The EU in the world - economy and finance
- Data extracted in March 2015. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: May 2016.
The article presents indicators from various areas, such as national accounts, government finance, exchange rates and interest rates, consumer prices, and the balance of payments in the European Union (EU) and in the 15 non-EU members of the Group of Twenty (G20). It gives an insight into the EU’s economy in comparison with the major economies in the rest of the world, such as its counterparts in the so-called Triad — Japan and the United States — and the BRICS composed of Brazil, Russia, India, China and South Africa.
- 1 Main statistical findings
- 2 Data sources and availability
- 3 Context
- 4 See also
- 5 Further Eurostat information
- 6 External links
Main statistical findings
National accounts (GDP)
G20 members accounted for 85.2 % of the world’s GDP in 2013
In 2013, the total economic output of the world, as measured by gross domestic product (GDP), was valued at almost EUR 57.0 trillion, of which the G20 members accounted for 85.2 %, 4.8 percentage points less than in 2003. The EU-28 accounted for a 23.7 % share of the world’s GDP in 2013, while the United States’ share was 22.2 % (see Figure 1); note these relative shares are based on current price series in euro terms, reflecting market exchange rates. The Chinese share of world GDP rose from 4.3 % in 2003 to 12.1 % in 2013, moving ahead of Japan (6.5 %). To put the rapid pace of recent Chinese growth into context, in current price terms China’s GDP in 2013 was EUR 5 454 billion higher than it was in 2003, an increase equivalent to the combined GDP in 2013 of the seven smallest G20 economies (South Korea, Mexico, Indonesia, Turkey, Saudi Arabia, Argentina and South Africa). The shares of global GDP contributed by Brazil and Russia also increased greatly, such that they moved from the 10th and 11th largest G20 economies in 2003 (leaving aside the four G20 EU Member States) to become the fifth and sixth largest G20 economies in 2013.
China and India had the highest GDP growth between 2003 and 2013
Figure 2 shows the real growth rate (based on constant price data) of GDP in the EU-28 compared with the other G20 members between 2003 and 2013 — note the different scales used for the three parts of the figure. The lowest rates of change were generally recorded by the developed economies such as Japan, the EU-28, the United States and Canada, while the highest rates were recorded in the two Asian economies of China and India.
Among the G20 members, the highest GNI per inhabitant in 2013 was recorded in the United States, marginally higher than in Saudi Arabia. Note that the conversion to United States dollars used for this indicator in Figure 3 is based on purchasing power parities (PPPs) rather than market exchange rates and so reflects differences in price levels between countries. The average level of income per inhabitant in the United States and in Saudi Arabia was 3.7 times as high as the average GNI for the world (USD 14.3 thousand per inhabitant). Canada and Australia also recorded average GNI per inhabitant that was more than three times the world average, followed by Japan, the EU-28 and South Korea where it was more than twice as high. By contrast, five G20 members recorded levels of GNI per inhabitant that were around or below the world average, namely Brazil, South Africa, China, Indonesia and India.
In broad terms, members with relatively low GNI per inhabitant recorded relatively high economic growth over the 10 years from 2003–13; this was most notably the case in China and India. By contrast, members with relatively high GNI per inhabitant recorded fairly low levels of economic growth over the same period; this was most notably the case in Japan and the EU-28. Saudi Arabia reported an atypical pattern of development, combining a relatively high level of GNI per inhabitant (that by the end of the period was almost as high as that in the United States) with the third highest growth in GDP during the period 2003–13 among the G20 members, an average of 6.4 % per year. The reverse situation could be observed in Mexico which reported relatively low growth (2.6 % per year) with a relatively low level of GNI per inhabitant.
General government finances
The financial and economic crisis of 2008–09 resulted in considerable media exposure for government finance indicators. The importance of the general government sector in the economy may be measured in terms of general government revenue and expenditure in relation to GDP. Subtracting expenditure from revenue results in a basic measure of the government surplus/deficit (public balance), which measures government borrowing/lending for a particular year; in other words, borrowing to finance a deficit or lending made possible by a surplus. General government debt (often referred to as national debt or public debt) refers to the consolidated stock of debt (external obligations) at the end of the year of the government and public sector agencies. The external obligations are the debt or outstanding (unpaid) financial liabilities arising from past borrowing. Typically, these indicators are expressed in relation to GDP.
The average of general government revenue and expenditure in relation to GDP peaked among the G20 members in 2013 at 46.9 % in the EU-28 (in the euro area it was higher still, at 48.0 %), followed by 43.0 % in Canada and 42.1 % in Saudi Arabia. The lowest ratio was in Indonesia (19.0 %). Note that the data for Mexico, Saudi Arabia and South Korea relate only to the expenditure and revenue of central government as opposed to all levels of public administration (general government).
All but two G20 members had a government deficit in 2013
Most G20 members had a government deficit in 2013; only two — South Korea and Saudi Arabia — recorded a surplus (see Table 1). Some of the G20 members with the highest government deficits had the highest levels of government debt and this was notably the case for Japan and the United States. Equally, Saudi Arabia had the lowest level of government debt and was one of the two members with a government surplus in 2013. India and to a lesser extent Australia deviated somewhat from this pattern, with relatively low levels of government debt combined with relatively high deficits. This can be seen in Figure 4 which plots the deficit/surplus against the debt (both relative to GDP), showing the absolute size of general government debt in terms of the size of each bubble. In 2013, government debt ranged from EUR 11 billion in Saudi Arabia to EUR 13.2 trillion in the United States. In the United States the ratio of gross debt to GDP exceeded 100 %, while in Japan it was 243 %.
Japan and South Africa recorded the largest increases (in relative terms) in government deficits between 2008 and 2013
Comparing data for 2008 with 2013 (see Figure 5), the surpluses recorded by Saudi Arabia and South Korea both contracted, substantially in the case of Saudi Arabia. Russia and Indonesia moved from surpluses (small in the case of Indonesia) to deficits, while China moved from a balanced position to a government deficit. The government deficits of the EU-28 (between 2010 and 2013), India, the United States and Turkey contracted, while those in the remaining G20 members expanded, most notably in South Africa and Japan.
Japan and the United States recorded the largest increases in government debt between 2008 and 2013
Five of the G20 members recorded a fall in their levels of government debt relative to GDP between 2008 and 2013, namely India, Argentina, Turkey, Indonesia and Saudi Arabia (see Figure 6). All other G20 members recorded higher levels of general government gross debt relative to GDP in 2013 than in 2008, ranging from an increase of 2.8 percentage points in Brazil to an increase of 18.0 percentage points in Canada and South Africa, with the United States (increase of 31.4 percentage points) and Japan (51.4 percentage points) above this range.
Balance of payments
Saudi Arabia recorded the largest current account surplus relative to GDP
The current account of the balance of payments provides information on international transactions in goods and services (see the article on international trade for more details), as well as income from employment and from investment, and current transfers with the rest of the world. Among the G20 members, the largest current account surplus in 2013 in absolute terms was EUR 182.8 billion for China, while in relative terms the current account surplus peaked in Saudi Arabia at 17.7 % of GDP (see Figure 7). The largest current account deficit in 2013 was EUR 400.3 billion for the United States, while Turkey’s deficit represented 7.9 % of GDP.
The current account balances of Argentina, Brazil, Canada, India and Indonesia moved from surpluses to deficits between 2003 and 2013, while the EU-28 moved from a deficit to a surplus. The deficits of Australia and the United States narrowed over the period under consideration, while they expanded for Turkey, South Africa and Mexico; in South Korea and Saudi Arabia the surpluses expanded while those of Russia, Japan and China narrowed.
Foreign direct investment
Foreign direct investment (FDI) is characterised by investment in new foreign plant/offices, or by the purchase of existing assets that belong to a foreign enterprise. FDI differs from portfolio investment as it is made with the purpose of having a lasting interest, by acquiring control or an effective voice in the management of the direct investment enterprise.
The highest inflows of FDI were recorded in the emerging markets and resource rich members
Among the G20 members, FDI outflows exceeded inflows in 2013 in the EU-28, Russia, Japan, the United States and South Korea (see Figure 8). Relative to GDP, the highest inflows of FDI were recorded into China, Canada, Brazil, Russia, Australia and Mexico, a mixture of emerging economies and resource rich members. Outflows of FDI relative to GDP were highest from Russia, followed at some distance by Japan, the EU-28, Canada, the United States and South Korea. As such, Canada figured among the G20 members with the highest inflows and outflows. Australia recorded negative outflows of FDI, indicating that disinvestment (of investment made abroad in previous years) outweighed new investment abroad.
Figure 9 presents an analysis of the destination and source of FDI flows into and out of the EU-28. In some cases disinvestment can be identified, for example EU-28 disinvestment from Russia and Canada and the disinvestment of offshore financial centres from the EU-28. As such, the percentages shown are percentages of the total net outflows and net inflows. FDI flows are dominated by the United States: the level of the EU-28’s outward FDI to the United States in 2013 was equivalent to 46.6 % of all net outflows, while inflows from the United States were equivalent to 95.7 % of all net inflows. A relatively large part of the EU-28’s FDI flows were with offshore financial centres (an aggregate composed of 38 financial centres across the world), as well as with developed countries outside of the G20, notably Switzerland.
An analysis of the EU-27’s FDI stocks as of the end of 2012 (see Map 1) presents a broadly similar picture to that in terms of flows, with the United States the main partner for the EU. Among the G20 members, Canada, Brazil, Russia, Australia and China were the next most common destinations for EU-27 FDI.
Consumer prices, interest and exchange rates
Figure 10 shows the annual rate of change in consumer price indices (CPIs) between 2004 and 2014 for the G20 members and the world. Consumer price indices indicate the change over time in the prices of consumer goods and services acquired, used or paid for by households. They aim to cover the whole set of goods and services consumed within the territory of a country by the population.
The worldwide inflation rate increased between 2004 and 2008 (to peak at 6.4 %) before dropping sharply during the global financial and economic crisis. Inflation increased again to peak at 5.2 % in 2011 before declining to finish in 2014 at the same rate (3.8 %) as it had been 10 years earlier. For several years during this period Japan recorded negative annual inflation rates, indicating falling consumer prices (deflation), a situation that was mirrored in China and the United States in 2009 during the financial and economic crisis. Between 2004 and 2014, high price increases were recorded in Russia and Argentina, and to a lesser extent in Turkey, India and Indonesia. The average inflation rate was particularly high in Russia in 2008 (14.1 %) and in Indonesia in 2006 (13.1 %). By contrast, the EU recorded relatively low inflation rates between 2004 and 2014 (2.1 %), with only Canada (1.8 %) and Japan (0.2 %) recording averages that were lower.
Argentina had the highest recent inflation rate among G20 members
In 2014, inflation rates among the G20 members ranged from a low of 0.6 % in the EU-28 to 7.8 % in India with Turkey’s 9.0 % rate above this range. 2014 data are not available for Argentina, but in 2013 the inflation rate was 10.6 %.
By far the largest fall in interest rates between 2003 and 2013 was in Brazil
Central bank short-term interest rates varied greatly between the G20 members in 2013, but to a somewhat lesser extent than they had done 10 years earlier. Rates were below 1.0 % in the euro area and in the United Kingdom and were 1.30 % in Japan. Elsewhere, rates ranged from 3.00 % in Canada to 11.66 % in Indonesia, with the rates in Argentina (17.15 %) and Brazil (27.39 %) exceeding this range. In nearly all G20 members interest rates were lower in 2013 than they had been in 2003, with the exception of China where the rate rose 0.69 percentage points to 6.00 %. By far the largest fall in interest rates during this period was in Brazil.
Among the G20 members, the pesos in Argentina and Mexico devalued the most between 2003 and 2013 relative to the euro (see Table 2). By contrast, the Australian and Canadian dollars, Brazilian real, Chinese renminbi and Japanese yen appreciated relative to the euro during this 10-year period. Relative to the United States dollar, the euro and the South Korean won also appreciated in value between 2003 and 2013, the value of the euro being 15 % higher in 2013 than it had been in 2003.
Data sources and availability
The statistical data in this article were extracted during March 2015.
The indicators are often compiled according to international — sometimes global — standards, for example, UN standards for national accounts and the IMF’s standards for balance of payments statistics. Although most data are based on international concepts and definitions there may be certain discrepancies in the methods used to compile the data.
EU and euro area data
Most if not all of the indicators presented for the EU and the euro area have been drawn from Eurobase, Eurostat’s online database. Eurobase is updated regularly, so there may be differences between data appearing in this article and data that is subsequently downloaded. Data concerning interest rates in the euro area have been extracted from the European Central Bank (ECB).
G20 members from the rest of the world
For the 15 non-EU G20 members, the data presented have been extracted from a range of international sources, namely the International Monetary Fund, the United Nations Statistics Division and the World Bank. For some of the indicators shown a range of international statistical sources are available, each with their own policies and practices concerning data management (for example, concerning data validation, correction of errors, estimation of missing data, and frequency of updating). In general, attempts have been made to use only one source for each indicator in order to provide a comparable analysis between the members.
An analysis of the economic situation can be performed using a wide range of statistics, covering areas such as national accounts, government finance, exchange rates and interest rates, consumer prices, and the balance of payments. These indicators are also used in the design, implementation and monitoring of economic policies.
GDP is the most commonly used economic indicator and it provides a measure of the size of an economy. It is the sum of the gross value added of all resident institutional units (‘domestic’ production) engaged in production, plus any taxes, and minus any subsidies, on products not included in the value of their outputs. It is also equal to i) the sum of the final uses of goods and services (all uses except intermediate consumption), minus the value of imports of goods and services; ii) the sum of primary incomes distributed by resident producer units. By contrast, gross national income (GNI) is the sum of gross primary incomes receivable by residents, in other words, GDP less income payable to non-residents plus income receivable from non-residents (‘national’ concept).
GDP per inhabitant is often used as a broad measure of living standards, although there are a number of international statistical initiatives to provide alternative and more inclusive measures (such as GDP and beyond). GDP at constant prices is intended to allow comparisons of economic developments over time, as the impact of price developments (inflation) has been removed. The use of a time series of GDP in constant prices shows the volume (or ‘real’) change in GDP. Equally, international comparisons can be facilitated when indicators are converted from national currencies into a common currency using purchasing power parities (PPPs) which reflect price level differences between countries rather than market exchange rates.
Further Eurostat information
- The European Union and the African Union — 2014 edition
- Asia-Europe Meeting (ASEM) — A statistical portrait — 2014 edition
- The EU in the world 2014
- Key figures on the enlargement countries — 2014 edition
- Pocketbook on Euro-Mediterranean statistics — 2013 edition
- The EU in the world 2013
- The European Union and the BRIC countries
- The European Union and the Republic of Korea — 2012
- Key data on education in Europe 2012
- Main GDP aggregates (nama_10_ma)
- GDP and main components (output, expenditure and income) (nama_10_gdp)
- Balance of payments statistics and International investment positions (bop_q)
- Euro area balance of payments (source ECB) (bop_q_euro)
- European Union balance of payments (bop_q_eu)
- European Union direct investments (bop_fdi)
- EU direct investments - main indicators (bop_fdi_main)
- Exchange rates (ert), see:
- Bilateral exchange rates (ert_bil)
- Euro/ECU exchange rates (ert_bil_eur)
- Euro/ECU exchange rates - annual data (ert_bil_eur_a)
- Euro/ECU exchange rates (ert_bil_eur)
- Government finance statistics (EDP and ESA2010) (gov_gfs10)
- Annual government finance statistics (gov_10a)
- Government revenue, expenditure and main aggregates (gov_10a_main)
- Government deficit and debt (gov_10dd)
- Government deficit/surplus, debt and associated data (gov_10dd_edpt1)
- HICP (2005 = 100) - annual data (average index and rate of change) (prc_hicp_aind)
- Balance of payments
- Exchange rates
- GDP and beyond
- Government finance statistics
- Harmonized Indices of Consumer Prices (HICP)
- Interest rates
- National accounts (including GDP)
Source data for tables and figures (MS Excel)
- European Central Bank
- International Monetary Fund IMF
- United Nations Statistics Division
- World Bank