest economies combined produced 50% of the world’s total economy.
Why Some Still Say the United States Is No. 1
Many sources still say the United States is the world’s largest economy. They use the IMF’s GDP figures as follows:
- United States: $20.5 trillion
- EU: $18.7 trillion
- China: $13.4 trillion
- Japan: $4.9 trillion
- Germany: $4.0 trillion
- United Kingdom: $2.8 trillion
- France: $2.8 trillion
- India: $2.7 trillion
- Italy: $2.1 trillion
- Brazil: $1.9 trillion
These calculations use the official exchange rate instead of PPP. The country’s government or central bank sets this rate.
It tells you how much the bank will give you in exchange for one unit of your country’s currency.
Unlike PPP, it doesn’t account for changes in the exchange rate over time. It also doesn’t compensate for government manipulation of its exchange rates.
PPP takes these variances into account, giving a more realistic picture.
Last thought
As of 2018, the largest economy in the world is China when measured by PPP.
The EU is second and the United States is third. But America retains its No.1 rank when measured by nominal GDP.
This position has remained unchanged since 1871.
The top 20 economies produce about 81% of the world’s GDP.
This statistic is staggering, considering that the rest of the world’s production totals to less than one-fifth of global GDP.
