The local currencies of Sudan and Lebanon lost about 87% and 82% of their purchasing power against the United States (US) dollar, respectively, between 2019 and 2021. Meanwhile, price levels declined in 2021 in most Arab countries in comparison with the US. These are some of the findings of a new report by the United Nations Economic and Social Commission for Western Asia (ESCWA) titled “Release of new purchasing power parities (PPP) for the Arab region: real sizes of Arab economies”.
The report provides purchasing power parities and price level indices (PLIs) for 2020 for 13 Arab countries, as well as 2021 forecasts. “With the release of this new series of PPPs, the Arab region leads the way in providing recent estimates and valuable up-to-date information for researchers and policymakers about economic challenges,” underscored Majed Skaini, Regional Programme Manager of the International Comparison Programme at ESCWA.
When comparing the PLIs of the 13 Arab countries with those of the US, the report shows, for example, that price levels in Iraq considerably decreased in 2021 as a result of the outweighing effect of the appreciation in the purchasing power of the Iraqi dinar against its market exchange rate depreciation to the US dollar. Meanwhile, in Lebanon, which has registered the highest price level increase, households required 5.5 times the amount of Lebanese pounds they used to pay in 2019 to get the same equivalence in US dollars.
Skaini explained further that a “comparison between exchange rate (XR) versus PPP-based gross domestic product (GDP) unveils the real sizes of economies and corrects for price level differences between countries.” For instance, the economic size of Egypt more than doubled in 2020, thus becoming the largest Arab economy in PPP terms, while Saudi Arabia came in second place despite having the largest economy in XR terms.
When observing the economic performance of countries through PPP-based GDP between 2017 and 2020, it appears that the Sudan witnessed the highest percentage change in real GDP value with a 20% decrease, whereas Bahrain and the United Arab Emirates maintained the same real GDP level and Egypt saw the highest percentage increase of 18%.