There are many developed countries in the world. It is hard, if not impossible, to discuss all of them in one article. So, let’s focus on the largest economies.
As a reminder, gross domestic product (GDP) is an estimate of the total value of finished goods and services produced in a country’s borders during a specified period, usually a year. It is commonly used to estimate the size of a country’s economy. Notably, GDP is often measured by using the expenditure method, which calculates GDP by adding up spending on new consumer goods, government spending, new investment spending, and the value of net exports.
The information regarding the largest economies is based on the data from 2020. The Covid-19 pandemic had a tremendous impact on economies around the world. The pandemic slashed energy prices, cratered tourism, lowered trade volumes, etc. Even though many countries began to recover in the third quarter of 2020, the vast majority of the top 25 countries experienced negative GDP growth for the year.
Largest economies and their capabilities
It is no secret that the United States’ economy is the largest globally. The biggest contributor to that GDP is the economy’s service sector which includes finance, real estate, professional and business services, as well as healthcare.
Importantly, the country has a relatively open economy, facilitating flexible business investment and foreign direct investment in the country. Moreover, it is the world’s dominant geopolitical power. The country is able to maintain a large external national debt as the producer of the world’s primary reserve currency.
It dominates many industries, but the country faces rising threats in economic inequality, rising healthcare, social safety net costs, and deteriorating infrastructure.
When it comes to the largest economies, we need to mention China. The country reached phenomenal results. Currently, it has the world’s second-largest nominal GDP in current dollars and the largest when it comes to Purchasing Power Parity (PPP).
With annual growth that regularly outperforms that of the United States, China may be on course to become the largest economy in the world by nominal GDP in the years to come.
The country has a vast economy. Unsurprisingly, it is the world’s number one exporter. However, China faces significant challenges, such as a rapidly aging population and severe environmental degradation.
Japan, Germany, and the U.K.
Apart from the countries mentioned above, there are other interesting countries as well, and Japan is one of them. It has one of the largest economies in the world. Presently, it is the third-largest economy in the world. The country’s GDP surpassed the $5 trillion mark in 2019. Strong co-operation between the country’s government and companies and advanced technological know-how have built Japan’s manufacturing and export-oriented economy.
Despite these advantages, Japan has to cope with various challenges. For example, it is poor when it comes to natural resources. It also struggled with a rapidly aging population.
Any list of the largest economies would be incomplete without Germany. The country has the fourth-largest economy in the world. For example, Germany is a top exporter of vehicles, machinery, chemicals, and other manufactured goods. Moreover, the country has a skilled workforce.
We can’t forget about the United Kingdom as well. It has the fifth-largest economy in the world. Its economy is driven by its extensive service sector, particularly in finance, insurance, and business services.