IMF: China nominal per-capita GDP highest among BRIC in 2016

[esolve]

In theory you are correct if they play a large role in Russia's overall conusmption. However out of the large Russian Economy, they import about 300 billion USD total in 2014. That too large amounts of this trade were conducted/are being conducted in Ruble/other currencies where the depreciation effect was not so terrible.

In fact to have a proper picture we need to do a weighted trade study by % trade relevance to get a better picture on the effect on Russia's WPI and CPI from increased import cost (and not just go by RUB/USD depreciation % since this trade is not 100% of Russia's trade by currency).

The impact has also been mitigated by Russia's forex reserves they have accumulated over the commodity/oil boom preceding this year....since the stockpiles of USD and other major countries can be released at the appropriate rate rather than solely using the Ruble to continuously convert into fresh USD/Yen/Euro/Yuan etc...This is why you can see the Russian total forex dropped from about 450 Billion USD in total to about 320 billion USD at its lowest.

Cheaper currency through depreciation also makes a country's exports cheaper on world markets helping to offset the impact of more expensive imports. However Russia is dependent on commodity exports so cannot take much advantage of this. But they are not a super-reliant country on trade %wise.

All this means IMF has predicted relatively low inflation for Russian consumer:

Report for Selected Countries and Subjects

An average of about 6% yearly till 2020. So an assumption/implication that everyday prices in Rubles will somehow shoot up to the same extent that the Ruble has depreciated versus foreign currencies is plain wrong.

So combined with the GDP still holding and even growing in Ruble terms and purchasing power impacted very marginally...the situation is not so full of doom like some are painting here.

Nominal GDP measured in US dollars has limited use when domestic consumption and investment are concerned.

When you have high export/re-export/import reliant countries where trade forms more than 50% of GDP and even more than 100% and 200% in cases like HK, Singapore, Malaysia....yes these countries are very prone to depreciation and capital flight from market jitters and speculation (look at asian financial crisis for example). China is not so extreme like this but it is definitely up there given the economic model it has pursued over the last few decades and the resulting economic structure that is only now slowly transitioning (somewhat inevitably).

This is also part of the reason China Nominal USD figures look good compared to its PPP and the reverse is true for other countries where their trade situation/integration has been affected due to mass depreciation (Russia, Brazil) or where the trade situation/integration is still in an earlier phase of development (India).

I will repeat it again for all that think Western Sanctions have had a massive effect on Russia. Yes you have hit their elites where it hurts in many places...and you have hit the aggregate of their economy measured in US dollars (which is not a Russian currency however)....but the Russian economy in Ruble terms remains stable and solid for the average consumer...they have entered recession but it has been mitigated by low inflation, solid stable purchasing power and inner resilience of economic fundamentals and forex reserves.

Does the average Russian care so much about his/her economy now being ranked/valued much lower in USD terms? Only if they are holding massive amounts of captive wealth that they dont spend (aka elite) and which they traditionally use to buy foreign currencies etc...and they are a tiny fraction of the population.

Russia and Brazil have so far managed the impact of this recession for the large part of their domestic society which is why their purchasing power has not degraded by any significant amount....neither are they experiencing massive inflation.

Those 2 things are much more important to the common person than how much their rubles are worth in US dollars...and where their economy ranks in US dollars. With these 2 things under control in both countries....is the reason you dont see major rioting and revolution...and why Russia even has the political and economic buffer to wage war in Ukraine and now Syria.



Hope this post helps!

in short term, the depreciation of Ruble against US dollars won't make the price go up very quickly. But if Russian ruble remain this low exchange rate, .i.e, 5 years, then its price will go up steadily. In modern life, we don't only eat local food and use local services. Russians use imported industrial products(TV, Smartphones, cars, gargets, toys, clothes, blabla), use telecom services(telecom equipments/maintainances are imported), public transport(railway/publich vehicles involves foreign companies), oversea tourism, blabla. All of these will push price up.

 

[tranquilium]

What Russia has suffered also affects Europe. Standing closer to US just makes EU sink faster. What you are suffering in European continent is radical social structural changes in the near future.

He is British. You know the relationship between Britain and EU. While the sanction does have significant effect on Europeans as well, France and Germany are the ones bearing the blunt of the backlash, hence why the British is happy.

 

[Nilgiri]

in short term, the depreciation of Ruble against US dollars won't make the price go up very quickly. But if Russian ruble remain this low exchange rate, .i.e, 5 years, then its price will go up steadily. In modern life, we don't only eat local food and use local services. Russians use imported industrial products(TV, Smartphones, cars, gargets, toys, clothes, blabla), use telecom services(telecom equipments/maintainances are imported), public transport(railway/publich vehicles involves foreign companies), oversea tourism, blabla. All of these will push price up.

Yes but IMF does not predict it to be long term (look at their prediction for the deflator it peaks at about 8 - 9 % for couple years and then drops below 5% and lower by 2017).

Report for Selected Countries and Subjects

This thread is about the IMF WEO projections. If we want to talk about Russian economy outside of that we can...but then we have too many sources to consider....so it becomes difficult to analyse.

We will have to wait and see I guess.

BTW, the exact impact depends on the demand elasticity of these imports you mention. We are already seeing a massive drop in the value of imports for 2015 for Russia so they are certainly not inelastic overall to any significant degree.

Russia Imports | 1994-2015 | Data | Chart | Calendar | Forecast | News

 

[tranquilium]

And even Mexico at $9,592 and remember people are risking their lives fleeing Mexico.

This actually brought up a interesting point. Currently, GDP per capita is used as one of the main identifier of whether a country is developed or developing. This is rather misleading. Like you observed, Mexico actually has a very high GDP per capita, yet it clearly isn't performing well.

Part of the reason is, of course, Mexico's close proximity to US. US is a stronger economy than Mexico, both in absolute term and per capita. Mexico also has internal stability and security problems (largely owing to its close proximity to US too) However, on top of this:
Trade Map - List of products imported by United States of America
View attachment 263350
The leading sector of Mexico industry is vehicle manufacturing, followed by electronics and machinery. Unlike China, which the manufacturing industry is primarily domestically owned, Mexico's industry is much more dependent on foreign investment and by extension, policy change. This means Mexicans themselves have a lot less control over their economy than their GDP per capita will indicate.

 

[Nilgiri]

It is also worth to note that Mexican production is concentrated around Mexico city and the states bordering the US in the north (where manufacturing, electronics etc are located).

It is not a somewhat more homogenous mix like in China which is now getting such industry spread even into its hinterlands and interior.

This results in significant persistent + seasonal intra-migration within Mexico northwards and the U.S is simply an extension of that.

 

[esolve]

Yes but IMF does not predict it to be long term (look at their prediction for the deflator it peaks at about 8 - 9 % for couple years and then drops below 5% and lower by 2017).

Report for Selected Countries and Subjects

This thread is about the IMF WEO projections. If we want to talk about Russian economy outside of that we can...but then we have too many sources to consider....so it becomes difficult to analyse.

We will have to wait and see I guess.

BTW, the exact impact depends on the demand elasticity of these imports you mention. We are already seeing a massive drop in the value of imports for 2015 for Russia so they are certainly not inelastic overall to any significant degree.

Russia Imports | 1994-2015 | Data | Chart | Calendar | Forecast | News

we can think about one case: let's say the bus fee is 40 rubles now. You said Russia's import is going down. Let's say they stop importing buses and continue to use the old-style bus 10 years ago. Then they can still keep the bus fee as 40 rubles, which is put into CPI. While in other countries, they import buses and upgrade/renew their public buses in business, as well as increase the bus fees. Then we see that other countries are using new buses which provide better experience, but CPI or price level only consider about price but not quality/experince, so it is misleading.

This actually brought up a interesting point. Currently, GDP per capita is used as one of the main identifier of whether a country is developed or developing. This is rather misleading. Like you observed, Mexico actually has a very high GDP per capita, yet it clearly isn't performing well.

Part of the reason is, of course, Mexico's close proximity to US. US is a stronger economy than Mexico, both in absolute term and per capita. Mexico also has internal stability and security problems (largely owing to its close proximity to US too) However, on top of this:
Trade Map - List of products imported by United States of America
View attachment 263350
The leading sector of Mexico industry is vehicle manufacturing, followed by electronics and machinery. Unlike China, which the manufacturing industry is primarily domestically owned, Mexico's industry is much more dependent on foreign investment and by extension, policy change. This means Mexicans themselves have a lot less control over their economy than their GDP per capita will indicate.

the IMF report was release in October 2015, and I think they were using the data of the first half of 2015. In the second half of 2015, the mexican currency is depreciating fast, so the final GDP per capita of Mexico may be below 9000 dollar and become similar to China.

 

[Nilgiri]

we can think about one case: let's say the bus fee is 40 rubles now. You said Russia's import is going down. Let's say they stop importing buses and continue to use the old-style bus 10 years ago. Then they can still keep the bus fee as 40 rubles, which is put into CPI. While in other countries, they import buses and upgrade/renew their public buses in business, as well as increase the bus fees. Then we see that other countries are using new buses which provide better experience, but CPI or price level only consider about price but not quality/experince, so it is misleading

You are talking as though Russia is not capable of producing buses and cars and is fully reliant on imports which is not true.

Automotive industry in Russia - Wikipedia, the free encyclopedia

Consumers will simply switch to more domestic brands if the depreciation stays at this level...and these brands will get the evolving technology that they need from other countries as they need it to give the quality/experience you talk about. Russian industry is not so antiquated and insulated like in the USSR and they will simply stabilise and respond to any long term gap caused by market dynamics. Russian customers on the other hand will simply prefer whatever is the most cost effective solution and if that means forgoing persistently more expensive imports, they will forego them (especially the average consumer that is not an elite and cares about brand name and status etc). This in turn will act to reverse the depreciation. Thats the beauty of the market based system. The response velocity of this happening depends on the ease of tech transfer/legislation/IPR and specific elasticities of Russia's imports vis a vis the supply elasticities of its local producers among other factors. It may take a couple years....but this is also the relatively short time period the IMF expects as well:

Report for Selected Countries and Subjects

As you can see they expect Ruble to claw back its long term value versus other currencies like USD starting in 2016 and materializing in the figures in USD for 2017 and beyond....with no significant effect on the purchasing power of Russia which will simply utilise higher latent domestic capability during the years where they are extra-competitive. In fact the local companies in various sectors might see this as a great opportunity especially if they are not foreign-input reliant.

So again we will have to wait and see exactly how Russia's economy evolves...but its long term stability and performance should be fine.

 

[esolve]

You are talking as though Russia is not capable of producing buses and cars and is fully reliant on imports which is not true.

Automotive industry in Russia - Wikipedia, the free encyclopedia

Consumers will simply switch to more domestic brands if the depreciation stays at this level...and these brands will get the evolving technology that they need from other countries as they need it to give the quality/experience you talk about. Russian industry is not so antiquated and insulated like in the USSR and they will simply stabilise and respond to any long term gap caused by market dynamics. Russian customers on the other hand will simply prefer whatever is the most cost effective solution and if that means forgoing persistently more expensive imports, they will forego them (especially the average consumer that is not an elite and cares about brand name and status etc). This in turn will act to reverse the depreciation. Thats the beauty of the market based system. The response velocity of this happening depends on the ease of tech transfer/legislation/IPR and specific elasticities of Russia's imports vis a vis the supply elasticities of its local producers among other factors. It may take a couple years....but this is also the relatively short time period the IMF expects as well:

Report for Selected Countries and Subjects

As you can see they expect Ruble to claw back its long term value versus other currencies like USD starting in 2016 and materializing in the figures in USD for 2017 and beyond....with no significant effect on the purchasing power of Russia which will simply utilise higher latent domestic capability during the years where they are extra-competitive. In fact the local companies in various sectors might see this as a great opportunity especially if they are not foreign-input reliant.

So again we will have to wait and see exactly how Russia's economy evolves...but its long term stability and performance should be fine.

of course I know there are auto industry in Russia. I just give you an example. Even if Russia use its own brand bus, the bus factories in Russia still need to import components from abroad, which push up the bus prices. And there are many industries which Russia doesn't have or are very week. For example, telecom equipment, electronics/chip design/manufacturing, blabla. It is not easy or possible for Russia to replace foreign products with its own products in such industries.

Russia is relatively highly-industralized in developing world, many other countries simply can't have their domestic product in many industries and can't bring up their own industries.

 

[Hamartia Antidote]

This actually brought up a interesting point. Currently, GDP per capita is used as one of the main identifier of whether a country is developed or developing. This is rather misleading. Like you observed, Mexico actually has a very high GDP per capita, yet it clearly isn't performing well.

Part of the reason is, of course, Mexico's close proximity to US. US is a stronger economy than Mexico, both in absolute term and per capita. Mexico also has internal stability and security problems (largely owing to its close proximity to US too) However, on top of this:
Trade Map - List of products imported by United States of America
View attachment 263350
The leading sector of Mexico industry is vehicle manufacturing, followed by electronics and machinery. Unlike China, which the manufacturing industry is primarily domestically owned, Mexico's industry is much more dependent on foreign investment and by extension, policy change. This means Mexicans themselves have a lot less control over their economy than their GDP per capita will indicate.

The problem is it is very hard to judge things simply by statistics.
At first you'd think Mexico must be some 3rd world backwards hellhole if people are trying to leave.
As this video shows the capital is pretty nice. Seems like happy people.

Who knows what is going on behind the scenes.

 

[Nilgiri]

of course I know there are auto industry in Russia. I just give you an example. Even if Russia use its own brand bus, the bus factories in Russia still need to import components from abroad, which push up the bus prices. And there are many industries which Russia doesn't have or are very week. For example, telecom equipment, electronics/chip design/manufacturing, blabla. It is not easy or possible for Russia to replace foreign products with its own products in such industries.

Russia is relatively highly-industralized in developing world, many other countries simply can't have their domestic product in many industries and can't bring up their own industries.

Then you need to illustrate the exact % of the values of these "components" plus also show their price inelasticity w.r.t demand in Russian factory consumption.

Auto industry is not like jet engine industry where there are multiple levels of closely guarded IPR and production processes and import-only components and no supply lock methods (unless you have a huge positive political relationship/dependence with a supplier country like say Germany and Japan have with the US).

Also auto industry has very different supply chains with price-lock mechanisms for 5 years and even longer (when the supply chain is first set up) designed to mitigate such depreciation related events...especially for crucial components in an important sector like tranport/energy etc.

I am also not saying this is 100% true in every sector ( you have correctly brought up chips/electronics and there are other examples as well)....thats why Russian imports are dropping but they are not going to go below a certain "essential" amount comprised of inelastic goods and services.

What can be made domestically will become more competitive for domestic consumption (and will also be helped by becoming cheaper to export worldwide) and relieve the depreciation trend long term so that the crucial irreplaceable imports do not have such a heavy impact on the economy. Hence in probably 2 years Russia will definitely recover with its politics and economy pretty much intact....and no major almost irreversible hit on its consumers (like we saw in USSR collapse period for example) will take place in the crisis.

We already saw a Ruble bounce back in the 2015 for example till it fell again. A sustained rebound will probably happen soon...starting next year. This is also what IMF predicts.

 

[Huan]

So by 2019, on the 70th Anniversary of the founding of P.R.China, her nominal GDP will reach $16 trillion?

 

[Nilgiri]

The problem is it is very hard to judge things simply by statistics.
At first you'd think Mexico must be some 3rd world backwards hellhole if people are trying to leave.
As this video shows the capital is pretty nice. Seems like happy people.

Hence another argument for PPP over somewhat misused Nominal in USD.

 

[esolve]

You are talking as though Russia is not capable of producing buses and cars and is fully reliant on imports which is not true.

Automotive industry in Russia - Wikipedia, the free encyclopedia

Consumers will simply switch to more domestic brands if the depreciation stays at this level...and these brands will get the evolving technology that they need from other countries as they need it to give the quality/experience you talk about. Russian industry is not so antiquated and insulated like in the USSR and they will simply stabilise and respond to any long term gap caused by market dynamics. Russian customers on the other hand will simply prefer whatever is the most cost effective solution and if that means forgoing persistently more expensive imports, they will forego them (especially the average consumer that is not an elite and cares about brand name and status etc). This in turn will act to reverse the depreciation. Thats the beauty of the market based system. The response velocity of this happening depends on the ease of tech transfer/legislation/IPR and specific elasticities of Russia's imports vis a vis the supply elasticities of its local producers among other factors. It may take a couple years....but this is also the relatively short time period the IMF expects as well:

Report for Selected Countries and Subjects

As you can see they expect Ruble to claw back its long term value versus other currencies like USD starting in 2016 and materializing in the figures in USD for 2017 and beyond....with no significant effect on the purchasing power of Russia which will simply utilise higher latent domestic capability during the years where they are extra-competitive. In fact the local companies in various sectors might see this as a great opportunity especially if they are not foreign-input reliant.

So again we will have to wait and see exactly how Russia's economy evolves...but its long term stability and performance should be fine.

about PPP per capita, let's check a country cuba

In cuba, the buses, cars, modern facilities are very old, 1970's generation. Ordinary people don't have or have very very old home appliances, like TV, fridge. Ordinary families eat cheap food, and it is a bit luxury to have meat. Internet services are very limited, very few can afford. Foreign food, like cococola, are very expensive. But according to world bank, its PPP is 18796 dollars, which is just unbelievable, very unbelievable.

 

[mike2000 is back]

True. Ultimately it's size that matters. The temporary wealth concentration in Europa is odd. It won't last long. U.S. is teaching some lessons to Russia, so is to Europe.

LOL if it was only size that mattered then Europe and U.S wont stand a chance against other more larger/populous countries in Asia and Africa/Latin america.

Well, the thing is, Russia does have a lot of natural resources and even more so Land(being by far the world's largest country by size/land). Its blessed with huge reserves of natural resources like oil and gas which are among the largest in the world. That is a blessing, but it can also be a curse. Lol Since this has made Russia to be very dependent on its natural resources as well and pulls away government resources/investments towards oil and gas industries, neglecting other more crucial sectors on its economy. If one sector (exploitation of natural resources) is much more productive than the remaining part of the economy, its wages are higher and it attracts more human capital. As a consequence other sectors have to increase wages as well to get enough labor. The increase in wages lowers their competitiveness (internationally) since productivity hasn't increased in these sectors. so in conclusion it creates unbalanced growth in one single sector which kind of decreases overall competitiveness of an economy.

For example a country like Japan with smaller population than Russia and a tiny barren land mass with little to no natural resources, how do you explain that Japan has now over 5 times Russia GDP? Same with Britain, despite the fact that we have almost 3 times less people than Russia and a farrrrr smaller landmass(over 11 times smaller. lol) with little natural resources, how come we have not only farrrrrr higher living standards/GDP per capital than Russia and now over 2.5 times Russia's GDP?? Shows you just inefficient Russia is in productivity terms.

So in short size doesn't matter at all if you don't know how to use it, in this case it becomes even more of a burden than advantage. You leaders didn't adopt the one child policy for nothing, they knew if left uncontrolled it will be far more of a burden for China than vice versa. So don't always believe everything depends on size. Small Israel fought almost all Arabs countries combined during the six day war and defeated them. I don't need to say more.

 

[esolve]

The problem is it is very hard to judge things simply by statistics.
At first you'd think Mexico must be some 3rd world backwards hellhole if people are trying to leave.
As this video shows the capital is pretty nice. Seems like happy people.

Who knows what is going on behind the scenes.

if you compare it with many Chinese cities (not top-tier Chinese cities like Beijing Shanghai, but cities in the poor hinterland), you will see those Chinese cities are similar or even more nicer. But China has a smaller GDP per capita than Mexico, so city look is just one aspect.