The size of the world economy in 2019: A baseline from which to measure the impact of COVID-19 and track economic recovery

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New results from the ICP including purchasing power parities (PPP), price level indexes and PPP-based expenditures for reference year 2017 are now available at icp.worldbank.org. This blog series covers all aspects of the ICP and explores the use made of these data by researchers, policymakers, economists, data scientists and others. We encourage users to share their data applications and findings in this blog series via [email protected].

 

The release of results from the International Comparison Program (ICP)’s most recent cycle provided users with a comprehensive view of the global economy in 2017. Using new economic data for the years 2018 and 2019 published by World Development Indicators (WDI) in July 2020, we project the ICP economic indicators, measured in purchasing power parity (PPP) terms, to 2019. These projections provide a much-needed spotlight on the volume and per capita output of national economies and prevailing price levels just prior to the emergence of the COVID-19 pandemic and its resulting socioeconomic disruptions.

 

Main findings

The size of the world economy was $133 trillion in current US dollars in 2019, compared to $120 trillion current US dollars in 2017.  Five G20 member countries increased their share of global GDP over the period with the largest gain seen in China, which increased its share by over one percentage point to account for 17.7% of global GDP in 2019.  India and Indonesia also saw relatively large expansions taking their shares to 7.2% and 2.5% of the global economy respectively. Furthermore, Indonesia surpassed the United Kingdom, Brazil and France since 2017 and is now the seventh largest economy in the world. The Russian Federation and Australia also saw slight increases in their global shares. Despite relatively high economic growth in the United States, its share of the global economy decreased slightly to 16.1% in 2019.  The shares of the remaining G20 economies also decreased slightly with Japan seeing the largest fall of a fifth of a percentage point to stand at 4.1% of global GDP in 2019.

Play the data visualization below to see PPP-based GDP per capita and the GDP price level index, together with PPP-based GDP in current US dollars, for each year for those G20 economies increasing their share of global GDP, followed by those decreasing their share. Pause play and hover over each economy to see the specific data.

Upper-middle income and lower-middle income economies (classified according to the FY21 income classification) increased their respective global GDP shares by half a percentage point each whilst the high income group’s share contracted by one percentage point between 2017 and 2019. East Asia and Pacific increased its global GDP share more than any other region, fueled mainly by China’s and Indonesia’s growth. South Asia was the only other region to increase its global share with India, and to a lesser extent Bangladesh, contributing towards this. At the same time the GDP per capita for these regions and income groups also increased relative to the world average.

 

In terms of consumption per capita, a measure of material or economic well-being, the USA remained the highest with an average per capita spend four and a half times that of the world average in 2019 at around $43,000.  Five economies in Sub-Saharan Africa recorded per capita spends of less than one tenth of the global average, or less than $950 per year.

Price level indexes (PLIs), the ratio of market exchange rates to purchasing power parities, provide a measure of how expensive or cheap a country is compared to another. With the world average set at 100 Bermuda remains the most expensive economy at the level of GDP with a PLI of 212. The Cayman Islands, Switzerland, Norway and Iceland follow. Whereas Egypt was the cheapest country in 2017, Sudan was the cheapest in 2019 recording a PLI of 16, and Kyrgyzstan the second cheapest at 37, just below Egypt at 38. Sudan saw wide fluctuations in its exchange rate in recent years, which can explain some of these findings.

World Development Indicators also publishes PPP-based GDP in constant 2017 US dollars, which allows us to examine the growth of the world economy between 2017 and 2019. Global PPP-based GDP grew 3.5% in 2018 and 2.8% in 2019. This is slightly higher than global GDP growth when measured in market exchange rate terms, which stood at 3.2% and 2.6% respectively for 2018 and 2019.  Market exchange rate-based comparisons understate the size of economies with lower price levels, which are typically developing economies showing strong economic expansion. It follows that the growth of these economies is also understated in market exchange rate-based analyses of global GDP growth. Using a PPP-based approach, the lower-middle income group of economies grew on average by 5.0% each year between 2017 and 2019, whilst the low income and upper-middle income groups realized 4.2% and 4.0% average annual growth respectively. High income economies grew, on average, by 2.0% annually over the period.

 

Going forward

Forecasts presented for 2020 and beyond by the World Bank in its Global Economic Prospects predict heavy economic downturns across the globe. Lockdowns, the restricted movement of populations and business closures have disrupted the supply chain of common goods from producer to retailer to purchaser, and have consequently impacted their price with many items no longer available or in limited supply, or no longer needed by the consumer. The expenditure structures of households and governments have been upended, redefining the basket of goods and services they are consuming.

We will continue to present projections of the headline ICP results going forward as 2020 economic data become available. Moreover, while our current dataset provides a benchmark of the pre-pandemic global economy, we are launching the ICP’s next cycle with reference year 2021. The 2021 results will provide a clearer picture of the impact of the COVID-19 pandemic at the granular level, providing policymakers, economists and the development community with the tools needed to measure the effect of this pandemic on the size of world’s economies, their price levels, and the standards of living of their citizens.

 

Concepts and methods

Market exchange rate-based cross-country comparisons of GDP and its expenditure components reflect both differences in economic outputs and prices. Given the differences in price levels, the size of higher income economies is inflated, while the size of lower income economies is deflated. PPPs control for price level differences between economies and thus PPP-based cross-country comparisons of GDP reflect only differences in the volume of economic output.

The projections of 2017 ICP data to 2018 and 2019 used economic indicators published in July 2020 by WDI and, where these data were unavailable, other sources or linear forecasts were used for gap-filling. For PPPs and PPP-based indicators, WDI uses the ICP’s benchmark PPPs for 2017 and extrapolates them to 2018 and 2019 following the methodology described here. The data presented in this blog represent the 176 economies that took part in the ICP’s 2017 cycle. The report Purchasing Power Parities and the Size of World Economies: Results from the 2017 International Comparison Program provides more information on the methodologies underpinning the ICP results.

Authors

Mizuki Yamanaka

Statistician, Development Data Group

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