Macroeconomic indicators. GDP.

Macroeconomic indicators. GDP

Regularly in newspapers, on the Internet and on television we see and hear the term GDP. For many people it’s an incomprehensible acronym. What is GDP and why is it so important to the financial world?

There are many different things around us: food, clothes, furniture, cars, household appliances, etc. Some of these items were brought into our country, i.e. imported, and something was produced within the country itself. And the more things were created inside the country, the richer its economy is.

Gross Domestic Product (GDP) is the value of all final goods and services produced in a year in the territory of the state.

The calculation does not take into account “intermediate” goods and services – for example, metal, from which cars are later produced. Also, all non-productive transactions – for example, payments of benefits and pensions, securities transactions, sale of used goods – are excluded from the GDP calculation.
GDP is the most important macroeconomic indicator, allowing money to assess the “strength” of the economy. If we compare GDP over different years, we can determine the dynamics – the economy is growing, stagnating or falling.

Imagine that a country is a large factory (enterprise), the more this factory produces and sells products, the more profit it makes. The GDP basically shows how much money the country earns.

An increase in GDP is considered a development indicator. For developed countries, a GDP increase of 3% per year is considered a good indicator. Laggard countries need to move even faster if they want to catch up with other countries.

In English, GDP is called Gross Domestic Product (GDP). Simon Kuznets, an American economist who came from the Russian Empire, proposed this concept in the 1930s. For that time it was an innovative idea – it turned out that “economic power” can be counted and tracked in dynamics.

GDP is divided by..:

Nominal is the value of all final goods and services in current market prices. But because of inflation, prices are rising, so nominal GDP is also rising, so it may not reflect real economic growth.

Real GDP takes into account production growth – for this purpose, the gross domestic product is considered not in current prices, but, for example, in last year’s prices. The ratio of nominal GDP to real GDP is called a deflator.

Gross domestic product can be considered both in national and foreign currency. Thus, Russian GDP can be expressed in rubles, or it can be expressed in US dollars, and this will allow comparing Russia with other countries.

For a more accurate comparison of GDP, it is possible to present purchasing power parity – in this case it is not currencies that are compared at the exchange rate, but the quantity of certain goods and services that can be bought with this money.
Counting all the final goods and services produced in a country is not an easy task. There are three methods for calculating GDP – by income, by expenditure and by value added.

Macroeconomic indicators. GDP
Some growing stacks of coins with the word GDP (gross domestic product) on it

An important economic indicator is GDP per capita. When calculating it, total GDP is divided by the number of residents. This allows an approximate representation of the average welfare of citizens. For example, China is the leader in absolute GDP (23 trillion dollars), while the USA is only second in the world (19 trillion). However, China’s population is about 1.4 billion, while the US population is 325 million. That is, the U.S. GDP is $59.495 per person per year, while in China it is only $16.624 per person per year. It becomes clear how much richer Americans are than Chinese on average.

According to the estimates of the World Bank and the International Monetary Fund, Russia is in 6th place in the world by GDP. This is the data for 2017. The table of GDP of Russia and the world countries for 2018 will be compiled only in a few months after the end of the year.

GDP of Russia and other countries in the world by purchasing power parity (according to IMF data):

  1. China $23,159.107 million
  2. US $19,390,600 million
  3. India $9,459,002 million
  4. Japan $5,428,813 million
  5. Germany $4,170,790 million
  6. Russia $4,007,831 million
  7. Indonesia $3,242,771 million
  8. Brazil $3,240,319 million
  9. Great Britain $2,914,042 million
  10. France $2,835,746 million

And here’s the list of leaders by GDP per capita.

  1. Qatar $124,927
  2. Luxembourg $109.192
  3. Singapore $90,531
  4. Brunei $76,743.
  5. Ireland $72,632
  6. Norway $70,590
  7. Kuwait $69,669
  8. United Arab Emirates $68,245
  9. Switzerland $61,360
  10. San Marino $60,35960,359.

In terms of GDP per capita, Russia ranks 48th (according to the IMF) or 53rd in the world (according to the World Bank). […]

Many governments consider GDP growth to be the main indicator of economic efficiency. The higher the GDP indicator, the more the country produces, which means that the turnover of monetary resources in the economy is also increasing. A steadily growing economy that generates money attracts investors from all over the world. Therefore, investors and economists are closely monitoring the level of GDP in different countries and in the world as a whole. And Pavel Berlinov was with you, goodbye.