Go to ...

Economics Gazette

Economy and Business news

RSS Feed

October 22, 2019

Living standard in Russia is similar to Bulgaria and Equatorial Guinea

Russia living standardRussia fails to reach the standard of living of developed countries. Given on the country’s gross domestic product (GDP) by purchasing power parity (PPP) per capita, Russia is in a group with Equatorial Guinea, Bulgaria and Romania. And if for some such a group is a success, then for Russia this is rather a failure. Russia lags behind the world’s leading countries. For this cannot be blamed only the “oil curse” because it did not prevent some of the countries exporting the strategic raw material from becoming the richest in the world.

For the period from 1992 to 2016, the world GDP, calculated in terms of PPP per capita, grew by about 70% – from 8,900 to 15,100 international dollars (the international dollar is a notional monetary unit used to compare macroeconomic indicators across the world).

Many countries have improved their efficiency, including Russia. For this period, Russian GDP, calculated by this method, has grown almost one and a half times – from 16,700 to 24,400 international dollars.

The analysts are exploring how the situation is changing with the uneven development of the countries. The analysis covers 175 countries. As a basis for their calculations, the experts have used World Bank statistics with a methodology that helps to equalize currency fluctuations.

It is stated that 1992 was chosen as the first in which the former Soviet republics were presented separately in the analysis. The experts identified seven clusters, each of which includes several dozen countries. The cluster approach gives an idea of ​​the country’s distribution according to the level of economic development in the world, avoiding the inconvenience associated with country rating.

According to the latest World Bank data by 2016, Russia is in the third cluster, which includes countries with GDP per capita in the range of 16,900 to 25,400 international dollars. It includes St Kitts and Nevis, Equatorial Guinea, Turkey, Latvia, Kazakhstan, Chile, Romania, Croatia, Panama, Uruguay, Mauritius, Iran, Argentina and Bulgaria.

For some countries, positioning in this cluster can be considered a success. For example, for Equatorial Guinea, which in 2017 became a member of the Organization of Petroleum Exporting Countries (OPEC). Because, for about 25 years, it has increased its GDP per capita by 19 times.

And if earlier Equatorial Guinea has been in the cluster of the poorest countries, it is now on the list of catching-up economies that seek to reach the level of developed countries in the future.

For Russia this is definitely not the best position in the world. Especially when it is reported that worldwide, the Russian Federation not only does not catch up with the leading economies, but is further behind them. It turns out that despite the increase in GDP over the years, Russia has shifted from the second cluster to the third.

The second cluster now includes countries with a GDP per capita GDP between 25,400 and 42,300 thousand international dollars. These are Belgium, Finland, Great Britain, Japan, France, Korea, Italy, Spain and others.

In 1992 and 2008 Russia was in the second cluster. In 2016, Russia again found itself in the third, but near the border with the second cluster. By the way, as the Analytical Center notes, the situation has deteriorated not only for Russia.

Low growth rates have led Japan to move in the second cluster since 1992. Between 2008 and 2016, in the second cluster fell also a number of highly developed countries of the European Union: Italy, France, Great Britain, Belgium, Finland.

Various trends are seen in the BRICS countries (Brazil, Russia, India, China, South Africa). Brazil from the third cluster in 1992 after the crises of 2000 and 2016 fell in the fourth cluster. China and India, which in 1992 were in the sixth cluster in 2016, came to the fourth and fifth cluster.

South Africa remains the fourth cluster throughout the analysis period, as despite the significant economic growth, the population is also rising at high rates, leaving GDP per capita almost constant.

The first cluster of the richest countries includes economies with GDP per capita of 42,300 international dollars. But while there were many shifts in the richest countries at the start of the study, the cluster is now less homogeneous.

In 2016, the first cluster included the UAE, Saudi Arabia and Kuwait, an oil exporter, small in size and population – Macao, Luxembourg, Singapore, Hong Kong and San Marino. It naturally includes such developed European countries as Norway, Germany, Ireland, Switzerland and the Netherlands as well as the United States and Canada.

The analysis showed that the “oil curse” is not necessarily a curse. In the list of richest countries are the largest oil-exporting economies, both within OPEC and outside of this cartel.

At the same time, not all oil exporters have increased their GDP. For example, the United Arab Emirates for this period have lowered this figure by about 35%, according to World Bank data. But the country is still on the list of the richest.

And in OPEC the situation is uneven. While Qatar, Kuwait, the United Arab Emirates and Saudi Arabia are leading economic development, Iran, Gabon, Iraq, Algeria, Ecuador, Nigeria and others are dividing their positions among less successful clusters.

There are several reasons why Russia can not repeat the success of some oil exporters. The Middle East countries have a relatively small population (resulting in high per capita figures) and a high level of production and exports per capita.

The oil production in Russia is roughly the same as that of Saudi Arabia, but domestic oil consumption is higher than that, so the spending per capita is higher.

Russia has experienced a significant boom in consumer durables from 2011 to 2014 between crises and heavy oil shocks. During this period, purchases of personal cars, computers and Internet access increased.

Leave a Reply

Your email address will not be published. Required fields are marked *