What Are the Top Economies in the World?

If you’re trying to expand your business on a global scale, it may help to have a better sense of global economies. Where are the biggest markets? In which countries should you be focusing your efforts?

Here are the top ten economies in the world as measured by nominal Gross Domestic Product:

Let’s explore what this list of countries ranked by GDP means in a little more depth, starting with GDP.

What is GDP?

Gross Domestic Product (GDP) is an estimate of the size of a nation’s economy based on the total value of goods and services produced within a particular country over a specified period of time. GDP is most often calculated on an annual basis. Despite the fact that GDP fluctuates based on economic cycles and economic growth, the list of top economies does not shift dramatically from year to year. Exceptions to this include countries like Nigeria, which moved 19 places—from 46th to 25th.

What influences GDP?

Some of the factors that influence GDP include: supply and demand, inflation and deflation, fiscal and monetary policies, trade policy, and financial markets. Other factors include natural disasters, domestic and international conflict, epidemics and the obvious—worldwide pandemics. COVID-19 has wreaked havoc on economies around the world by slashing energy prices, wiping out tourism, lowering trade volumes, and closing down businesses. This has led to economic contraction, or a decline in GDP, in nations around the globe.

How is GDP measured?

GDP is measured in various ways, the most common of which is by nominal GDP. In this measure, current market exchange rates are used to convert local prices and currencies into U.S. dollars. Nominal GDP takes into account inflation, as opposed to real GDP, which does not.

To calculate nominal GDP, economists use the equation:

GDP = Private Consumption + Gross Investment + Government Investment + (eXports - iMports)

To calculate real GDP, on the other hand, a “GDP deflator” is used to remove inflation from the equation.

Other ways to measure GDP include:

• Purchasing Power Parity (PPP): GDP is adjusted in this measurement into Current International Dollars to account for differences in cost of living around the world.

• GDP Per Capita: Based on the annual percentage growth rate of a country’s Nominal GDP in local prices and currencies, this figure is used to estimate how fast a nation’s economy is growing.

• GDP Growth: Divide nominal GPA by the number of people in a given country to determine how much an economy produces per person.

What is the richest country in the world?

Just shy of 25 percent of the global economy, the United States has the best economy in the world as measured by nominal GDP. The service industry is the largest sector of the U.S. economy and includes business and professional services, finance, healthcare, insurance, and real estate. The economy of the United States is threatened, however, by issues of economic inequality, the rising costs of healthcare and social services, as well as worsening infrastructure.

Not surprisingly, China is ranked as the second-best economy in the world, when it comes to countries ranked by GDP. Despite the economic challenges of COVID-19, China ended 2020 with a 2.3 percent increase in GDP, the only nation in the world to avoid a decline that year. As the globe’s leading exporter, it is predicted that China will become the largest economy in the world in the coming years. Challenges facing the nation, however, include environmental degradation and the speed at which its population is aging.

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