“With its barriers, Tokyo led to an actual recession, and Moscow found access to friendly markets.”
The World Bank found that Russia’s economy is the fourth largest in the world in terms of purchasing power parity. The first three places are occupied by China, the USA and India, whose population and GDP are many times higher than those of our country. It would seem that only in March 2024 did President Putin announce Russia’s ability to overtake Japan and become the fourth economy in the world, but two months later this happened. How did we achieve this, and what does this result mean? Experts told MK about this.
Head of the department for working with wealthy clients of Fontvielle Investment Company Sergei Solovykh: “The GDP indicator at purchasing power parity (PPP) is really very important for understanding how, in simple words, “good” lives» the population of a particular country.
Comparing the GDP of countries in absolute terms is not always fair, because in different countries the same amount (for example, in US dollars) can purchase different quantities of goods and services. Therefore, the PPP GDP indicator more accurately reflects the purchasing power of the population and allows for a more accurate comparison of living standards in different countries.
The fact that Russia took 4th place in this indicator, ahead of Japan this year, despite the severe sanctions pressure, is an unconditional success of the Russian economy. However, it should be noted that this indicator is not the only parameter for determining the standard of living of the population. Yes, for the Russian population it is certainly positive that for the same amount (traditionally calculated in US dollars), our compatriots can afford to purchase more goods and services. However, this indicator cannot be considered in isolation from others. GDP at PPP does not always directly correlate with, for example, the Human Development Index, the Welfare Index, life expectancy and health indicators, or the Gini Coefficient (a measure of inequality in income distribution).
For example, Russia’s neighbors in terms of GDP PPP ranking are India, the USA and China. Based on the data provided by one of the most popular platforms for determining the quality of life index, Russia in this ranking ranks 66th in 2024, India 60th, China 61st, and the USA 15th. The first places are occupied by Luxembourg, the Netherlands and a number of Scandinavian countries.
On the other hand, it should be noted that an improvement in the GDP indicator based on PPP (as well as an increase in the country’s GDP as a whole) is, of course, a driver of economic and social development. An illustrative example of this thesis is China. Over the past thirty years, we can observe, in parallel with the growth of China's economy, an improvement in the quality of life of its citizens. Improvements in the economy, health care and education have contributed to an increase in the overall level of well-being of the Chinese population.»
Mikhail Zeltser, stock market expert at BCS World of Investments: «Moving in the ranking is a multifaceted process: someone can either strengthen their positions relative to competitors, or worsen. It happens both at the same time.
In this case, the revaluation is associated with the previous low expectations of international agencies regarding the possibility of transformation and adaptation of the Russian economy in the conditions of tough sanctions.
But the common phrase “not cut the bitch…» worked. With their barriers, importers of raw materials Japan and Germany led to an increase in costs within the countries, a decline in industry and an actual recession, while Russia, on the contrary, found access to friendly markets, replacing the deficit.
Russia’s 4th position on this indicator is likely to be fixed in the coming years. Many people are skeptical about GDP based on PPP, but that is their right. In terms of purchasing power parity, the country’s position has strengthened, and even biased institutions note this.”