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GDP Growth Rate Calculator

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How to calculate economic growth rate?Importance in economicsInteresting factsFAQs

This GDP growth rate calculator (alternatively called the economic growth rate calculator) helps you to measure the change in the GDP (Gross Domestic Product) in a given economy over a specific time.

If you are interested in how GDP relates to other economic indicators, you may check some of the following tools.

How to calculate economic growth rate?

Economic growth rate typically refers to the increase in the inflation-adjusted market value of the goods and services produced by an economy over a specific period.

It is conventionally measured in percentage terms since it is the most supportive way to make a comparison over time and space.

Also, usually, the real inflation-adjusted GDP is used for the calculation since it removes the effect of the rising price level. Rising prices can be a result of multiple factors, as even a change in consumption tax rates, for example, VAT or sales tax can cause a shift in prices.

Furthermore, economists often focus on the percentage change in the real GDP per capita because it improves the comparison between countries and also isolates the effect of changing the population. See our GDP per Capita calculator to learn more.

To make things more palpable, let's have a real-world example of the GDP growth rate calculator in the US economy.

The real GDP in the United States in 2017 was 17,304,984 Million US dollars and in 2016 was 16,920,328 Million US dollars.

Applying the GDP growth rate formula, which is GDP growth = (GDP in current period - GDP in the previous period) / GDP in the previous period × 100, the following calculation has to be made:

GDP growth = (17,304,984 -16,920,328) / 16,920,328 × 100 = 2.27%

Therefore, the real GDP growth in the United States in 2017 compared to the previous year was 2.27%, which is, by the way, a decent figure for a developed country in a worldwide comparison.

Source: data.worldbank.org

Importance in economics

The GDP growth rate formula is an important supplementary indicator of the gross domestic product since it provides key information about the development and progress of a given economy.

In other words, measuring the economic growth rate provides essential guidance to the government and policymakers as it indicates the dynamic feature of economic performance.

Dynamic economic growth gains particular relevance in the long run. To demonstrate this, it might be a good idea to check the rule of 72 and apply it to the puzzle of long-term economic growth.

Let's consider a country with a real GDP per capita of around half the US GDP per capita, for example, Poland. You can see if the real GDP per capita grows at 1 percent per year, it will take nearly 70 years to double. However, if it grows at 2 percent per year, it will take only 35 years to reach the US level. It is a vast difference. Isn't it?

Interesting facts

  • The US economy experienced the fastest economic growth in the 19th century, on average by about 4.5% per year. In the 20th century, the US economy grew by about 3.5% per annum.

  • From 1800 to 2000, no other nation — except Luxembourg — managed to grow at a pace as high as the US, which is why by the year 2000, the US was the second wealthiest country in the world. Luxembourg was the richest per capita (Sabillon, 2005).

  • The very first person who connected the concept of growth and the growth rate of the national income (the predecessor of GDP) as a measure of economic progress was a British economist, Colin Clark, at the beginning of the 20th century (Lepenies, 2016).

FAQs

How does GDP growth rate affect employment?

During periods of positive GDP growth, businesses often expand and create more job opportunities, leading to lower unemployment rates. Conversely, during periods of negative GDP growth, companies may cut back on hiring or lay off workers, resulting in higher unemployment rates.

What does a negative GDP growth rate indicate?

A negative GDP growth rate indicates that an economy has contracted over a given period. It suggests that the value of goods and services produced within the economy has decreased, which can signify an economic downturn, a recession, or a contraction.

What is the GDP growth rate if the current GDP is $5,000,000,000?

Assuming that the previous GDP was $3,000,000,000? The GDP growth rate will be 66.67%. You can calculate this using this formula:

GDP growth rate = (current GDP - previous GDP) / previous GDP.

How can I calculate the GDP growth rate?

You can calculate the GDP growth rate in 3 steps:

  1. Determine the GDP in the current period

  2. Determine the GDP in the previous period

  3. Apply the GDP growth rate formula:

    GDP growth rate = (current GDP - previous GDP) / previous GDP.

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