By Ben Aris in Berlin
The Russian economy has overtaken Japan to become the fourth largest in the world in PPP terms (purchase power parity), according to revised data from the World Bank released at the start of June.
As bne IntelliNews reported in August, Russia had already overtook Germany to become the fifth biggest economy in adjusted terms. Hit by multiple shocks recently and cut off from cheap Russian gas, Germany is now stagnating and has fallen to sixth place in the World Bank’s ranking.
PPP GDP measurement is preferred by many economists, as it takes into account the difference between local prices and nominal prices similar to The Economist’s famous Big Mac inde> despair index has fallen to its lowest level ever this year – the sum of inflation, unemployment and poverty.
As a result of these changes, economists estimate that Russia’s growth potential has increased from 1-1.5% pre-war to around 3.5% now. Last year, Russia’s economic growth caught analysts off guard with a 3.6% expansion. This year the World Bank has already almost trebled its forecast for growth from 1.1% to 3.2%. Russia’s Economic Ministry is similarly bullish.
Even the World Bank’s PPP adjusted size of the economy may be an underestimate. The World Bank also estimates that 39% of Russia’s economy is in the shadows, while the shadow economy only makes up 10% of Japan’s economy, which would add an additional $2.5 trillion to Russia’s $6.4 trillion PPP adjusted economic size – still not enough to overtake India’s $14.6 trillion PPP adjusted GDP value, but widening the gap with Japan further.
