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Taiwan 20th richest country: IMF

September 24, 2011

The International Monetary Fund recently released economic data showing that Taiwan ranked 20th in per capita income when adjusted for purchasing power parity, much higher than it would be ranked if comparing nominal per capita GDP.
Taiwan placed higher than the United Kingdom, France, Japan and South Korea in the latest IMF ranking, released Sept. 20.
Purchasing power parity (PPP) is used to adjust exchange rates so that the rates accurately reflect each currency’s purchasing power.
The following is an excerpt of the United Daily News report on the IMF ranking based mostly on data and estimates for 2010:
According to the IMF report, Taiwan’s PPP-based per capita GDP was estimated at US$35,604 for 2010, only slightly behind 19th-ranked Germany’s US$36,081.
The U.K. ranked 21st with an estimated US$35,059 in per capita GDP on a PPP basis, and France was 23rd at US$33,910.
Japan came in 24th at US$33,885 and South Korea was two notches behind with PPP-based per capita GDP estimated at US$29,997. China was ranked 94th at US$7,544.
In 2010, the Gulf oil-producing country of Qatar replaced Luxembourg as the world’s richest country with the highest PPP-based per capita GDP of US$81,466. Qatar’s figure was almost double that of the United States, which ranked seventh at US$46,860.
The IMF report said GDP dollar estimates used in its ranking were derived from purchasing power parity (PPP) calculations prepared by various organizations, including the World Bank. It also qualified the statistics, saying PPP figures were estimates rather than hard facts.
Comparisons of national wealth are also frequently made on the basis of nominal GDP, which does not reflect differences in the cost of living in different countries.
Consequently, the IMF and the World Bank tend to use the PPP index to compare national wealth or living standards of various countries.
One popular index based on the concept is the Big Mac Index. Published by The Economist as an informal way of comparing PPP between two currencies, the index provides a test of the extent to which market exchange rates result in goods costing the same in different countries. It "seeks to make exchange-rate theory a bit more digestible."
For instance, if a Big Mac is sold for NT$100 in Taiwan and for US$4 in the U.S., it means that the exchange rate between the greenback and the local currency should be 1 to 25. In reality, the exchange rate is around 1 to 30. The gap either reflects that Taiwan’s commodity prices are relatively lower than those in the U.S. or that the value of the local currency is underestimated.
In using PPP per-capita GDP to compare Taiwan and Japan, Taiwan’s per capita income is actually higher by US$1,749. But Taiwan’s nominal GDP per capita is less than half Japan’s US$42,782. The huge difference can be attributed to the high cost of living in Japan or the overvaluation of the Japanese yen, or a combination of both.

Sept. 23, 2011 By Sofia Wu Taipei Times

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