GDP Rising Closer to Average in E Europe, Mexico, Turkey
New benchmark comparisons based on purchasing power parities (PPPs) show the level of gross domestic product per head has risen closer to the OECD average in a number of countries including Turkey, Mexico, the Slovak Republic, Hungary, Poland and the Czech Republic. Purchasing power parities (PPPs) are currency conversion rates that take into account price differences between countries. The benchmark results, released every three years, reflect a new set of price quotations for a basket of about 3000 comparable and representative goods and services that make up GDP.
For example, the OECD says, nominal per capita GDP for Denmark (based on exchange rates) appears to exceed that of the United States. But when PPPs are used (real GDP per head), Denmark’s per capita GDP turns out to be lower than that of the US. This is because the price level is higher in Denmark than in the US. Exchange rates overstate the purchasing power of Danish consumers compared to consumers in the US. The PPP conversion corrects for this bias.
The new PPP figures, produced by the OECD in conjunction with Eurostat, ROSSTAT and CISSTAT, based on the benchmark year 2005, enable a comparison of economic and consumer activity in 55 countries, including Russia and the Balkan states. They show for instance that since 2002, the previous benchmark year used for calculating PPPs, Mexico’s gross domestic product (GDP) per head rose from a level that was 37% of the OECD average to 39% in 2005.
Italy’s GDP per head fell from a level that was 5% above the OECD average to a level 4% below between 2002 and 2005. Switzerland’s GDP per head slipped from 30% to 20% above the OECD average over the same period. Meanwhile, the rising value of Norway’s oil exports helped its GDP per head jump from 45% to 65% above the OECD average.
The latest PPP calculations also show that the share of GDP represented by household consumption of goods and services can vary considerably from country to country.
The UK’s GDP per head is about 7% above the OECD average but its actual individual consumption is 20% above the average. The situation is the opposite in the Netherlands and Australia where the relative ranking of GDP per head is higher than for consumption per head.
The complete report is available at no charge from the OECD website.
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