The size of a country’s economy, measured by gross domestic product (GDP), is a key indicator of the health and strength of its society and its ability to provide for its citizens. But comparing GDP levels across countries isn’t straightforward, because economic data are recorded in the local currencies of each country and must be converted into common units—international dollars—before they can be meaningfully compared.
GDP is an aggregator of all the goods and services produced in a country over a specific period, whether used for consumption or investment. It does not take into account the products that are used to replace existing ones or the products purchased in order to generate income for other purposes, such as renting an apartment or selling a car. The figure that is commonly reported is the gross national product, excluding indirect taxes and excluding foreign aid. A slightly different measure, gross domestic product by purchasing power parity (GDP PPP), takes into account the relative prices of goods and services across countries and is calculated according to international accounting standards.
Global growth this year and next is projected to be weaker than previously expected, largely due to increased trade barriers and elevated policy uncertainty. While lower-than-expected oil prices and a repricing of risk in financial markets are mitigating these risks, the overall outlook is cloudy. The world has a growing population, and it needs to invest in its people in order to create prosperity for all.
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