California has slipped to the fifth-largest economy in the world, according to the latest data released by the International Monetary Fund (IMF) on Tuesday. The state’s economy, which was generating goods and services at an annual rate of $4.215 trillion in the second quarter of 2025, fell behind Japan, whose economy reached $4.28 trillion, as reported by the Orange County Register.
The Golden State had previously held the fourth position, a spot it gained in 2024 when it surpassed Japan. California’s economy grew by 5% over the past year, but Japan’s economy grew by 6.5%, allowing it to reclaim the fourth spot. The IMF’s latest estimates indicate that the United States remains the largest economy at $30.6 trillion, followed by China at $19.4 trillion and Germany at $5 trillion.
Governor Gavin Newsom previously celebrated California’s rise in the global rankings, attributing the state’s success to investments in people, sustainability, and innovation. However, he has also raised concerns about federal policies, such as tariffs, that could impact the state’s economic growth.
Looking ahead, California faces competition from India, which is close behind with a GDP of $4.125 trillion. The IMF projects that India may surpass California by 2026. Despite the slip in rankings, California remains a significant contributor to the U.S. economy, leading in sectors such as agriculture, manufacturing, and technology.
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