Briefly about GDP
We launch on #BTBlog the category The MacRO Zone, a place where macroeconomic concepts gain more meaning. Whether it is about economic developments or the factors that influence them, you have all the key information at hand.
We go straight to the point and start with the most commonly used economic indicator for measuring a country's economic performance: GDP or Gross Domestic Product.
GDP Romania
Evolution 1987 - 2023 MLD | USD
- Romania's GDP increased by eight times in the last 20 years. We observe a constant, long-term increase, with a significant advance in recent years.
- In 2024 a tempered result is recorded, an economic growth of 0.9%, below initial estimates, but above the European average. This indicates a slowdown of the economy compared to previous years.
- This situation is influenced by a global economic context marked by slowdown, high financing costs, and a less favorable external environment.
WHAT IS GDP?
GDP (Gross Domestic Product) represents the total value of final goods and services produced in a country within a certain period of time, usually a year or a quarter. It is used as the main indicator of a country's economic performance.
WHAT DOES GDP INCLUDE?
- Goods and services intended for final consumption
- Production from all economic sectors: agriculture, industry, services
- Government expenditures on goods and services (e.g., infrastructure, public employees' salaries)
- Investments in equipment, constructions and stocks
- Exports (products manufactured in the country and sold abroad)
Do foreign companies count in the GDP calculation?
Yes, foreign companies operating within a country contribute to that country's GDP. For example, a multinational located in Romania adds value to Romania's GDP, even if the parent company is in Germany.
On the other hand, Gross National Product (GNP) measures the production achieved by national firms, regardless of where they operate. For example, if a Romanian company has a factory in Germany, it is not included in Romania's GDP, but it is included in Romania's GNP.
NOMINAL GDP VERSUS REAL GDP
Characteristics | Nominal GDP | Real GDP |
| Used prices | Current prices | Prices from a reference year |
| Influenced by inflation? | Yes | No |
| Comparisons between years | Less relevant | Correct and relevant |
| Indicates the real power of the economy? | Not necessarily | Yes |
In short, nominal GDP shows the total value of the economy at current prices, while real GDP provides a more accurate picture by removing the effect of inflation. Economic growth is measured by the evolution of real GDP and is essential for the development of a country.
Despite the geopolitical challenges with which 2025 began, Romania is going through the best economic period in history, and the prospects are good, including considering the potential as well as the gaps that Romania must catch up in the coming years compared to Western countries.
