We often hear GDP being discussed in relation to economics and how a specific country is performing. A growing GDP is generally understood to be a good thing but there is much more to it than that. Why is a growing GDP considered to be such a good thing and why do we use it as an indicator of how an economy is doing?
You may already have some questions. What is GDP? Why is it such an important measure of a country and its success? Put extremely simply, GDP, standing for gross domestic product, is a measure of the value of the goods and services sold by a country, usually calculated annually but often over other timescales, too.
It doesn’t give us the complete overview of how a country is doing but it certainly gives us some idea, and most countries would rather have a booming GDP than one that is stagnant or shrinking. It can provide a snapshot of all the goods and service markets.
Signs of a growing GDP
So what are some of the tell-tale signs of a growing GDP?
A booming job market
In many economies around the world, a competitive job market is one of the best signs of prosperity. Those with certain skills will always be in demand, but in times of economic growth, there tend to be a lot of jobs out there, and people aspiring to fill them, too.
It could also be the case that more and more people come from abroad to work in those countries. This has certainly been the case in countries such as the USA and Singapore, which has positioned itself as a center for research and development, with some huge tech companies.
More tech coming into the country
More technology coming into the country, and being used in a more widespread manner, is also a sign of an increasing GDP. For example, people may now be able to afford the best smartphones and latest televisions as jobs get better and income increases.
More technology can also come into the country in the form of investment. Big companies may be looking for places to headquarter themselves or to employ more people, and a growing economy can be an attractive prospect for these companies.
Better public services (sometimes)
The impact on a country with a responsible government, and one that handles tax affairs well, is that the money generally trickles down to public services. If there are more companies doing well and more people are in jobs with higher pay, that means there should also be more money being taxed in that country. This tax income means more money for the state to operate with.
This money can fund things like schools, healthcare and other public services. Countries that are doing well economically and which have a great tax system tend to be able to spend more on these services, and its citizens may even have a higher life expectancy than those of other countries.
This can also extend to areas like public transport and the road system. Of course, it doesn’t always work like this, and responsible spending is crucial to ensure the money gets utilized in public services.
More tourism out of the country
When a country is doing well economically, there is often a boom in tourists who are leaving the country to see more of the world. This comes from there being more disposable income and economic performance making it viable to leave the country and stay in other locations temporarily.
Tourism industries tend to be the strongest in the wealthiest countries, but growing economies can also lead to opportunities for visitors to the country in question. If an economy grows, that means there is more of a chance for countries to build up a tourist industry and more desirable locations to visit.
It is important to understand that GDP isn’t everything, nor is it the sole measure required to tell how an economy is doing. Economics is a large and complex subject. However, not many indicators give us such a valuable snapshot of a country’s performance. GDP can be measured against that of other countries, and against prior years to show how a country is performing, and we tend to see certain patterns crop up in a country with a growing GDP. This includes more jobs, higher pay and growth in a variety of other ways, including better public services such as schooling and healthcare.