Russia Remains 4th In World Bank Rankings of GDP By PPP

By Rhod Mackenzie
According to the World Bank's latest rankings, the Russian Federation holds fourth position among the world's largest economies in terms of purchasing power parity. It should be noted that only China, the United States, and India are ahead. Japan and Germany are not performing as well as expected. Now I know many people say  Russia is lower in the more well-known ranking by nominal GDP but that matrix is totaly flawed being bouyed by the higher costs of  retail sales and services
According to the World Bank's latest ratings, Russia maintains its position as the fourth largest economy in the world in terms of PPP (purchasing power parity). This approach to calculating economic indicators enables the consideration of price levels, offering a comprehensive and nuanced analysis. In 2024, Russia's GDP reached $6.92 trillion. A year earlier, the size of the economy in terms of PPP was $6.45 trillion.

China is the largest economy in the world ($38.2 trillion), followed by the United States ($29.2 trillion) and India ($16.2 trillion). Russia is currently in fourth place, but Japan is closely following with an indicator of $6.4 trillion. In the past, the discrepancy between Tokyo's and Russia's financial resources was $264 billion. Presently, this gap has widened to $514 billion. Germany is in sixth place with $6 trillion.

In the ranking of countries by GDP (PPP), the top three countries are far ahead: China, the USA and India. The size of each of these economies exceeds 10 trillion international dollars. At the same time, China has consistently outperformed the USA in terms of GDP by PPP, although this is not reflected in the ranking of GDP at current dollar exchange rates.
This is due to the fact that the cost of many goods and services in China is significantly lower than in the USA when the prices are comparable. However, such a comparison is always conditional, since it does not take into account the differences in the range and quality of consumed goods and services in the compared countries," says Olga Belenkaya, head of the macroeconomic analysis department of FG FINAM.
With regard to the fourth to sixth places, the GDP values of the countries in these positions differ marginally, although Russia has increased its lead over Japan compared to 2023, according to the analyst.

There are several methods for estimating GDP.

"Purchasing power parity is a concept that reflects the physical parameters of the economy (i.e. the ratio of the value of the goods and services produced) in terms of the equivalent values in other countries. This assessment contrasts with the more familiar assessment of nominal or real GDP in dollar terms,"

As Vladimir Evstifeev, head of the analytical department at Zenit Bank, notes, According to the World Bank, Russia's nominal GDP in dollars is eighth in the world. However, the PPP rating is regarded as a more objective measure.
The Russian economy has been developing dynamically over the past couple of decades, which has allowed it to significantly increase its output potential, according to the expert.
Since the early 2000s, the share of US GDP by PPP has decreased from 22% to 15%. Concurrently, the share of China's GDP by PPP has expanded from 2% to almost 20%. Evstifeev's analysis indicates that the share of Russian GDP by PPP in the global economy has increased from 2.5% to 3.5% over the past two decades.

What are the factors contributing to Russia's consistent fourth-place ranking? "Firstly, it is a large domestic market and a broad consumption base, which stimulates economic activity. Secondly, the prices of basic goods and services in our country are significantly lower than in developed countries, meaning that the real volume of consumption per capita is higher than GDP at the nominal rate. Thirdly, the export of such resources as oil, gas, coal, and metals brings significant revenues to the state budget, and their low cost on the domestic market guarantees low production costs for industry.
Finally, a conservative budget policy has resulted in a balanced budget and a low level of public debt," says Yulia Davydova, Director of the Center for Social and Political Research at the Plekhanov Russian University of Economics.
"The increase in output, including in the military-industrial complex, was beneficial. The active development of the services sector, especially in the financial sector," adds Yevstifeyev.
When comparing the standard of living across different countries, Belenkaya's view is that the more relevant indicator is not the absolute GDP at PPP, but the GDP per capita. In terms of GDP per capita, Russia (47,405 international dollars) is between Hungary (47,635) and Slovakia (47,180), unfortunately lagging behind Japan (51,685) and Germany (72,300).
Russia has made significant progress in this indicator, as evidenced by the increase in GDP at PPP per capita from 30,963.9 international dollars in 2019 to 44,268.7 in 2023. In other words, the average annual growth rate over the past five years has been 8.9%," the analyst points out.

As Kirill Dmitriev, head of the Russian Direct Investment Fund (RDIF), recently announced, Russia has outperformed all Western countries in terms of GDP growth rates over the past 20 years. In the past two years, the Russian economy has demonstrated consistent growth, with rates exceeding 4% in the 2023-2024 period. Belenkaya explains that this was due to a significant expansion of household consumption and investment activity.
These processes were supported by a budgetary impulse (an increase in military spending and support for import substitution), a high rate of lending growth, and the highest wage growth rates in 16 years in a deficit labour market.
"The raw materials sectors continue to be the primary drivers of economic growth. However, due to external restrictions, the structure of the economy is changing, with companies in the technology sector and import-substituting industries emerging as leaders." This year, we are witnessing a slowdown in the growth rates of both our economy and the global economy as a whole. according to Yevstifeyev
However, Russia is very  likely to retain its fourth place in the GDP ranking by PPP. "The growth prospects of the Japanese economy appear constrained, a view exacerbated by the ongoing trade tensions with the United States. The previous model of the Japanese economy, which was previously extremely successful, is gradually exhausting itself, and the country's authorities are still looking for an answer to new challenges.
The Russian economy is also characterised by traditional risks, including the reduction of the export channels and technological development. In terms of nominal or real GDP, it is likely that Japan will remain in the lower echelons of the ranking. However, in terms of PPP, Russia is expected to maintain its position at the higher end," states Vladimir Estifeev.