What is economic growth?

Economic growth is an increase in the real volume of goods and services an economy produces over time, usually measured through real GDP. An increase in the monetary value of production can reflect higher prices and is not sufficient evidence of real growth.

Sources and measurement of growth

1. Factors of production More labour, machinery, facilities or infrastructure can expand productive capacity. Using existing resources more effectively also supports growth. Education, health, technology, management and reliable institutions influence how resources become output. 2. Productivity and the long run Working longer is different from producing more value per hour. Higher productivity allows more or better output from the same labour and capital. Investment quality, maintenance and allocation to productive uses matter as much as investment quantity. 3. Reading growth rates Real output rising from 100 to 104 represents 4 percent growth. Year-on-year changes differ from quarter-on-quarter changes. Seasonally adjusted series facilitate comparisons between periods. Initial estimates may be revised as new information becomes available.

Growth, development and sustainability

4. Population effects When population grows rapidly alongside total output, output per person may rise more slowly. National growth and average living standards are not identical. It also matters which sectors and regions generate the increase. 5. The difference from development Development includes changes in education, health, production structures, institutions and opportunities. Economic growth can support these improvements but does not guarantee them. GDP can rise while inequality or environmental damage increases. 6. Fluctuations and potential Rapid growth after a crisis can reflect a low comparison base. Potential growth concerns the sustainable expansion of productive capacity rather than a temporary demand surge. Debt, resource use and investment returns should be assessed together.