Germany falls out of the top 20 richest countries

An overview of the most important factors

Germany, long a fixture on the list of the world's wealthiest nations, has lost its position in the top 20 in the latest ranking based on gross domestic product (GDP) per capita adjusted for purchasing power. The International Monetary Fund's (IMF) World Economic Outlook (WEO) for September 2024 shows that Germany has now fallen to 21st place. This highlights the challenges facing the country and at the same time highlights why GDP alone is not enough to measure a country's prosperity.

The importance of purchasing power parity

Gross domestic product (GDP) measures the total value of all goods and services produced in a country and is often used as an indicator of economic wealth. With its high GDP, Germany continues to be one of the largest economies in the world. According to the latest WEO data, it ranks fourth in the global comparison of total GDP behind the USA, China and Japan. But this value says little about the prosperity of the general population. Klaus-Jürgen Gern from the Kiel Institute for the World Economy (IfW) emphasizes: “GDP alone does not provide any information about the distribution of wealth and people's actual standard of living.”

To more accurately reflect wealth, GDP is calculated using purchasing power parity (PPP). Purchasing power parity takes into account how many goods and services can be purchased in different countries for the same amount of money. This method allows for better comparability between countries, as the value of a given amount varies from country to country. A high value in purchasing power parity per capita GDP indicates a wealthier population, even if total GDP is lower.

The ranking of the wealthiest countries by purchasing power parity

Countries with small populations but highly developed financial or raw materials sectors dominate the list of the richest nations. These states usually have a high per capita income and are less affected by external economic influences such as global crises or inflation. This explains why countries such as Luxembourg or Qatar are high in the rankings, while larger economies such as Germany can fall behind, despite their high overall production.

The top 10 richest countries by purchasing power adjusted GDP per capita (2023):

1. Luxembourg
   • GDP (2023): $85.78 billion
   • Purchasing power adjusted GDP per capita: 115,626 international dollars
   • Population: 674,000
   • Focus: Financial services
   • Projected economic growth (2024): 1.3%
   • Inflation rate (2024): 2.5%
2. Ireland
   • Purchasing power adjusted GDP per capita: 113,351 international dollars
   • Ireland benefits greatly from a booming technology sector and tax incentives for international corporations.
3. Singapore
   • Purchasing power adjusted GDP per capita: 104,731 international dollars
   • Singapore has established itself as a global financial center and trading hub.
4. Macao
   • Purchasing power adjusted GDP per capita: 97,043 international dollars
   • Macau's success is largely based on the gaming sector, which is growing again after the pandemic.
5. Qatar
   • Purchasing power adjusted GDP per capita: 90,683 international dollars
   • Qatar benefits from enormous gas and oil reserves and stable export markets.
6. United Arab Emirates
   • Purchasing power adjusted GDP per capita: 87,045 international dollars
   • The UAE has built a diversified economy that relies heavily on trade, finance and tourism.
7. Switzerland
   • Purchasing power adjusted GDP per capita: 84,655 international dollars
   • Switzerland scores points with its stability and a strong financial sector.
8. San-Marino
   • Purchasing power adjusted GDP per capita: 78,169 international dollars
   • San Marino is a small state that relies heavily on tourism and finance.
9. United States of America
   • Purchasing power adjusted GDP per capita: 75,610 international dollars
   • Despite the size of its economy and strong innovation capacity, per capita income in the United States lags behind some smaller countries.
10. Norway

• Purchasing power adjusted GDP per capita: 74,477 international dollars
• Norway has benefited from its oil reserves while at the same time establishing a high quality of life and social security.

These top 10 are characterized by high economic stability, a wealthy financial sector and, in many cases, natural resources such as oil or gas.

Germany and the challenges of recent years

Germany is now in 21st place, having lost its position within the top 20. This can be explained by several factors that have affected the country's economic dynamism in recent years:

1. High energy costs: The energy crisis triggered by the war in Ukraine has significantly increased production costs for many companies in Germany. Energy-intensive industries such as the chemical and steel industries are particularly badly affected.
2. inflationInflation in Germany has reached a record high in recent years, which has significantly weakened the purchasing power of the population. This has an impact on consumption and the quality of life of many people.
3. Global supply chain problems: Global supply chains disrupted by the pandemic and the war in Ukraine have impacted Germany's export economy. Companies are suffering from increased raw material and transport costs, which has slowed economic growth.
4. Skilled labor shortage: The shortage of skilled workers in Germany has become even more severe. Companies are having difficulty finding qualified staff, which is having a negative impact on productivity and innovation.

How the corona pandemic and geopolitical crises have changed the ranking

The effects of the coronavirus pandemic, the war in Ukraine and other geopolitical crises have had a significant impact on the global ranking of the wealthiest countries. While countries such as Macau and Qatar have been able to recover quickly from the economic consequences, other countries, including many European nations, have lost their positions.

Macau's return to the top 10 is particularly striking. The Chinese special administrative region suffered minimal economic losses due to China's pandemic measures, but recovered quickly and pushed Qatar into fifth place. Smaller countries such as San Marino and Iceland were also able to rise in the rankings.

However, Germany has lost important positions during this time. Despite this setback, however, Germany remains one of the largest economic powers in the world. The future depends on how quickly the country overcomes its economic challenges and whether it can increase the purchasing power of its population again.

Germany in international comparison

Germany's disadvantage in the ranking of the richest countries shows that GDP alone is not enough to measure a country's wealth. Countries such as Luxembourg and Ireland, which boast small populations and specialized industries, dominate the ranking, while larger economies such as Germany are more affected by global crises.

The shortage of skilled workers, high energy costs and inflation are weighing on the German economy, but with targeted reforms and a more stable global situation, Germany could regain strength. “Prosperity is not just economic performance, but also the distribution of wealth and the quality of life,” says Mannheim economics professor Tom Krebs. Germany will have to focus on improving these factors in order to regain its place among the wealthiest nations in the world.