February 2018 :: Trends and Insights
HOW IS GROWTH MEASURED IN AN ECONOMY AND WHAT IS THE OUTLOOK FOR THE GLOBAL ECONOMY IN 2018?
How is economic growth measured?
The most common way to measure economic growth in an economy is by 'real GDP'.
Gross Domestic Product (GDP) is the total market value of all the goods and services produced by an economy over a period of time.
Real Gross Domestic Product (Real GDP) removes the effects of inflation from GDP and is a better index for expressing the output of an economy.
Economic growth is usually expressed as the percentage increase in growth in a year above the previous year.
One objection to using GDP is that it doesn't include the increase of the standard of living in an economy or a country. This is not easy to measure. If there was another world war and a nation's resources were dedicated to the war effort and the unemployed drafted into the war services, it might mean an increase in the GDP, but would anyone be better off?
What is the outlook for the global economy?
Economists are predicting sustained solid growth in the world economy in 2018.
Global economic growth reached 3% in 2017 – the highest growth rate since 2011.
A number of international organizations have forecast stronger growth than expected for 2018. The World Bank and the International Monetary Fund (IMF) are expecting global growth to be from 3.1 - 3.9%.
The World Bank reported that 'broad based recovery in global growth is encouraging but this is no time for complacency'. Challenges and risk remain, including a possible change in policies in the US and China, geo-political tensions and the possibility of a trade war.
