By: Azhar Azam
GDP PPP is the gross domestic product of a country converted to US dollars using purchasing power parity rates so it has the same purchasing power as US dollar in the United States. PPP or purchasing power parity is the economic theory that is the adjustment required of the currencies or exchange rate of two different countries so that to calculate the economic strength. It is derived by dividing the cost of certain good in Currency-A by the cost of the same good in Currency-B.
In other words, we may say that it eliminates the purchasing power differences in two different currencies to and helps to calculate the price of a certain good at identical price in two different countries. For example, 01-kg of meat sold in Pakistan for PKR 800 costs US$ 10 in United States hence purchasing power parity between Pakistan and United States will be 800/10=80. This means for purchase of same weight of meat in Pakistan for PKR 80, US$ 1 would be spent in United States.
GDP PPP is the gross domestic product of a country converted to US dollars using purchasing power parity rates so it has the same purchasing power as US dollar in the United States. PPP or purchasing power parity is the economic theory that is the adjustment required of the currencies or exchange rate of two different countries so that to calculate the economic strength. It is derived by dividing the cost of certain good in Currency-A by the cost of the same good in Currency-B.
In other words, we may say that it eliminates the purchasing power differences in two different currencies to and helps to calculate the price of a certain good at identical price in two different countries. For example, 01-kg of meat sold in Pakistan for PKR 800 costs US$ 10 in United States hence purchasing power parity between Pakistan and United States will be 800/10=80. This means for purchase of same weight of meat in Pakistan for PKR 80, US$ 1 would be spent in United States.
The ‘GDP PPP’ rankings of the top 50-countries as reported by International Monitory Fund (IMF) World Economic Outlook April-2015 and World Bank are:
GDP PPP’ Ranking – 2015
The data shows that the top 50-countries have nearly 92% contribution of Total World ‘GDP PPP’ with $103,464 so rest of the world is left with just app. 8%. China and United States continues to top the rankings yet again with India, Japan, Germany and Russia following them.
If we go on to calculate the Asia’s contribution to World GDP PPP, it would be 44.12% against Europe’s 18.74% and North America’s 19.54% dominated by United States off course. The contributions of Africa and South America remain 3.02% and 5.51% respectively whilst Oceania’s Australia chips in with 1.01%.
GDP PPP per Capita
GDP PPP per Capita is calculated by dividing the GDP PPP with the population or number of individuals residing in the country. It gives a better idea as how much an individual in either United States or Pakistan has the same purchasing power parity to spend or consume. Though it may not exactly translate the living standard, well-being of the people however is anyways a good indicator of the financial space the people are available with.
According to the said source, the ranking of GDP PPP per Capita of the world is:
GDP PPP per Capita by Country - 2014
Qatar is the richest country in the world with GDP PPP per Capita of $143,427 which is 944% of World GDP PPP per Capita. The major source of its wealth is derived from oil sources. The other factors that boost Qatar’s GDP are highly developed industries such as mining, transportation, trade and financial sector. Qatar’s GDP PPP per Capita against the lowest 50-countries and lowest 100-countries is 6403% and 2730% respectively.
Luxembourg has the second GDP PPP per capita in the world having $92,049, 606% of World GDP PPP per Capita. The main sources of its wealth are iron, steel and financial sector. However it has very small population with least unemployment rate in the world.
Singapore is considered to be the third richest countries with GDP PPP per Capita of $82,762, 545% of World average GDP PPP. The key factors driving the Singapore growth are stability in economic system, trade and vibrant tourism sector. Also, the country has the highest Trade-GDP ratio showing its high dependency on Trade.
Brunei Darrusalam with $73,233 is the fourth in the world highest GDP PPP per Capita ranks which accounts for 482% of World average GDP PPP. It is another tinny populated country having rich oil and natural gas reserves. Therefore, smaller in population with excessive resources makes it reaching the top per capita GDP PPP countries.
Kuwait has a GDP PPP per capita of $71,020 which is number fifth in the world and 468% of World GDP PPP per capita. The country is rich in oil reserves and has a open trade policy which is quite attractive to the investors.
Norway, United Arab Emirates, San Marino, Switzerland, Hong Kong, United States, Saudi Arabia, Bahrain and a few others are also amongst the nations who have high GDP PPP per Capita. Over all, there are 79-countries which have GDP PPP per Capita more than average World GDP PPP whereas all other are trailing behind.
The data further reveals that the Central African Republic, Democratic Republic of Congo, Malawi, Liberia, Burundi, Niger and many other whose GDP PPP per Capita is poorest in the world. As a matter of fact, the GDP PPP per Capita of the lowest 50-countries is just $2,240 and of the lowest 100-countries is just $5,254 which is a bit more than 1.5% of Qatar. Isn’t amazing that the sum of poorest 57-countries GDP PPP per Capita gets closer to GDP PPP per Capita of Qatar?