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 2019 US$ Million

countryGDP
1United States21374418
2China14342902
3Japan5081769
4Germany3845630
5India2875142
6United Kingdom2827113
7France2715518
8Italy2001244
9Brazil1839758
10Canada1736425
11Russian Federation1699876
12Korea, Rep.1642383
13Spain1394116
14Australia1392680
15Mexico1258286
16Indonesia1119190
17Netherlands909070
18Saudi Arabia792966
19Turkey754411
20Switzerland703082
21Poland592164
22Thailand543649
23Sweden530832
24Belgium529606
25Argentina449663
26Nigeria448120
27Austria446314
28United Arab Emirates421142
29Norway403336
30Israel395098
31Ireland388698
32Philippines376795
33Singapore372062
34Hong Kong SAR, China366029
35Malaysia364701
36South Africa351431
37Denmark348078
38Colombia323802
39Egypt, Arab Rep.303175
40Bangladesh302571
41Chile282318
42Pakistan278221
43Finland268761
44Vietnam261921
45Romania250077
46Czech Republic246489
47Portugal237686
48Iraq234094
49Peru226848
50Greece209852
51New Zealand206928
52Qatar183466
53Kazakhstan180161
54Algeria169988
55Hungary160967
56Ukraine153781
57Kuwait134761
58Morocco118725
59Ecuador107435
60Slovak Republic105422
61Puerto Rico104988
62Ethiopia96107
63Kenya95503
64Angola94635
65Dominican Republic88941
66Sri Lanka84008
67Oman76983
68Guatemala76710
69Myanmar76085
70Luxembourg71104
71Bulgaria67927
72Ghana66983
73Panama66800
74Tanzania63177
75Belarus63080
76Costa Rica61773
77Croatia60415
78Cote d'Ivoire58792
79Uzbekistan57921
80Uruguay56045
81Lithuania54219
82Macao SAR, China53859
83Slovenia53742
84Lebanon53367
85Libya52076
86Serbia51409
87Azerbaijan48047
88Congo, Dem. Rep.47319
89Jordan43743
90Bolivia40895
91Tunisia38797
92Cameroon38760
93Bahrain38574
94Paraguay38145
95Uganda34387
96Latvia34117
97Estonia31386
98Nepal30641
99Cambodia27089
100El Salvador27022
101Honduras25095
102Papua New Guinea24969
103Cyprus24564
104Iceland24188
105Trinidad and Tobago24100
106Senegal23578
107Zambia23064
108Zimbabwe21440
109Bosnia and Herzegovina20047
110Afghanistan19101
111Sudan18902
112Botswana18340
113Lao PDR18173
114Georgia17743
115Mali17510
116Gabon16657
117Jamaica16458
118Burkina Faso15745
119Albania15278
120Mozambique14934
121Malta14786
122Benin14390
123Mauritius14180
124Madagascar14083
125Mongolia13852
126Armenia13672
127Guinea13590
128Brunei Darussalam13469
129Niger12928
130Bahamas, The12827
131North Macedonia12694
132Nicaragua12520
133Namibia12366
134Moldova11955
135Chad11314
136Equatorial Guinea11026
137Congo, Rep.10820
138Rwanda10122
139Haiti8498
140Kyrgyz Republic8454
141Tajikistan8116
142Kosovo7926
143Malawi7666
144Mauritania7593
145Maldives5729
146Fiji5535
147Montenegro5494
148Togo5459
149Barbados5209
150Eswatini4405
151Guyana4280
152Suriname3985
153Sierra Leone3941
154Djibouti3318
155Andorra3154
156Liberia3070
157Burundi3012
158Lesotho2460
159Central African Republic2220
160St. Lucia2122
161Cabo Verde1981
162Belize1879
163Gambia, The1763
164Antigua and Barbuda1727
165Seychelles1698
166Timor-Leste1673
167Solomon Islands1425
168Guinea-Bissau1340
169Grenada1228
170Comoros1185
171St. Kitts and Nevis1050
172Vanuatu917
173Samoa850
174St. Vincent and the Grenadines825
175Dominica596
176Sao Tome and Principe429
177Kiribati194
178Nauru118
179Tuvalu47

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 2019

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