The Top 10 Economies by 2030 May Surprise You.

The Top 10 Economies by 2030 May Surprise You.

There was an article written by Tibi Puiu from ZME Science on May 4, 2020, that explains what the World Bank in the International Monetary Fund think of the world growth by 2030.  The article was titled, “China and India on Track for World’s Largest Economies by 2030.”

The article just sums up what the International Monetary Fund has been doing all along. They keep track of the economies of the world a little bit differently by looking at the purchasing power parity. That is explained below.

Purchasing Power Parity (PPP) is measured by finding the values (in USD) of a basket of consumer goods that are present in each country (such as pineapple juice, pencils, etc.). If that basket costs $100 in the US and $200 in the United Kingdom, then the purchasing power parity exchange rate is 1:2.

For example, suppose that Japan has a higher GDP per capita ($18) than the US ($16). That means that someone in Japan would, on average, make $2 more than someone in American. However, they are not necessarily richer. Suppose that one gallon of orange juice costs $6 in Japan and only $2 in the US; then $6 in Japan exchanges to only $2 worth of US goods.

The article goes on to explain where the growth is going to come from.

By PPP alone, China is already the world’s largest economy. On a nominal basis, however, the US is still leading the pack.

In the future, emerging markets are expected to catch up with historically developed countries, driven by the convergence of per-capita GDP. In other words, as a country’s output starts matching the size of its population, this can mean a lot as far as hugely populated nations are concerned. For instance, Indonesia, Turkey, Brazil, and Egypt are expected to experience massive growths in their economies. To get a better idea of the bigger picture, Visual Capitalist compared Standard’s 2030 projections with the International Monetary Fund’s most recent data on GDP (PPP) for 2017. It’s a bit of a case of counting apples and oranges, since the Standard assessment also includes nominal GDP in its formula, but the table gets the job done.

Rank	Country —-	Proj. GDP (2030, PPP) —-	GDP (2017, PPP) —-	% Change
#1	China	$64.2 trillion	$23.2 trillion	+177%
#2	India	$46.3 trillion	$9.5 trillion	+387%
#3	United States	$31.0 trillion	$19.4 trillion	+60%
#4	Indonesia	$10.1 trillion	$3.2 trillion	+216%
#5	Turkey	$9.1 trillion	$2.2 trillion	+314%
#6	Brazil	$8.6 trillion	$3.2 trillion	+169%
#7	Egypt	$8.2 trillion	$1.2 trillion	+583%
#8	Russia	$7.9 trillion	$4.0 trillion	+98%
#9	Japan	$7.2 trillion	$5.4 trillion	+33%
#10	Germany	$6.9 trillion	$4.2 trillion	+64%

You can see, by 2030, seven of the top 10 countries will be emerging market countries. Of course, if you look at the total growth for all those countries in the top 10, emerging markets grow much faster than the established ones.  This information is useful in determining where the growth will be coming from going forward. 

This may make some people feel uncomfortable but it’s a good thing. As the United States tends to slow down based on our demographics and aging population, the rest of the world could certainly pick up the slack and that is good for our economy.  In the next newsletter will look at how we can project that growth in a more visual way.

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