The Big Mac Index (2020)

[Roy Baht]

 

 

Expats more than normal people are concerned with exchange rates and how those rates affect their salaries, their pensions and their purchasing power in the country where they happen to live. The "Big Mac Index" is a playful guide to global exchange rates that the Economist puts out every January using data from the previous year. It is designed to measure purchasing power parity (PPP) between nations, using the price of a McDonald's Big Mac as the benchmark. It is a flawed method. It is light-hearted. Don't go crazy.

 

(The full Economist article is here but behind a paywall)

A look at Big Macs in SE Asia
Now remember: the more a currency is undervalued against the US dollar, more purchasing Americans (or people spending USD) have in that country. So, for example, if you are choosing a retirement destination in SE Asia based solely on the price of Big Macs, Malaysia is the way to go. Also remember: the prices quoted are averages for the entire country over the course of the year 2019. So if a Big Mac today costs more than 115 baht at the McDonald's at Central Festival Pattaya, it's irrelevant. (And you should probably find a cheaper McDonald's.)

The Thai baht is 33% undervalued against the US dollar
A Big Mac costs 115 baht in Thailand and US$5.67 in the United States. The implied exchange rate is 20.28. The difference between this and the actual exchange rate, 30.28, suggests the Thai baht is 33% undervalued

The Vietnamese dong is 50% undervalued against the US dollar
A Big Mac costs 66,000 dong in Vietnam and US$5.67 in the United States. The implied exchange rate is 11,640.21. The difference between this and the actual exchange rate, 23,176.00, suggests the Vietnamese dong is 49.8% undervalued

The Philippine peso is 51% undervalued against the US dollar
A Big Mac costs 142 pesos in the Philippines and US$5.67 in the United States. The implied exchange rate is 25.04. The difference between this and the actual exchange rate, 50.58, suggests the Philippine peso is 50.5% undervalued

The Malaysian ringgit is 59% undervalued against the US dollar
A Big Mac costs 9.50 ringgit in Malaysia and US$5.67 in the United States. The implied exchange rate is 1.68. The difference between this and the actual exchange rate, 4.07, suggests the Malaysian ringgit is 58.9% undervalued

 

 

[scottiejohn]

I wonder what a "Haggis" index would look like?

[Farangwithaplan]

Now which from RAW data to GDP adjusted and see the results.

 

[Roy Baht]

Good point. GDP per person affects the numbers if you are a Thai--or a foreigner working in Thailand on a Thai salary. However, it does not affect you if you are a retired expat living in Thailand on USD from overseas.

According to GDP adjusted figures:
The Thai baht is 14% overvalued against the US dollar
The British pound is 8% undervalued against the US dollar
The Philippine peso is 10% undervalued against the US dollar
The Malaysian ringgit is 33% undervalued against the US dollar
[No GDP adjusted data for Vietnam]

 

P.S.--Malaysia still wins the cheapest Big Mac contest

Edited February 4, 2020 by Roy Baht
P.S.

[Airalee]

I have always found the Big Mac Index prices far more than the actual prices paid.  I have never seen a McDonald’s in the US that wasn’t running some sort of special that runs forever.  Kind of like mattress sales (has anybody ever paid full price?)

 

From McDonalds website currently....

 

[Roy Baht]

9 minutes ago, Airalee said:

I have always found the Big Mac Index prices far more than the actual prices paid.  I have never seen a McDonald’s in the US that wasn’t running some sort of special that runs forever.  Kind of like mattress sales (has anybody ever paid full price?)

 

From McDonalds website currently....

 

I agree.

[TallGuyJohninBKK]

1 hour ago, Roy Baht said:

A Big Mac costs 115 baht in Thailand and US$5.67 in the United States.

 

I'm seeing some online sources that say the list price for a Big Mac right now in the U.S. is $3.99, and it's the Big Mac Meal (I presume including fries and drink) that's $5.99.

 

 

Edited February 4, 2020 by TallGuyJohninBKK

[Airalee]

1 minute ago, Roy Baht said:

I agree.

It’s almost like “they” (pick your industry) always try to condition the sheep to pay higher prices rather than accept any kind of deflation after credit driven inflationary periods.

[mshs]

The Big Mac Index, like the Purchasing Power Parity is created by SJWs hellbent on making the world a better place.  Essentially, it is a benchmark to bring joy & happiness to the aggrieved.

 

 

[Henryford]

Just looked up the Big Mac price here on line 129 baht = $4, about the same as Americans are quoting above. Bearing the mind the average US salary is probably 5 x that of Thailand it makes the Big Mac massively expensive here.