This document examines how far the world economy has recovered since the 2008 global financial crisis. It finds that while most developed economies like the US, Germany, and Japan have seen moderate growth of around 2-7% since 2007, Italy still has 8.7% less economic activity. Emerging markets like China, India, and some BRIC nations have fared better, with China's economy nearly doubling in size. The top 10 economies by GDP, including developed nations and BRICs, contribute around 64% of total world economic activity. When measured by purchasing power parity, which accounts for domestic costs, BRIC nations make up an even larger share of around 29% of the global economy.
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5 Years since the financial crisis, how far has the world really moved?
1. Five years since the
financial crisis, how far has
the world really moved?
Data up till Q1, 2014
2. How did the 2008 crisis precipitate?
The bubble in U.S. housing market had
to finally end in early 2006 …
… new construction stuttered; into a
tailspin rapidly declining to 50% of peak
activity …
… Securities linked to real estate
started plummeting …
Chart source: U.S. FED
3. Sep 15, 2008: Lehman
filed for Chapter 11
Lehman closed its doors with over $600
billion in debt; largest in U.S. history.
4. … from its peak in Oct 2007, S&P 500
fell over 55% by Mar 2009…
Chart source: Google finance
Equity Markets crashed…
5. Chart source: U.S. FED
US economy saw the worst ever contraction since the great
depression of 1930s
6. Real GDP growth rates for 2009. Countries in brown were in recession
… the financial crisis spread rapidly. Many of the world
economies went into recession…
Chart source: CIA Fact book
7. 5 years since the crisis..
Let’s take stock of how far has the world moved?
14
14.5
15
15.5
16
2005 2007 2009 2011 2013
9. Usual GDP growth chart… says very little about how far has
the US economy moved
Can only infer the US economy contracted till the Q4 2009.
10. Q1 2008 Q2 2008 Q3 2008
100
Baseline
2007
101 100.9
99.7
97.2
97.6
96.8
Q4 2008 Q1 2009 Q2 2009
Use a technique called indexation to see the cumulative
effect… track for each quarter starting from Q1 2008
Above chart explains by Q2 2009, the US economy is at 96.8 scale of
Q2 2007 level of activity - contraction of 3.2% from the base year
Note: this method introduces some errors, but charting over 25 quarters, the errors are minimised
11. So, how far has the US economy really moved?
By Q1 2014, the cumulative growth is 7.4% over Q1 2007 (Indexed Growth 107.4 over 7 years)
12. Let’s include the other developed economies
United States
Japan
Germany
France
United Kingdom
Italy
13. Now with the developed economies mix…
Starkly different growth pattern… An easy to read table in the next slide
15. There is another influential pack: The BRICs
Brazil
Russia
India
China
16. This is how the BRICs performed
Better than developed markets, but again widely different performance
17. For those who like tables (need to do better charts :) )
2 Bands of cumulative performance
Top Pack:
China: almost doubled its size
India: added more than half of
its 2007 size
Middle Pack:
Brazil & Russia
Qtr China_idx India_Idx Brazil_Idx Russia_Idx
01-Jan-14 180.3 158.5 123.3 114.1
01-Jan-14 80.3% 58.5% 23.3% 14.1%
19. What is T10?
Group Country/Region $ Billion Share
World 74,900
DM-6 United States 16,800
Japan 4,902
Germany 3,635
France 2,735
United Kingdom 2,522
Italy 2,071
Total 32,665 44%
BRICs China 9,240
Brazil 2,246
Russia 2,097
India 1,877
Total 15,460 21%
Top 10 Economies 48,124 64%
Next 10 Economies (11-20) 15%
2013 Nominal GDP Data
T10 economies contribute 64% of world economic activity.
China and India are the fastest growing among T10
Top 10 Economies by size = Top 6 Developed Economies + BRICs
20. Purchasing Power Parity
Purchasing Power Parity (PPP) is a better approach to compare
economic output of nations
For a representative basket of goods the prevailing price in a nation is
collected and used to estimate the conversion rate between the nation’s
currency and the US $.
21. Top 10 economies by PPP
Rank GDP (PPP) $ Billion
World 1,01,887
1 United States 16,800
2 China 16,158
3 India 6,774
4 Japan 4,624
5 Germany 3,493
6 Russia 3,461
7 Brazil 3,012
8 France 2,437
9 Indonesia 2,388
10 United Kingdom 2,321
Share of World 61,468 60.3%
BRICs Total 29,405 29%
World Bank Estimate for 2013
Why BRICs still matter? BRICs (4 countries) contribute to 29% of world economic activity by PPP.
22. Some more slides on the way charting other aspects :)
How far has the world really
moved since the crisis?
