While measuring the economy of a country, two methods are used. These methods are purchasing power parity (PPP) method and finding the nominal gross domestic product (GDP) of a state. The core difference between these two approaches is that purchasing power parity takes into account the variances in living costs in different nations and involves more estimation while nominal GDP does not. The GDP of a country refers to the market value of all its final goods and services in a particular year. Both of these methods are used concurrently in order to put matters concerning the economy into better perspective.
The Biggest Economies of the World
According to data from the International Monetary Fund in 2017, the gross world product is estimated to be at $77.99 trillion using the nominal method, while it stands at $126.69 trillion according to the PPP method. Calculating the ratio of PPP to nominal, using the values from IMF, the PPP value is 1.62 times greater than the nominal GDP. The data from IMF studies 191 economies. Out of these economies, 181 economies have higher figures when PPP method is used and 9 of them have better rankings using the nominal methods.
For the nominal data, the top 25 economies account for over 80% of the total world economy. Nominal valuation is higher than PPP in this regard because the top 25 economies account for at least 75% of the economy.
Regardless of whether the nominal GDP or PPP is used, the United States and China are undoubtedly the two biggest economies in the world. Using nominal data, the US’s economy stands at $19 trillion (approximately 24.9% of the world’s economy), while that of China is second at $11 trillion (approximately 15.1% of the world’s economy). The two positions are reversed when PPP data is used. The US then has a PPP figure which is similar to the nominal value ($19 trillion and a market share of 15.3%), while China takes the top spot with a value of $23 trillion and a share of 18.3% of the world’s economy. The values of the US do not change in either method and stay the same even for projections over the next five years (2022).
Of the 25 biggest economies of the world, Belgium is the last with a 0.593% market share. Belgium’s economy stands at approximately $462 billion. The PPP value is higher for Belgium, $529 billion, although its rank drops to 37.
Further analysis shows that only 15 economies have a GDP above $1 trillion. The countries that don’t attain the $1 trillion mark are Mexico, Turkey, Netherlands, Saudi Arabia, Switzerland, Argentina, Taiwan Province of China, Sweden, Poland, and Belgium. In PPP figures, all the top 25 economies have a GDP of above $1 trillion.
Projections into the future show little to no change to the list of the world's top 25 economies. Other economic dynamos like the UK, Japan, Russia, Spain, India, Indonesia, France, Italy, Germany, and others will still top the list.