What Is Future GDP?

M. McGee

Gross domestic product (GDP) is the total value of the business output of a country. This takes into account everything from copper mines to doctor visits, thereby putting a dollar amount on the economic strength of the country. Future GDP is an estimate used to illustrate the believed course of a country over the next period of time. The future GDP of a country will help investors decide how well the economy is functioning and determine how much money they can safely risk.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

GDP is one of the cornerstones of national macroeconomics. Within a country, the GDP is often seen as one of the main indicators of standard-of-living. The higher the GDP, the more likely it is that any given person has adequate to superior living conditions. When comparing one country to another, the GDP will often function as a means of directly comparing economic strength and personal effort.

Future GDP is based on the county’s current and past GDPs, as well as the current political and economic situation of the country and the region. Any obvious trends within past GDPs are the base for future calculations. Economies have a tendency to work in cycles, high spending vs. low spending for instance, and these cycles will often correlate with certain activities. For instance, a country may have strong or weak economic years whenever a new person is voted into a head office. An economist will use these past trends to work out what years will likely be higher than average and which will be lower.

The current social, economic and political situation in the country is the next big factor in determining future GDP. Unstable countries have a lower overall GDP and a lower rate of growth. This instability often creates a situation where investors find the area is too much of a risk and stay away. On the other hand, highly stable countries often find they have a lower rate of growth as well. The safety and stability of the region can foster a sense of complacency and discourage risky, but profitable, endeavors.

These factors are combined with the last common part of future GDP, global economic change. When one large economy changes, for good or ill, it has an effect on other large economies. These effects trickle down into the smaller ones until the entire developed world feels the effect of the change. Economists use the tendency to figure out the likely impact of other economies on the future GDP in question. They can then come up with an estimate for how much the economy will grow or decline over the next period.

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