Puerto Rico’s place in global GDP rankings requires cautious interpretation
Recently, the prestigious British magazine The Economist released its annual ranking comparing 178 economies using three criteria: GDP (gross domestic product) per person at market prices; second, adjusting income for differences in local prices, known as purchasing power parity, or PPP, which is the best guide to measuring the standard of living; and third, adjusting for changes in local prices and hours worked.
It should be noted that these comparisons must be taken with caution due to the conceptual and statistical limitations they may have, which affect comparability and the conclusions drawn.
For example, the editors of the Ranking exclude Ireland, due to the impact of its GDP estimate on the financial and tax transactions of large global technology companies, and Luxembourg, where income is inflated by foreign workers who commute to the country daily.
Furthermore, the ranking does not consider income inequality, asset values or social patterns, as highlighted in the analysis.
The three countries at the top of the list were Switzerland, Singapore and Norway on the first measure. Adjusted for PPP, Singapore moved up to first place, and based on the third measure, Norway took first place, as it did the previous year. The United States ranked fourth, seventh and sixth, respectively, on the three measures.
Based on the first measure, Puerto Rico’s estimated GDP per capita was $39,300, compared to $104,000 in Switzerland and $85,800 in the United States. Adjusted for the second measure of price differences (PPI), GDP per capita is $50,200, compared to $85,800 in the United States.
Using the third measure, adjusted for prices and hours worked, GDP per capita is $50,300, compared to $87,600 in the United States and $115,000 in Norway. For example, according to the IMF ranking, Puerto Rico ranks 30th in the world in GDP per capita.
In the case of Puerto Rico, there is a similar problem to that of Ireland in its GDP estimates, also affected by the tax practices of multinational companies with local subsidiaries.
So, Puerto Rico’s ranking must be evaluated in this context, as it can lead to erroneous conclusions when comparing us with other economies.
Leslie Adames, director of economic policy and analysis at Estudios Técnicos.
