Brexit Means California Could Soon Be World’s Fifth Largest Economy

June 24, 2016 by Paul Ausick

Earlier this month, the state of California’s GDP passed that of France to become the sixth largest in the world. The country just ahead of California, in fifth place, is the United Kingdom, where last year’s GDP totaled about $2.85 trillion according to the International Monetary Fund (IMF).

According to the U.S. Bureau of Labor Statistics, California’s GDP in 2015 totaled $2.46 trillion.

The U.K.’s economy was about 15% bigger than California’s, but in 2015 California’s economy grew by 4.1% while the U.K. economy grew by just 0.5%. And the U.K.’s growth is probably over, at least in the short term, thanks to Thursday’s vote to leave the European Union.

Most economics forecasts see a drop of around 3% to more than 9% in U.K. GDP by 2030 according to a report in the Financial Times. One economist who supported leaving the EU forecast a gain of 4% in GDP by 2020.

Looking at the worst possible case — a loss of 9.5% of GDP by 2030 — would drop Britain’s GDP to around $2.58 trillion over the 15-year period. That works out to a loss to GDP of around 0.7% annually for the next 15 years.

California is unlikely to grow its economy at more than 4% annually for very long, but at a compound annual growth rate of around 1%, California’s GDP would equal $2.58 trillion in just 5 years. At 1.9% annual growth, California’s GDP would top Britain’s current $2.85 trillion GDP in about 8 years.

It’s reasonable to expect that California’s GDP will be greater than the U.K.’s in less than a decade and perhaps less than half that time.

Sponsored: Attention Savvy Investors: Speak to 3 Financial Experts – FREE

Ever wanted an extra set of eyes on an investment you’re considering? Now you can speak with up to 3 financial experts in your area for FREE. By simply
clicking here
you can begin to match with financial professionals who can help guide you through the financial decisions you’re making. And the best part? The first conversation with them is free.


Click here
to match with up to 3 financial pros who would be excited to help you make financial decisions.