In economics, GDP is arguably the most important statistic. The advance release of each new estimate is eagerly watched by economists, analysts, investors, and policymakers—and it usually moves markets. It provides a quick read on whether the world economy is contracting or expanding, and it helps judges if a nation needs a boost with expansionary monetary policy or might need to slow down to ward off inflation.
However, GDP can be misleading. It places too much emphasis on material output and neglects the overall well-being of citizens. For example, a nation may experience rapid GDP growth that imposes environmental costs or increases income inequality.
The measurement also ignores the value of informal and unrecorded economic activity. Buying shares in a company, for instance, counts as a positive investment but not as a consumption expenditure; a baker producing a loaf of bread for sale would count as a negative investment but not as a consumption expenditure (the ingredients bought will still be counted). GDP relies on recorded transactions and official data and thus fails to capture the full extent of under-the-table or black-market activity.
Changes in COVID-19 deaths, lockdown restrictions, and exports all impacted global GDP growth to a statistically significant degree, although the size of these effects varied depending on the economies and time periods considered. Meanwhile, rising trade barriers, elevated policy uncertainty, tighter financial conditions, weakened consumer and business confidence, and higher commodity prices are likely to weigh on the global outlook.
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