The history behind 15 largest economies in the world by 2015 PPP and how each one of them became a part of that exclusive club is quite interesting. The Industrial Revolution of the 1700’s to the 1800’s has transformed the way people manufacture and produce goods. From largely manual production, simple machines such as the cotton gin revolutionized manufacturing and efficiency of workers, leading to an increase in income and production. As the world caught up, global output and income increased, leading to higher standards of living worldwide.
As we take a look at the 15 largest economies of the world by 2015 PPP, we must first define what PPP (purchasing power parity) is, and its difference to GDP as a measure of a country’s economy. Many of us are already familiar with GDP, which is defined by the OECD as “an aggregate measure of production equal to the sum of gross values added of all resident institutional units engaged in production.” Meanwhile, purchasing power parity is defined as the ratio of one country’s currency to buy a certain number of good in that country to another country’s currency to buy the same number of goods in that country. This concept allows an estimate of the exchange rate between two countries if the currency’s purchasing power would be at par with one another. This helps minimize false comparisons of output if two countries were to compare their respective production with the use of market exchange rates. However, the use of PPP is controversial as there are difficulties in finding a suitable “basket of goods” to compare in each country. Thus, several indexes have been proposed, which have a somewhat similar methodology as the PPP. Some of these are the Big Mac index and the iPad index, just to name a few.
isak55/Shutterstock.com
To rank the 15 largest economies in the world by 2015 PPP, Insider Monkey obtained 2014 data from the IMF, World Bank and CIA Factbook reports for 2014. Projected GDP growth for 2015 was obtained from the IMF 2015 report. Compared to 2014, there have been some changes in the ranking of each country, with some gaining spots and some losing them. GDP for 2015 was then computed using 2014 GDP and the projected GDP growth for 2015. With an estimated PPP of $107 trillion for 2015, the 15 largest economies in the world by 2015 PPP contribute almost 50% to this value.
Don’t be surprised to see the 10 richest countries in the world by 2015 GDP in this list, as many of these countries produce a vast amount of goods that increase their PPP valuation. However, as we have mentioned earlier, PPP is the valuation of produced goods in a standardized currency, in this case, the US dollar. Without delaying further, let us take a look at the largest economies in the world ranked by 2015 PPP.
15. Spain
Projected 2015 GDP growth: 3.1%
GDP based on PPP valuation (in billions of dollars): $1,636.3
Spain was the 16th largest economy in 2014 by GDP based on PPP and is set to overtake Canada in 2015 to be the 15th largest in the world. The country also has the 4th largest economy in the Eurozone and the 5th largest in the European Union. However, high inflation and a large underground economy are some areas that Spain has yet to improve on, according to the OECD.
14. Saudi Arabia
Projected 2015 GDP growth: 3.4%
GDP based on PPP valuation (in billions of dollars): 1,681.2
From an agriculture-based subsistence economy in the 1930’s, Saudi Arabia has transformed to be one of the wealthiest in the world. With a command economy that is primarily oil-based, Saudi Arabia is still projected to have the 14th largest economy in the world. The country has the second-largest proven oil reserves in the world, and the petroleum industry accounts for at least 92% of budget revenues.
Fedor Selivanov/Shutterstock.com
13. South Korea
Projected 2015 GDP growth: 2.7%
GDP based on PPP valuation (in billions of dollars): 1,849.4
After the Korean War, South Korea’s economy and infrastructure were devastated, and it became one of the poorest countries in the world for over a decade. Per capita income was less than $80, and poverty was widespread. A series of reforms began when general Park Chung Hee seized power in the 1960’s, which resulted in rapid economic growth in the 1960’s until the 1990’s. “The Miracle on the Han River”, a saying used to refer to South Korea’s rapid economic development, has transformed the once-agricultural nation into the 13th largest by PPP, and one of the most developed in the world.
12. Italy
Projected 2015 GDP growth: 0.8%
GDP based on PPP valuation (in billions of dollars): 2,173.6
Similar to the previous entry, Italy’s economy was ravaged and destroyed by war, specifically World War II. With the financial aid given by the United States through the Marshall Plan, Italy resurrected its economy and by the 1960’s had one of the highest growth rates in the world. Today, Italy has the 4th largest economy in Europe and ranks as one of the largest producers on renewable energy in the world.
11. Mexico
Projected 2015 GDP growth: 2.3%
GDP based on PPP valuation (in billions of dollars): 2,220.1
The electronics sector and automobile industry dominate Mexico’s imports, being the 6th largest electronics industry in the world and the largest producer of automobiles in North America. The Great Recession of 2009 severely affected Mexico’s growth, but the country has since recovered. However, the country has one of the highest income disparity rates in the world. According to the World Bank, the bottom 10% of the population controls 1.36% of the country’s GDP, while the upper 10% controls 36% of it.
10. France
Projected 2015 GDP growth: 1.2%
GDP based on PPP valuation (in billions of dollars): 2,646.9
Financial services, insurance, and banking have been the primary industries in France, making the country the second-largest economy in the European Union. Tourism has also helped the economy, attracting around 82 million visitors in 2009. The agricultural industry is also a big contributor to the economy, with wheat, wine, and cheese as some of the major agricultural exports.
9. United Kingdom
Projected 2015 GDP growth: 2.5%
GDP based on PPP valuation (in billions of dollars): 2,659.7
With London established as one the three command centers of the world’s economy, the United Kingdom has become 9th in the world, switching places with France. The services sector has the lion’s share of the UK economy, comprising 77% of the GDP. However, poverty is also a problem in the UK, with around 22% living below the national poverty line.
8. Indonesia
Projected 2015 GDP growth: 4.7%
GDP based on PPP valuation (in billions of dollars): 2,838.6
As one of the emerging markets of the world, Indonesia has become the biggest economy in Southeast Asia and the 8th largest in the world in terms of PPP. As one of the newly-industrialized countries, Indonesia has been experiencing rapid growth since the 1999 Asian Financial Crisis, growing between 4-6% every year since then. However, unrest due to the high income disparity has led to the formation of separatist movements in some areas.
AsiaTravel/Shutterstock.com
7. Brazil
Projected 2015 GDP growth: -3.0
GDP based on PPP valuation (in billions of dollars): 3,207.9
With a huge labor force and abundant natural resources, Brazil has become the largest economy in Latin America and is set to be one of the five largest in the world in the near future. Being the fourth largest carmaker in the world has certainly helped the country, along with being the largest coffee producer in the world for the past 150 years. Brazil is still recovering from the Great Recession of 2009 though, and since then the country has been experiencing a recession, with a -3.0% projected GDP growth for 2015.
6. Russia
Projected 2015 GDP growth: -3.8%
GDP based on PPP valuation (in billions of dollars): 3,473.8
The services sector of Russia accounts for 56% of its GDP, with the citizens enjoying 60% of their pre-tax earnings and spending it mostly on shopping. This is possible as housing is state-owned, so citizens do not have to pay for rent after privatization. The defense industry is also a significant contributor to Russia’s economy, employing up to 3 million people which account for at least 30% of all manufacturing jobs. However, the IMF has projected Russia to drop to 19th place in the succeeding years due to the depreciation of the ruble and the negative GDP growth.
Alexander Smorodinov/Shutterstock.com
5. Germany
Projected 2015 GDP growth: 1.5%
GDP based on PPP valuation (in billions of dollars): 3,842
A low level of corruption and a highly-skilled labor force has helped Germany transform into the 5th largest in the world by PPP. It also has the largest trade surplus of any country in the world, being both the 3rd largest exporter and importer. The service sector contributes the most to the economy at 71% and is known for its Mittelstand model of small and medium scale enterprises. It also has a robust automotive industry, being the fourth largest carmaker in the world and is widely known as the most competitive and innovative globally.
4. Japan
Projected 2015 GDP growth: 0.6%
GDP based on PPP valuation (in billions of dollars): 4,842
Present-day Japan has seen its most impressive growth happen during the 1960’s until the 1990’s. After the war, the country ignored spending for national defense and instead focused on the improvement of the economy. This resulted in an average of 10% annual GDP growth in the 60’s, and lower but high growth rates from the 70’s until the 90’s, when the Tokyo Stock Exchange crashed. Today, Japan has the world’s fourth largest economy by PPP, and is the world’s biggest creditor, with the country possessing 13.7% of the world’s financial assets. While the automobile industry is still the 3rd largest in the world, Japan has been shifting to high-tech and precision goods as the focus of the manufacturing industry.
3. India
Projected 2015 GDP growth: 7.3%
GDP based on PPP valuation (in billions of dollars): 8,027
For the past 2 decades, the Indian economy has grown at an average rate of 5.8% annually, making it one of the world’s fastest growing economies. A large labor force has supported the growing Indian economy, and the large population has also resulted into a large consumer market, predicted to be the world’s 5th largest by 2030. The improving economy has also resulted in the hourly wage rate doubling since the start of the 21st century. However, the GDP per capita has remained low, ranking 131st by nominal GDP.
2. United States
Projected 2015 GDP growth: 2.6%
GDP based on PPP valuation (in billions of dollars): 17,968.2
Abundant natural resources, a well-developed infrastructure, and a productive labor force have allowed the United States to become the largest economy in the world by nominal GDP and the second largest by PPP valuation. The country is the largest importer in the world, and as such has a trade deficit of $635 billion in 2010. Despite this, its citizens enjoy the highest average and household income among OECD nations. Poverty and unemployment are one of the biggest problems of the economy, with the unemployment rate at 7.7% as of 2013 and about half the population living in poverty, according to a US census data.
upthebanner/Shutterstock.com
1. China
Projected 2015 GDP growth: 6.8%
GDP based on PPP valuation (in billions of dollars): 19,510
Since 1978 when economic reforms were put into place, China has become one of the largest and fastest-growing economies of the world, and in 2014, the largest economy based on PPP valuation and the second-largest by nominal GDP. Because of this rapid growth, only 10% of its population of more than 1.3 billion people lives below the poverty line, a significant difference from 1978 when up to 64% of its population was living in poverty. The cheap labor costs, high productivity of laborers and a well-developed infrastructure have been the basis of China’s rapid economic growth and development.
