The gross domestic product of a country is usually measured in its own currency – in our case it would be the euro. And then converted to US dollars to compare countries with each other. This results in the nominal gross domestic product. But it says little about how rich a country actually is. If the currency falls against the dollar, the GDP falls accordingly, without anything having changed in the economic situation.
The problem has been known for a long time, also because important economies such as China ensure that their currency is chronically undervalued against the dollar, as this creates advantages for exports. For a better comparison, there is the purchasing power adjusted gross domestic product – or in English GPS after PPP – purchasing power parity. Here the local prices of important goods are determined and this price index is taken into account. In comparison to the USA, central products in China should only cost about 60 percent.
And in this purchasing power ranking, Russia is also very different from what the mockery about the weak Russian economy would suggest. Putin’s Russia has ousted Germany from 5th place in the world rankings. This means that Russia has the strongest economy in Europe. This is all the more astonishing given that the Russian economy is being hit by massive sanctions from the western states. Despite this, the economy in Russia seems to be booming. According to the IMF, Russia’s economy is expected to grow by 0.7 percent this year, and the Kremlin is hoping for two percent.
In Germany, the low real growth is noticeable. In the current ranking of the World Bank, Germany is at 5.3 trillion US dollars and Russia at 5.32. Because of the high proportion of industrial production, Russia is likely to be well ahead of Germany in terms of “manufacturing industry”. The list also holds other surprises. In general, emerging countries are pushing ahead, while “old” industrialized countries are sinking due to the high price level. The People’s Republic of China is in first place with 30.3 trillion, the USA is clearly behind with 25.4 trillion. India follows in third place ahead of Japan (5). After Germany, Indonesia comes in 7th place, followed by Brazil in 8th place. It is also surprising that Turkey (3.18 trillion and 11th place) ranks ahead of Italy (3.05 trillion) and Spain (2.18 trillion). The information relates to 2022 and is based on the July report from the World Bank.
The ranking should not be overestimated. In the system that receives estimates, the difference between Russia and Germany is currently minimal. And of course the GDP, whether nominal or adjusted for purchasing power, does not reflect a wealth index of the inhabitants. Russia has about 140 million inhabitants, Germany 83 million. The economic output per capita looks correspondingly different. Per capita, the US is also well ahead of China, with the US population of about 330 million compared to almost five times as many Chinese (1.412 million). In order to answer the question of how rich is the average citizen or the average family in country XYZ, one would have to proceed quite differently anyway and set the median values for income and wealth in relation to the price level.
Sources: American Affairs, BNE
