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February 20, 2010

Implied PPP and Big Mac Exchange Rates for Brazil, India, Russia, and China

Goldman Sachs has predicted that Brazil, Russia, India and China (BRIC's) are the countries with the most promising economic growth prospects The BRICs also performed the best during the latest financial crisis.

China has been singled out by economists and the US government as having an undervalued currency. An implication is that over the years as the currency exchange rates approach fair value then the economies with undervalued currencies will be larger with future exchange rates.

The Big Mac index approximates PPP (Purchasing Power Parity), but does not measure India because of the lack of beef consumption.

By PPP measures China, Russia and India should have a lot of currency appreciation over the next few years for China, Brazil and Russia and a bit longer for India. (India is at an earlier development stage and will take longer to get currency appreciation) Brazil will have a little less from PPP but with increasing oil production will have a boost from the strength in the value of commodities (Russia gets a similar boost from commodity prices).

China Yuan Implied exchange rate 3.5 yuan to 1 USD (48% undervalued)
Russia Ruble Implied Exchange rate 18.8 rubles to 1 USD (37% undervalued)
India has an implied 16.164 (65% undervalued)
Brazil has an implied 1.51 (20% undervalued)

China should have double its current economy when exchange rates are fair value. Russia's economy should be 60% larger. India's economy should be nearly triple and Brazil's economy should be 20-25% larger.



The Implied PPP Conversion Rate for India is 16.165

GDP Per Capita (Current Prices, National Currency) INR 47,402.87 .
GDP Per Capita (Current Prices, US Dollars) US$ 1,032.71
Output Gap, Percent of Potential GDP -
GDP (PPP), US Dollars US$ 3,528.61 Billion
GDP Per Capita (PPP), US Dollars US$ 2,932.49
GDP Share of World Total (PPP) 4.946 %

The current US dollar to Indian Rupee exchange rate is 46 rupee to one dollar

Economy watch has a profile of Russia

GDP Per Capita (Current Prices, National Currency) RUB 290,703.77 .
GDP Per Capita (Current Prices, US Dollars) US$ 8,873.61
Output Gap, Percent of Potential GDP -
GDP (PPP), US Dollars US$ 2,126.39 Billion
GDP Per Capita (PPP), US Dollars US$ 15,039.05
GDP Share of World Total (PPP) 3.327 %
Implied PPP Conversion Rate 19.33

Economy Watch profile of Brazil

GDP Per Capita (Current Prices, National Currency) BRR 15,796.24 .
GDP Per Capita (Current Prices, US Dollars) US$ 7,737.32
Output Gap, Percent of Potential GDP -
GDP (PPP), US Dollars US$ 2,002.04 Billion
GDP Per Capita (PPP), US Dollars US$ 10,455.60
GDP Share of World Total (PPP) 2.868 %
Implied PPP Conversion Rate 1.511

Economy watch profile of China

GDP Per Capita (Current Prices, National Currency) RMB 24,379.10 .
GDP Per Capita (Current Prices, US Dollars) US$ 3,565.73
Output Gap, Percent of Potential GDP -
GDP (PPP), US Dollars US$ 8,734.71 Billion
GDP Per Capita (PPP), US Dollars US$ 6,546.30
GDP Share of World Total (PPP) 12.054 %
Implied PPP Conversion Rate 3.724

BRICs in the Future

BRIC GDP forecast from goldman Sachs

Gross Domestic Product (nominal) [2006-2050] (in US$ trillions)
Country 2010  2015   2020   2025   2030   2035   2040    
USA    14.5  16.2    18.0   20.1   22.8   26.1   29.8
China   4.7   8.1    12.6   18.4   25.6   34.3   45.0 
Japan   4.6   4.8     5.2    5.6    5.8    5.9    6.0 
Germany 3.1   3.3     3.5    3.6    3.8    4.0    4.4
UK      2.5   2.8     3.1    3.3    3.6    3.9    4.3
France  2.4   2.6     2.8    3.1    3.3    3.6    3.9 
Italy   1.9   2.1     2.2    2.3    2.4    2.4    2.6 
Russia  1.4   1.9     2.6    3.3    4.3    5.3    6.3 
India   1.3   1.9     2.8    4.3    6.7    10.5  16.5
Brazil  1.3   1.7     2.2    2.8    3.7     5.0   6.6 
Canada  1.4   1.6     1.7    1.9    2.1     2.3   2.6 




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