This is a big news for the world. The United States has overtaken China to become the world’s largest economy in 2023, with a 6.3 per cent rise in gross domestic product (GDP) compared to China’s 4.6 per cent gain.
US Economy Data
The US economy expanded at an annual rate of 3.3% over the three months to December, the Commerce Department said. That was down from 4.9% in the prior quarter, but much faster than the 2% many analysts had expected. For 2023, the economy grew at an annual rate of 2.5%, up from 1.9% in 2022.
Top 10 Largest Economy in World
| Country | GDP (USD billion) |
|---|---|
| United States Of America (U.S.A) | 26,954 |
| China | 17,786 |
| Germany | 4,430 |
| Japan | 4,231 |
| India | 3,730 |
| United Kingdom (U.K.) | 3,332 |
| France | 3,052 |
| Italy | 2,190 |
| Brazil | 2,132 |
| Canada | 2,122 |
Indian Economy
India is set to become the world’s third-largest economy by 2032, and will eventually surpass China and the United States to become the “world’s largest economic superpower” by the end of this century, as per a report released by the Centre for Economics and Business Research (CEBR) on December 27.
Economic Landscape: US Strength Amid Pandemic Challenges
Initial projections had indicated that China would outpace the US in economic growth. However, the US economy, despite concerns of a potential recession at the beginning of 2023 due to interest rate hikes, demonstrated strength in navigating challenges posed by the pandemic.
China’s Economic Challenges and Contrasting Realities
While China was anticipated to undergo a flourishing recovery post-Covid-19 lockdown, recent GDP data paints a different picture. China faces a series of challenges, including a prolonged real estate crisis, a deflation streak of 25 years, declining exports, and a surge in youth unemployment. Doubts surrounding the accuracy of the claimed 5.2% economic expansion by the Xi Jinping government further contribute to the complex economic landscape.
Measuring Economic Size: US Leads with Nominal GDP
Economists often employ nominal GDP as a key metric to gauge a country’s economic size, and the US has now taken the lead in this aspect. Although some consider purchasing power parity, nominal GDP is widely recognized as a more reliable indicator on the global stage.
Factors Impacting China’s Economic Challenges
President Xi Jinping’s authoritarian rule is identified by experts as a significant factor contributing to China’s economic vulnerabilities. Adam Posen, President of the Peterson Institute for International Economics, emphasizes how arbitrary power exercises have heightened uncertainties, prompting households and small businesses to hoard cash.
Future Outlook and Key Uncertainties
As the US anticipates a potential surge in productivity growth, questions linger about the Federal Reserve’s strategy to bring US inflation back to its 2% target. These uncertainties add complexity to the economic landscape, shaping the future trajectory of both the US and China in the global economic arena. Stay tuned for further updates on these dynamic economic developments.
