PaySpace Magazine Global wonders which economies have managed to preserve stability and show resilience amidst the global turmoil
Every person would like to live in a country that has a strong economic position. A successful national economy is a powerful means to fulfill the needs of citizens and improve their life quality. The universally accepted way to measure a country’s economic success is to calculate its GDP. You must have heard that this indicator has been severely impacted by the pandemic in most cases. Yet, some countries are recovering sooner than others.
Here are the countries with the highest nominal GDP as of 2020:
- USA, GDP: $20.93 trillion
- China, GDP: $14.72 trillion
- Japan, GDP: $4.94 trillion (539,071.6 billion yen)
- Germany, GDP: $3.33 trillion
- UK, GDP: $2.74 trillion (1.96 trillion GBP)
- India, GDP: $2.59 trillion
- France, GDP: $2,49 trillion
- Italy, GDP: $1.99 trillion (1,651,595 million euro)
- Canada, GDP: $1.27 trillion (1.57 trillion CAD)
- South Korea, GDP: $1.63 trillion
The U.S. economy started 2021 with flying colours. Retail sales and factory output accelerated past expectations. The government stimulus provided a boom in demand and household spending as well. The situation brings out optimistic forecasts that 2021 could become the best year of economic growth in nearly four decades. First-quarter GDP for 2021 increased at an impressive 6.4% rate. That is the second-fastest pace for growth since the second quarter of 2003. The country is still struggling with internal trade volumes and mending the sectors most impacted by the pandemic (hospitality, tourism, restaurants, etc). However, it’s clear that the US economy is recovering much faster than the rest of the Western world.
The only country outperforming the US in economic growth is China. Its economy grew a record 18.3% in the first quarter of 2021 compared to the same quarter last year. It’s the biggest jump in GDP since 1992. At the same time, we must remember that the results are compared to the months of the strictest lockdown, so the next quarters won’t be so spectacular. Although China was the first to suffer from COVID-19, the country managed to avoid the overall shrinking of production and sales. Its GDP hasn’t contracted over 2020, but even rose by 2.3%. That fact prompted experts to suggest China will likely overtake the U.S. as the world’s largest economy a few years earlier than anticipated. Nevertheless, political tensions between China and the United States are bound to severely impact trade.
The Japanese economy managed to maintain relative stability despite the COVID-19 pandemic. In 2020 its GDP contracted only by 1.2%. Unfortunately, this year started with another serious outbreak and the government was forced to introduce a state of emergency for 11 prefectures, including Tokyo. Naturally, that slowed down domestic economic activities. The main economic problems Japan is facing today include low job availability, rise of unemployment, weak industrial output, and sluggish consumer demand.
In January, the government said it expected GDP to grow by 3% this year, after a drop of 4.9% in 2020. It practically coincides with the opinion of Germany’s economic institutes that have recently revised the forecast for Europe’s largest economy to 3.7% from 4.7%. The country is facing a prolonged lockdown which forces experts to expect lower private consumption. The main pillars holding up the German economy now are exports to faster recovering countries like the US and China, and gross fixed capital formation in the construction industry.
Although the UK economy shrank by drastic 9.8% in 2020, the EY Item Club forecasts the fastest annual growth in national income since 1941 (6.8%). The rosy expectations are based on a boom in consumer spending, a rise in savings by wealthier households during lockdown, the successful vaccination course, and extended furlough support. The country is currently witnessing an 8% increase in non-essential shopping and 2% in seated dining. Monthly retail sales volumes also rose above pre-pandemic levels this March, illustrating that the economy is on the right track.
India has been experiencing a second wave of coronavirus infections since March 2021. Hence, economic forecasts for the country have been downgraded by many agencies. Yet, they are mostly similar. The IMF prediction remains the highest – 12,5% GDP growth. However, S&P Global Ratings, the Asian Development Bank (ADB), and Crisil agree on 11% growth. RBI projects the most modest GDP growth rate of 10.5% for FY’22. Oxford Economics also revised downwards its forecast for 2021 to 10.2% from 11.8% previously. The reason is that the vaccination campaign isn’t going as well as planned, and the national healthcare burden is rising.
The Bank of France believes the French economy will see stronger growth in 2021 than expected before, as the country is weathering the Covid pandemic and government restrictions better than previously forecast. Namely, household and business investment held up despite the lockdown, so that the national economic activity remained robust. The ING agency expects France to outperform its European neighbors, with the industrial and construction sectors being the main growth drivers. GDP is forecast to grow by 5.3% till the end of the year. However, France’s public deficit is expected to reach 9% of GDP in 2021.
The Italian economy is set to rebound in 2021. Investment activity should be supported by increased EU funding, accommodative fiscal policies, and renewed foreign demand. The national government anticipates the economy to grow by 4.1% this year and 4.3% in 2022. However, the country is not expected to recover to pre-pandemic levels till 2024. The main economic problems to solve at the time include a high level of youth unemployment, inequality in living standards between the industrialised north and rural southern districts, and great losses in the tourism sector. The Italian PM is working on a €248bn recovery plan aimed at mending division as well as boosting GDP.
Canada’s economy expanded at a 6.5% growth rate in the first three months of 2021. The service sector is showing signs of a healthy recovery, although most goods-producing industries are still lagging. Retail sales jumped 4.5%, and even the food and accommodation sector expanded by 3.5%. Contracting segments include manufacturing, transportation, mining, quarrying, and oil and gas. After strong growth in January, Canada’s trade stalled in February, with both exports and imports experiencing declines. Despite the declines, goods exports remained 4.1% above February 2020 levels. Imports however, were 2.8% below values experienced a year prior.
The South Korean economy shrank by just 1% in 2020. It has already regained its pre-pandemic size and is projected to grow at about 3%-3.5% in 2021. The country’s exports, which account for half of the Korean economy and are dominated by semiconductors and other manufactured goods, were up by 16.6% year-on-year in March. Another factor helping the economy to develop faster than expected is the healthy investment pace. The sizable digital and green investments of the New Deal will support the quick recovery. The government project plans to invest 160 trillion won to create 1,901,000 jobs by 2025, and provide an overarching policy support to strengthen employment and social safety net. The key projects under the New Deal initiative range from green mobility to smart healthcare. The focus of the Green part of the program is on renewable energy, green infrastructure and sustainable modernisation of the industrial sector. The Digital investments share aims to establish a foundation for competitiveness in the promising fields of the future: 5G, big data, cloud computing, and AI.