In terms of per capita consumption, a measure of material or economic wealth, the United States remained the highest at about $43,000 in 2019, 4.5 times the global average. Five sub-Saharan African economies had per capita spending less than one-tenth of the global average, or less than $950 per year.
The Price Level Index (PLI) is the ratio of market exchange rates to purchasing power parity, and is a measure of how expensive or cheap a country is compared to other countries. With a global average of 100, Bermuda remains the most expensive economy at GDP level with a PLI of 212, followed by the Cayman Islands, Switzerland, Norway and Iceland. Egypt was the least expensive economy in 2017, but in 2019 Sudan had the lowest PLI of 16, while Kyrgyzstan was the second cheapest at 37, behind Egypt’s 38. Sudan has experienced significant exchange rate fluctuations in recent years, which may explain some of the findings.
World Development Indicators also publishes GDP in PPP terms in 2017 US dollars, which allows us to look at the growth of the world economy from 2017 to 2019. Global GDP in purchasing power parity terms grew by 3.5% in 2018 and 2.8% in 2019. This is slightly higher than global GDP growth measured at market exchange rates (3.2% and 2.6% in 2018 and 2019, respectively). Comparisons based on market exchange rates underestimate the size of developing economies with low price levels, which typically exhibit strong economic expansion. Their growth is therefore also underestimated in analyses of world GDP growth based on market exchange rates. In a PPP-based approach, lower-middle-income economies grew by an average of 5.0% between 2017 and 2019, while low-income and upper-middle-income countries achieved average annual growth of 4.2% and 4.0%, respectively. High-income countries grew by an average of 2.0% over the period.
from now on
The World Bank’s World Economic Prospects forecast for 2020 and beyond predicts a severe economic downturn around the world. Lockdowns, restrictions on people’s movement, and business closures have disrupted the supply chains of common goods from producers to retailers to buyers, resulting in many goods becoming unavailable, in limited supply, or no longer needed by consumers, affecting prices. Spending structures for households and governments have been transformed, redefining the range of goods and services consumed.
We will continue to publish forecasts of the ICP’s main results as 2020 economic data becomes available. Moreover, while the current dataset provides a benchmark for the pre-pandemic global economy, the next cycle of the ICP will start with 2021 as the base year. The 2021 results will provide a clearer picture of the impact of the COVID-19 pandemic at a granular level and provide policymakers, economists and the development community with the tools they need to gauge the impact of this pandemic on the size of the global economy, price levels and living standards of its people.
Concepts and Methods
International comparisons of GDP and its expenditure components based on market exchange rates reflect differences in both economic output and prices. When differences in price levels are taken into account, the size of high-income countries’ economies is inflated and the size of low-income countries’ economies is reduced. Because PPP controls for differences in price levels between economies, international comparisons of GDP based on PPP reflect only differences in economic output.
For the 2018 and 2019 projections of the 2017 ICP data, economic indicators published by the WDI in July 2020 were used, and where these data were unavailable, other sources or linear projections were used to fill in the gaps. For PPP and PPP-based indicators, the WDI uses the benchmark PPP from the 2017 ICP and extrapolates to 2018 and 2019 following the methodology described here. The data presented in this blog represent the 176 economies that participated in the 2017 cycle of the ICP. The report “Purchasing Power Parity and the Size of the World Economy: Results from the 2017 International Comparison Program” provides more information on the methodology underlying the ICP results.
