Economy - overview:
The international financial crisis of 2008-09 led to the first downturn in global output since 1946 and presented the world with a major new challenge: determining what mix of fiscal and monetary policies to follow to restore growth and jobs, while keeping inflation and debt under control. Financial stabilization and stimulus programs that started in 2009-11, combined with lower tax revenues in 2009-10, required most countries to run large budget deficits. Treasuries issued new public debt - totaling $7.6 trillion since 2008 - to pay for the additional expenditures. To keep interest rates low, most central banks monetized that debt, injecting large sums of money into their economies - between December 2008 and December 2012 the global money supply increased by more than 31%. Governments now are faced with the difficult task of spurring current growth and employment without saddling their economies with so much debt that they sacrifice long-term growth and financial stability. And when economic activity picks up, central banks will confront the difficult task of containing inflation without raising interest rates so high they snuff out further growth.
Fiscal and monetary data for 2012 are currently available for 180 countries, which together account for 98.5% of World GDP. Of the 180 countries, 85 pursued unequivocally expansionary policies, boosting government spending while also expanding their money supply relatively rapidly - faster than the world average of 4.1%; 37 followed restrictive fiscal and monetary policies, reducing government spending and holding money growth to less than the 4.1% average; and the remaining 58 followed a mix of counterbalancing fiscal and monetary policies, either reducing government spending while accelerating money growth, or boosting spending while curtailing money growth.
(For more information, see attached spreadsheet, )
In 2012, fiscal policy shifted towards greater austerity for a majority of the countries. In an attempt to attack their deficit and debt problems head-on, nearly 5 out of 6 countries slowed the rate of growth of government spending, and 1 in 3 countries actually lowered the level of their expenditures. The global growth rate for government expenditures dropped from 5.9% in 2010 and 10.1% in 2011, to just 1.4% in 2012. Roughly 1 out of 3 central banks tightened monetary policy, decelerating the rate of growth of their money supply, and about 1 out of 7 actually withdrew money from circulation. Growth of the global money supply, as measured by the narrowly defined M1, slowed from 8.7% in 2009 and 10.4% in 2010 to 5.2% in 2011 and 4.1% in 2012.
These policy choices significantly affected economic performance. The global budget deficit narrowed to roughly $2.7 trillion in 2012, or 3.8% of World GDP. But growth of the world economy slipped from 5.1% in 2010 and 3.7% in 2011, to just 3.1% in 2012. And world unemployment increased to 9.2%.
Countries with expansionary fiscal and monetary policies achieved significantly higher rates of growth, lower unemployment, higher growth of tax revenues, and greater success reducing the public debt burden than those countries that chose contractionary policies. In 2012, the 85 countries that followed a pro-growth approach achieved a median GDP growth rate of 4.9%, compared to just 0.8% for the 37 countries with restrictive fiscal and monetary policies, a difference of more than 4 percentage points. Among the 85, China grew 7.8%, Indonesia 6.0%, Mexico 4.0%, Russia 3.4%, Turkey 3.0%, the United States 2.2%, and Canada 1.9%, while among the 37, Brazil grew 1.3%, Germany 0.7%, France 0.1%, Belgium -0.2%, Netherlands -0.5%, Spain -1.4%, and Italy -2.3%. The median unemployment rate for the 37 countries jumped to 11.5%, while the median for the pro-growth countries held steady at 7.3%.
Faster GDP growth and lower unemployment rates translated into increased tax revenues and a lower debt burden. Revenues for the 85 expansionary countries grew at a median rate of 10.8%, whereas tax revenues fell at a median rate of 6.2% for the 37 countries that chose austere economic policies. Budget balances improved for about half of the 37, but, for most, debt grew faster than GDP, and the median level of their public debt as a share of GDP increased 2.5 percentage points, to 57.8%. On the other hand, budget balances deteriorated for most of the 85 pro-growth countries, but GDP growth outpaced increases in debt, and the median level of public debt as a share of GDP actually declined slightly (-0.1 percentage points).
The world recession has suppressed inflation rates - world inflation declined 1.0 percentage point in 2012 to about 4.0%. At the same time, the median inflation rate for the 85 pro-growth countries, at 5.5%, was 2.5 percentage points higher than that for the countries that followed more austere fiscal and monetary policies. Overall, the latter countries also improved their current account balances by shedding imports; as a result, current account balances deteriorated for most of the countries that pursued pro-growth policies. Slower growth of world income reduced import demand and crude oil prices fell. Consequently, the dollar value of world trade grew just 1% in 2012, compared with 18% in 2011.
Beyond the current global slowdown, the world faces several long-standing economic challenges. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, waste-disposal, epidemics, water-shortages, famine, over-fishing of oceans, deforestation, desertification, and depletion of non-renewable resources. The nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, services, funds, and technology. The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, has created economic risks because the participating nations have varying income levels and growth rates, and hence, require a different mix of monetary and fiscal policies. Governments, especially in Western Europe, face the difficult political problem of channeling resources away from welfare programs in order to increase investment and strengthen incentives to seek employment. Because of their own internal problems and priorities, the industrialized countries are unable to devote sufficient resources to deal effectively with the poorer areas of the world, which, at least from an economic point of view, are becoming further marginalized. The terrorist attacks on the US on 11 September 2001 accentuated a growing risk to global prosperity - the diversion of resources away from capital investments to counter-terrorist programs.
Despite these vexing problems, the world economy also shows great promise. Technology has made possible further advances in a wide range of fields, from agriculture, to medicine, alternative energy, metallurgy, and transportation. Improved global communications have greatly reduced the costs of international trade, helping the world gain from the international division of labor, raise living standards, and reduce income disparities among nations. Much of the resilience of the world economy in the aftermath of the financial crisis resulted from government and central bank leaders around the globe working in concert to stem the financial onslaught, knowing well the lessons of past economic failures.
GDP (purchasing power parity):
$83.66 trillion (2012 est.)
$81.17 trillion (2011 est.)
$78.23 trillion (2010 est.)
note:data are in 2012 US dollars
$12,000 (2010 est.)
note:data are in 2012 US dollars
GDP - composition, by end use: household consumption: 62%
investment in fixed capital:
investment in inventories:
exports of goods and services:
imports of goods and services:
dominated by the onrush of technology, especially in computers, robotics, telecommunications, and medicines and medical equipment; most of these advances take place in OECD nations; only a small portion of non-OECD countries have succeeded in rapidly adjusting to these technological forces; the accelerated development of new technologies is complicating already grim environmental problems
developing countries 5.1% (2012 est.)
note:the above estimates are weighted averages; inflation in developed countries is 0% to 4% typically, in developing countries, 5% to 10% typically; national inflation rates vary widely in individual cases; inflation rates have declined for most countries for the last several years, held in check by increasing international competition from several low wage countries, and by soft demand as a result of the world financial crisis (2011 est.)
Exports - commodities:
the whole range of industrial and agricultural goods and services
top ten - share of world trade:
electrical machinery, including computers 14.8%; mineral fuels, including oil, coal, gas, and refined products 14.4%; nuclear reactors, boilers, and parts 14.2%; cars, trucks, and buses 8.9%; scientific and precision instruments 3.5%; plastics 3.4%; iron and steel 2.7%; organic chemicals 2.6%; pharmaceutical products 2.6%; diamonds, pearls, and precious stones 1.9%
NOTE: 1) The information regarding World on this page is re-published from the 2014 World Fact Book of the United States Central Intelligence Agency. No claims are made regarding the accuracy of World Economy 2014 information contained here. All suggestions for corrections of any errors about World Economy 2014 should be addressed to the CIA.
2) The rank that you see is the CIA reported rank, which may habe the following issues:
a) They assign increasing rank number, alphabetically for countries with the same value of the ranked item, whereas we assign them the same rank.
b) The CIA sometimes assignes counterintuitive ranks. For example, it assigns unemployment rates in increasing order, whereas we rank them in decreasing order