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Price levels
The price level index (PLI)¡ªthe ratio of a PPP to its corresponding market exchange rate¡ªis used to compare the price levels of economies. Figure 14 presents a multidimensional comparison of the index PPP-based GDP per capita of each economy relative to its GDP PLI with both measures based on the world set equal to 100.1 The filter allows a view for both 2021 and 2017.2 Each economy is represented by a circle with an area proportional to its GDP and color-coded by region. As a general observation, PLIs at the GDP level tend to be generally lower in economies with lower GDP per capita. This observation is consistent with the fact that, as an economy develops, consumers move from consuming basic goods that are also tradable to consuming more services that are not tradable. As wage rates increase, so do the costs of services, which subsequently increases the general price level.
In the case of most higher-income economies, toward the right of the figure, price levels increase very sharply with relatively small changes in GDP per capita, whereas price levels for lower-income economies increase less prominently with changes in income.
Bermuda was the most expensive economy, with a GDP PLI of 194, while the Syrian Arab Republic recorded the lowest PLI for GDP at 31.
Figure 15 charts the PLIs for major expenditure components by region and income group. It shows the high price levels prevalent in North America. It also shows both the high cost of Gross Fixed Capital Formation (GFCF) in both Sub-Saharan Africa and the low-income economies relative to other components and the low PLI for Actual Individual Consumption (AIC) in South Asia and the lower-middle-income group relative to other components.
Figure 16 shows the PLIs for 17 expenditure components alongside the PLI for GDP for each region. Across most expenditure components, South Asia recorded the lowest PLIs, while North America recorded the highest. The difference between these two regions was most pronounced for education, ranging from a PLI of 34 in South Asia to 247 in North America. In Sub-Saharan Africa, PLIs for all expenditure components, except machinery and equipment, were significantly below the world average of 100. In South Asia, the lowest PLI was recorded for health at 24, and the highest were for alcoholic beverages, narcotics, and tobacco and for machinery and equipment. Europe and Central Asia had PLIs across many expenditure components that clustered near the world average of 100 with housing and transport having the highest PLIs in the region.
In East Asia and the Pacific many components were near the global average although clothing and footwear had a PLI of 134 and food and non-alcoholic beverages a PLI of 127. In Latin America and the Caribbean many components had a price level just below the global average, with health the lowest at 27. The Middle East and North Africa had PLIs below the world average with housing the lowest at 51. In Sub-Saharan Africa the majority of PLIs were below the global average and health was the lowest at 43, along with housing with 44. In North America, PLIs for all components except machinery and equipment were above the global average, and construction was the highest at 291.
1/ PPPs are statistical estimates and should be treated as approximations of true values, subject to sampling, measurement, and classification errors. They should not be used as indicators of currency under- or overvaluation. ICP Results are based on data supplied by participating economies to the global and regional implementing agencies, and produced in accordance with ICP methodology. Results are not deemed to be national official statistics.
2/ The standard ICP methodology between the two most recent 2017 and 2021 ICP cycles has been maintained. However, in ICP 2021, the Commonwealth of Independent States (CIS) region was linked through the standard global core list approach, unlike in ICP 2017, when the CIS region was linked through the Russian Federation, which participated in both the OECD and CIS comparisons. For ICP 2017, the Russian Federation result¡¯s are based on the OECD comparison, and for ICP 2021, they are based on the CIS comparison. Furthermore, the Asia and Pacific region moved to the standard ICP approach for estimating housing PPPs based on rental and volume data during the ICP 2021 cycle. The standard approach was utilized for the revised ICP 2017 results and ICP 2021 results, both at the regional and global levels, instead of the previously utilized reference volume approach.