Global economic growth is likely to continue at the same pace (3.2 percent in 2023) in 2024 and 2025. Meanwhile, global headline inflation is likely to fall from an annual average of 6.8 percent in 2023 to 5.9 percent in 2024 and to 4.5 percent in 2025, according to the IMF/World Economic Outlook in April 2024.
The report said risks to the outlook are balanced but more tilted to the downside in the near term. On the downside, new price spikes from geopolitical tensions, along with persistent core inflation, could raise interest rate expectations and reduce asset prices.
Overview of the world’s largest economy
The United States is the world’s largest economy, boasting a nominal GDP of over $28 trillion. This economic powerhouse is a mixed economy, blending private enterprise with strategic government intervention. The backbone of the US economy is its expansive service sector, which contributes more than 80% to its GDP. This sector encompasses many industries, including finance, healthcare, and technology, all of which drive economic growth.
The US’s influence on the global economy profoundly impacts international trade and finance. The country’s economic growth rate hovers around 2% annually, reflecting a stable and robust economic environment. The diversification of the US economy is another key strength, with a strong presence in manufacturing, technology, and finance sectors. Additionally, the US is a magnet for foreign investment, attracting multinational corporations from around the globe to set up operations within its borders. This influx of foreign investment further bolsters the country’s economic standing and contributes to its position as the world’s largest economy.
Largest economies in the world by nominal GDP in 2024
Let’s take a look at the largest economies in the world as per the country’s GDP, according to the IMF as of July 1, 2024.
United States of America (World’s largest economy, GDP: $28,783 billion)
The United States of America (U.S.) continues to be the largest economy in the world and the richest nation, maintaining its dominant position from 1960 onwards, as measured by its gross domestic product. Major industries such as manufacturing, services, finance and technology drive the economy of the United States. This marks an impressive diversification. The U.S. has a sizable consumer market that encourages innovation and entrepreneurship. It has a robust infrastructure and offers a favourable business environment. Also, the U.S. dollar’s dominant position as the world’s reserve currency contributes to its economic influence.
China (GDP: $18,536 billion)
China’s economy is growing faster, as seen by its rise from fourth place in 1960 to second place in 2023. The three main pillars of the Chinese economy are manufacturing, exports, investment, and net exports, which represent the balance between the country’s exports and imports. The country possesses a large staff, strong support from the government, modern infrastructure, and a rapidly growing consumer base.
Germany (GDP: $4,590 billion)
Germany is popular in the engineering, automotive, chemical and pharmaceutical industries. Exports are the main driver of Germany’s economy. It benefits from a skilled workforce, strong R&D programmes, and a commitment to innovation promotion.
Japan (GDP: $4,112 billion)
Japan is the fourth-largest, one of the world’s most developed and most technologically sophisticated economies. It is a leader in high-tech sectors, including robotics, electronics and automobiles, with a heavy emphasis on innovation and technology. It also has a large manufacturing base. Japan keeps driving economic growth despite an ageing labour force by investing heavily in R&D and maintaining a highly developed infrastructure.
India (GDP: $3,942 billion)
India’s economy ranks fifth in the world in 2024 in terms of GDP. Industries such as manufacturing, services, information technology and agriculture drive the country’s economic growth. Its economy is diverse and expanding quickly. The country makes use of its sizable home market, a young, tech-savvy work population, and a growing middle class.
United Kingdom (GDP: $3,502 billion)
The U.K., recognized as the sixth largest economy in the world, is a highly developed country with a robust service industry. The country’s financial and business services are heavyweights regarding economic contribution. London is a major international centre for insurance and finance.
France (GDP: $3,132 billion)
Manufacturing, tourism and agriculture are important industries in France. Luxury products and aerospace also play important roles. France is also well-known for its social security system and high standard of living. The nation’s strong economy and global influence result from its extensive R&D spending and well-developed infrastructure.
Brazil (GDP: $2,333 billion)
Brazil is a major force in the world economy. The country’s several industries, including mining, manufacturing, oil and gas extraction, and agriculture, are the foundation of its robust economy. Brazil’s economy has grown due to its large local market and efforts to draw in international investment.
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Italy (GDP: $2,332 billion)
A strong manufacturing sector drives Italy’s economic growth. It focuses on the automotive, fashion and design industries. Its GDP is likely to reach $2.33 trillion in 2024. Another important factor in Italy’s robust economy is tourism. Despite the constraints posed by a substantial national debt, Italy’s skilled labour force and rich cultural legacy remain invaluable resources. Italy is the third-biggest economy in the EU. The country has a highly robust market. It is renowned for both its agricultural and commercial sectors. These sectors are influential and innovative.
Canada (GDP: $2,242 billion)
Oil, gas, minerals and lumber are just a few of the rich natural resources vital to Canada’s economy. The country also has a strong industrial sector, a booming services sector, and a strong commitment to promoting innovation and technical breakthroughs.
How GDP and GDP per capita are measured
GDP measures the monetary value of final goods and services and is a crucial indicator of a country’s economy. It includes goods and services bought by the final user and produced within a country in a given period (quarter or a year). It counts all of the output generated within the borders of a country. GDP consists of goods and services produced for sale in the market. It also includes some non-market production, such as defense or education services the government provides. An alternative concept, gross national product, or GNP, counts all the output of the residents of a country. So, if a German-owned company has a factory in the United States, the output of this factory would be included in the U.S. GDP but in German GNP.
Economic growth and world GDP
Economic growth is a fundamental driver of world GDP, reflecting the increase in the production of goods and services over time. As of 2024, the global GDP is estimated to be around $90 trillion, with the United States, China, and Japan being the largest contributors. The International Monetary Fund (IMF) projects a global GDP growth rate of approximately 3.5% annually, driven largely by emerging Asian markets, particularly China and India.
Understanding purchasing power parity (PPP) is crucial when analyzing world GDP. PPP adjusts countries’ GDP to reflect their relative purchasing power, providing a more accurate comparison of economic performance. Regarding PPP, China leads the world with a GDP exceeding $25 trillion, highlighting its significant economic influence.
Another important indicator is a country’s GDP per capita, which measures the average economic output per person and serves as a gauge of the standard of living. The United States boasts one of the highest GDP per capita figures globally, at over $69,000, underscoring its economic prosperity.
Government expenditures are a vital component of a country’s GDP, encompassing spending on infrastructure, education, healthcare, and defense. These expenditures play a crucial role in supporting economic growth and development. Additionally, foreign investment is a key driver of global economic growth, taking various forms such as foreign direct investment (FDI), portfolio investment, and foreign aid. The United States remains a major recipient of foreign investment, further solidifying its position in the global economy.
In conclusion, the United States leads as the world’s largest economy, with a nominal GDP of over $28 trillion. The global economy is poised for continued growth, driven by emerging markets and supported by concepts like purchasing power parity. GDP per capita, government expenditure, and foreign investment are all critical components that shape the economic landscape and contribute to global growth.
Future economic growth
The PwC report sets out latest long-term global growth projections to 2050 for 32 of the largest economies in the world, accounting for around 85% of world GDP.
Here are some key results of the analysis:
- Due to ongoing productivity gains spurred by technology, the size of the global economy might exceed fourfold by 2050, surpassing population growth.
- On average, emerging markets may expand twice as quickly as established economies.
- As a result, it is predicted that six of the world’s seven largest economies would be developing economies by 2050, with China ranking first, India ranking second, and Indonesia ranking fourth.
- By 2050, the EU27’s GDP share of the global GDP may drop below 10%, while the U.S. may drop to third place in the rankings.
- By 2050, the UK may drop to 10th position, France out of the top 10, and Italy out of the top 20, as faster-growing developing economies like Mexico, Turkey, and Vietnam surpass them, respectively.
- However, in order for developing economies to reach their full potential for long-term growth, they will need to make considerable improvements to their infrastructure and institutions.
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