Facing constraints on public resources and fiscal space, while recognizing the importance of investment in infrastructure to help their economies grow, governments are increasingly turning to the private sector as an alternative additional source of funding to meet the funding gap. While recent attention has been focused on fiscal risk, governments look to the private sector for other reasons:.
Development, bidding and ongoing costs in PPP projects are likely to be greater than for traditional government procurement processes - the government should therefore determine whether the greater costs involved are justified. For example, purchasing power parity is often used to equalize calculations of gross domestic product. Because purchasing power can vary from country to country, the statistic for GDP based on purchasing power parity is often different than nominal GDP — GDP as described by currency exchange alone.
This is important because currencies that are over or undervalued according to PPP are likely to correct over time, leading to potential economic impacts and long-term fluctuations in the exchange rate. PPP helps provide some predictability to these economic impacts.
When projects are well executed, the monetary rewards for companies involved in PPPs are significant and long-lasting. When partnering with the public sector, companies can work with courts, prisons, schools or waste management services. And if projects are well run and they achieve their stated aims, these partnerships can last for decades. The five key advantages of public —private partnerships What is a PPP? PPPs can have major benefits for both sides — public and private: 1.
Access to finance When governments are cash poor, PPPs can offer access to private capital. Access to technology, people and skills For the public sector, one of the greatest advantages of a PPP is the access it provides to modern technology, management and skills from the private sector. Transfer of risk The balance between cost and risk for the public sector and risk and reward for the private sector is the nub of all PPP projects.
Investment opportunities Without PPPs, few private companies would have the chance to work on major capital infrastructure projects, helping them to develop knowledge, experience and skills, which they can then constructively reapply back into the private sector.
Business development When partnering with the public sector, companies can work with courts, prisons, schools or waste management services. For further insight, please email editor capitalinsights. Select personalised ads.
Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. One popular macroeconomic analysis metric to compare economic productivity and standards of living between countries is purchasing power parity PPP.
According to this concept, two currencies are in equilibrium—known as the currencies being at par —when a basket of goods is priced the same in both countries, taking into account the exchange rates. The relative version of PPP is calculated with the following formula:. To make a meaningful comparison of prices across countries, a wide range of goods and services must be considered. However, this one-to-one comparison is difficult to achieve due to the sheer amount of data that must be collected and the complexity of the comparisons that must be drawn.
With this program, the PPPs generated by the ICP have a basis from a worldwide price survey that compares the prices of hundreds of various goods and services. The program helps international macroeconomists estimate global productivity and growth. Every few years, the World Bank releases a report that compares the productivity and growth of various countries in terms of PPP and U.
Also, some forex traders use PPP to find potentially overvalued or undervalued currencies. Investors who hold stock or bonds of foreign companies may use the survey's PPP figures to predict the impact of exchange-rate fluctuations on a country's economy, and thus the impact on their investment. In contemporary macroeconomics, gross domestic product GDP refers to the total monetary value of the goods and services produced within one country.
Nominal GDP calculates the monetary value in current, absolute terms. Real GDP adjusts the nominal gross domestic product for inflation. This adjustment attempts to convert nominal GDP into a number more easily comparable between countries with different currencies.
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