Gross Domestic Product (GDP) is a measure of the size and strength of an economy. In this article, we'll discuss the world's ten largest economies and how trading could provide exposure to them.
The most reliable and widely recognized measure for evaluating the strength of global economies is Gross Domestic Product (GDP). GDP represents the total annual value of all goods and services produced within a country. Despite its limitations, it has provided economists with valuable insights into the relative size and performance of different economies. The strongest economies in the world play a pivotal role in shaping international trade and finance.
Since trade is crucial to global economic growth, the wealthiest nations maintain strong economic ties with their competitors. These connections involve interactions across stock markets, currencies, and commodities traded internationally. Every major country has at least one stock exchange, with the top five located in key economic hubs like Shanghai, Tokyo, London, and New York.
How to Trade the Strongest Economies in the World – Quick Guide
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- Once you have developed a trading strategy for the world’s strongest economies that consistently produces positive results, it is time to upgrade to a fully funded live account, where you can put your newly acquired skills to use.
How to Measure a Country’s Economy
Macroeconomic indicators, particularly the ones outlined below, are the most straightforward tools for evaluating a nation’s economic strength. These indicators are essential for calculating inflation rates, currency exchange rates, and overall economic growth. When assessing the economy of a country, consider the following key indicators:
- Gross Domestic Product (GDP): The most comprehensive measure of all economic activity within a nation.
- Unemployment Rates: Higher unemployment typically leads to reduced demand for goods and services.
- Consumer Price Index (CPI): The primary measure of inflation at both the consumer and producer levels.
- Purchasing Power Parity (PPP): This compares prices between countries to assess how much each currency can purchase relative to another.
But before you start trading or investing in the Strongest Economies in the World, you need to be well-versed in a few fundamental ideas and how they affect a nation's ability to develop economically:
Top 10 economies of the world
The global GDP amounts to nearly US$110 trillion, with more than a quarter of that contributed by the United States alone. The world’s twelve largest economies include all seven G7 nations and the four largest BRICS economies. Since the interwar period, the United States has consistently held the position of the world’s strongest economy. While earlier projections suggested that China would overtake the U.S. in the 2020s, more recent estimates indicate that the U.S. will maintain its lead well into the 2030s.
In 2024, the U.S. is projected to have the world’s largest economy, with a GDP of approximately US$29 trillion. China will follow with a GDP of around US$18.5 trillion, making it the second largest. Notably, Recent adjustments in the list have seen Germany's economy overtake Japan's to become the third-
largest in the world in 2023, while Brazil's economy moved ahead of Italy's in 2024.
Source: statista.com
Here are the 10 largest economies in the world by GDP:
1. United States
With a GDP of $28.78 trillion, the United States has held the title of the world's strongest economy since 1871, when it surpassed the United Kingdom. The US dollar (USD) is one of the world’s most powerful and widely traded currencies, frequently appearing in major forex pairs like EUR/USD, USD/JPY, and GBP/USD. Due to its stability, traders often view the USD as a "safe haven" during periods of political or economic uncertainty, using it to hedge their investments.
Additionally, the U.S. is home to some of the largest companies by market capitalization, spanning industries such as e-commerce (Amazon), technology (Microsoft), consumer goods (Coca-Cola), finance (Visa), and healthcare (Johnson & Johnson). These companies are part of the Dow Jones Industrial Average, a stock index of 30 leading firms. The New York Stock Exchange (NYSE) and NASDAQ are also among the largest stock exchanges globally, further reinforcing the U.S. economic dominance.
2. China
With a GDP of $18.53 trillion, China ranks second among the world’s largest economies, despite surpassing the U.S. in purchasing power parity (PPP) due to lower price levels. Many economists consider PPP a more accurate reflection of economic strength, as it accounts for price inflation. China leads globally in international trade, manufacturing, and exports, and the gap between the U.S. and China’s nominal GDP has narrowed significantly in recent years. Analysts predict China may eventually surpass the U.S. in both nominal GDP and PPP.
China’s technology sector is home to some of the world’s largest companies, including Baidu, JD.com, and Alibaba, making it a favorite among traders. Investors can trade various Chinese tech stocks through baskets like the China Tech share basket. Additionally, China plays a key role in the 5G industry, gaming, streaming services, and mobile phone development. With over 10% of its GDP coming from agriculture, China holds the world’s largest agricultural economy, a stark contrast to developed nations like the U.S. and the U.K., where agriculture contributes only around 1%.
3. Germany
With a GDP of $4.59 trillion, Germany holds the title of the largest economy in Europe, largely driven by the export of high-quality manufactured goods. The German stock market spans a wide range of industries, with the DAX 30, similar to the Dow Jones 30, consisting of 30 leading companies listed on the Frankfurt Stock Exchange. The exchange ranks as the 10th largest in the world by market capitalization, featuring well-known companies such as Adidas, BMW, Deutsche Bank, Merck, and SAP.
In addition to its thriving stock exchange, Germany's treasury market strengthens its position as one of the world's leading economies. Its government bonds and debt securities, with maturities of 10 to 30 years, are considered medium- and long-term bonds. Germany’s bond index reflects U.S. Treasury bonds and includes instruments such as the medium-term Euro Bobl, short-term Euro Schatz, and long-term Euro Bund bonds.
4. Japan
With a GDP of $4.11 trillion, Japan is renowned for its booming automotive industry, featuring major manufacturers like Nissan, Toyota, Honda, Suzuki, and Mitsubishi, which contribute significantly to the nation's earnings. The Nikkei 225 stock index, a key indicator of blue-chip companies in Japan, is comparable to the Dow Jones 30. These companies are listed on the Tokyo Stock Exchange and represent a variety of sectors, including technology, consumer goods, transportation, and finance. Investors can access the Nikkei 225 through various exchange-traded funds (ETFs), providing exposure to Japan's diverse economy.
Japan boasts one of the world's lowest unemployment rates at 2.3%, but it also has the highest proportion of elderly citizens, which some analysts fear may slow future economic growth. In response, the Japanese government is working to raise the fertility rate and keep its aging population more active to sustain the economy. Despite these challenges, the USD/JPY currency pair remains one of the most traded globally, with the Japanese yen (JPY) often serving as a safe haven investment, particularly due to its inverse correlation with the Nikkei 225 index.
5. India
With a GDP of $3.93 trillion, India ranks fifth in the world but holds third place in purchasing power parity (PPP). India boasts the fastest-growing economy globally, having expanded sixfold since 2000. Classified as a developing market economy, India's growth is driven by its reliance on international supply and demand.
India is one of the world's largest commodity suppliers, with 66% of its population engaged in agriculture and food production. Key products include dairy, produce, fish, rice, wheat, cattle, sugarcane, and cotton. Additionally, India is a major exporter of natural gas and crude oil and plays a crucial role in producing textiles, natural resources, coal, cement, and automobiles. For investment strategies in raw materials, explore our commodities trading guide. You can also trade CFDs on our commodity indices, such as the Precious Metals Index and the Agricultural Index, which group assets from the same sector into a single trade.
6. United Kingdom
With a GDP of $3.49 trillion, the United Kingdom ranks sixth among the world’s largest economies. The UK’s economy is highly globalized, with foreign trade playing a key role. Approximately 80% of its GDP comes from the services sector, with a strong focus on banking and finance, making the UK the second-largest financial center globally after New York. The Bank of England oversees interest rates and works to maintain economic stability. Investors can trade the share prices of top UK banks, such as Barclays, HSBC, and Lloyds.
The UK is also a leader in the aerospace industry, collaborating with international manufacturers like Boeing and Airbus to create many well-known aircraft models. Its pharmaceutical sector has made notable contributions to R&D, retail, and vaccine development, especially in times of global medical emergencies. AstraZeneca and GlaxoSmithKline (GSK) are among the top pharmaceutical stocks. The FTSE 100, which comprises the top 100 UK companies by market capitalization, is one of the world’s most traded indices, further highlighting the UK’s economic strength.
7. France
With a GDP of $3.13 trillion, France ranks seventh among the world’s largest economies. Known for its high GDP per capita, France offers a strong standard of living and is the most popular tourist destination globally. Beyond tourism, France is a leader in the chemical, pharmaceutical, and automotive industries. Groupe PSA ranks as the world’s sixth-largest automaker, Sanofi as the fifth-largest pharmaceutical company, and Total as one of the seven largest oil corporations globally.
France also plays a key role in global agriculture, possessing one-third of Europe’s agricultural land. Its top exports, including dairy products, cheese, wine, poultry, and wheat, are highly valued for their quality. Additionally, tourism is a significant contributor, accounting for 10% of France’s nominal GDP and 11% of domestic employment, with nearly 90 million visitors annually enjoying the country’s rich culture and lifestyle.
8. Brazil
With a GDP of $2.33 trillion, Brazil stands as the largest economy in Latin America and ranks eighth globally. Its rapid growth began in the 1960s, driven by modernization and reform efforts, which boosted trade and industrial development. Despite facing political turmoil and hyperinflation over the years, Brazil has maintained steady economic growth. Currently, the industrial sector contributes 20% to the GDP, while agriculture accounts for just under 10%, and the services sector represents over 70%.
Brazil’s wealth in natural resources plays a key role in its economy. It is the world’s leading producer of agricultural products like oranges, coffee, soy, and sugarcane. Additionally, Brazil possesses the 15th-largest oil reserves globally and significant deposits of copper, tin, and iron ore. With a strong manufacturing base, Brazil is a major producer of automobiles and the E-Jet family of aircraft from Embraer. Key sectors include consumer durables, petrochemicals, and steel, with the Bovespa index reflecting the strength of companies like Vale and Petrobras in Brazil's economy.
9. Italy
With a GDP of $2.32 trillion, Italy's economy is characterized by a divide between its northern and southern regions. The highly industrialized north contributes significantly to the nation's economy, while the south faces challenges such as higher unemployment and poverty rates. After the financial crisis of 2008, unemployment surged, peaking at 12.7% in 2014 and predominantly affecting younger generations. However, by 2019, this figure had improved to an average of 9.9%, reflecting a positive trend.
Italy is the third-largest luxury goods market globally and the largest in Europe. Within the "industrial triangle" of Milan, Turin, and Genoa, numerous small and medium-sized enterprises drive the manufacturing sector. Traders often analyze company fundamentals when investing in small and medium-cap stocks, as these can present promising growth opportunities. The northern regions are typically home to the automobile and aerospace industries, while the southern areas feature more family-run businesses engaged in the production of commodities, textiles, and tools.
10. Canada
With a GDP of $2.24 trillion, Canada is renowned for its precious metal mining and is home to some of the largest gold-producing companies in the world, both of which significantly impact the country's economy. Before its 2019 merger with US-owned Newmont Corporation, which resulted in the rebranding of Newmont Goldcorp Corporation, Goldcorp was the world's largest supplier of gold. Major international markets list Canadian gold equities, including Barrick Gold, Yamana Gold, and Kinross Gold. Be sure to check out our guides on trading gold and gold stocks.
Canada boasts one of the highest employment rates globally, with an average annual unemployment rate of roughly 5-6%. However, this rate has notably increased since the COVID-19 pandemic. This is partly due to its strong presence in the manufacturing and services industries, where job opportunities are expanding along with supply and demand.
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Final words
Gross Domestic Product (GDP) is a key indicator of a country's economic output and is used to measure the size and strength of its economy. Nations regularly track GDP growth to assess the health of their economies and identify policies for stable, sustainable growth. The strongest economies in the world are shaped by factors such as population size, political stability, trade agreements, and access to resources.
For traders looking to invest in the strongest economies in the world, it’s essential to stay informed about market trends, economic policies, and geopolitical risks that could impact these economies. Understanding key sectors, such as technology, energy, and finance, is crucial, as well as monitoring currency fluctuations, interest rates, and trade relationships. These factors can significantly influence market performance and offer opportunities or risks for traders.
Free resources
Before you trade the biggest economies in the world, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more-informed investment decisions.
Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.
Sources:
- https://www.statista.com/statistics/268173/countries-with-the-largest-gross-domestic-product-gdp/
- https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD
- https://datacatalog.worldbank.org/search/dataset/0038130
- https://www.oecd.org/