Sunday, May 1, 2011

IMF Predicts China Overtaking the USA in PPP by 2016

The International Monetary Fund has released new figures last week predicting that China will overtake the United States by 2016 in an important economic indicator, PPP (purchasing power parity).

America's economic dominance on the world stage could end in five years, according to a new report.

The International Monetary Fund's latest forecast predicts that China's economy will outflank the United States' in 2016. 
That moment would come more than a decade earlier than most forecasters suggest. However, other forecasts compare the gross domestic products and current exchange rates of the U.S. and China in arguing that it will be many years before the countries trade places.MarketWatch reported that the IMF is using what's known as "purchasing power parities," comparing what residents of both countries earn and spend domestically.

Based on that comparison, China's economy will rise from $11.2 trillion in 2011 to $19 trillion in 2016. The U.S. economy will rise at a slower pace, from $15.2 trillion to $18.8 trillion in that period. According to MarketWatch, China's share of the global economy will hit 18 percent, while the United States' share will lag behind at 17.7 percent. 
The finding comes at a rocky time for the U.S. economy. Though the job market has improved since the 2008 Wall Street collapse, unemployment remains high and Washington has struggled to balance stimulus and incentive programs against the need to close the deficit.

In the absence of a deficit-reduction deal, Standard & Poor's rating agency last week announced that it was downgrading the U.S. debt outlook from stable to negative, warning that a failure to strike a deficit agreement could lead to a lower credit rating in the future.
RT has more for an explanation of what this means:

1 comment:

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