Global Economy Outlook

The present one to a tenth the global economy in 2023 and would be 2026

Introduction

?The United States of America, China, Japan, Germany, and India are the largest economies in the world in 2023, as per their GDP data. GDP serves as a key metric for assessing the magnitude of a nation's economy. The conventional approach for gauging a country's GDP involves the expenditure method, wherein the total is derived by aggregating expenditure on fresh consumer goods, new investments, government outlays, and the net value of exports.

We are providing insight into the ten largest economies in the world in 2023, arranged by their GDP.

?Top 10 Largest Economies in the World 2023

?Which are the top 5 GDP countries in the world? The US, China, Japan, Germany, and India, respectively, hold those positions in 2023. Now, let’s take a look at the top 10 largest economies/ richest countries in the world in 2023, sourced from?IMF data:

?Rank and Country??GDP($billion)?GDP Per Capita($ thousand)

1.???The USA????????26854?????????????80.03

2.???China????????????19374?????????????13.72

3.????Japan????????????4410?????????????35.39

4.????Germany??????????4309?????????????51.38?

5.????India??????????????3750??????????????2.60

6.????UK????????????????3159?????????????46.31

7.?????France????????????2924?????????????44.41

8.????Italy????????????????2170?????????????36.81

9.?????Canada????????????2090?????????????52.72

10.?????Brazil??????????????2080?????????????9.67????

Here is one special thing we can see, though GDP is fifth due to the large population per capita income is the lowest in India. But the world's top population country China is 13.72 ($ thousand)

?Closer Look at the Globe's Largest Economies by 2023

THE UNITED STATES OF AMERICA

·??????GDP:?$26,854 billion

·??????GDP By Country Per Capita: $80,030

·??????Annual GDP Growth Rate: 1.6%

The United States keeps its status as the major global economy and richest country, consistently conserving its pinnacle position from 1960 to 2023. Its economy boasts remarkable diversity, propelled by important sectors, including services, manufacturing, finance, and technology. The United States enjoys a substantial consumer market, fosters innovation and entrepreneurial spirit, possesses resilient infrastructure, and experiences advantageous business conditions.

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CHINA

·??????GDP:?$19,374 billion

·??????GDP By Country Per Capita: $13,720

·??????Annual GDP Growth Rate: 5.2%

China has observed a notable surge in its economic progress, moving from the fourth rank in 1960 to the second rank in 2023. The Chinese economy predominantly hinges upon manufacturing, exports, and investment. It proudly possesses an extensive workforce, robust governmental backing, infrastructural advancements, and an expeditiously expanding consumer market.

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JAPAN

·??????GDP:?$4,410 billion

·??????GDP By Country Per Capita: $35,390

·??????Annual GDP Growth Rate: 1.3%

Japan's notable economy is distinguished by its progressive technology, manufacturing prowess, and service industry. Prominent sectors encompass automotive, electronic, machinery, and financial domains. Moreover, Japan garners recognition for its unwavering work ethic, pioneering technological advancements, and exceptional exports of superior quality.

Germany

·??????GDP:?$4,309 billion

·??????GDP By Country Per Capita: $51,380

·??????Annual GDP Growth Rate:?-0.1%

The German economy strongly focuses on exports and is renowned for its precision in the engineering, automotive, chemical, and pharmaceutical sectors. It derives advantage from its proficient labor force, robust research and development initiatives, and a pronounced commitment to fostering innovation.

INDIA

·??????GDP:?$3,750 billion

·??????GDP By Country Per Capita: $2,600

·??????Annual GDP Growth Rate: 5.9%

India's economy boasts diversity and swift growth, fueled by key sectors such as information technology, services, agriculture, and manufacturing. The nation capitalizes on its broad domestic market, a youthful and technologically adept labor force, and an expanding middle class.

UNITED KINGDOM

·??????GDP:?$3,159 billion

·??????GDP By Country Per Capita: $46,310

·??????Annual GDP Growth Rate: -0.3%

The economy of the United Kingdom comprises a blend of services, manufacturing, finance, and creative sectors. London functions as a worldwide financial center, enticing foreign investments. The economic expansion of the UK is additionally shaped by its trade alliances and globalization.

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FRANCE

·??????GDP:?$2,924 billion

·??????GDP By Country Per Capita: $44,410

·??????Annual GDP Growth Rate: 0.7%

France is expected to have a GDP estimated at 2,920 billion US dollars in 2023. The economy of France is characterized by diversification, emphasizing industries such as aerospace, tourism, luxury goods, and agriculture. France is renowned for its robust social welfare system, well-developed infrastructure, and substantial investment in research and development.

ITALY

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·??????GDP:?$2,170 billion

·??????GDP By Country Per Capita: $36,810

·??????Annual GDP Growth Rate: 0.7%

Italy boasts a highly developed market as the third-largest economy in the European Union. The nation is known for its influential and pioneering business sector and diligent and competitive agricultural industry.

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CANADA

·??????GDP:?$2,090 billion

·??????GDP By Country Per Capita: $52,720

·??????Annual GDP Growth Rate: 1.5%

The Canadian economy relies heavily on its abundant natural resources, encompassing oil, gas, minerals, and timber. Moreover, the nation boasts a thriving services sector, a well-established manufacturing industry, and a steadfast dedication to fostering innovation and technological advancements.

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BRAZIL

·??????GDP:?$2,080 billion

·??????GDP By Country Per Capita: $9,670

·??????Annual GDP Growth Rate: 0.9%

The Brazilian economy exhibits a breadth of sectors, encompassing agriculture, mining, manufacturing, and services. Notably, it is a prominent global hub for agricultural production and exportation. Several factors, including commodity prices, domestic consumption, and the advancement of infrastructure, shape the growth of Brazil's economy.

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Frequently Asked Questions

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1. How is Gross Domestic Product (GDP) computed?

GDP is determined by summing up consumption (expenditure by consumers), government expenditure, investment (expenditure by businesses), and net exports (the difference between exports and imports).

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2. What are the top 10 poorest countries in the world?

The top 10 poorest countries in the world by GDP per capita would be:

1.???Burundi - $308

2.???Sierra Leone - $472

3.???Malawi - $483

4.???The Central African Republic - $516

5.???Madagascar - $540

6.???Somalia - $562

7.???South Sudan - $570

8.???Niger - $574

9.???Mozambique - $579

10.??????????????????????Eritrea - $700

?The outlook is uncertain again amid financial sector turmoil, high inflation, ongoing effects of Russia’s invasion of Ukraine, and three years of COVID

The baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8 percent in 2023, before settling at 3.0 percent in 2024. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. In a plausible alternative scenario with further financial sector stress, global growth declines to about 2.5 percent in 2023 with advanced economy growth falling below 1 percent. Global headline inflation in the baseline is set to fall from 8.7 percent in 2022 to 7.0 percent in 2023 on the back of lower commodity prices but underlying (core) inflation is likely to decline more slowly. Inflation’s return to target is unlikely before 2025 in most cases.

The natural rate of interest is important for both monetary and fiscal policy as it is a reference level to gauge the stance of monetary policy and a key determinant of the sustainability of public debt. Chapter 2 aims to study the evolution of the natural rate of interest across several large advanced and emerging market economies. Public debt as a ratio to GDP soared across the world during COVID-19 and is expected to remain elevated. Chapter 3 examines the effectiveness of different approaches to reducing debt-to-GDP ratios. Supply-chain disruptions and rising geopolitical tensions have brought the risks and potential benefits and costs of geoeconomic fragmentation to the center of the policy debate. Chapter 4 studies how such fragmentation can reshape the geography of foreign direct investment FDI and how it can affect the global economy.

?Global Prospects and Policies

Tentative signs in early 2023 that the world economy could achieve a soft landing—with inflation coming down and growth steady—have receded amid stubbornly high inflation and recent financial sector turmoil. Although inflation has declined as central banks have raised interest rates and food and energy prices have come down, underlying price pressures are proving sticky, with labor markets tight in a number of economies. Side effects from the fast rise in policy rates are becoming apparent, as banking sector vulnerabilities have come into focus and fears of contagion have risen across the broader financial sector, including nonbank financial institutions. Risks to the outlook are heavily skewed to the downside, with the chances of a hard landing has risen sharply.

?The Natural Rate of Interest: Drivers and Implications for Policy

The natural rate of interest—the real interest rate that neither stimulates nor contracts the economy—is important for both monetary and fiscal policy; it is a reference level to gauge the stance of monetary policy and a key determinant of the sustainability of public debt. It aims to study the evolution of the natural rate of interest across several large advanced and emerging market economies. To mitigate the uncertainty that typically surrounds estimates of the natural rate, the chapter relies on complementary approaches to analyze its drivers and project its future path. Overall, the analysis suggests that once the current inflationary episode has passed, interest rates are likely to revert toward pre-pandemic levels in advanced economies. How close interest rates get to those levels will depend on whether alternative scenarios involving persistently higher government debt and deficit or financial fragmentation materialize.

?Coming Down to Earth: How to Tackle Soaring Public Debt

Public debt as a ratio to GDP soared across the world during COVID-19 and is expected to remain elevated, posing a growing challenge for policymakers, particularly as real interest rates are rising across the world. Chapter 3 examines the effectiveness of different approaches to reducing debt-to-GDP ratios. Based on econometric analyses and complemented with a review of historical experiences, the chapter reaches three main conclusions. First, adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios. Second, when a country is in debt distress, a comprehensive approach that combines significant debt restructuring—the renegotiation of terms of servicing of existing debt—fiscal consolidation, and policies to support economic growth can have a significant and long-lasting impact on reducing debt ratios. Coordination among creditors is essential. Finally, economic growth and inflation have historically contributed to reducing debt ratios.

Geo-economics Fragmentation and Foreign Direct Investment

Supply-chain disruptions and rising geopolitical tensions have brought the risks and potential benefits and costs of geo-economics fragmentation to the center of the policy debate. Chapter 4 studies how such fragmentation can reshape the geography of foreign direct investment (FDI) and, in turn, how FDI fragmentation can affect the global economy. FDI flows are increasingly concentrated among geopolitically aligned countries, particularly in strategic sectors. Several emerging markets and developing economies are highly vulnerable to FDI relocation, given their reliance on FDI from geopolitically distant countries. In the long term, FDI fragmentation arising from the emergence of geopolitical blocs can generate large output losses, especially for emerging markets and developing economies. Multilateral efforts to preserve global integration are the best way to reduce the large and widespread economic costs of FDI fragmentation.

?Fragmentation: Geopolitics and the Impact on the Global Economy in 2023 and Beyond

?Based on the above, EXPERTS PRESUME THE FOLLOWING SCENARiO

.World’s Top 5 Largest Economies in 2026

?1. United States:??USD 29.3 trillion in 2026

Focus Economics panelists see the U.S. retaining its title as the world’s largest economy over the next few years, forecasting nominal GDP of USD 29.3 trillion in 2026. Healthy private consumption and fixed investment, growing energy output, a flexible labor market, still-favorable demographics, and a supportive fiscal policy will all aid activity. However, the Fed’s hawkish monetary stance poses a risk to domestic activity, while the political gulf between Republicans and Democrats is hampering structural reforms and endangering social stability. On the external front, growing frictions with China—over technology and Taiwan in particular—will hamper bilateral trade between the two countries and could spark a full-blown conflict. Moreover, the U.S. will shed its relative economic clout: While in 2000,?the U.S. economy?was around four times the combined size of the BRIC economies (Brazil,?Russia,?India,?and?China), the BRICs will be around 15% larger than the U.S. in 2026.

2. China:??USD 24.3 trillion in 2026

Our panelists forecast Chinese GDP at USD 24.3 trillion, or roughly 83% of U.S. GDP, in 2026. In 2021, the corresponding figure was around 77%. Near-term economic momentum will be hampered by stop-start Covid-19 restrictions and a housing market downturn. However, China still has strong potential for catch-up growth in the longer term, given that per-capita income is only a small fraction of developed-country levels. Risks to the outlook are myriad, though. In recent years, the government has taken a more central role in the economy, which could lead to a misallocation of resources. The prolongation of strict Covid-19 restrictions would harm demand and competitiveness, and deteriorating relations with the West will continue to hamper trade and the transfer of technology and ideas. A possible invasion of Taiwan—while seemingly unlikely—is a key downside risk to the economic outlook.

“Growth will remain on a decelerating trend over the medium to long term. Rapid demographic aging will be a primary factor. Technological change will drive productivity growth, but the self-sufficiency drive will generate economic inefficiencies. Increasing reliance on the state sector to drive economic activity will also worsen the competitive and discriminatory pressures facing some private and foreign firms.” –?The?EIU?

3. Japan:?USD?5.4 trillion in 2026

?Japan?will remain the world’s third-largest economy over the next few years, with nominal GDP of 5.4 trillion in 2026 according to our panelists’ forecasts. Extensive fiscal support and the loosest monetary stance of any major developed economy will prop up activity at home. However, Japan will continue to lose relative economic clout compared to both high-income and emerging-market rivals. A shrinking population will feed through to anemic growth of 1.2% on average in 2023–2026. At the beginning of the 21st?century, Japan’s nominal GDP was roughly half that of the U.S.; by 2026, it will be less than a fifth. Fiscal sustainability concerns amid an aging, shrinking population, low uptake of digital services, an ingrained low-inflation mindset, and a rigid labor market cloud the horizon.

“Accelerating structural reforms will be critical to boost productivity and wages and improve income distribution. Beyond the pandemic, Japan’s aging and shrinking population will continue to depress productivity, investment, and real GDP growth. To ease the demographic-driven growth slowdown and reflate the economy, Fund staff analysis suggests that implementing a mutually supportive set of structural reforms complemented by accommodative monetary policy could over the medium term boost GDP by as much as 11 percent and raise prices by 3 percent compared to the baseline.” –?The IMF

4. Germany:?USD 5.2 trillion in 2026

Germany?is projected to cling to fourth place, with nominal GDP of USD 5.2 trillion. While a stable policy environment and stronger government investment will support activity in the coming years, the economy will be hindered in the near term by gas shortages and tighter monetary policy. Out to 2026, a deteriorating demographic profile will weigh on growth; the population is projected to begin declining in 2025. Moreover, the shift to electric vehicles could spell trouble for the country’s crucial car industry, given the need for substantial retraining, retooling, and restructuring of workforces to take advantage of job opportunities opening up in the electric vehicle supply chain.

5. India:?USD 5.0 trillion in 2026

India is set to become the world’s fifth-largest economy by 2026, with nominal GDP of USD 5.0 trillion, overtaking the UK. Growth will be spurred in the coming years by surging consumption, investment—from both domestic and foreign firms—and exports, while Prime Minister Modi’s Make in India agenda could spur the manufacturing sector. GDP growth will average over 6% a year out to 2026. That said, the government’s increasing attempts to pick winners could result in an inefficient use of resources, such as the USD 10 billion of public money earmarked to build an indigenous semiconductor industry. Moreover, the country’s protectionist bent—India bowed out of the Asia-wide RCEP trade deal in 2019 for instance—will dampen potential growth, as will shoddy infrastructure, significant red tape, and economic scarring from the pandemic.

“Despite reopening benefiting the contact-intensive services sectors, the?underwhelming performance of the most vulnerable segments suggests potentially deeper scarring. Outside of agriculture, which was not impacted by the pandemic,?these three sectors?– manufacturing, construction & trade, and hotels, transport & communication –?are also the ones that employ more unorganized sector workers. Their slower rebound, despite reopening, suggests firms have either shut down or are no longer contributing to production, whereas larger firms have thrived and gained market share. To us, this suggests that the steady-state growth moderated after the pandemic struck and at this stage is running even below our estimate of 5.5-6.0%.”?–?Analysts at Nomura

CONCLUSION

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic. Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024. Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.

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