Economy - Size

Size of the Economy, 2003

Note: The ranking for Europe (EMU) was calculated by the author and treats the countries of the European Monetary Union as one large economy. The other rankings correspond to the World Bank ranking.

Source: World Bank (2005): World Development Indicators, 2005, Table 1.1.

According to these World Bank estimate, the United States of America is, by far, the largest economy with a Gross National Income of 11,013 billion US$. The European Monetary Union (EMU) would be the second largest economy, if we would treat these countries as one state - significant larger than Japan (which is actually the second larges economy in the ranking of states). Germany, the United Kingdom and France have the third, fourth and fifth largest economies, respectively. China is already the sixth largest economy.

These numbers, however, are based on current Market Exchange Rates (MER), which can be heavily distorted due to government interventions and controls. This is particularly true in the case of China, which in the past has linked its currency to the US Dollar and now to a basket of several currencies at (almost) a fixed rate. This rate greatly underestimates the actual purchasing power of the Chinese currency. 100 US$ converted in Yuan/RMB can buy much more goods and services in China, than the equivalent amount in the US or Europe. Because of these currency rate distortions, economist are using so-called Purchasing Power Parity (PPP) based estimates of the Gross National Income. These should provide more realistic comparisons of the "true" economic conditions across countries. Based on PPP GNI China would be already the second largest economy on earth - far bigger than that of Germany, France and the United Kingdom combined.

GDP growth in China was far higher than in Europe or the United States. Germany, Europe's major economy, was actually shrinking between 2002 and 2003, according to these World Bank estimates.