Good ole top sirloin steak is to the body what the GDP is to a country. African economies are beginning to recover from the impact of COVID-19 and have been bouncing back in full force growing their GDP since 2022.
Gross Domestic Product (GDP) is the total goods and services produced by a country in a specific period of time. The measurement can be in say a quarter or a year.
Simply put, GDP is an economy doctor, critical like your dentist who loves to poke, drill and smoke out those nasty cavities. GDP measures the health of a country. A country with a high GDP is a good economy while a country with a low GDP is poor economy. Globally, the ideal GDP growth rate is between 2% and 3%.
The GDP can be expressed in two different ways:
- Nominal GDP- takes current market prices into account without factoring in inflation or deflation.
- The Real GDP-factors in inflation which means accounting for the overall rise in price levels.
Economists generally prefer using the Real GDP as a way to compare a country’s economic growth rate.
The components of GDP
- Chop that money – Consumption by the citizens: If the citizenry have money to spend, then the economy is good.
- Investments in new assets that will provide future benefits like increase in productive capacity and higher employment rates.
- Give unto Caesar what belongs to Caesar. The Government’s consumption expenditure and gross investment on goods and services funded by taxes, companies or borrowed. To run at a surplus instead of a deficit, the government needs to collect more money than it spends.
- Exports Vs Imports: Higher exports and Lower imports mean a surplus. Low exports vs High imports mean the country is running a trade deficit. For example, sharing the love with the world through exporting that Nigerian oil, South African diamonds, Congolese gold, Kenyan tea and our beautiful landscape with the world at a justified fee.
The Importance of the GDP
- GDP is a critical measurement of an economy’s size, performance, and general health.
- Investors are able to make key investment decisions by comparing the current GDP against past numbers. If the number is growing, then the economy has become more productive. If the number is shrinking, then the economy has become less productive.
- New markets investments: If you’re looking to expand into new markets use GDP to evaluate which markets would prove healthiest and fattest.
- Emerging Markets: Investors interested in emerging markets might use GDP to understand which countries are growing at the fastest rates and, therefore, might provide the greatest return on investment.
- Policy Making: Politicians, policymakers or people in governance might use GDP to understand how policies have impacted the economy.
- Economists can use GDP to determine whether an economy is growing or experiencing a recession.
Current Rays of Hope For Investors in Africa:
- The free trade zone under the African Continental Free Trade Agreement ( AfCFTA) 2021. This may eventually result in a liberalized single market for goods and services, facilitated by the easy movement of people and capital.
- Digital trading and Tech startup prospects: Increased fast-tracking of a lot of businesses. The role of tech in economic activities and the employment of labor cannot be overemphasized.
- Domestic African tourism is forecast to pick up considerably in the next few years, after being particularly hard hit during COVID-19 pandemic.
- Commodity-dependent economies such as Nigeria, for instance, which relies on oil, Angola, Zambia on copper, even Ghana on gold — are expected to help mitigate some of the current challenges and help increase economic recovery affected by COVID-19.
Read More: https://afrikanexcellence.thelovetablet.com/2023/01/09/does-devolution-accelerate-economic-growth/
