Largest city economies in the world in 2008 and 2025

Cities tend to be ranked in size according to their populations, but to assess the relative size of their economies we also need to take account of their average income per capita levels. Doing this in a consistent and comprehensive way at a global level is challenging, but in Section III below we have pieced together data from a number of reputable sources (e.g. the OECD, the UN and the World Bank as well as national statistical agencies) to produce a ranking by GDP at Purchasing Power Parity (PPP) exchange rates of the largest 100 urban economies in the world in 2008 (updating our earlier estimates from 2005). The precise rankings are dependent on the definitions and data sources adopted, but looking at GDP gives a much better indication of relative economic size than just looking at population.

Our analysis re-emphasises the economic significance of the world’s largest cities. The top 30 such cities ranked by GDP accounted, according to our estimates, for around 18% of world GDP in 2008 and this share rises to around 30% for the top 100 cities.

At present, as Table 1.2 shows, the mega-cities of the major developed economies continue to lead the global GDP rankings, with the top six in 2008 being Tokyo, New York, Los Angeles, Chicago, London and Paris (using UN definitions). Only seven emerging economy cities are currently in the top 30 (Mexico City, Sao Paulo, Buenos Aires, Moscow, Shanghai, Mumbai and Rio de Janeiro), but our illustrative projections suggest that they will all move up the GDP rankings by 2025 and be joined in the top 30 by fast-growing cities such as Istanbul, Beijing, Guangzhou and Cairo. Tellingly, we expect the largest emerging market cities to grow at a faster rate (between 6%–7% pa) than the cities in advanced economies (ca 2%) leading to cumulative growth of up to nearly 200% for the period under investigation (2008-25). This is in contrast to advanced economy cities whose cumulative growth will be only around 35%.

According to our illustrative projections, London is projected to grow somewhat faster than leading rivals such as Tokyo, New York, and Chicago, moving up from 5th place in 2008 to 4th place by 2025. However, other ‘old Europe’ cities like Milan, Madrid and Rome seem likely to slide down the rankings as the emerging mega-city economies of Asia and Latin America rise. Smaller UK cities such as Birmingham, Manchester and Leeds, while continuing to grow at reasonable rates in absolute terms, will also tend to fall down the relative GDP rankings.

Our projections for individual cities are subject to many uncertainties, but our conclusion that the emerging economy cities as a group should increase their relative weight in the global economy seems likely to be robust. But the cities of the established developed economies should see this as more of an opportunity than a threat as it gives opportunities for them to specialise further in those areas (e.g. business and financial services, entertainment and media, fashion, cultural tourism) where they have potential comparative advantages in fast-growing global markets. Competition between cities, as between nations, should not be seen as a zero sum game.