Why is the United States still identified as the world’s largest economy? What criteria do the media use to describe our neighbor in this way?– A. Gosselin
To answer these questions, La Presse consulted statistics compiled by the World Bank, which is one of the main international organizations for measuring and analyzing national economies.
With this data, the World Bank acts as one of the main international bodies for coordinating economic and financial assistance measures for countries in difficulty.
That said, in economic analysis and information circles, the primary measure of the size of the national economy is gross domestic product, or GDP in economics jargon.
What is it about ? GDP makes it possible to quantify the total value of the production of goods and services carried out by economic actors (individuals/consumers, businesses, public sector/governments) who reside within a given territory, and during a given period. .
GDP therefore reflects the internal economic activity of a country or a group of neighboring countries such as the European Union. Also, the change in GDP from one period to another is used to measure the growth rate of the economy concerned.
Why “again”? Because, as this chart of the world’s 15 largest economies by GDP compiled by the World Bank shows, the strong growth of the Chinese economy over the past 25 years has significantly narrowed the gap with the US economy. We also note the rise of India among the top 5 economies in the world by GDP.
Moreover, in recent years, another measure of the size of economies has been increasingly considered in the worlds of economic analysis and information. This is the measure of GDP based on purchasing power parity (PPP).
Essentially, this measure of “GDP at PPP” uses a sample of basic goods and services normalized across countries, while taking into account the impact of conversion rates between currencies on the real price of those goods and services in the currency of use in a given economy.
Consequently, the use of GDP at PPP makes it possible to mitigate the impact of differences in the value of currencies on the measurement and comparison of economic activity between countries or specific regions.
The following table prepared with PPP GDP data obtained from the World Bank illustrates the impact of this measure on the ranking of the largest economies in the world.
Thus, according to GDP at PPP, the Chinese economy is ranked first in the world, ahead of the United States and far ahead of its Japanese and South Korean neighbors.
The economy of India, the most populous country in the world, finds itself the third largest in the world in PPP GDP, well ahead of highly advanced economies such as Japan and Germany.
As for Canada, the size of its economy has fallen from 9th in the world, according to traditional GDP, to 15th in the ranking according to GDP at PPP.
