It’s at this time of year that Cebr Global — the international economics consultancy that is part of the Centre for Economics and Business Research — publishes its latest World Economic League Table, an annual ranking of countries by GDP based on the IMF’s World Economic Outlook and Cebr’s estimates, projections and forecasts for various periods into the future using a mix of economic data such as growth and inflation and variables that you can never totally rely on, such as the exchange rate and the oil price. Ask Russia.
The story over recent years has been how long it would be before the longstanding frontrunner, the United States, would be overtaken by the rapidly closing Asian upstart, China. 2025, the league tables now say, mainly because China had a statistical epiphany earlier this year, decided to restate its economic numbers by measuring its service sector more accurately and in so doing added an amount equivalent to the GDP of Malaysia. Doing this brought the overtaking date forward by three years.
But this story is not about the United States and China — we all know that the 21st century is China’s, even if it has hit a bit of a rough patch. No, it’s about the European contingent in the GDP top 10 tables and their relative places. Europe’s horses are two kinds — the vibrant-growth sleek and nimble fillies and the low-growth lumbering carthorses that can’t or won’t jump fences.
Whereas the 2014 GDP table shows Germany in fourth place, the United Kingdom in fifth, France sixth and Italy eighth, by 2019 the picture starts to change. Germany is still in fourth place, the United Kingdom is sixth, and France eighth. (For the purpose of this piece, Russia is not in Europe but an outcast and almost an economic basket case — though it always hovers between eighth and 10th place in the tables.)
By 2024, Germany is fifth, the United Kingdom seventh and France eighth. Five years on, to 2029, and Germany is sixth, the United Kingdom seventh, and France ninth. European countries are losing ground steadily to the BRIC countries (ex-Russia) and to faster-growing Asian economies.
By 2030, the story goes, the United Kingdom will overtake Germany to become Europe’s largest economy once again, to sixth and seventh place in the top 10, respectively. I say “once again,” but of course not in living memory. It’s a big deal. France is in ninth place. It might not sound like much of a drop, but by 2030 France’s economy is forecast to be almost $1 trillion or nearly one-quarter smaller than that of the United Kingdom and Germany, at $3,469 billion against $4,421 billion and $4,397 billion, respectively.
It helps enormously that the United Kingdom decided in 2014 to include earnings from drugs and prostitution in its GDP formulation. Every country has drugs and prostitution in its economic makeup but few decide to put an earnings value on it — or even can. (If every country had an accurate number to put down for this dubious economic activity, perhaps the world GDP rankings would look completely different, now and in the future. Put that in your pipe and smoke it.)
Of course, plenty can happen to upset the GDP numbers and the rankings. The euro zone could break up, in which case Germany’s relative position would be strengthened. The United Kingdom could decide to leave the European Union, with unknown consequences. Scotland could decide to leave the United Kingdom, also with unknown consequences. France could abandon its dirigiste approach and embrace free-market economics. Italy could add earnings from drugs, prostitution and bunga-bunga parties to its GDP numbers and double economic output — I jest.
Cebr’s CEO Douglas McWilliams comments that “the fun of the world economic league table is that it brings things back to hard figures. The table also shows the dramatic changes now taking place in the world’s economic geography, with slow-growing European economies falling back and Asian economies, even though their growth is slowing, catching up.”
McWilliams points to Sweden as a dark horse, coming up on the inside. “The only European economy that rises consistently in this league table,” he says, “is Sweden, where the economy was revitalized by the previous government. There may be lessons here for other European economies.”
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Richard Fleming is editor of The Institutional Real Estate Letter – Europe.
