Gross Domestic Product (GDP)
Gross domestic product is the total market value of final goods and services produced within a country over a period, usually a quarter or a year. It is the standard measure of the size of an economy and how fast it is growing.
Also called: GDP · gross domestic product · national output · economic output
GDP can be measured three ways that should, in principle, give the same answer. The production approach adds up the value added by every industry. The expenditure approach adds consumption, investment, government spending and exports, and subtracts imports. The income approach adds wages, profits and other incomes earned in production. Statistical agencies follow the United Nations System of National Accounts so that countries' figures are comparable.
Several distinctions matter when reading a GDP figure. Nominal GDP is at current prices; real GDP removes inflation and is what growth rates refer to. GDP measures production inside a country's borders, whoever owns it; gross national income adds income residents earn abroad and subtracts what foreigners earn locally. Comparisons between countries are often made at purchasing power parity, because market exchange rates understate what money buys in poorer economies.
GDP aims to capture all production, including much of the informal economy. National accounts are meant to be exhaustive, and statisticians use labour surveys, household surveys and estimates to fill gaps where nothing is registered. The IMF notes that countries rarely publish a separate informal figure, but that does not mean informal output is excluded. Unpaid household work, such as cooking and childcare for one's own family, is largely outside the measure by convention.
GDP is the denominator for most of the ratios that matter in country risk: debt to GDP, the current account as a share of GDP, and remittances as a share of GDP. For a remittance business, that last ratio shows how much a corridor matters to the receiving country.
In practice
GDP measures output, not welfare, wealth or how income is shared. It also revises: early estimates are routinely changed as fuller data arrive.
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Commonly confused with
| Term | How it differs |
|---|---|
| Gross national income | GDP counts production within the country's borders. Gross national income counts income earned by the country's residents, wherever it is produced, so it adds net income from abroad. |
See also
- Informal EconomyThe informal economy is the economic activity of workers and businesses that are not covered, or not adequately covered, by formal arrangements such as registration, tax, labour law and social protection. Most of it is legal work done outside those systems.
- Purchasing Power ParityPurchasing power parity (PPP) is a conversion rate between currencies that equalises what money can buy, calculated by comparing the cost of the same basket of goods and services in each country. It is used to compare incomes and living standards.
- Current Account BalanceThe current account balance is the net of what a country earns from and pays to the rest of the world for goods, services, investment income and transfers such as remittances. A deficit must be financed by borrowing, investment inflows or reserves.
- Balance of PaymentsThe balance of payments is the statistical record of all economic transactions between a country's residents and the rest of the world over a period. It is split into the current account, the capital account and the financial account.
- International Poverty LineThe international poverty line is the World Bank's threshold for extreme poverty: a daily amount per person, expressed in purchasing-power-adjusted dollars, below which someone is counted as extremely poor. Since June 2025 it has been US$3.00 a day.