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THE WORLD’S TOP 10 ECONOMIES

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When it comes to the top 10 national economies around the globe, the order may shift a bit, but the key players usually remain the same, and so does the name at the head of the list. The United States has been the world’s biggest economy since 1871. But that top ranking is now under threat from China.

The Top 10 Economies in the World

Note: This list is based on estimates for 2017 by IMF’s World Economic Outlook Database, April 2017. Select data is from the CIA World Factbook. (Nominal GDP = gross domestic product, current prices, U.S. dollars, GDP per capita (PPP) = gross domestic product based on purchasing-power-parity (PPP) per capita, current international dollar, and GDP based on PPP = gross domestic product based on purchasing-power-parity (PPP) valuation of country GDP, current international dollar)

1. United States

The U.S. economy remains the largest in the world in terms of nominal GDP. The $19.42 trillion U.S. economy is 25% of the gross world product. The United States is an economic superpower that is highly advanced in terms of technology and infrastructure and has abundant natural resources. However, the U.S. economy loses its spot as the number one economy to China when measured in terms of GDP based on PPP. In these terms, China’s GDP is $23.19 trillion exceeds the U.S. GDP of $19.42 trillion. However, the U.S. is way ahead of China in terms of GDP per capita in nominal terms as well as PPP; GDP per capita (PPP) for the U.S. economy is approximately $59,609 versus $16,676 in China. In nominal terms, China’s GDP per capita further falls to $8,480.

2. China

China has transformed itself from a centrally-planned closed economy in the 1970s to a manufacturing and exporting hub over the years. Since it initiated market reforms in 1978, the Asian giant has achieved economic growth averaging 10% annually (though it’s slowed recently) and, in the process, lifted almost half of its 1.3 billion population out of poverty and become the undisputed second-largest economy on Earth. The Chinese economy has already overtaken the U.S. economy in terms of GDP, based on another measure known as purchasing power parity (PPP), and is estimated to pull ahead of the U.S. steadily in the following years. However, the difference between the economies in terms of nominal GDP remains large with China’s $11.8 trillion economy. The Chinese economy has long been known for its strong growth, a growth of over 7% even in recent years. However, the country saw its total GDP growth go down to 6.7% in 2016 and is projected to slow to 6.6% in 2017, and further decline to 5.7% by 2022. The country’s economy is propelled by an equal contribution from manufacturing and services (45% each, approximately) with a 10% contribution by the agricultural sector.

The nominal GDP for the U.S. and China for the year 2022 is estimated at $23.76 trillion and $17.71 trillion respectively, while the GDP in terms of PPP is projected at $23.76 trillion for the U.S. and $34.31 trillion for China.

3. Japan

Japan’s economy currently ranks third in terms of nominal GDP, while it slips to fourth spot when comparing the GDP by purchasing power parity. The economy has been facing hard times since 2008, when it first showed recessionary symptoms. Unconventional stimulus packages combined with subzero bond yields and weak currency have further strained the economy (for related reading, see: Japan’s Economy Continues to Challenge Abenomics). Economic growth is once again positive, to about 1% in 2016 and further to around 1.2% in 2017; however, it is forecasted to stay below 1% during the next five years. The nominal GDP of Japan is $4.84 trillion, its GDP (PPP) is $5.42 trillion, and its GDP (PPP) per capita is $42,860.

4. Germany

Germany is Europe’s largest and strongest economy. On the world scale, it now ranks as the fourth largest economy in terms of nominal GDP. Germany’s economy is known for its exports of machinery, vehicles, household equipment, and chemicals. Germany has a skilled labor force, but the economy is facing countless of challenges in the coming years ranging from Brexit to the refugee crisis (for related reading, see: 3 Economical Challenges Germany Faces in 2016). The size of its nominal GDP is $3.42 trillion, while its GDP in terms of purchasing power parity is $4.13 trillion. Germany’s GDP (PPP) per capita is $49,814, and the economy has moved at a moderate pace of 1-2% in recent years and is forecasted to stay that way.

5. United Kingdom

The United Kingdom, with a $2.5 trillion GDP, is currently the world’s fifth largest. Its GDP in terms of PPP is slightly higher at $2.91 trillion while its GDP (PPP) per capita is $44,001. The economy of the UK is primarily driven by services, as the sector contributes more than 75% of the GDP. With agriculture contributing a minimal 1%, manufacturing is the second most important contributor to GDP. Although agriculture is not a major contributor to GDP, 60% of the U.K.’s food needs is produced domestically, even though less than 2% of its labor force is employed in the sector.

After the referendum in June 2016 when voters decided to leave the European Union, economic prospects for the UK are highly uncertain, and the UK and France may swap places. The country will operate under EU regulations and trade agreements for two years after the formal announcement of an exit to the European Council, in which time officials will work on a new trade agreement. Economists have estimated that Brexit could result in a loss of anywhere from 2.2-9.5% of GDP long term, depending on the trade agreements replacing the current single market structure. The IMF, however, projects growth to stay between 1.5-1.9% in the next five years.

6. India

India is the sixth largest economy in the world with a nominal GDP of $2.45 trillion. The country ranks third in GDP in terms of purchasing power parity at $9.49 trillion. The country’s high population drags its nominal GDP per capita down to $1,850. India’s GDP is still highly dependent on agriculture (17%), compared to western countries. However, the services sector has picked up in recent years and now accounts for 57% of the GDP, while industry contributes 26%. The economy’s strength lies in a limited dependence on exports, high saving rates, favorable demographics, and a rising middle class. India recently overtook China as the fastest growing large economy and is expected to jump up to rank fourth on the list by 2022.

7. France

France, the most visited country in the world, is now the seventh largest economies with a nominal GDP of $2.42 trillion. Its GDP in terms of purchasing power parity is around $2.83 trillion. France has a low poverty rate and high standard of living, which is reflected in its GDP (PPP) per capita of $43,652. The country is among the top exporters and importers in the world. France has experienced a slowdown over the past few years and the government is under immense pressure to rekindle the economy, as well as combat high unemployment which stood at 9.6% in Q12017 (a slight drop from 10% in Q42016). According to IMF forecasts the country’s GDP growth rate is expected to rise over the next five years, and unemployment is expected to continue to go down.

8. Brazil

With its $2.14 trillion economy, Brazil now ranks as the eight largest economy by nominal GDP. The Brazilian economy has developed services, manufacturing, and agricultural sectors, with each sector contributing around 68%, 26%, and 6% respectively. Brazil is one of the BRIC countries, and was projected to continue to be one of the fastest growing economies in the world. However, the recession in 2015 caused Brazil to go from seventh to ninth place in the world economies ranking, with a negative growth rate of 3.6% (2016). The IMF expects the economy to grow at 0.2% during 2017, further recovering to 1.7% in 2018 and then to 2% during the next four years. The Brazilian GDP measured in purchasing power parity is $3.22 trillion, while its GDP (PPP) per capita is $15,485.

9. Italy

Italy’s $1.81 trillion economy is the world’s ninth largest in terms of nominal GDP. Italy is among the prominent economies of the Eurozone, but it has been impacted by the debt crisis in the region. The economy suffers from a huge public debt estimated to be about 133% of GDP, and its banking system is close to a collapse and in need of a bailout/bail-in. The economy is also facing high unemployment, but saw a positive economic growth in 2014 (0.1%) for the first time since 2011, which is projected to continue. The government is working on various measures to boost the economy that has contracted in recent years. The GDP measured in purchasing power parity for the economy is estimated at $2.3 trillion, while its per capita GDP (PPP) is $37,905. (See also: The European Banking Crisis Explained (DB))

10. Canada

Canada took over Russia to feature as the tenth largest economy in 2015. It’s $1.6 trillion is expected to touch $1.9 trillion by 2022, maintaining its lead over Russia. Canada has a highly service-oriented economy, and has had solid growth in manufacturing as well as in the oil and petroleum sector since the Second World War. However, the country is very exposed to commodity prices, and the decline in oil prices kept the economic growth under 1% in 2015 (down from 2.6% in 2014). The economy is expected to grow in the range of 1.8-2.0% during 2017-22. The GDP measured in purchasing-power parity is $1.75 trillion, and the GDP per capita (PPP) is $47,771.

The nominal GDP of the top 10 economies adds up to over 68% of the world’s economy, and the top 15 economies add up to about 76%. The remaining 172 countries constitute less than a quarter of the world’s economy.

Will It Even Matter?

Only for bragging rights! With a population less than one-fourth that of China, the U.S. is still projected to remain one of the world’s most prosperous economies in terms of per capita GDP, which reflects living standards and quality of life for a nation’s residents. Even so, it throws an interesting light on the whole subject of GDP and global economies. But the U.S. is far from the top in terms of GDP per capita (PPP), where it claims 13th place. That’s after oil rich nations such as Qatar, Kuwait and Norway, as well as Luxemburg, Switzerland and Singapore.

  • Qatar — $129,112
  • Luxembourg — $107,737
  • Macao SAR — $98,323
  • Singapore — $90,724
  • Brunei — $76,568
  • Ireland — $72,529
  • Kuwait — 71,307
  • Norway — $70,666
  • United Arab Emirates — $68,425
  • Switzerland — $61,014

However, the U.S. ranks eighth in terms of GDP per capita when compared in nominal terms, after Luxembourg, Switzerland, Norway, Macau SAR, Iceland, Qatar and Ireland. Australia and Denmark take the ninth and tenth spots.

And Looking Forward …

Some other economies that are a part of the “trillion-dollar” club and have the potential to make it to the top 10 going ahead are Russia ($1.56 trillion), South Korea ($1.5 trillion), Australia ($1.36 trillion), Spain ($1.23 trillion), Indonesia ($1.02 trillion) and Mexico ($1 trillion). By 2020, Turkey is expected to join the “trillion-dollar” club.

The Top Economies of 2022

The rising importance of emerging market economies in 2022 will have broad implications for the world’s allocation of consumption, investments and environmental resources. Vast consumer markets in the primary emerging market economies will provide domestic and international businesses with many opportunities. Although income per capita will remain the highest in the world’s developed economies, the growth rate in per capita income will be much higher in major emerging market nations such as China and India.

According to projected nominal GDP, the top economies in 2022 will be the U.S., China, Japan, India, Germany, the U.K., France, Brazil, Italy and Canada respectively.

One of the major reasons for the growth of emerging economies is that advanced economies are mature markets that are slowing. Since the 1990s, the economies of advanced countries have experienced far slower growth in comparison to the rapid growth of emerging economies such as India and China. The worldwide financial crisis from 2008 to 2009 fueled the trend of decline among the advanced economies.

For example, in 2000 the U.S., the number one economy in the world, accounted for 24% of the world’s total GDP. This declined to just over 20% in 2010. The financial crisis and a faster-paced growth by emerging economies were key factors in the decline of the U.S. economy in relation to China. In the mid-2000s, Japan’s economy saw a slight recovery after a lengthy period of inactivity that was due, at least in part, to inefficient investments and to the burst of the asset price bubbles. The global economic downturn has had a significant impact on the country because of prolonged deflation and the country’s heavy dependence on trade.

The economies of countries in the European Union, which include France, Italy and Germany, account for just over 20% of the world’s total GDP. This is a relatively large decrease from the year 2000, when these countries collectively held over 25% of the world’s GDP. The increase in average population age and rising unemployment rates is contributing to this slowdown.

Before the Brexit vote in late June 2016, the IMF issued a report warning the UK of the economical consequences of leaving the EU. Brexit aside, the IMF predicts advanced economies will experience a growth of less than 3% in 2020. Advanced economies are also facing challenges in terms of public debt reduction and government budget deficits. The IMF also forecasts that growth of Asian economies will be significantly higher, at approximately 9.5%, and it is one of the factors driving the worldwide economic recovery.

The Advance of Emerging Countries

Emerging economies are catching up with the progress of the advanced world and are predicted to overtake many of them by 2020. This will cause a substantial shift in the global balance of economic power. China’s share of the world’s total GDP increased more than 6% from 2000 to 2010. As already noted, by some calculations, China is already ranked as the largest economy in the world.

Many analysts foresee India surging in growth and taking over Japan’s place as the third largest economy in the world by 2020. Some believe India may grow even more rapidly and push the U.S. into third place. Analysts point out India’s young and faster-growing population as key factors in the rate of growth for this country’s economy.

Russian and Brazilian growth potential is great, as both countries are two of the world’s largest exporters of natural resources and energy. However, in the future, the lack of economic diversification in Russia may be likely to cause the country some difficulty with continued growth.

Mexico will remain the 11th largest economy by GDP measured at PPP terms. The country’s proximity to the U.S., growing business and trade deals with the U.S. and a growing population will aid its economic development.

Implications of the Economic Shift

As household incomes rise and populations expand, the service and consumer goods markets will present exponential opportunities in emerging markets. More specifically, luxury goods will have opportunities in these markets as more families reach the middle class.

One of the biggest implications is the importance placed on younger consumers. Though in some emerging countries, including China, the population is aging, the populations of emerging markets are overall significantly younger than those of people in advanced economies. Young consumers also represent substantial power over purchases, particularly large items such as cars and homes, as well as the items needed to furnish homes.

Emerging countries are likely to become important foreign investors. The foreign investments they are responsible for making only serve to enhance their influence in the global economy. Investments from foreign countries, including those from advanced nations, will also flow more readily into these developing nations, further driving their economies toward future growth.

Why Is GDP Important?

The GDP of a country provides a measure of the total monetary value of all the goods and services it produces during a certain time period, most commonly a year. This is an important statistic that indicates whether an economy is growing or contracting. In the United States, the government releases an annualized GDP estimate for each quarter and also for an entire year; it makes a preliminary estimate, based on the initial information it has, and then makes a second estimate and a final one as more information flows in.

A country’s GDP is essentially a measure of the health and size of its economy. Countries with healthy economies tend to produce more goods and have higher GDPs, and could therefore be said to be the most productive. A growing GDP represents expansion within a country’s economy, signaling that it is in the process of becoming more productive.

Providing a quantitative figure for GDP helps a government make decisions such as whether to stimulate the economy by pumping money into it, in case the economy is not growing and needs such stimulus. And in case the economy is getting heated, a government could also act to prevent it from getting overheated.

Businesses can also use GDP as a guide to decide how best to expand or contract their production and other business activities. And investors also watch GDP since it provides a framework for investment decision-making.

Types of GDP

There are different ways to calculate GDP. Nominal GDP is the total value of all the finished goods and services produced within a country’s borders in a specific time period, evaluated at current market prices in its local currency. But GDP can also be calculated based on purchasing power parity (PPP), which is essentially the implied exchange rate at which the currency of one country would have to be converted into that of another country to buy an identical basket of goods and services in each. One of the best-known examples of PPP is the “Big Mac” index, published by The Economist magazine, which calculates simplified PPP exchange rates based on the popular McDonald’s sandwich. The biggest advantages of PPP exchange rates is that they have greater stability over time as compared to more volatile market exchange rates, and they provide a better estimate of consumers’ purchasing power in developing nations.

As a general rule, developed countries have a smaller gap between their nominal GDP (i.e., current prices) and GDP based on PPP. The difference is greater in developing countries, which tend to have a higher GDP when valued on purchasing power parity basis.

Another method of analyzing a country’s productivity is by calculating its GDP per capita, which is accomplished by simply dividing its GDP by its population. This gives an indication of how productive, on average, each citizen is.

Source: Investopedia

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EUROPEAN INVESTMENT BANK RUNS BLOCKCHAIN HACKATHON

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A team from EY triumphed in a 48-hour European Investment Bank (EIB) hackathon designed to find ways to use blockchain technologies to redesign the transaction processing of commercial paper.

The EIB brought together 56 coders from 15 countries in 12 teams for the hackathon, run alongside the bank’s annual forum dedicated to treasury issues.

While the conference was running, the coders were locked in an adjacent room, trying to prove that blockchain tech can improve the transaction process of commercial paper – a short-term financing instrument that is used worldwide in treasury operations and still relies on an ‘archaic’ and complex process.

In the pitching session, the EY team won the contest with an effort that taps a combination of blockchain, robotics and business AI tools to optimise the issuance process and reduce the number of exchanges between the EIB and its counterparties while maintaining each one’s role within the ecosystem.

The EY team won a EUR5000 cash prize and a contract with the EIB to further develop its solution into a proof of concept.

Alexander Stubb, vice president, EIB, say: “There will be major gains from the use of new technologies such as blockchain, generated from the simplification and streamlining of existing financial processes. The new perspectives opened up by digitalisation and Distributed Ledger Technology must be assessed and we must all be ready to make use of them and embark on this new venture.

“As the EU’s financial arm, we decided to be on the active side, learn by experience and make things happen, to be a facilitator and join with our banking partners to pave the way for tomorrow’s financial industry.”

Separately, Barclays is planning a hackathon that will see coders use blockchain technology for post-trade processing of derivatives contracts. The event will take place over two days in September in London and New York, according to Coindesk.

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GOOGLE WILL PAY YOU $100,000 IF YOU CAN HACK A CHROMEBOOK

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Since 2010, Google has been paying money to hackers who have found vulnerabilities in its hardware or software. And after a call last year to crack its Chromebook’s security system went unanswered, Google is now doubling its reward to $100,000.

The $100,000 payout specifically applies to anyone who can crack the yet-uncrackable Chromebook, but Google also has a wide range of bounties for smaller bugs. Payouts start at $500, and if you provide a fix with your bug submission you’re rewarded with the hacker-friendly sum of $1,337 (the digits appear similar to the word “leet,” which is hacker slang for “elite hacker”).

Google also says that any vulnerabilities — regardless of whether there’s an official bounty — are potentially eligible for a reward, although the rules for qualifying submissions are relatively strict.

Bub bounty rewards programs like these are becoming more and more common among tech companies, which is good for those of us hoping for safer hardware and software. Google even ended its bounty announcement with an encouraging note: “Happy hacking!”

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THE STORY BEHIND GOOGLE’S SECRET OFFER TO SETTLE EU’S ANDROID PROBE

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European Union Competition Commissioner Margrethe Vestager coolly hit Google with a 4.3 billion-euro ($5 billion) fine last week, the biggest penalty in the history of antitrust enforcement.

It didn’t have to be that way. Months earlier, when the company — already reeling from a 2.4 billion-euro fine in another EU case — made quiet attempts to settle the probe into deals it has with Android phone makers, the response was equally chilly.

The Silicon Valley search giant had waited at least a year too long to broach the subject of a settlement, the 50-year-old Vestager said in an interview. When a company wants to settle, it needs to “reach out immediately after” getting the EU’s initial complaint or statement of objections.

“That didn’t happen in this case and then of course it takes the route that it has now taken,” Vestager said of the settlement talks, which haven’t been previously reported. “So no surprises.”

Google, a unit of Alphabet Inc., has been one of the EU’s biggest antitrust targets, with three probes, countless headlines and a steady drumbeat of smaller rivals and customers demanding action. The company has now twice failed to strike settlements that would resolve cases into its shopping services and Android that have resulted in a total of 6.7 billion euros in fines — with a looming threat of more still to come.

Google declined to comment on the settlement attempts. Google will appeal the EU decision, Chief Executive Sundar Pichai said in a blog post. The company has “shown that we’re willing to make changes,” he said.

In the weeks after the June 2017 fine in the shopping case, Google lawyers began to make overtures to their EU counterparts to express a willingness to settle the probe into Android, one of the company’s flagship products. Previous attempts to start a conversation with the EU on ways to end the probe had failed to catch fire, with officials stonewalling or saying it was too early to negotiate, people familiar with the negotiations said.

The Mountain View, California-based company’s incentive to settle the Android probe was easy to see.

Google gives Android software for free to mobile phone makers but coerces them to pre-install Google’s apps if they want the Play app store, which offers more than a million programs. The search giant also pays phone manufacturers, telecommunications carriers and other browser makers to run Google’s search engine which collects user data. Thanks to those agreements, Google has captured almost $50 billion in yearly mobile ad-market sales, or a third of the global market, according to research firm EMarketer.

Google executives believed Vestager left the door open to a deal when she refused to rule out a settlement at the June 27, 2017, press conference where she announced the fines in the shopping case.

“Each case is separate,” she told reporters. “And obviously I have taken no conclusions in the cases that are still open.”

 

Google Fined Record $5 Billion by EU

 

Vestager said Google must end its “illegal practices” within 90 days.

Source: Bloomberg

Encouraged, Google’s lawyers drafted a letter suggesting possible changes to address the EU concerns, according to the people familiar with the discussions.

Some people said contacts started in August. Two others said a discussion started later in the year and a formal letter wasn’t sent until shortly after Pichai’s Nov. 16 meeting with Vestager in Brussels.

Google said it was prepared to adjust contracts to loosen restrictions the EU didn’t like, even weighing distributing apps in two different ways going forward. The letter didn’t go into detail, only setting out an outline to kickstart talks, according to the people, who declined to be identified because the initial conversations with regulators were confidential.

The lawyers never received a formal response, hearing from officials by phone months later that a settlement was no longer an option. That prevented them from even discussing whether the company would be willing to pay a fine as part of a deal, the people said.

EU officials didn’t find the offer convincing and viewed it as too little too late, two other people said.

Moving to a cease-and-desist order for Google “seemed to be the best thing to do in this case in order to enable mobile manufacturers to have a real choice,” Vestager said in the interview. “It’s a very serious legal infringement and you see how it has worked. It has cemented Google’s position in search and it has de-facto locked down Android in a completely Google-controlled ecosystem.”

Vestager indicated in the interview that any settlement offer should have been made in 2016, after the company received the EU’s statement of objections, which detailed the antitrust problems with Android. The EU said the company might breach competition rules by unfairly pushing search and browser apps onto Android phones.

That might have been the narrow window to settle the case, but Google’s legal team were spinning dozens of plates in 2016. They had deadlines to respond to the Android charges, the shopping probe was still a major priority and there were new complaints filed to the EU by News Corp. and other rivals.

After the rebuff, the EU stepped up its probe, sending a formal “letter of facts” in November 2017, adding new evidence, two people said. There was little substantive contact between the two sides until Google representatives talked with EU officials in April during a so-called state of play meeting about the case, which was well on the way to the record fine.

Google hasn’t had much luck trying to find a path to peace with the EU. It spent two years trying to negotiate a settlement in the shopping probe. But a tentative deal came under heavy fire from publishers and politicians, forcing the EU to abandon it shortly before Vestager became commissioner in November 2014.

One of Vestager’s first acts was to restart the Google shopping investigation, putting a final end to the botched settlement attempt. She quickly racked up a fearsome reputation as the scourge of U.S. tech giants, She ordered Apple Inc. to pay 13 billion euros in back taxes and fined Facebook Inc. 110 million euros over allegations the company misled regulators during a merger review.

“Android, as compared to shopping, is a Vestager case, one not inherited,” said Nicolas Petit, a visiting fellow at the Hoover Institution and a law professor at the University of Liege in Belgium. “Her incentives to make this case the emblem of her tenure were presumably higher. So the odds of a settlement were, to me, lower.”

The EU isn’t always averse to thrashing out a deal even after a long investigation. The nation’s state-controlled gas export giant Gazprom PJSCside-stepped a potentially huge EU penalty after seven-year-long probe by agreeing in May to change how it sells gas to Europe. Vestager said Gazprom had “reached out very very quickly” to the EU to negotiate a settlement after receiving objections in April 2015.

Google had a better time in Moscow. Russia’s Federal Antimonopoly Service fined the company $7.8 million as part of an April 2017 settlement to end a probe into similar Android concerns.

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