Gross domestic product (GDP)


    What is GDP and how is it calculated?

    The gross domestic product, short GDP, is the most widespread tool to measure the economy of a country.

    “Gross” means that GDP measures production regardless of the various uses to which that production can be put. Production can be used for immediate consumption, for investment in new fixed assets, or for replacing depreciated fixed assets. “Domestic” means that GDP measures production that takes place within the country’s borders.

    There are multiple ways to determine the GDP of a country. One common calculation method is the following definition:

    GDP = private consumption + gross investment + government spending + (exports − imports)

    Or short: GDP = C + I + G + (X – M)

    It is most often measured on a quarterly or annual basis. Central banks and other institutions will raise or lower their growth forecasts based on the prevailing factors in the economy.

    GDP per capita (per citizen of the country) is commonly used as a measure for the quality of living.

    Further reading

    Learn more about the impact of economic indicators such as the GDP on currencies: