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The richest countries in the world – and where South Africa fits in

Statistics South Africa (Stats SA) recently published updated estimates of gross domestic product (GDP) in South Africa, following a comprehensive rebasing of the data.

The stats body said this is in line with international best practices to periodically review and update the estimates of the size, structure and performance of the economy.

During this process, Stats SA included new sources of information, improved the compilation methodology, reviewed and refined the classification of economic activities, and updated the reference year.

The new base year for the national accounts is 2015 – in other words, real GDP is now measured at constant 2015 prices instead of 2010 prices as was previously the case.

As a result, the revised estimate of GDP in 2020 is now R5,521 billion, an increase of 11% compared with the previous estimate of R4,973 billion – an addition of R548 billion in estimated output. The annual growth rate for 2020 was revised from -7.0% to -6.4%.

With South Africa rebasing its GDP data, we now have a better understanding of where the country fits on a global scale.

The changes to South Africa’s placement in the global GDP ranking is not significant. The rebased GDP figure in USD (using like for like conversion) is $335.2 billion, making South Africa the 36th largest economy in the world, up from 37th ($301 billion).

 

Purchasing power

A raw conversion of South African rands to dollars doesn’t tell the full story of economic value, however. Because some countries carry a much lower cost of living, currencies like the rand have more buying power compared to major currencies like the dollar or euro.

This is the concept of purchasing power parity – the notion that, in the long run, exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services. This has been brought to the fore through things like the Big Mac Index and similar comparisons, which try to account for the buying power of local currencies.

The World Bank represents this value as the ‘international dollar’, which uses OECD data on purchasing power parity (PPP) to calculate the size of global economies relative to the US.

For 2020, South Africa’s local currency GDP number of R4.974 trillion was converted at a PPP rate of 1 international dollar = R6.933 to scale the economy to $717.4 billion. Using this metric, South Africa had the 33rd largest economy in the world before rebasing the figure.

Accounting for the rebasing of GDP, South Africa’s PPP-adjusted GDP is now $796.7 billion, pushing it one place higher to 32nd.

GDP per capita

Another measure used to better present the wealth of a country is GDP per capita.

This measure shows how a nation’s wealth is spread across the population. Countries with large populations would expect to have much higher GDP levels as there are more productive and economically active workers available.

But high GDP numbers are not necessarily indicative of a wealthy population. Average wealth in higher-GDP nations can be quite low – a marker of low productivity, high unemployment, or many other socio-economic ills.

For example, while China has an extremely high GDP number – second only to the US in raw terms – on a GDP per capita level, the nation is quite poor: $10,500 versus the USA’s $63,544.

Closer to home, in Africa, Nigeria has a much higher GDP than South Africa – $432.3 billion vs $335.2 billion (rebased) – however, spread among its massive population, the per capita figure is much lower: $2,097 vs ~$5,590 (rebased) in South Africa.

Using GDP per capita as a basis places South Africa further down the global rankings, however, ranking 83rd, showing lower productivity overall. Adjusting for PPP, South Africa’s rebased GDP per capita of ~$13,270 pushes the country even further down the rankings to 88th.


Read: Revised GDP data for South Africa adds R550 billion to estimates


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