Sunday, May 9, 2010

Just How Big are the US, Japanese, Chinese, ASEAN, Korean and Australian Economies?

Percentage of World GDP and the Differences between PPP and USD Measurements

Table 1 shows relativities between countries on the basis of their percentage of the total global economy. It is measured on a current prices basis, which means that the measures are taken at the time and do not account for changing prices. Constant price GDP measures do account for inflation and measure GDP or GDP per capita using a base year, which is then used to measure ‘constant ‘prices. But for our purposes the failure to account for inflation doesn't matter because we're considering the percentage of the total at particular points in time.

Table 1 is constructed on a PPP basis. It shows that the United States’ percentage has fallen slightly but it remains the world’s largest economy by a long way. ASEAN has increased its share from 2.3 per cent of the world economy to 4.1 per cent. China’s growth has been the most dramatic, however, increasing from 2 per cent to 13.3 per cent. Japan’s percentage of the total has declined from 7.9 per cent to 5.9 and India has more than doubled its percentage from 2.2 per cent to 5.2 per cent, as has Korea from 0.8 per cent to 2 per cent.

Table 2 shows the percentage of world economic GDP accounted for by our countries of interest except this time on a US Dollar exchange basis. By this measure the developing countries and ASEAN are much smaller and the figures are profoundly affected by the USD exchange rate. Indeed as a percentage of global GDP ASEAN has not advanced its relative position very far at all, ASEAN accounted for 2.2 per cent in 1980 and 2.8 per cent in 2010. In 1985 at the height of the dollar in terms of its value, the US accounted for 35 per cent of global GDP. In 1995 at the height of the value of the yen, Japan accounted for 17.8 per cent of global GDP, falling to 8.5 per cent in 2010. Australia has advanced considerably, partly because of continuous growth since 1990 and partly because the AUD has increased in value since its low point in 2000.

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