GDP Growth Rate Calculator
Calculate the percentage change in economic output between two periods.
Economic Growth Rate
Understanding the GDP Growth Rate Formula
The Gross Domestic Product (GDP) growth rate is a primary indicator of a country's economic health. It measures how fast the economy is growing (or shrinking) by comparing the value of all goods and services produced in the current period against a previous period.
How to Calculate GDP Growth Step-by-Step
To calculate the growth rate manually, follow these three steps:
- Step 1: Subtract the GDP of the previous period from the GDP of the current period. This gives you the net change in output.
- Step 2: Divide that net change by the GDP of the previous period.
- Step 3: Multiply the result by 100 to convert the decimal into a percentage.
Real-World Example
Imagine a country named Econoland. In 2022, Econoland had a Real GDP of 500 billion. In 2023, the Real GDP increased to 515 billion. To find the annual growth rate:
- 515 – 500 = 15 (Net Change)
- 15 / 500 = 0.03
- 0.03 × 100 = 3%
Therefore, Econoland's economy grew by 3% in 2023.
Why GDP Growth Rate Matters
A positive growth rate typically signals economic expansion, leading to more jobs, higher wages, and increased corporate profits. Conversely, a negative growth rate (economic contraction) for two consecutive quarters often defines a recession. Central banks and governments monitor this figure closely to decide on interest rate changes and fiscal policies.