Ranked: The Megaregions Driving the Global Economy
If you’ve ever flown cross-country in a window seat, chances are, the bright lights at night have caught your eye. From above, the world tells its own story—as concentrated pockets of bright light keep the world’s economy thriving.
Today’s visualization relies on data compiled by CityLab researchers to identify the world’s largest megaregions. The team defines megaregions as:
- Areas of continuous light, based on the latest night satellite imagery
- Capturing metro areas or networks of metro areas, with a combined population of 5 million or higher
- Generating economic output (GDP) of over $300 billion, on a PPP basis
It’s worth pointing out that each megaregion may not be connected by specific trade relationships. Rather, satellite data highlights the proximity between these rough but useful regional estimates contributing to the global economy—and supercities are at the heart of it.
From Megalopolis to Megaregion
Throughout history, academics have described vast, interlinked urban regions as a ‘megalopolis’, or ‘megapolis’. Economic geographer Jean Gottman popularized the Greek term, referring to the booming and unprecedented urbanization in Bos-Wash—the northeast stretch from Boston and New York down to Washington, D.C.:
This region has indeed a “personality” of its own […] Every city in this region spreads out far and wide around its original nucleus.
By looking at adjacent metropolitan areas rather than country-level data, it can help provide an entirely new perspective on the global distribution of economic activity.
Where in the world are the most powerful urban economic clusters today?
The Largest Megaregions Today
The world’s economy is a sum of its parts. Each megaregion contributes significantly to the global growth engine, but arguably, certain areas pull more weight than others.
|Megaregion||Cities||Region||Population||Economic Output (EO)||EO per Capita|
|1. Bos-Wash||New York, Washington, D.C., Boston||North America||47.6M||$3,650B||$76,681|
|2. Par-Am-Mun||Paris, Amsterdam, Brussels, Munich||Europe||43.5M||$2,505B||$57,586|
|3. Chi-Pitts||Chicago, Detroit, Cleveland, Pittsburgh||North America||32.9M||$2,130B||$64,742|
|4. Greater Tokyo||Tokyo||Asia||39.1M||$1,800B||$46,036|
|5. SoCal||Los Angeles, San Diego||North America||22M||$1,424B||$64,727|
|6. Seoul-San||Seoul, Busan||Asia||35.5M||$1,325B||$37,324|
|7. Texas Triangle||Dallas, Houston, San Antonio, Austin||North America||18.4M||$1,227B||$66,685|
|8. Beijing||Beijing, Tianjin||Asia||37.4M||$1,226B||$32,781|
|9. Lon-Leed-Chester||London, Leeds, Manchester||Europe||22.6M||$1,177B||$52,080|
|10. Hong-Shen||Hong Kong, Shenzhen||Asia||19.5M||$1,043B||$53,487|
|11. NorCal||San Francisco, San Jose||North America||10.8M||$925B||$85,648|
|12. Shanghai||Shanghai, Hangzhou||Asia||24.2M||$892B||$36,860|
|14. São Paolo||São Paolo||South America||33.5M||$780B||$23,284|
|15. Char-Lanta||Charlotte, Atlanta||North America||10.5M||$656B||$62,476|
|16. Cascadia||Seattle, Portland||North America||8.8M||$627B||$71,250|
|17. Ista-Burs||Istanbul, Bursa||MENA||14.8M||$626B||$42,297|
|18. Vienna-Budapest||Vienna, Budapest||Europe||12.8M||$555B||$43,359|
|19. Mexico City||Mexico City||North America||24.5M||$524B||$21,388|
|20. Rome-Mil-Tur||Rome, Milan, Turin||Europe||13.8M||$513B||$37,174|
|21. Singa-Lumpur||Singapore, Kuala Lumpur||Asia||12.7M||$493B||$38,819|
|22. Cairo-Aviv||Cairo, Tel Aviv||MENA||19.8M||$472B||$23,838|
|23. So-Flo||Miami, Tampa||North America||9.1M||$470B||$51,648|
|24. Abu-Dubai||Abu Dhabi, Dubai||MENA||5M||$431B||$86,200|
|25. Osaka-Nagoya (tied)||Osaka, Nagoya||Asia||9.1M||$424B||$46,593|
|25. Tor-Buff-Chester (tied)||Toronto, Buffalo, Rochester||North America||8.5M||$424B||$49,882|
|27. Delhi-Lahore||New Delhi, Lahore||Asia||27.9M||$417B||$14,946|
|28. Barcelona-Lyon||Barcelona, Lyon||Europe||7M||$323B||$46,143|
|29. Shandong||Jinan, Zibo, Dongying||Asia||14.2M||$249B||$17,535|
Altogether, these powerhouses bring in over $28 trillion in economic output.
Unsurprisingly, Bos-Wash reigns supreme even today, with $3.6 trillion in economic output, over 13% of the total. The corridor hosts some of the highest-paying sectors: information technology, finance, and professional services.
The largest city in Brazil, São Paulo, is the only city in the Southern Hemisphere to make the list. The city was once heavily reliant on manufacturing and trade, but the $780 billion city economy is now embracing its role as a nascent financial hub.
On the other side of the world, the cluster of Asian megaregions combines for $8.7 trillion in total economic output. Of these, Greater Tokyo in Japan is the largest, while Shandong might be a name that fewer people are familiar with. Sandwiched between Beijing and Shanghai, the coastal province houses multiple high-tech industrial and export processing zones.
The data is even more interesting when broken down into economic output per capita—Abu-Dubai churns out an impressive $86,200 per person. Meanwhile, Delhi-Lahore is lowest on the per-capita list, at $14,946 per person across nearly 28 million people.
Where To Next?
This trend shows no sign of slowing down, as megacities are on the rise in the coming decade. Eventually, more Indian and African megaregions will make its way onto this list, led by cities like Lagos and Chennai.
Stay tuned to Visual Capitalist for a North America-specific outlook coming soon, and a deep dive into the biggest factors contributing to the growth of these megaregions.
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News Explainer: The Economic Crisis in Sri Lanka
Sri Lanka is currently in an economic crisis with over $50 billion in debt and consumer inflation at 39%. So how did they get here?
Explained: the Economic Crisis in Sri Lanka
Sri Lanka is currently in an economic and political crisis of mass proportions, recently culminating in a default on its debt payments. The country is also nearly at empty on their foreign currency reserves, decreasing the ability to purchase imports and driving up domestic prices for goods.
There are several reasons for this crisis and the economic turmoil has sparked mass protests and violence across the country. This visual breaks down some of the elements that led to Sri Lanka’s current situation.
A Timeline of Events
The ongoing problems in Sri Lanka have bubbled up after years of economic mismanagement. Here’s a brief timeline looking at just some of the recent factors.
In 2009, a decades-long civil war in the country ended and the government’s focus turned inward towards domestic production. However, a stress on local production and sales, instead of exports, increased the reliance on foreign goods.
Unprompted cuts were introduced on income tax in 2019, leading to significant losses in government revenue, draining an already cash-strapped country.
The COVID-19 pandemic hit the world causing border closures globally and stifling one of Sri Lanka’s most lucrative industries. Prior to the pandemic, in 2018, tourism contributed nearly 5% of the country’s GDP and generated over 388,000 jobs. In 2020, tourism’s share of GDP had dropped to 0.8%, with over 40,000 jobs lost to that point.
Recently, the Sri Lankan government introduced a ban on foreign-made chemical fertilizers. The ban was meant to counter the depletion of the country’s foreign currency reserves.
However, with only local, organic fertilizers available to farmers, a massive crop failure occurred and Sri Lankans were subsequently forced to rely even more heavily on imports, further depleting reserves.
In early April this year, massive protests calling for President Gotabaya Rajapaksa’s resignation, sparked in Sri Lanka’s capital city, Colombo.
In May, pro-government supporters brutally attacked protesters. Subsequently, Prime Minister Mahinda Rajapaksa, brother of President Rajapaksa, stepped down and was replaced with former PM, Ranil Wickremesinghe.
Recently, the government approved a four-day work week to allow citizens an extra day to grow food, as prices continue to shoot up. Food inflation increased over 57% in May.
Additionally, the increasing prices on grain caused by the war in Ukraine and rising fuel prices globally have played into an already dire situation in Sri Lanka.
The Key Information
“Our economy has completely collapsed.”
Prime minister Ranil Wickremesinghe to Parliament last week.
One of the main causes of the economic crisis in Sri Lanka is the reliance on imports and the amount spent on them. Let’s take a look at the numbers:
- 2021 total imports = $20.6 billion USD
- 2022 total imports (to March) = $5.7 billion USD
In contrast, the most recent reported foreign currency reserve levels in the country were at an abysmal $50 million, having plummeted an astounding 99%, from $7.6 billion in 2019.
Some of the top imports in 2021, according to the country’s central bank were:
- Refined petroleum = $2.8 billion
- Textiles = $3.1 billion
- Chemical products = $1.1 billion
- Food & beverage = $1.7 billion
Of course, without the cash to purchase these goods from abroad, Sri Lankans face an increasingly drastic situation.
Additionally, the debt Sri Lanka has incurred is huge, further hampering their ability to boost their reserves. Recently, they defaulted on a $78 million loan from international creditors, and in total, they’ve borrowed $50.7 billion.
The largest source of their debt is by far due to market borrowings, followed closely by loans taken from the Asian Development Bank, China, and Japan, among others.
What it Means
Sri Lanka is home to more than 22 million people who are rapidly losing the ability to purchase everyday goods. Consumer inflation reached 39% at the end of May.
Due to power outages meant to save energy and fuel, schools are currently shuttered and children have nowhere to go during the day. Protesters calling for the president’s resignation have been camped in the capital for months, facing tear gas from police and backlash from president Rajapaksa’s supporters, but many have also responded violently to pushback.
India and China have agreed to send help to the country and the the International Monetary Fund recently arrived in the country to discuss a bailout. Additionally, the government has sent ministers to Russia to discuss a deal for discounted oil imports.
A Foreshadowing for Low Income Countries
Governments need foreign currency in order to purchase goods from abroad. Without the ability to purchase or borrow foreign currency, the Sri Lankan government cannot buy desperately needed imports, including food staples and fuel, causing domestic prices to rise.
Furthermore, defaults on loan payments discourage foreign direct investment and devalue the national currency, making future borrowing more difficult.
What’s happening in Sri Lanka may be an ominous preview of what’s to come in other low and middle-income countries, as the risk of debt distress continues to rise globally.
The Debt Service Suspension Initiative (DSSI) was implemented by G20 countries, suspending nearly $13 billion in debt from the start of the pandemic until late 2021.
Some DSSI and LIC countries facing a high risk of debt distress include Zambia, Ethiopia, and Tajikistan, to name a few.
Going forward, Sri Lanka’s next steps in managing this situation will either serve as a useful example for other countries at risk or a warning worth heeding.
Note: The debt breakdown in the above visual represents total outstanding external debt owed to foreign creditors rather total debt.
Interest Rate Hikes vs. Inflation Rate, by Country
Inflation rates are reaching multi-decade highs in some countries. How aggressive have central banks been with interest rate hikes?
Interest Rate Hikes vs. Inflation Rate, by Country
Imagine today’s high inflation like a car speeding down a hill. In order to slow it down, you need to hit the brakes. In this case, the “brakes” are interest rate hikes intended to slow spending. However, some central banks are hitting the brakes faster than others.
This graphic uses data from central banks and government websites to show how policy interest rates and inflation rates have changed since the start of the year. It was inspired by a chart created by Macrobond.
How Do Interest Rate Hikes Combat Inflation?
To understand how interest rates influence inflation, we need to understand how inflation works. Inflation is the result of too much money chasing too few goods. Over the last several months, this has occurred amid a surge in demand and supply chain disruptions worsened by Russia’s invasion of Ukraine.
In an effort to combat inflation, central banks will raise their policy rate. This is the rate they charge commercial banks for loans or pay commercial banks for deposits. Commercial banks pass on a portion of these higher rates to their customers, which reduces the purchasing power of businesses and consumers. For example, it becomes more expensive to borrow money for a house or car.
Ultimately, interest rate hikes act to slow spending and encourage saving. This motivates companies to increase prices at a slower rate, or lower prices, to stimulate demand.
Rising Interest Rates and Inflation
With inflation rates hitting multi-decade highs in some countries, many central banks have announced interest rate hikes. Below, we show how the inflation rate and policy interest rate have changed for select countries and regions since January 2022. The jurisdictions are ordered from highest to lowest current inflation rate.
|Jurisdiction||Jan 2022 Inflation||May 2022 Inflation||Jan 2022 Policy Rate||Jun 2022 Policy Rate|
The Euro area has 3 policy rates; the data above represents the main refinancing operations rate. Inflation data is as of May 2022 except for New Zealand and Australia, where the latest quarterly data is as of March 2022.
The U.S. Federal Reserve has been the most aggressive with its interest rate hikes. It has raised its policy rate by 1.5% since January, with half of that increase occurring at the June 2022 meeting. Jerome Powell, the Federal Reserve chair, said the committee would like to “do a little more front-end loading” to bring policy rates to normal levels. The action comes as the U.S. faces its highest inflation rate in 40 years.
On the other hand, the European Union is experiencing inflation of 8.1% but has not yet raised its policy rate. The European Central Bank has, however, provided clear forward guidance. It intends to raise rates by 0.25% in July, by a possibly larger increment in September, and with gradual but sustained increases thereafter. Clear forward guidance is intended to help people make spending and investment decisions, and avoid surprises that could disrupt markets.
Pacing Interest Rate Hikes
Raising interest rates is a fine balancing act. If central banks raise rates too quickly, it’s like slamming the brakes on that car speeding downhill: the economy could come to a standstill. This occurred in the U.S. in the 1980’s when the Federal Reserve, led by Chair Paul Volcker, raised the policy rate to 20%. The economy went into a recession, though the aggressive monetary policy did eventually tame double digit inflation.
However, if rates are raised too slowly, inflation could gather enough momentum that it becomes difficult to stop. The longer high price increases linger, the more future inflation expectations build. This can result in people buying more in anticipation of prices rising further, perpetuating high demand.
“There’s always a risk of going too far or not going far enough, and it’s going to be a very difficult judgment to make.” — Jerome Powell, U.S. Federal Reserve Chair
It’s worth noting that while central banks can influence demand through policy rates, this is only one side of the equation. Inflation is also being caused by supply chain issues, a problem that is more or less outside of the control of central banks.
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