"The first economy of Europe." Putin’s pride was an unimportant indicator that does not describe the real volume of the economy

At a meeting with entrepreneurs of the Far East in Khabarovsk, Vladimir Putin boasted the achievements of the Russian economy:

“The Russian economy is a very, very persistent creature that can adapt, but most importantly, it grows and develops with a speed that is surprising even us. If you look at the preliminary forecast of this year, then the growth [is] 3.5% of GDP. This is significantly larger than the average ID. But here are analysts of “business Russia”, for example, they believe that now we will count everything and by the end of the year it will definitely be more than 4% of growth.

It seems that we are strangled, crushed from all sides, and we became the former in Europe in the volume of the economy as a whole, we overtook Germany and took fifth place in the world: China, USA, India, Japan, Russia. In Europe - number one. <...>

By the parity of purchasing power, we overtook the whole of Europe, but we still need to try to per capita. Therefore, there is something to work on here. ”

In August 2023, the World Bank published the next calculation of GDP of the countries of the world for purchasing power parity (PPS). Data on Russia is equipped with a note: "It is based on the official statistics of the Russian Federation, as well as the UN." But the most interesting thing is what this indicator is a PPP GDP. Commenting on this message, Russian economist Nikita Mitrofanov wrote:

“The media, especially a propaganda nature, immediately broke this statistics into the headlines in the spirit“ despite sanctions and pressure, our economy not only survived, but also ahead of Europe ”. This characteristic is quite screaming, but in the context of statistics, there are facts.

Few people understand the context of the metric, judging by the texts and news in the media. This metric does not say that our economy is stronger than European. She says that the Russian economy in this metric is higher than others.

GDP is the amount of goods, works and services created within the economy over a period of time. PPS is the ratio of the cost of the same set of goods and services in different countries, expressed in one currency. <...>

This metric compares the economic development and well -being of different countries without distortions caused by differences in the price level and fluctuations in exchange rates.

But there is a certain trick in GDP on the PPS. The indicator can be high in the country with a bad or weak economy, if in this country the prices of goods and services are low compared to the base country. For example, India has 3rd place in this metric, but this is one of the weakest countries from the point of view of GDP per capita, which shows a large population and inequality in the distribution of income.

To conduct high -quality measurement of the economy of different countries, you need to compare it with others comprehensively. According to the usual GDP, GDP per capita, GDP on the PPS, the Index of Human Development (IChR), the Happiness Index (IS) and the Index of Social Progress (ISP). ”

Vladimir Milov in the Breakfast Show program in the YouTube channel Alexander Poyshchev figuratively explained what the meaning of the indicator in which Russia was the first in Europe:

“This is a very narrow academic thing for scientists, which has nothing to do with real life. <...>

Parity of purchasing power is such a basic consumer basket, such as tomatoes, cucumbers, potatoes, that is, relatively speaking, if you get a dollar per week in your Sierra Leone, but you can buy so many battles in the market for this dollar that you, in principle, have enough to eat. This thing is called the parity of purchasing power.

For example, so that you understand right away, according to this PPS, if you recalculate GDP, then Ukraine is ahead of Portugal and Norway. <...> This means that the country with high prices, as it were, lowers artificially, and countries with low prices ... It is believed that if you can eat cheap tomatoes, then you are a rich economy.

That is, this thing is needed for a very narrow academic analysis, comparison of living standards, but to assess the size of the economy and the value of what you produce, it is not at all suitable. Just go, dial a PPP GDP there - a table of PPS GDP countries - you will see that African poor countries will become large, because there you can buy battles for a dollar so that it will be enough for a year. ”

In the list of countries according to the nominal GDP according to the IMF, Russia ranks 11th after the USA, China, Germany, Japan, India, Great Britain, France, Italy, Brazil and Canada. GDP of Germany in terms of dollars above Russian by 2.38 times.

Putin prudently silent about what place Russia occupies in GDP per capita, because the place is 63rd. From Bulgaria, where this indicator is the lowest in the EU, Russia is 19%behind. And even when using the data on the PPS, which Putin is so proud of, in the list of GDP per capita, Russia is only in 55th place, however, already higher than Bulgaria (but below all other EU countries).

As for the forecasts of economic growth for 2024, there are not only Russian ones - another subject of Putin’s pride - but also international ones. So, according to the IMF forecast published in October last year, the growth of the world economy in 2024 will be 2.9%, and the Russian one will be 1.1%.

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