By Doug Short
"PIIGS" we are informed in the current Wikipedia entry "is a pejorative acronym used to refer to the economies of Portugal, Italy, Greece and Spain. Since 2008, the term has included Ireland, either in place of Italy or with an additional I."
With apologies, I am joining the ranks of contributors to such august publications as the New York Times, Wall Street Journal, Financial Times and The Economist who have used this handy label as a linguistic convenience and, I believe, with no aspersions intended.
My topic is the relative size of these five countries in a basic economic sense -- to one another and to the world as a whole. To make comparisons, I'm using GDP based on purchasing power parity (PPP). My source for the data is the IMF (International Monetary Fund), specifically the IMF's World Economic Outlook Databases.
The complete IMF database includes over 180 countries. For the chart below, I used the 58 countries with the largest GDP, which thereby includes the newcomer and smallest of the PIIGS (both in size and GDP) -- Ireland.
As an aside, anyone who is curious about the relative size of these five nations in a more conventional non-economic sense, the adjacent table arranges them in order of population along with the square miles and the GDP percent of world total. My source for geographic size and population is the Central Intelligence Agency's World Factbook.
The financial threat of Greece to the eurozone and a potential spillover to the rest of the world has, of course, been much in the news. My illustration of the relatively tiny contribution of Greece to world GDP, should not be construed as an effort to downplay the reality of the financial risk it poses. The complex financial and political interlinkage of debtors and creditors trumps an easy metric such as GDP.
The PIIGS are Big!
The bar chart above does suggest the rationale for the broader anxieties about potential risks posed by the financial stresses in Spain and Italy. To put the size issue in a broader context, consider this: The European Union, which I didn't include in the chart above, would be the largest entity if I had. It's about 4.8% larger than the U.S. based on GDP purchasing power parity. The PIIGS collectively constitute about 5.05% of world GDP, but they account for 25% of the GDP of European Union.
The world is worried about the PIIGS, and it should be.