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International Comparison Program

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ICP Methodology header
 

The ICP estimates purchasing power parities (PPPs) for the world’s economies in order to provide comparable price and volume measures of GDP and its expenditure components. PPPs convert different currencies to a common currency and, in the process of conversion, equalize their purchasing power by controlling for differences in price levels between economies.

Overall, the ICP methodology has three major components. The first is the System of National Accounts (SNA) definition of final expenditures on GDP. The second is the basket of goods and services from which items are selected for pricing: these items should be comparable across economies and should represent an important part of each economy’s final purchases. The national annual average prices or related data collected for these goods and services must be consistent with the underlying values in the national accounts. The third component is the methodology used to compute PPPs, first within regions for the regional comparisons and then across regions for the global comparison.

Each ICP comparison has a reference year, such as 2011, 2017 or 2021. Each participating economy is required to provide the following data for the reference year: a set of national annual average prices for a selection of items chosen from a common basket of precisely defined goods and services; a detailed breakdown of the national accounts expenditures in local currency units according to a common classification; the economy’s market exchange rates; and its resident population.

Data on prices and expenditures are used to calculate PPPs and real expenditures (i.e., PPP-converted expenditures). Market exchange rates and PPPs are used to calculate price level indexes. Population totals and real expenditures are used to calculate real expenditures per capita. Prices and expenditures are reported by participating economies in their local currencies. Both metrics cover the whole range of final goods and services constituting GDP.