What is economic growth?

Economic growth is critical for various reasons:

Increased standard of living

Economic growth allows people to buy more expensive goods and services. Wages tend to rise as the economy expands, job possibilities multiply, and overall quality of life improves.

Poverty alleviation

When an economy expands and stabilises, it produces jobs, raises salaries, and improves access to fundamental necessities like health care, education, and infrastructure. These elements help to take individuals out of poverty and promote social well-being.

Technological advancement

As economies grow, they spend money on research and development, leading to innovations, increased productivity, and new industries. Technological innovations increase efficiency, create new job opportunities, and contribute to long-term development.

Fiscal strength

Governments benefit from higher tax revenues from inclusive economic growth. This extra cash can fund public services like education, health care, and infrastructure. Governments with stronger public finances can enact policies that enhance social-welfare programs, alleviate inequities, and promote economic stability.

Workforce

Workforces that are highly competent, educated, and well-trained directly impact economic performance; work will be more efficient and of high quality. In contrast, unskilled, underutilised labour forces will have the reverse effect: harming economies and raising unemployment rates.

Infrastructure

Infrastructure, such as factories, transportation links, and machinery, decreases costs, allows international trade, enhances labour productivity, and boosts economic output and efficiency.

Natural resources

Resources, such as oil, can potentially improve production capacity and, therefore, economies. Governments’ proper use of natural resources is an important driver of economic growth and stability and is influenced by skills and knowledge, labour availability, and technology.

Technology

Because new technologies can boost productivity and progress economies at lower prices, technological change and advancement substantially impact economic growth.

Economists use a variety of quantitative methods to estimate economic growth effectively:

Gross domestic product (GDP)

GDP is the total worth of goods and services generated inside a country’s borders over a given period. It is the most extensively used economic growth indicator. Economists can evaluate the growth rate and identify changes in the overall size of the economy by comparing GDP data over time.

Gross national product (GNP)

GNP is the total worth of goods and services generated by a country’s population in each period, domestically and outside. It considers the revenue generated by nationals living outside the country. GNP gives information about a country’s economic performance and the contributions of its citizens, regardless of their geographical location.

Real GDP

Real GDP modifies GDP estimates to account for price changes, allowing for a more realistic assessment of economic growth. It allows economists to focus on changes in production volume rather than price fluctuations.

Human Development Index (HDI)

Since 1990, the United Nations has used the Human Development Index (HDI) to assess various countries’ social and economic development levels. It is divided into four categories: mean years of schooling, expected years of schooling, life expectancy at birth, and gross national income (GNI) per capita.

Gross national income (GNI)

The GNI of a country is the entire amount of money earned by its citizens and enterprises. It is used to calculate and track a country’s wealth through time. The figure covers the country’s GDP and income from foreign sources.

GHD adheres to its commitment to be one of the catalysts of economic development, using its full range of services to drive growth across multiple sectors. We aim at the business case and economics to enable companies and communities to thrive.

Expertise-driven decision-making

One of our key strengths is our diverse expert team, which includes engineers, scientists, economists, and consultants. GHD develops robust solutions tailored to the individual demands of its clients by integrating their different skill sets.

Sustainability and resilience

We are at the forefront of adopting environmentally friendly solutions as the globe grapples with climate change and the need for sustainable practices. GHD’s expertise helps businesses reduce their carbon footprint, mitigate environmental risks, and comply with regulatory requirements.

Innovation and transformation

We recognise technology’s revolutionary impact and digital innovation. GHD transforms traditional problem-solving methodologies by embracing emerging technologies such as artificial intelligence, data analytics, and digital modelling. Clients work with the company to create smart solutions that optimise resource allocation, streamline operations, and increase overall performance.

Our dedication to economic progress extends beyond the confines of traditional business. The company regularly collaborates with local communities, promoting social and economic growth.

Know more about our expertise in business and economics by visiting our business case and economics page, and there, you can view our business approach and projects. To learn more about us, visit GHD, and together let us create a sustainable commercial outcome.

Articles referenced

^{Cornwall, John L. n.d., ‘Economic growth: Supply, demand, and target-instrument models’, retrieved June 22, 2023, from https://www.britannica.com/money/topic/economic-growth/Demand-and-supply}

^{Corporate Finance Institute 2020, ‘Economic growth,’ retrieved June 22, 2023, from https://corporatefinanceinstitute.com/resources/economics/economic-growth/}

^{Investopedia 2021, ‘What is economic growth and how is it measured?’ retrieved June 22, 2023, from https://www.investopedia.com/terms/e/economicgrowth.asp}

^{University of Sunderland 2022, ‘The main drivers of economic growth’, retrieved June 22, 2023, from https://online.sunderland.ac.uk/the-main-drivers-of-economic-growth/}