The US economy managed to shake off Wall Street’s gloomy forecasts and dodge a long-predicted slump last year — but the same can’t be said for two other members of the G7. Japan and the UK are both officially in recession, according to figures published Thursday, after Gross Domestic Product (GDP) fell for two consecutive quarters to close out 2023. Japan had the second-largest economy until 2010 when it was surpassed by China. Last year, Japan’s nominal GDP was USD 4.2 trillion, while Germany’s was USD 4.4 trillion (or USD 4.5 trillion, depending on the currency translation).
The data show how the Japanese economy has increasingly lost competitiveness and productivity, while the population is shrinking as Japanese people age and have fewer children. Immigration is one possibility for addressing Japan’s labor deficit, but the country has been highly unaccepting of foreign labor, except for temporary stays, leading to accusations of discrimination and a lack of variety.
Because nominal GDP is measured in dollars, a lower Japanese yen played a significant role in the country’s slip to fourth position. However, experts believe Japan’s relative weakness is due to a declining population as well as lacking productivity and competitiveness.
Real GDP is a measure of the worth of a country’s goods and services. The yearly rate represents what would have occurred if the quarterly rate had lasted a year.
Japan has long been seen as “an economic miracle,” emerging from the ashes of WWII to become the world’s second-largest economy after the United States. This continued until the 1970s and 1980s. However, for the majority of the past 30 years, the economy has developed only marginally, primarily languishing in the doldrums since the bursting of its financial bubble in 1990.
The Japanese and German economies are driven by robust small and medium-sized firms with high productivity.
Germany, like Japan in the 1960s-1980s, surged ahead for the majority of this century, dominating global markets for high-end products such as luxury vehicles and industrial gear, selling so much to the rest of the world that exports accounted for half of its GDP.
However, its economy, which was among the worst performers in the world last year, dropped by 0.3% in the fourth quarter.
After Japan, Britain’s economy entered a recession in the second half of 2023, presenting a difficult backdrop for Prime Minister Rishi Sunak, who has promised to boost growth ahead of the projected 2024 election.
The Office for National Statistics (ONS) reported that gross domestic product (GDP) declined by a worse-than-expected 0.3% in the three months to December, after falling by 0.1% between July and September. The ONS reported that economic output declined by 0.1% in monthly terms in December, following a 0.2% increase in November. According to the ONS, the manufacturing, construction, and wholesale sectors contributed the most to the fall in GDP.
According to the ONS, the fourth-quarter GDP decrease was the largest since the first quarter of 2021. Britain’s economy has remained stagnant for nearly two years. The Bank of England expects it to pick up somewhat in 2024.
Source: Agencies