The size of the Asia and the Pacific economy based on purchasing power parities: results from the International Comparison Program
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New results from the ICP including purchasing power parities (PPP), price level indexes and PPP-based expenditures for reference year 2017 are now available at icp.worldbank.org. This blog series, edited by Edie Purdie, covers all aspects of the ICP and explores the use made of these data by researchers, policymakers, economists, data scientists and others. We encourage users to share their data applications and findings in this blog series via [email protected].
Since the publication of the 2017 International Comparison Program’s (ICP) global results for 176 economies in May 2020, the program’s regional implementing agencies have released results and analyses covering the economies participating in their respective regions. These regional programs are the building blocks of the global program, and in this series of region-focused blogs, we highlight each to explore how the ICP is organized regionally, what the regional ICP results tell us, and what’s in store as we launch the ICP 2021 cycle.
The Asian Development Bank (ADB) has been the ICP regional implementing agency for Asia and the Pacific since the ICP 2005 cycle. ADB first released the 2017 regional ICP summary results in May 2020, covering the 22 participating economies in the region. This was followed by a comprehensive report in October 2020 detailing the methodology used and presenting estimates of 2017 and revised 2011 purchasing power parities (PPPs), total and per capita measures of PPP-based GDP and its component expenditures, and price level indexes (PLIs) showing the relative cost of living for each economy. These publications, along with a comprehensive database, are accessible via the main ADB website, as well as via the comprehensive regional ICP website which features interactive visualizations, an ICP database, ICP resources, and regional ICP events.
A snapshot of the Asia and the Pacific economy in 2017
The Asia and the Pacific region covers a unique and diverse group of economies that represent a microcosm of the globe: it includes some of the world’s most populous economies, as well as very small island economies, and landlocked economies. They also range from lower-middle-income to high-income economies with widely varying statistical capacities. The 22 economies that participated in the ICP 2017 Asia and the Pacific comparison were Bangladesh; Bhutan; Brunei Darussalam; Cambodia; China; Fiji; Hong Kong SAR, China; India; Indonesia; the Lao PDR; Malaysia; Maldives; Mongolia; Myanmar; Nepal; Pakistan; Philippines; Singapore; Sri Lanka; Taiwan, China; Thailand; and Vietnam.
Given the region’s shares of the global economy and population, Asia and the Pacific is a key contributor to the global ICP. The chart below shows that the region accounted for more than half of the world’s population in 2017. It also compares the region’s contribution to the global economy when measured using PPPs and market exchange rates (MERs). PPPs account for the different price levels between economies of traded products and non-traded products and thus provide a measure of the difference in economic outputs or volumes, while MER-based conversions take no account of price differences in non-traded goods and thus reflect differences in both volume and prices in comparisons of economic size. The chart below shows PPP-based GDP for the region accounted for around a third of the global economy, while the MER-based GDP measure resulted in Asia and the Pacific accounting for less than a quarter of the global economy in 2017. The chart also shows the PPP-based and MER-based measures of total actual individual consumption (AIC), which reflects expenditure on goods and services consumed by households, and total gross fixed capital formation (GFCF), reflecting investment. PPP-based GFCF in Asia and the Pacific accounted for over 40% of the global total, while PPP-based AIC accounted for just less than 30%. These three PPP-based expenditure aggregates show that the global shares of Asia and the Pacific are much larger when price level differences are taken into account.
Highlights of the 2017 ICP Asia and the Pacific Results
The chart below plots the PLI at the level of GDP for all economies against their PPP-based GDP per capita, with the size of each bubble representing PPP-based GDP. It shows that the richer economies tend to have the higher price levels. Among the 22 economies in the region, only Hong Kong SAR, China has a PLI higher than the world average (set to 100). Hover over the interactive chart to see the data.
Three economies in the Asia and the Pacific region were among the largest in the world in terms of share of global PPP-based GDP: China (16.4%), India (6.7%), and Indonesia (2.4%), ranking first, third, and tenth, respectively, in the world. Together, they accounted for nearly 80% of the region’s total economy and about 26% of the global economy. In contrast, the smallest of region’s participating economies—Bhutan, Fiji, and Maldives—each accounted for less than 0.01% of the global economy.
Overall, the region’s PPP-based GDP per capita was $10,210, some 38% lower than the world average of $16,596. The region is also home to two of the world’s ten richest economies: Singapore was the third richest with a PPP-based GDP per capita of $93,981 - more than fivefold the world’s average, while Brunei Darussalam ($60,282) was the tenth richest. Seven economies in the region, namely, Thailand; Maldives; Malaysia; Taiwan, China; Brunei Darussalam; Hong Kong SAR, China; and Singapore had a PPP-based GDP per capita above the world average. At the same time, Nepal’s PPP-based GDP per capita ($2,890) was 83% lower than the world’s average.
PPP-based AIC per capita is a useful measure of material well-being in a country as it reflects expenditures by individuals and households on sectors such as food, housing, health, and education, as well as the purchasing power of a consumer for the goods and services they wish to consume. Some economies in the region have a significantly smaller value for PPP-based AIC per capita than PPP-based GDP per capita. A large gap between the two may indicate high per capita levels of investments (as measured in GFCF), collective consumption by government, or a high value of net exports.
The chart below shows that while Singapore has the highest PPP-based GDP per capita in the region at $93,981, its PPP-based AIC per capita is significantly lower at $31,966. Hong Kong SAR, China has the highest PPP-based AIC per capita of $42,371 which is 29% lower than its PPP-based GDP per capita of $59,927. Pakistan and Cambodia show the smallest percentage difference between the two measures. Hover over the interactive chart to see the data and filter the view using the controls and legend.
Uses of the ICP Results
The PPPs from the ICP are used in several indicators for monitoring the Sustainable Development Goals (SDGs) of Agenda 2030 and in many other socioeconomic comparisons. Furthermore, the most recent ICP cycle provides benchmark and extrapolated data providing economic measures of total and per capita expenditures and price levels just prior to the emergence of COVID-19. The results of the forthcoming ICP 2021 cycle will be critical in assessing both the impacts of the pandemic across the world and in Asia and the Pacific, and the subsequent recovery of economies.
The ICP framework and methodology can also be applied to analyses looking at differences in expenditures and price levels within an economy. Vietnam’s General Statistics Office (GSO) undertakes subnational comparisons regularly and publishes results for its provinces via the Spatial Cost of Living Index (SCOLI). The GSO benefitted from technical assistance from ADB and the World Bank during the initiative’s early stages in 2011. Furthermore, an exploratory ADB study of producing subnational PPPs in the Philippines through integrating the ICP and the national consumer price index was published through the ADB Working Paper Series in 2011.
The participating economies have benefitted from ICP activities, and the ICP regional workshops organized by ADB have improved statistical capacity in price data collection and in the compilation of national accounts statistics (see Chapter 7 of the latest main regional report). Furthermore, statistical offices in participating economies have adopted useful ICP practices such as data validation techniques and structured product descriptions in their own price collections and national price index compilation activities. The regional workshops and trainings have also served as avenues for statistical staff to learn from the practices and experiences of other participating economies.
The 2021 ICP cycle is now underway with price collection surveys initiated in the region. ADB has conducted a series of virtual workshops in recent months for the ICP teams of participating economies to discuss the program’s conceptual framework, operational and technical guidelines, and regional work plans. Face-to-face meetings have been replaced by virtual online meetings, allowing more participants to attend, including price collectors, field supervisors, and headquarters staff members and officers. Additionally, ADB plans to continue to strengthen the statistical offices’ capacity in ICP implementation and the production of subnational PPPs, contributing to the research in comparison-resistant areas such as housing, while continuously enhancing the information technology tools needed for efficient data management and improved quality of the PPPs generated by the program.
A version of this blog is also published at the Asian Development Bank’s Asian Development Blog.
Economic income in Asia and the Pacific is still low. To this end, we should deepen reforms and fully open up; adhere to a democratic market economy, popularize education, and cultivate talents!