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Economic growth doesn't tell the whole story.

Some twenty-five years ago there was a modest commotion in the British press, and indeed on the streets of Rome, when it was announced that the Italian economy had reached a size bigger than the UK's. It even had a name: il sorpasso, as if to be treated as a great, historical and irreversible event.

Times have changed since then, and, while Italy is now stuck in the grip of the Eurozone's austerity squeeze, the UK is growing at a relatively quick rate, free of the one-size-fits-all straitjacket shouldered by much of the continent. Needless to say, the tables have been turned again on GDP, though it's nothing to shout about.

Moreover, as previously noted, it's not so much aggregate, national income that the average person is concerned about, though it may absorb economists. Individual or household income and its progressive purchasing power (i.e. compared to inflation) is legitimately of greater interest, which means something nearer to GDP per capita. It's just that the boffins and governments set their sights higher, namely at the numbers which tell them whether countries can pay their way. Debt and deflation have become fearful concerns.

Leaving the parochial and the slightly abstract behind a moment, last week a rather more pertinent secular change was proclaimed for the whole world, when the statisticians were said to have decided that China would overtake the US as the leading economy this year, not towards the end of this decade as was previously thought.

It's no more nor less really than many would have imagined, particularly if they are following the financial markets, and noting the insistent influence that China has had on commodity prices, as well as on the economic fortunes and investor sentiments spanning the Asian region especially.

Chinese demand

The copper market in particular -- taken to be among the most reliable of indicators of the robustness or otherwise of the international economic trend -- has been captured by the mood of traders monitoring Chinese demand, in addition to that country's ongoing, key economic data and financial policy stance.

Meanwhile, the behaviour of the emerging markets of Asia, long considered the most dynamic as a bloc, has been marked by volatility induced by US monetary pronouncements -- but in equal measure also by China's impetus to globalised trade and payments patterns.

For the Gulf, of course, the whole Asian region has been much touted as the outstanding source of export and other business potential for the foreseeable future. Likewise, investors in emerging markets will logically have a degree of portfolio exposure accordingly.

Reflections on the dragon or beasts to tackle in the east were presented here some weeks ago. Right now it's just interesting to reflect on the data that pertain to the Gulf emanating from the study alluded to above, known as the International Comparison Programme (ICP), by the World Bank.

Though published this year, this mammoth statistical compilation draws together figures for 2011, still recent enough to give a meaningful snapshot, though timed during the workout period of the global financial crisis.

While confirming the numbers comparatively for GDP totals, it does so according to the purchasing power criterion mentioned, taking account of differing currencies and price levels, so that the relative data are expressed in common terms by means of a double conversion factor.

Income distribution

It also provides the per capita version. But, moreover, it goes beyond even that pursuit of meaning to search out a better indication of what is referred to as "material well-being". One of the comprehensive tables measures specifically "active individual consumption", which qualifies the initial GDP data to pinpoint, as far as is feasible, personal usage of goods and services.

By so doing, notification is given roughly of how wealthy the populace might actually feel, in terms of living standards, rather than how wealthy is any specified country on a national basis. That may stop short of any gauge of income distribution as such (another preoccupation these days), but is nevertheless a useful advance in terms of an evidence-based perception of lifestyle conditions.

The table compiled selectively below should offer an interesting view of the relative economic prosperity of the GCC nations, at different levels.

To some extent you can take what you like as findings from the figures. For one thing, they confirm Qatar's surpassing of Kuwait in total GDP. At the same time, it's notable that world leadership in per capita GDP doesn't translate into consumption by ordinary people in their everyday spending power. That's somewhat in the nature of the energy windfall that accrued to Qatar, which so far has instead substantially powered the national finances. Equally, the translation of the UAE's smaller economy overall into higher consumption by households is also visible.

Not Earth-shattering stuff, perhaps, but helping to keep tabs on what economic growth really means.

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Publication:Gulf News (United Arab Emirates)
Date:May 4, 2014
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