Tuesday, 6 January 2015

Has the UK economy overtaken France's already? YES!

It's bound to happen - the moribund French economy, the world's fifth-largest, will be overtaken by the UK, which has bounced back vigorously after a long recession. The only question is when.

Gross Domestic Product is measured in each country by its statistical office, calculated in local currency. Then, to be able to create an annual global ranking, the GDP is converted into US dollars at a exchange rate that reflects the average for that year.

If we take as a starting point the World Bank's GDP figures for 2013, released only last month, we have the nominal GDP for France standing at $2,806 billion. The UK's stood at $2,678 billion. Behind the UK in seventh place in the world we have Brazil ($2,245 billion) and Italy in eight ($2,149 billion). Both economies are currently shrinking, so neither have a chance of threatening the UK or France.

But the UK is powering ahead, with annualised GDP growth forecast at 3.2%. French GDP is forecast to grow at a mere 0.4%. And sterling is doing so much better against a strong dollar than the feeble euro.

So - let's take the World Bank 2013 data, convert into local currency. The UK's economic output in 2013 was worth £1,781 billion (at an exchange rate of 66.5p = $1, the average for that year). France's economic output was worth €2,197 billion (at an exchange rate of 78.3 eurocents = $1).

Last year, if the above forecasts - which are a aggregate of three quarters of actual growth plus one quarter's projected growth - are correct, the UK's output in sterling was worth £1,838 billion, while France's output was worth €2,206 billion.

Now - the pound fared much better against the dollar than the euro over the course of 2014. So when you calculate the above figures by the average exchange rate for both currencies as announced by the central banks (£1 = $1.6477; €1 = $1.3272), we get the following dollar-denominated figures for the two countries' GDP... UK $3,029 billion, France $2,928 billion.This would make the UK the world's fifth-largest economy, pushing France down to sixth place.

And the UK, having a slightly smaller population (64 million vs. 66 million), will also have leapfrogged France in terms of GDP per capita. All good news in the year that Britain celebrates the 200th anniversary of the Battle of Waterloo (and indeed the 600th anniversary of the Battle of Agincourt).

There we have it - by my reckoning the UK economy will have overtaken France's last year by a margin of $101 billion. Admittedly, not a lot, lots of ins, lots of outs, and new stuff may come to light.

Is my methodology flawed? Certainly the exchange rate figures are both official and OK. The start-point can be debated (the International Monetary Fund agrees with the World Bank as to France's GDP for 2013, but gives the UK's GDP as being $155 billion smaller than the World Bank). And 2014 fourth-quarter growth may yet surprise us (but then even if the final-year outturn for France was doubled at 0.8% and the UK's not 3.2% but just 2.8%, the UK would still be ahead).

Am I wrong, Dude?

Good news for David Cameron and George Osborne - a vindication of their economic policy.

This time four years ago:
Ice in the Vistula

This time five years ago:
A consolation to my British readers

This time six years ago:
Winter in its finery

The time seven years ago:
Snow fences keep the trains running

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