Gross Domestic Product

The Gross Domestic Product is the monetary value of final goods and services produced by an economy in a given period of time.

The word gross means that certain values are not calculated; these values are: variation in inventories and capital depreciations or appreciations.

The word domestic indicates production within the geographical boundaries of a given economy and

The word product refers to an added value.

How is the Gross Domestic Product calculated?

Three equivalent theoretical methods are used to calculate GDP: (1) Expenditure Method, (2) Income Method, and (3) Added Value Method.

Expenditure Method

The GDP is the sum of all expenditures made for the acquisition of end product goods or services produced within a given economy; this means that the acquisition of intermediate goods and services is excluded, as are imported goods or services.

Added Value Method

The GDP is the sum of the added values in the different production stages in every sector of the economy. The added value created by a business in the production process is equal to the value of its production minus the value of the intermediate goods.

Income Method

The GDP is the sum of the earnings of salaried employees, profits made by businesses, and taxes minus any grants. The difference between the value of a company’s outputs and the intermediate goods ends up in one of the three following categories: workers; in the form of labor income, businesses; in the form of benefits, or the State; in the form of indirect taxes, such as the VAT (Value Added Tax).

Nominal GDP versus real GDP

It must be kept in mind that production is measured in monetary terms; because of this, inflation can cause the nominal measurement of the GDP to be bigger from one year to the next, while at the same time the real GDP is unchanged. To solve this problem, the real GDP is calculated by deflating the nominal GDP through a price index, or, to be more exact, a GDP deflator is applied. A GDP deflator is a price index that includes every produced good.

To make international comparisons, the GDP can be expressed in US dollars. Since exchange rates tend to be very unstable, this measurement is affected by the exchange rate fluctuations. To solve this problem, economists use another method to conduct international comparisons, which consists of deflating the GDP by using the purchasing power parity (better known as PPP).

Domestic Product versus National Product

In the case of the Gross Domestic Product (GDP), the added value within a country is calculated. In the case of the Gross National Product (GNP), the value added by the nationally owned production factors is calculated.

Gross Product versus Net Product

The difference between the gross product and national product is the depreciation of the capital. Gross Product does not consider the depreciation of the capital, while the Net Product does, in fact, use it for calculating the total.

Product Per Capita

The GDP per capita is the average amount of Gross Product per person. It is calculated by dividing the total GDP by the number of people living in a given economy.

What is wrong with the GDP?

The use of the GDP per capita as a measurement of well being is generalized, but the Gross Domestic product might not be the best way to measure well-being. Here is why:

  • The GDP does not take capital depreciation into account (this includes machinery, factories, etc. as well as natural resources; and “human capital” could also be included). For instance, a country can increase its GDP by intensively exploiting its natural resources, but the countries´ capital will diminish, leaving decreased capital for future generations.
  • It does not consider negative externalities generated by some production activities, for instance: environmental pollution.
  • The distribution of income is not taken into account. The inhabitants of a country with the same per capita GDP as another country but with a more equitable distribution of its income will enjoy an increased level of well being.
  • The GDP does not take into consideration productive activities that affect well being but do not generate transactions, for instance, volunteer work or stay-home parents.
  • Some activities that negatively affect well being can actually increase the GDP, for instance, divorces, crimes and war.
  • The GDP ignores external debt. The GDP of a country will increase if the government or the businesses within its boundaries take on loans from foreign entities. Obviously, this would cause a diminished GDP in future periods.

Gross Domestic Product: Data by Cuntry

Current 2018 US$ Million

countryGDP
1United States20544343
2China13608151
3Japan4971323
4Germany3947620
5United Kingdom2855296
6France2777535
7India2718732
8Italy2083864
9Brazil1868626
10Canada1713341
11Russian Federation1657554
12Korea, Rep.1619423
13Australia1433904
14Spain1419041
15Mexico1220699
16Indonesia1042173
17Netherlands913658
18Saudi Arabia786521
19Turkey771350
20Switzerland705140
21Poland585663
22Sweden556086
23Belgium542761
24Argentina519871
25Thailand504992
26Austria455285
27Norway434166
28United Arab Emirates414178
29Nigeria397269
30Ireland382487
31Israel370587
32South Africa368288
33Singapore364156
34Hong Kong SAR, China362682
35Malaysia358581
36Denmark355675
37Colombia331047
38Philippines330910
39Pakistan314588
40Chile298231
41Finland276743
42Bangladesh274024
43Egypt, Arab Rep.250894
44Czech Republic245225
45Vietnam245213
46Portugal240674
47Romania239552
48Iraq224228
49Peru222044
50Greece218031
51New Zealand204923
52Qatar191362
53Kazakhstan179339
54Algeria173757
55Hungary157882
56Kuwait140645
57Ukraine130832
58Morocco117921
59Ecuador108398
60Slovak Republic105904
61Angola105750
62Puerto Rico101130
63Cuba100023
64Sri Lanka88900
65Kenya87908
66Dominican Republic85555
67Ethiopia84355
68Oman79276
69Guatemala78460
70Myanmar71214
71Luxembourg70885
72Ghana65556
73Bulgaria65132
74Panama65055
75Croatia60971
76Costa Rica60130
77Belarus59662
78Uruguay59596
79Tanzania58001
80Lebanon56639
81Macao SAR, China55084
82Slovenia54007
83Lithuania53429
84Serbia50597
85Uzbekistan50499
86Libya48364
87Congo, Dem. Rep.47227
88Azerbaijan46939
89Cote d'Ivoire43007
90Jordan42231
91Sudan40851
92Turkmenistan40761
93Paraguay40496
94Bolivia40287
95Tunisia39871
96Cameroon38675
97Bahrain37746
98Latvia34409
99Zimbabwe31000
100Estonia30732
101Nepal29040
102Uganda27461
103Yemen, Rep.26914
104Zambia26720
105El Salvador26057
106Iceland25878
107Cyprus24961
108Cambodia24542
109Senegal24129
110Honduras23969
111Trinidad and Tobago23808
112Papua New Guinea23497
113Bosnia and Herzegovina20161
114Afghanistan19362
115Botswana18616
116Lao PDR17953
117Georgia17599
118Mali17163
119Gabon16853
120Jamaica15713
121Albania15102
122Mozambique14717
123West Bank and Gaza14615
124Malta14553
125Namibia14521
126Mauritius14220
127Burkina Faso14124
128Madagascar13853
129Brunei Darussalam13567
130Equatorial Guinea13432
131Nicaragua13117
132Mongolia13066
133North Macedonia12672
134Armenia12433
135Bahamas, The12424
136Moldova11443
137Chad11273
138Congo, Rep.11263
139Guinea10907
140Benin10354
141Haiti9658
142Rwanda9508
143Niger9290
144Kyrgyz Republic8092
145Kosovo7938
146Tajikistan7522
147Monaco7184
148Malawi7064
149Guam5920
150Fiji5536
151Montenegro5504
152Togo5358
153Maldives5327
154Mauritania5234
155Barbados5145
156Somalia4720
157Eswatini4710
158Sierra Leone4085
159Guyana3878
160Suriname3590
161Liberia3264
162Andorra3236
163Curacao3127
164Burundi3036
165Djibouti2955
166Lesotho2738
167Timor-Leste2581
168Bhutan2534
169Central African Republic2219
170Cabo Verde1976
171St. Lucia1921
172Belize1871
173Gambia, The1632
174Antigua and Barbuda1610
175Seychelles1590
176Guinea-Bissau1458
177Solomon Islands1395
178Northern Mariana Islands1323
179Grenada1185
180Comoros1177
181Turks and Caicos Islands1022
182St. Kitts and Nevis1010
183Vanuatu914
184Samoa820
185St. Vincent and the Grenadines811
186American Samoa636
187Dominica550
188Tonga450
189Sao Tome and Principe422
190Micronesia, Fed. Sts.401
191Palau283
192Marshall Islands221
193Kiribati188
194Nauru125
195Tuvalu42

Source: World Bank national accounts data, and OECD National Accounts data files.
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD

GDP at purchaser's prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in current U.S. dollars. Dollar figures for GDP are converted from domestic currencies using single year official exchange rates. For a few countries where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions, an alternative conversion factor is used.

Top 10 Countries by Gross Domestic Product

Gross Domestic Product

Source: World Bank 2018

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