MOSCOW, June 1, Elena Savelyeva. In terms of purchasing power parity (PPP), the Russian economy is the fourth in the world. And this despite Western sanctions. What made it possible to achieve such a result, what are the specifics of this indicator and what it indicates — in the material .
Fourth line
The World Bank updated PPP data. Russia is in fourth place. Next come Japan and Germany. The top three are China, the USA and India.
Russian GDP at PPP in 2021 amounted to 5.7 trillion dollars, Japan — 5.6, Germany — 5.2.
The situation did not change in the next two years, according to calculations. The domestic economy grew to six trillion in 2022 and 6.45 in 2023. Japanese GDP is 5.9 and 6.3, German GDP is 5.5 and 5.9, respectively.
China remains the absolute leader — 35 trillion. The USA has 27.4, India — 14.6.
The World Bank reported at the end of 2022 that Russia has become the fifth economy in the world, displacing Germany. However, the PPP calculations were based on 2017 data, and they were updated on Thursday.
< h3 id="1949773145-2">Indicator specifics
Purchasing power parity is the cost of a certain set of goods and services in different countries. That is, the price of the commodity basket, converted at the dollar to national currency exchange rate. Used in conjunction with GDP — thereby demonstrating the real value of goods produced in the country.
Nominal GDP measures the real volume of production of goods and services without taking into account price differences. PPP takes them into account. This indicator allows us to understand the economic processes taking place in the country in dynamics. It is often more informative.
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«Gross domestic product depends on the exchange rate, domestic prices, so it is not well suited for international comparisons. GDP calculated in comparable prices for a standard set of goods and services is a different matter. It reflects real economic growth», explains Professor Galina Sorokina, Director of the Institute of Economics and Finance of the State University of Management.
“An increase in GDP can be associated both with real growth in production and with rising prices. This does not happen with PPP,” adds Pyotr Shcherbachenko, associate professor of the Department of Corporate Finance and Corporate Governance at the Financial University under the Government of Russia.
Growth PPP indicates an improvement in the quality of life of the population, increased consumer activity and overall economic well-being.
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This means increased wages, decreased unemployment, and increased demand for goods and services both within the country and in international markets, emphasizes Nikolai Pereslavsky, head of the economic research department of CM Service.
Structural changes
Russia managed to reach a good rate of GDP growth in terms of PPP during the pandemic period. Then, using a reasonable mixed tactic of restrictions and support for small and medium-sized businesses, it was possible to avoid an economic drawdown, unlike in the West, notes Galina Sorokina.
In the next two years, structural changes that occurred under the influence of sanctions allowed us to maintain our positions. Firstly, the diversification of the economy has sharply increased, including the development of the agro-industrial complex, the military industry, aircraft and shipbuilding, the IT sector and other sectors.
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"Secondly, exports to the countries of the Middle East, Africa, Latin America and, of course, China and India have increased. Thirdly, opportunities for investment potential have expanded, both internal (development of the Northern Sea Route and the entire Arctic region, modernization of the Baikal-Amur Mainline and the Trans-Siberian Railway) and external (significant projects in China, India, Africa). All this has a positive effect on the economy, which is what we have been seeing lately: we have sustainable growth, which cannot be said about many European countries,” says Ekaterina Novikova, Associate Professor of the Department of Economic Theory of the Plekhanov Russian University of Economics.
On May 8, Putin signed a decree in which he set the goal of reaching fourth place in the world in terms of GDP in PPP terms by 2030. The transition from a resource-based economic model to a highly productive one made it possible to do this earlier.
At the beginning of the year, influential international organizations that predicted long-term stagnation for Russia again rewrote their forecasts. In 2024, according to the Organization for Economic Co-operation and Development (OECD), GDP will increase by 1.8%. The November report suggested only 1.1%.
The International Monetary Fund (IMF) is even more optimistic — 2.6%. And in October they predicted only 1.1%.
The eurozone economy, according to a new OECD forecast, will grow by 0.6% this year and by 1.3% in 2025. According to the IMF — 0.8% and 1.5%, respectively.