When considering GDP as a benchmark, purchasing power must be taken into account.

(Baonghean)GDP is an indicator in the national accounts system, representing the total domestic product of each country. It is determined by various methods, but the most common, easiest to calculate, and most accurate is: GDP = C + I + G + (Ex-Im), which means = Consumption + Investment + Government spending + Net exports (exports - imports). However, this indicator can also be calculated for individual localities (mainly provinces), but all items not included in GDP generated by the province must be added up and excluded.

While GDP represents a nation's economic potential in absolute terms, it doesn't fully reflect its social development. Today, the world is paying more attention to the national happiness index. A country may not have a high GDP, but if its social welfare, security, and cultural development are highly valued, the GDP figure is more important. Conversely, a country might have a high GDP but low per capita income (like China) or high prices for goods and services compared to other countries. A high GDP might not be desirable for workers because it reflects quantitative economic growth but not qualitative social development.

Regarding GDP per capita, this is an indicator that directly reflects the living standards of the population. In fact, in most countries around the world, when considering the quality of life, people are more concerned with per capita income. Some countries have low GDP but small populations, yet their GDP per capita remains high (such as Singapore and Hong Kong). Conversely, some countries have high GDP but large populations, yet their GDP per capita remains low (such as China and India). Therefore, when evaluating a country's economic development, both GDP and GDP per capita must be considered. If GDP is high but per capita income is low, that country has not truly achieved comprehensive development. Conversely, countries with lower GDP but high GDP per capita represent the goal and expectation of most of their citizens.
When considering GDP, purchasing power in each country must be taken into account.

It's also important to note that when calculating GDP per capita, the purchasing power of money, i.e., the prices of goods and services, must be considered. When calculating GDP for a poor province, because prices (especially food prices) are low in most provinces, and the economy in these provinces still bears the mark of self-sufficiency, the real GDP (guaranteed by the quantity of goods that can be purchased) will be higher when compared to the national and international levels. For example, a cup of coffee might cost $10 USD abroad, but in Nghe An it only costs 6,000-10,000 VND, meaning the purchasing power in this exceptional case is more than 33 times higher; a bunch of water spinach for 5 people might cost $5 USD in some countries, but in the mountainous and lowland districts of Nghe An it only costs 1,000-2,000 VND. Prices for other services such as hotels and restaurants in Nghe An are low, so a foreign expert was surprised to learn that with an income of 15-20 USD/month/person, people in mountainous areas still have a normal life. Therefore, when considering GDP per capita, purchasing power parity, or real income, must be taken into account. In Vietnam, although GDP per capita is not high, if calculated according to purchasing power parity, that income must be multiplied significantly to accurately reflect and compare with the GDP of other countries in the world, especially high-income countries with high prices, such as those in Europe and America…

Dr. Duong Xuan Thao (Principal of Nghe An College of Technology and Engineering)