After Statistics South Africa (Stats SA) released updated estimates of gross domestic product (GDP) in South Africa, following a complete rebasing of the data, we now have a better understanding of where there is ‘South Africa in the richest countries of the world. .
The richest countries in the world
Enterprise technology writes that the revised estimate of GDP in 2020 is now R5.521 billion, an increase of 11% from the previous estimate of R4.973 billion, an addition of R548 billion to output estimated. The annual growth rate for 2020 has been revised from -7.0% to -6.4%.
The rebasing of the GDP figure in USD (using a comparable conversion) is $ 335.2 billion, making South Africa the 36th largest economy in the world, up from 37th ($ 301 billion). While South Africa is in 36th place between Malaysia (35) and Bangladesh (37), the top 10 looks like this:
- United States
- Korea, Rep.
- Russian Federation
Purchasing power parity
GDP alone does not necessarily give us the full picture of economic value. It is reported that currencies like the rand have more purchasing power compared to major currencies like dollar or euro due to the concept of purchasing power parity (PPP).
This is what the Big Mac Index is trying to calculate. Since July 2021, The Economist updated its Big Mac Index, showing how the rand continues to be one of the most undervalued currencies in the world, against the US dollar.
The Big Mac Index
In a previous article, Enterprise technology writes that the Big Mac is selected for comparison because the popular fast food meal is widely available and remains fairly consistent in price; however, this is by no means an exact measurement even though it has become a worldwide standard.
What they found was that a Big Mac costs Rand 33.50 in South Africa and $ 5.65 in the United States. The implied exchange rate is R5.93 per dollar. The difference between that and the real exchange rate – 14.66 rand to the dollar at the time of the report – suggests that the rand is undervalued by 59.6%, which is the third most undervalued currency measured by l index in July.
The gross index does not tell the whole story of currency valuation, however. Therefore, due to PPP, the cost of producing a Big Mac is cheaper in poorer countries, and that is why The economist fper capita GDP actors – to draw a more precise conclusion.
A simple price comparison
“It should be emphasized that it is common for poor countries to appear cheap compared to rich countries in a simple price comparison.” The Economist said, noting that in most countries, “the price of a burger is about what you would expect given the country’s GDP per person.”
In the group’s adjusted index, the South African currency is still significantly undervalued (7th), but less than when it comes to simple conversion data.
In PPP terms, a Big Mac costs 59.2% less in South Africa ($ 2.28) than in the United States ($ 5.65) at market exchange rates.
Based on the differences in GDP per person, the index suggests that the rand is undervalued by 29.6% and is expected to be around 10.32 rand to the dollar.
The Hong Kong dollar is said to be the most undervalued currency against the US dollar, by up to 45.7%.