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November 2016

The top 10 economies in the world for 2016

2018-10-11T13:31:25+00:00

USA

The U.S. economy remains the largest in the world in terms of nominal GDP. The $18.5 trillion U.S. economy is approximately 24.5% of the gross world product. The United States is an economic superpower that is highly advanced in terms of technology and infrastructure and has abundant natural resources. However, the U.S. economy loses its spot as the number one economy to China when measured in terms of GDP based on PPP. In these terms, China’s GDP is $21.3 trillion and the U.S. GDP is $18.5 trillion. However, the U.S. is way ahead of China in terms of  GDP per capita (PPP) – approximately $57,294 in the U.S. versus $15,423 in China.

China

China has transformed itself from a centrally planned  economy  in the 1970s to a manufacturing and exporting hub over the years. The Chinese economy overtook the U.S. economy in terms of GDP based on PPP. The Chinese economy has long been known for its strong growth, a growth of over 7% even in recent years. However, the country saw its exports projected to grow only by 1.9% in 2016, and total GDP growth has gone down to 6.5% and is projected to slow to 5.8% by 2021. The country’s economy is propelled by an equal contribution from manufacturing and services (45% each, approximately) with a 10% contribution by the agricultural sector.

Japan

Japan’s economy currently ranks third in terms of nominal GDP, while it slips to fourth spot when comparing the GDP by purchasing power parity. The economy has been facing hard times since 2008, when it was first showed recessionary symptoms. Economic growth is once again positive, to just over 0.5% in 2016; however it is forecasted to stay well below 1% during the next six years. The nominal GDP of Japan is $4.73 trillion, its GDP (PPP) is $4.93 trillion, and its GDP (PPP) per capita is $38,893.

Germany

Germany is Europe’s largest and strongest economy. On the world scale, it now ranks as the fourth largest economy in terms of nominal GDP. Germany’s economy is known for its exports of machinery, vehicles, household equipment, and chemicals. Germany has a skilled labor force, but the economy is facing countless of challenges in the coming years ranging from Brexit, the Greek debt crisis to the refugee crisis. The size of its nominal GDP is $3.49 trillion, while its GDP in terms of purchasing power parity is $3.97 trillion. Germany’s GDP (PPP) per capita is $48,189, and the economy has moved at a moderate pace of 1-2% in recent years and is forecasted to stay that way.

United Kingdom

The United Kingdom, with a $2.65 trillion GDP, is currently the world’s fifth largest. Its GDP in terms of PPP per capita is $42,513. The economy of the UK is primarily driven by services, as the sector contributes more than 75% of the GDP. With agriculture contributing a minimal 1%, manufacturing is the second most important contributor to GDP. Although agriculture is not a major contributor to GDP, 60% of the U.K.’s food needs is produced domestically, even though less than 2% of its labor force is employed in the sector. After the referendum in June 2016 when voters decided to leave the European Union, economic prospects for the UK are highly uncertain, and the UK and France may swap places. The country will operate under EU regulations and trade agreements for two years after the formal announcement of an exit to the European Council, in which time officials will work on a new trade agreement. Economists have estimated that Brexit could result in a loss of anywhere from 2.2-9.5% of GDP long term, depending on the trade agreements replacing the current single market structure. The IMF, however, projects growth to stay between 1.05-1.09% in the next five years.

France

France, the most visited country in the world, today has the sixth largest economy with a nominal GDP of $2.48 trillion. Its GDP in terms of purchasing power parity is around $2.73 trillion. France has a low poverty rate and high standard of living, which is reflected in its GDP (PPP) per capita of $42,384. The country is among the top exporters and importers in the world. France has experienced a slowdown over the past few years and the government is under immense pressure to rekindle the economy, as well as combat high unemployment which stood at 9.8% in 2016 (a slight drop from 10.35% in 2015). According to IMF forecasts the country’s GDP growth rate is expected to rise over the next five years, and unemployment is expected to continue to go down.

India

India ranks third in GDP in terms of purchasing power parity at $8.7 trillion, while its nominal GDP puts it in a seventh place with $2.25 trillion. The country’s high population drags its GDP (PPP) per capita down to $6,658. India’s GDP is still highly dependent on agriculture (17%), compared to western countries. However, the services sector has picked up in recent years and now accounts for 57% of the GDP, while industry contributes 26%. The economy’s strength lies in a limited dependence on exports, high saving rates, favorable demographics, and a rising middle class. India recently overtook China as the fastest growing large economy.

Italy

Italy’s $1.8 trillion economy is as of this writing the world’s eighth largest in terms of nominal GDP. Italy is among the prominent economies of the Euro zone , but it has been impacted by the debt crisis in the region. The economy suffers from a huge public debt estimated to be about 133% of GDP, and its banking system is close to a collapse. The GDP measured in purchasing power parity for the economy is estimated at $2.22 trillion, while its per capita GDP (PPP) is $36,313.

Brazil

With its $1.77 trillion economy, Brazil now ranks as the ninth largest economy by nominal GDP. The Brazilian economy has developed services, manufacturing, and agricultural sectors with each sector contributing around 68%, 26%, and 6% respectively.

Canada

Canada has recently pushed Russia off the top 10 list with a nominal GDP of $1.53 trillion. Canada has a highly service oriented economy, and has had solid growth in manufacturing as well as in the oil and petroleum sector since the Second World War. However, the country is very exposed to commodity prices, and the drop in oil prices kept the economy from growing more than 1.2% in 2015 (down from 2.5% in 2014). The GDP measured in purchasing-power parity is $1.7 trillion, and the GDP per capita (PPP) is $46,239.

The top 10 economies in the world for 2016 2018-10-11T13:31:25+00:00

October 2016

The science of happiness can trump GDP as a guide for policy

2018-10-11T13:32:56+00:00

For centuries, happiness was exclusively a concern of the humanities; a matter for philosophers, novelists and artists. In the past five decades, however, it has moved into the domain of science and given us a substantial body of research. This wellspring of knowledge now offers us an enticing opportunity: to consider happiness as the leading measure of well-being, supplanting the current favourite, real gross domestic product per capita, or GDP.

 

In the social sciences, data on individuals’ happiness are obtained from nationally representative surveys in which a question such as the following is asked:

 

Taken all together, how would you say things are these days, would you say that you are very happy, pretty happy, or not too happy?

 

You might be asked to place yourself on a “ladder of life”, running from the best possible to the worst. The common objective is to deliver an evaluation of the respondent’s life at the time of the survey. We can use the term “happiness” as a convenient proxy for this set of measures.

 

Meaning

In measuring happiness each respondent is free to conceive happiness as he or she sees it. You might think, then, that combining responses to obtain an average value would be pointless. In fact, there is now a substantial consensus that such averages are meaningful. A major reason for this is that most people respond quite similarly when asked about things important for their happiness.

 

In countries worldwide – rich or poor, democratic or autocratic – happiness for most is success in doing the things of everyday life. That might be making a living, raising a family, maintaining good health, and working in an interesting and secure job. These are the things that dominate daily lives everywhere; the things that people care about and which they think they have some ability to control. It means that comparisons among groups of people are possible.

 

Psychologists have investigated the reliability and validity of the measures and economists have studied the nature and robustness of the results. This is not the place for a detailed discussion, but we can say that the data have withstood a thorough vetting. More support comes from the fact that many countries now officially collect happiness data. The same relationships are found between happiness and a variety of life circumstances in country after country. Those who are significantly less happy are typically the unemployed, those not living with a partner, people in poor health, members of a minority, and the less-educated.

 

Preferences

So we can see that happiness and GDP can give quite different pictures of the trend in societal well-being. But why prefer happiness to GDP? There are several reasons.

 

  1. Happiness is a more comprehensive measure of well-being. It takes into account of a range of concerns while GDP is limited to one aspect of the economic side of life, the output of good and services. Perhaps the most vivid illustration of this can be seen in China where, in the two decades from 1990, GDP per capita doubled and then redoubled. Happiness, however, followed a U-shaped trajectory, declining to around the year 2002 before recovering to a mean value somewhat less than that in 1990. Economic restructuring had led to a collapse of the labour market and dissolution of the social safety net, prompting urgent concerns about jobs, income security, family, and health – concerns not captured in GDP, but which significantly affect well-being.

 

  1. The evaluation of happiness is made by the people whose well-being is being assessed. For GDP, the judgement on well-being is made by outsiders, so-called “experts”. There are some who think of GDP as an objective measure of the economy’s output. In fact the numerous judgements involved in measuring GDP have long been recognized. Should the unpaid services of homemakers be included? What about revenues from drug trade or prostitution? Should the scope of GDP be the same for the US and Afghanistan? For the US in 1815 and 2015? In short, GDP is not a simple or “objective” measure of well-being.

 

  1. Happiness is a measure with which people can personally identify. GDP is an abstraction that has little personal meaning for individuals.

 

  1. Happiness is a measure in which each person has a vote, but only one vote, whether rich or poor, sick or well, old or young. Everyone in the adult population counts equally in the measure of society’s well-being.

 

Happiness tells us how well a society satisfies the major concerns of people’s everyday life. GDP is a measure limited to one aspect of economic life, the production of material goods. The aphorism that money isn’t everything in life, applies here. If happiness were to supplant GDP as a leading measure of societal well-being, public policy might perhaps be moved in a direction more meaningful to people’s lives.

The science of happiness can trump GDP as a guide for policy 2018-10-11T13:32:56+00:00

Is cash passing away? 10 ways to go cashless

2018-10-11T13:34:14+00:00

Cashless payments could overtake cash transactions for the first time in 2015, according to the Payments Council.

If you’re considering going cashless, here are 10 different ways to take the plunge, from well-established products like debit and credit cards to more modern options like digital wallets and Bitcoins.

1. Pay direct from a debit card

When you pay with a debit card, the money comes directly out of your account, so there’s no difference to withdrawing cash to pay.

2. Consider paying with a credit card

A credit card lets you spend money on credit (you borrow it from the bank or a credit card company), and can be a safe, secure way to spend.

But if you don’t pay it back straight away you will have to pay interest, so it’s important to be disciplined to make sure you don’t get into debt.

3. Swipe with a contactless card

A more recent way to use your debit or credit card lets you simply tap it on a reader, making it much quicker.

You don’t use a Pin for this and payments are limited to £20. Not all cards can do this and not all shops have the readers. In London you can even use these cards to pay for tubes and buses. Look out for the contactless symbol for compatibility.

4. Spend online instead

Buying things online means you can’t pay with cash. You can use cards or a registered payment service linked to your account such as PayPal.

5. Use your phone number

Paym (pronounced pay-em) is a partnership between many of the banks that lets you send money to someone with just their mobile phone number.

As long as you and the receiver are registered, you use your phone banking apps to pay someone without the need for cash or account numbers and sort codes. The end of having to find the right change to pay your friend back for lunch?

6. Get a digital wallet

This isn’t just cashless shopping, it’s cardless and uses a mobile phone linked to your bank account. They work in different ways. Your handset might have a chip that is swiped in the same way as contactless cards. Others let you pay through scanning a QR code or by ‘checking in’. It’s still in its early days right now, but possibly one for the near future.

7. Send it on an email

Anyone with Google Mail and Google Wallet can now send money as an attachment on their email, though the other person needs to be signed up too.

8. Preload money on a card

A prepaid card is loaded with money in advance. You can only spend the money you put on it so it’s a popular way to give kids an allowance, take money abroad or a handy way to keep to a budget.

9. Buy expensive things with a charge card

Unlike credit cards there’s usually no upper limit on a charge card. You have to pay off all the money you spend on them each month, so they’re usually for people with higher incomes and they’re not accepted everywhere.

10. Use a store card for your favourite shop

Store cards are a type of credit card you can only use in one chain of shops. They’re only a good idea for people who often spend a lot in a particular store as interest rates can be very high, so need to be handled with care – and discipline.

Is cash passing away? 10 ways to go cashless 2018-10-11T13:34:14+00:00

The sharing economy: the new shape of economy or just a passing fad?

2018-10-11T13:34:49+00:00

The sharing economy is the cool new term for connecting spare capacity or spare assets to demand for that unused resource. This trend has emerged as entrepreneurs have spotted opportunities emanating from shifts in demographics, global economic power, urbanization rates, climate and resource availability, and technology.

The projected size of the sharing economy is vast. PwC research suggests over $300bn of revenue by 2025, as seen coming from five key ‘sharing economy’ sectors (peer-to-peer accommodation, car sharing, peer-to-peer finance, music, TV and video streaming, and online staffing).

Strategic options

Whether the sharing economy is a passing fad or here to stay, broadly speaking there are three possible strategies that companies could adopt:

 

  1. Organically build your own sharing concept or differentiate your products/services

Some companies have adopted a DIY approach. For example, Daimler launched Car2Go in 2009, a car sharing service that was rolled out across European and North American cities. BMW and Sixt soon followed suit by teaming up to create DriveNow, another car sharing service offered across European cities.

This approach takes time, money and other resources. You would need to find the right people with the right skill sets which will either need current employees to be retrained or new skills to be hired in. Infrastructure would also need to be put in place. Both of these approaches are resource-heavy and marked with difficulties.

  1. Partner with sharing platforms

Toyota and Uber have entered into a memorandum of understanding to collaborate on a rideshare service. Funding Circle has entered into a partnership with Santander UK, where Santander proactively refers small business customers to Funding Circle, giving them greater access to finance. And Caterpillar has entered into an agreement with Yard Club, a start-up company that has developed an online peer-to-peer equipment rental platform, to help customers maximize the use and productivity of their owned equipment. An even greater degree of creativity and entrepreneurialism is seen in Tesla’s partnership with Airbnb – bringing charging stations to select homes across the globe, starting with California. By collaborating like this, partnering companies give themselves access to new clients and markets that might not normally be accessible to them.

This strategy, as demonstrated by the Toyota-Uber tie up, appears to be more of a longer term play where ideas in which the partners share a common interest need to be researched and explored before launch. And, when launched, are often on a limited scale such as Tesla-Airbnb in California.

It’s seen as a more robust approach than the DIY approach- the partners have already proven their element of the business model and market acceptance, de-risking the market entry to some extent. It’s a way of dipping your toe into the water without committing too much capital.

But it’s worth remembering that no alliances last forever. Just as the formation of an alliance needs to be planned up front, so should the break up.

  1. Acquire and integrate with an existing sharing platform

This is the ultimate big splash – if you’ve got access to capital there’s the option of acquiring an existing sharing platform. We’ve seen this with AccorHotels acquiring Onefinestay, a London-based startup for £117 million. Onefinestay provides a home share option for high-end homes combined with a hotel-like service for hosts and travellers. Another example is PayPal’s acquisition of payments gateway Braintree, which powers and automates online payments for merchants and companies online, in a deal worth $800 million in late 2013. And global car hire firm Avis Budget bought Zipcar, the world’s biggest car-sharing firm, for £307m in 2013.The risks here are seen in effective integration, culture clash as old meets new and ultimately getting the value from what will need to be a high priced acquisition.

Many of the examples here are from a few select industry sectors – automotive, hospitality and financial services. There are undoubtedly lots of examples from other sectors.

The question is: how prepared is your company to survive and thrive in the sharing economy?

The sharing economy: the new shape of economy or just a passing fad? 2018-10-11T13:34:49+00:00

Top 17 countries with the highest level of government debt for 2016

2018-10-11T13:35:46+00:00

One of the most interesting and important rankings is actually the level of government debt.

By looking at level of gross government debt as a percentage of GDP, it can indicate how able a country is to pay back debts without incurring further debt. Basically the lower the debt-to-GDP ratio the better.

Let’s take a look to see who made the top 17 and who beat Greece for the top spot:

17. Iceland – 90.2%. Prior to the credit crisis in 2007, government debt was a modest 27% of GDP. At the time of WEF’s rankings, its debt was still super high.

16. Barbados – 92.0%. The tax-haven nation is the wealthiest and most developed country in the eastern Caribbean, but its growth prospects look weak due to austerity measures to combat the effects of the credit crisis.

15. France – 93.9%. The eurozone’s second-biggest economy has been recovering “in fits and starts,” says the country’s statistical agency.

14. Spain – 93.9%. S&P is confident that Spain’s buoyant growth prospects and labor-market reforms will boost its outlook.

13. Cape Verde – 95.0%. The island nation is a service-orientated economy and suffers from a poor natural-resource base. This means it has to import 82% of its food, leading to vulnerability to market fluctuations.

12. Belgium – 99.8%. The country is known as “the sick man of Europe,” because while the government managed to reduce the budget deficit from a peak of 6% of GDP in 2009 to 3.2% — its debt is still incredibly high.

11. Singapore – 103.8%. It’s one of the wealthiest countries in the world but the island nation suffers from high debt. The government is now trying to find new ways to grow the economy and raise productivity.

10. United States – 104.5%. The US hiked interest rates for the first time in seven years in December 2015. In March, Federal Reserve Chair Janet Yellen said the economy was on a path of slow and steady growth.

9. Bhutan – 110.7%. The small Asian economy is closely linked to India and depends heavily on it for financial assistance and foreign laborers for infrastructure.

8. Cyprus – 112.0%. The country’s excessive exposure to Greece hit it hard when the European sovereign-debt crisis rippled across the world in 2010. Like Greece, it had to be bailed out by international creditors and enforce capital controls and austerity measures to get funding.

7. Ireland – 122.8%. The country exited its bailout program two years ago but still faces a huge debt pile. But it’s on the right track. Ireland has already had success in refinancing a large amount of banking-related debt.

6. Portugal – 128.8%. Portugal exited its own bailout program in the middle of 2014. However, GDP was still 7.8% lower than it was at the end of 2007.

5. Italy – 132.5%. The country’s proportion of debt to GDP is the second highest in the Eurozone.

4. Jamaica – 138.9%. The services industry accounts for 80% of GDP, but high crime, corruption, and large-scale unemployment drag the country’s growth down. The International Monetary Fund said Jamaica has to reform its tax system, among other things.

3. Lebanon – 139.7%. The country used to be a tourist destination but war in Syria and domestic political turmoil have led to a lack of an official budget for months.

2. Greece – 173.8%. The country has taken over €320 billion worth of bailout cash and it’s looking increasingly impossible to pay it all back — especially since it has had to implement painful austerity measures to get its loans. But it’s surprisingly not the worse country in the world for government debt.

1. Japan – 243.2%. The country is in a troubling spot. Its economy is growing very slowly and now the central bank has implemented negative interest rates.

Top 17 countries with the highest level of government debt for 2016 2018-10-11T13:35:46+00:00

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