India is set to overtake the UK in 2019 in the rankings of the world’s largest economies, with Britain’s economic weight set to decline as emerging markets grow to command an increasing share of global output.
The UK was the fifth-largest economy in the world in 2018, according to the IMF’s estimates of gross domestic product, measured in dollar terms at market exchange rates. Next year, the IMF’s projections show it slipping to seventh place in the global rankings, outstripped by India and also France.
The figures are a stark reminder of the challenge Britain will face to maintain its influence once outside the EU, despite the government’s assertion that a post-Brexit “global Britain” will be a leading player on the world stage.
Mike Jakeman, an economist at PwC, whose forecasts for 2019 match the IMF’s projections, noted that India, the fastest-growing large economy in the world, is “all but certain to continue to rise in the global GDP league table”, given its rapid growth rate, enormous population, favourable demographics and high catch-up potential.
The UK and France, with similar populations and levels of development, have often switched places in the rankings. France’s performance in 2019, measured at market exchange rates, will depend on the relative strength of the euro against the pound. Much of the UK’s slippage with be owing to sterling’s post-referendum depreciation and PwC noted that “much depends on how Brexit turns out”.
Critics of the government’s handling of Brexit talks say Britain is already losing its ability to shape international affairs. Jo Johnson, who resigned as transport minister last month, complained of “a failure of statecraft” comparable to the 1956 Suez debacle, which confirmed the end of Britain’s imperial sway. John Major, former prime minister, has warned that the world will see Britain as a “middle-sized, middle-ranking nation”.
The measurement of GDP at market exchange rates is not the best reflection of overall economic wellbeing.
Using estimates of purchasing power parity — a measure of the goods and services money can buy in any economy — India is already more than twice the size of any European economy, while its GDP per capita is far smaller.
However, the IMF’s projections show that the UK will also fall behind France next year in its level of per capita GDP, measured in dollar terms at PPP exchange rates — and will remain behind even in 2023.