FAQs

The International Comparison Program (ICP), is the largest global statistical initiative, implemented under the auspices of the United Nations Statistical Commission (UNSC), and is aimed at estimating purchasing power parities (PPPs) to compare the real size and relative price levels of economies around the world. In the latest cycle with 2021 as the reference year, globally 176 economies participated.

This global initiative is implemented on a regional basis through the Regional Implementing Agencies. The participating economies are from Africa, Asia and the Pacific, the Commonwealth of Independent States, Latin America and the Caribbean, Western Asia, including economies participating in the regular PPP program managed by the Organisation for Economic Co-operation and Development (OECD) and the Statistical Office of the European Communities (Eurostat), with the World Bank coordinating the global program.

The Asian Development Bank (ADB) is the Regional Implementing Agency (RIA) of the regional program known as the ICP for Asia and the Pacific, and has been in this role since the 2005 ICP round and continues as the RIA since then. In the latest 2021 ICP cycle in Asia and the Pacific, 21 ADB regional members participated with ADB coordinating the regional program. As the RIA for Asia and the Pacific, ADB is responsible for estimating and publishing the regional purchasing power parities and estimates of GDP and its components. ADB is also responsible to provide relevant regional data from the participating economies to the ICP Global Office at the World Bank who is responsible to link the regional results for calculating the global PPPs and related real expenditure aggregates for all economies in the world. The 2021 ICP cycle marks ADB’s successful completion of the fourth benchmark under its stewardship, after the 2005, 2011, and 2017 benchmarks. The next ICP cycle will have 2024 as the reference year and ADB will continue to be the RIA for the Asia and the Pacific region.

In simple terms, purchasing power parity (PPP) of an economy B with reference to an economy A is defined as “the number of units of B’s currency that are needed in economy B to purchase the same quantity of individual good or service as one unit of A’s currency will purchase in economy A” (United Nations 2009, para. 15.199).

PPPs serve both as currency convertors and as spatial price deflators. They convert different currencies to a common currency and, in this process eliminate the differences in the price levels between economies.

“The most important use and main purpose of PPPs is to convert national accounts aggregates into a common currency unit after accounting for price level differences, thus allowing for comparisons of real expenditure levels of GDP and its component expenditures across economies“ (ADB 2020, 13).

“A price level index (PLI) for an expenditure aggregate is the ratio of its PPP to the exchange rate and is expressed as an index with a base of 100. For example, a PLI of 110 for an economy indicates that prices in that economy are on average 10% higher than the prices in the reference economy, whereas a PLI of 90 indicates that the prices are lower by 10% on average” (ADB 2020, 13).

The PLIs of different economies in Asia and the Pacific can also be expressed relative to the region as a whole, with the PLI of Asia and the Pacific at 100, using a normalization process that guarantees that the real values (converted using PPPs with Asia and the Pacific as the base) and nominal values (converted using exchange rates) of a given aggregate (such as GDP) are the same for the whole region. For 2021, with the PLI for household consumption for Asia and the Pacific at 100, the corresponding PLI for Hong Kong, China is 182 and the PLI for Malaysia is 83. This means that prices for household consumption aggregate in Hong Kong, China are well above the regional average but prices in Malaysia are below the regional average. It may be noted that whether the base is Hong Kong, China or the region as a whole, the price level index for household consumption in Malaysia is about half of the price level in Hong Kong, China.

Purchasing power parities serve as economically meaningful alternatives to exchange rates for compiling internationally comparable national accounts aggregates or real expenditures that fully account for differences in price levels across economies.

The PPPs produced from the ICP are used in various indicators identified for tracking progress across several Sustainable Development Goals. Among these, the primary use of PPPs is in setting the international poverty line, to track the critical global target of eliminating extreme poverty. Recently, the extreme poverty line, currently used in estimating global and regional poverty, was revised from $1.90/day at 2011 PPPs to $2.15/day (based on the PPPs from the 2017 ICP). Additionally, other SDGs also require the use of PPPs to monitor progress on income inequality, zero hunger, quality of education, healthy lives and well-being, affordable and clean energy, labor productivity, clean and environmentally-sound technologies, and sustainable cities and communities. ADB’s Corporate Results Framework, 2019–2024 integrates SDGs and some indicators related to development progress in Asia and the Pacific, includes indicators whose measurement depends on purchasing power parities.

A more detailed discussion on the uses of PPPs and PPP-based measures can be found in the publication “Purchasing Power Parities for Policy Making: A Visual Guide to Using Data from the International Comparison Program.”

Aside from PPP and PLI, the International Comparison Program (ICP) also publishes the following data at the level of GDP and its components.

1. Real expenditure: Measures obtained by using PPPs to convert final expenditures of different economies into a common currency, by valuing them at a uniform price level. Expenditures so converted reflect only volume differences between economies. They provide a measure of the relative magnitudes of the product groups or aggregates being compared. At the level of GDP, they are used to compare the sizes of economies. They may be presented either in terms of a common currency or as an index number.
2. Nominal expenditure: The term nominal expenditure is used when exchange rate is used for conversion. As exchange rate simply convert aggregates into a common currency unit but do not necessarily reflect differences in prices across economies, exchange-rate converted aggregates are termed “nominal” aggregates.”. Nominal expenditure may be presented either in terms of a common currency or as an index number relative to the region's total nominal expenditure.
3. Per capita (real or nominal) expenditure: Total expenditure divided by the total population of a given economy. Per capita expenditure measures the standard of living in an economy. This can be expressed either in real or nominal terms. The per capita expenditures are also published as indexes with reference to Hong Kong, China as the reference economy along with indexes with Asia and the Pacific average as the reference.
4. Economy share of (real or nominal) expenditure in Asia and the Pacific: An economy's real or nominal expenditures for an aggregate, expressed as a percentage of the total real or nominal expenditure of all participating economies in Asia and the Pacific..

These indicators are published for GDP and its components as follows:

Gross Domestic Product
Actual Individual Consumption by Households^a
Food and non-alcoholic beverages
    Food
        Bread and cereals
        Meat
        Fish and seafood
        Milk, cheese and eggs
        Oils and fats
        Fruit
        Vegetables
        Sugar, jam, honey, chocolate and confectionery
        Food products n.e.c.
    Non-alcoholic beverages
Alcoholic beverages, tobacco and narcotics
    Alcoholic beverages
    Tobacco and narcotics
Clothing and footwear
Housing, water, electricity, gas and other fuels^a
Furnishings, household equipment and routine household maintenance
Health^a
Transportation
    Purchase of vehicles
    Transport services
Communication
Recreation and culture^a
Education^a
Restaurants and hotels
Miscellaneous goods and services^a
Net purchases abroad
Individual Consumption Expenditure by Government
Collective Consumption Expenditure by Government
Gross Capital Formation
Gross fixed capital formation
    Machinery and equipment
    Construction
    Other products
Changes in inventories
Acquisitions less disposals of valuables
Balance of Exports and Imports

Individual Consumption Expenditure by Households^b
Individual Consumption Expenditure by Households without Housing^b
Government Final Consumption Expenditure
Domestic Absorption
Total Consumption

^a Includes individual consumption expenditure by households, nonprofit institutions serving households, and government.
^b Includes expenditure by nonprofit institutions serving households.

“There are three approaches to measuring GDP: the production approach, the income approach, and the expenditure approach, all yielding same results. For the purposes of the ICP, the expenditure approach is preferred because the collection of prices and GDP expenditure components is more feasible. Also, the expenditure side provides more direct measures of the standards of living of people residing in the participating economies.” (ADB 2020, 13).

“The ICP completed more than 50 years in 2018 since its inception in 1968 with 1970 as the reference year. In 1970, the first phase of the ICP covered only 10 economies, steadily increasing to 16 in 1973 and 34 in 1975, 60 in 1980, and 64 in 1985, and 115 economies in 1993. The ICP covered 146 economies in the 2005 cycle, when the ICP adopted a new global governance, with national statistical offices responsible for price and national accounts data, regional agencies coordinating regional activities, and the World Bank coordinating the global program. The 2011 ICP round was the largest ever conducted. It included 177 economies participating at the full economy level, covering all components of GDP, and an additional 22 economies covering only the household consumption aggregate. With 176 participating economies, the latest 2017 ICP cycle covers more than 99% of the world population and the world’s economic activity and is thus justifiably recognized as a global statistical program” (Asian Development Bank 2020, 2).

“During its 47th session in March 2016, the UNSC considered the evaluation report of the 2011 ICP by the Friends of the Chair group and accepted its recommendation to establish the ICP as a permanent element of the global statistical work program, to be conducted more frequently, which led to the decision to implement the ICP every three years, beginning with 2017. Accordingly, the 2020 was the next reference year, however, it was postponed to 2021 in the wake of the COVID-19 pandemic” (Asian Development Bank 2020, vii).