GDP is one of the most important indicators that help understand the overall health and size of a country’s economy. While growth in GDP may reflect a country’s economic development, negative GDP growth may indicate recession or shrinkage of the economy. The infographic lists the top five countries by GDP, in addition to their historical year-on-year change in GDP from 1960 to the present. Knowing these top five countries’ movement is helpful in understanding the changing balance of power in today’s world.
List of the Top 5 Countries by GDP
The rankings and figures (current US$, in millions) are based on the World Bank, where the latest figures are as of 2020.
- The United States – 20,953,030.00
- China – 14,722,730.70
- Japan – 5,057,758.96
- Germany – 3,846,413.93
- The United Kingdom – 2,759,804.06
1. The United States: The Economic Superpower over a Century
Since 1871, the United States has been the largest economy in the world—yet GDP was not the main tool for measuring a country’s economy until 1940s. Historical GDP data by the World Bank since 1960 show that this lucky country has always topped the GDP rankings by a large margin.
Moreover, the US has recorded negative growth only twice in available history. The country marked the first negative in 2009 when the Global Financial Crisis hit and the second in 2020 when the COVID-19 pandemic started.
The country’s strong economy has been backed by several factors: abundant natural resources, large fertile landmass, plentiful freshwater and expansive access to the sea. In other words, the US can produce almost all of its needs on its own—from agriculture to industry, from wheat to oil and natural gas. Moreover, the coastlines help the country import and export goods. As of 2019, the United States was the world’s largest trading nation.
2. China: One of the Fastest Growing Economies in the Last Decades
Once being one of the poorest countries, China today is the second largest economy in the world. China initiated economic reforms and trade liberalization in December 1978, giving a fresh start to economic growth. In 2010, China overtook Japan, the country that had been at the 2nd from 1968.
The Chinese economic reforms involved opening up to foreign trade and investment, de-collectivization of agriculture, and allowing entrepreneurs to start businesses. These reforms were largely successful, pushing up the country’s economy. Based on the World Bank data, the average GDP growth rate from 1960 to 1978 was 5.9%, while the post-reform average GDP growth rate from 1979 to the present was 11.9%.
China’s rapid economic growth can be attributed to two main factors: huge government investment and high productivity performance soon after the reforms, especially in manufacturing. The huge government’s spending systematically directs industries to high-priority projects. Additionally, improved productivity in the industrial and manufacturing sectors increased China’s exports. Since 2009, the country has been the world’s largest exporter of goods.
3. Japan: Post-War Miracle to Lost 30 Years
With the initiatives of the United States, reconstruction and reforms of war-torn Japan took place soon after the World War II. One of the agendas was to stabilize the Japanese economy, breaking up the large Japanese business conglomerates (Zaibatu / 財閥). Hereby, Japan’s economy adopted a free market capitalist system. The outbreak of Cold War and the Korean War further boosted Japan economy.
Japan’s GDP growth between the early 1950s to the late 1970s was remarkable—the average GDP growth rate from 1960 to 1979 was a whopping 18.5%. The next decade 1980s was rather stable with an average growth rate at about 12%. Technological improvements and Japanese society’s adaptability to the new era were among other factors to foster the growth. Especially, Japan became the largest automotive producer in the world, overtaking the US, in 1980.
Then came the Lost Decades, a period of economic stagnation triggered by an economic bubble in the early 1990s. Unfortunately, the growth rate dropped—the average GDP growth rate between 1990 to the present is only 2%. And of those 30 years, 13 years recorded negative or zero growth. The outlook of the Japanese economy is pessimistic due to several elements. These elements include: ageing society, low birth rates, low inflation and feeble economic growth projections.
4. Germany: Another Post-War Miracle, ‘Wirtschaftswunder’
Much alike Japan, Germany was another war-torn country that came back stronger after the devastating World War II. Economists call the country’s rapid economic reconstruction Miracle on the Rhine or Wirtschaftswunder in German.
Amid the outbreak of the Cold War, the United States strongly backed Wirtschaftswunder, founding about $3 billion to the Western Germany. This was part of the Marshall Plan, an American initiative to strategically stabilize the Western Europe, including Western Germany, with a large sum of foreign aid. Again similar to Japan, Germany became a supplier of goods needed in the Korean War, which as a result fostered Germany’s recovery.
Statistically, the average GDP growth rate was 17.2% between 1971 and 1979. The next decades saw a slowdown: 5.8% in the 1980s, 5.1% in the 1990s, and 4.9% in the 2000s. In the recent decade, it dropped to 1.3%. Furthermore, the country may have to brace for recession as the pandemic and Russia-Ukraine war hit its economy.
5. The United Kingdom: The Wealthiest Country in the 19th Century
The country with the second largest financial hub took the 5th position in the rankings. Britain was the wealthiest country in the 19th century—expanding the British Empire and piling up wealth across the globe. At the end of the 19th century, the United States overtook the Empire in economy. After the World War II, Japan and Germany surpassed the United Kingdom, making the kingdom the fourth largest economy. In 2006, China finally overtook the UK, pushing the country down to the 5th.
As was the case for other mature economies such as Germany and Japan, the GDP growth stumbled in the last decade. Furthermore, much alike Germany, the country is likely to go into recession in 2022, suffering from stagflation.
The Final Thoughts: The Top 5 Countries by GDP
Amid much uncertainty about the prolonged pandemic and Russia-Ukraine tension, financial institutions have reduced their projections for the global GDP growth rate for 2022. The United Nations projects the world economy to grow by 3.1%. The International Monetary Fund (IMF) by 3.6%, revising their previous projection of 4.4%.
While some regions and countries still expect positive growth in 2022, the fear of global economic slowdown is looming globally. Many “developed countries” struggle in economic growth in recent years for their economy has already reached maturity. On the other hand, emerging countries are increasingly catching up. For instance, economists expect India to surpass Japan in GDP as the third largest economy by 2031.
The two most populous countries with nuclear weapons will sit at the top of the rankings just behind the US. This clearly means that the political importance of the region will also mount. The balance of power may shift from the West to East as more emerging markets in Asia take a larger share in the global economy in coming years.