How do we calculate a country's economy

Economic growth: computation and importance

The change in the gross domestic product of an economy is expressed in terms of economic growth. So it can be both negative and positive. Here you can read how economic growth is to be viewed as a measure and how it is calculated.

Economic growth: importance

The importance of economic growth in an economy is omnipresent: The term economic growth comes across almost every day in the daily newspapers or news formats. The development of jobs, tax revenues of the state and thus also of the social security funds are directly related to the growth of the economy.

How is economic growth calculated?

Economic growth stands for the increase in the gross domestic product (GDP) of an economy. It indicates the value of all goods and services that - often related to a year - are generated within an economy.

Economic growth is in turn expressed in the rate of change in real gross domestic product. In this context, real means that it has been adjusted for price effects.

The reason for the increase in productivity, i.e. for economic growth, can lie in better utilization of production capacities. Another trigger for economic growth can be the expansion of production capacities.

GDP as a useful measure for economies?

GDP is often criticized as being too difficult to measure and, according to experts, has some gaps. Nevertheless, it is still used as an important measure for the evaluation of an economy: Both investors and the stock market media like to orientate themselves on the development of the GDP.

A common point of criticism is that not all factors of an economy are taken into account when calculating GDP. Typical examples are illegal work or unpaid work such as raising children or housework.

It can therefore be concluded that economic growth continues to provide an orientation. But it is not a metric that you should blindly trust. Take a close look at an economy and question what growth is based on and what really stands for more prosperity.

A look at Germany shows: Last year economic growth totaled 0.7%. This enabled the German economy as a whole to stand out from the euro zone. In the last quarter, economic output had declined, but the three preceding quarters were so strong that the plus could not be eaten up.

Economic growth 2013: forecast at 0.4%

According to the Federal Ministry of Economics, economic growth of just 0.4% is expected for Germany in 2013.

As in the previous year, the growth of the German economy will set itself apart from other countries in the euro zone, the government's annual economic report states. For 2014, the federal government expects significant growth. The current forecast is 1.6%.

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