The Meaning of Gross Domestic Product (GDP), Gross National Product (GNP), and Gross National Income (GNI)

Encyclopedia of Business Terms and Methods, ISBN 978-1-929500-10-9. Revised 2013-05-02.

Economists refer to several measures of total economic production for individual countries, including Gross Domestic Product (GDP) and Gross National Product (GNP). Another measure seen increasingly is Gross National Income (GNI), essentially an augmented version of GDP.

• Gross domestic product (GDP) is the total market value of all goods and services produced in the country, in a given year or quarter. GDP is equal to all government, consumer, and investment spending, plus the value of exports, minus the value of imports. GDP includes earnings made by foreigners while inside the country. GDP does not include earnings by its residents while outside of the country.
• Gross National Income (GNI) is GDP plus income paid into the country by other countries for such things as interest and dividends (less similar payments paid out to other countries).
• Gross National Product (GNP) is the total market value of all goods and services produced by domestic residents.
  GNP includes domestic residents earnings from goods and services produced and sold abroad, and investments abroad. GNP does not include earnings by foreign residents while inside the country.

GDP and GNI thus refer to economic income within the borders of the country, while GNP refers to economic output by the country's residents.

Since the the early 1990s, economists and government officials have generally regarded GDP (rather than GNP) as the primary indicator of a country's economic output. Data from the three sources listed below, for example, agree that currently (2010) the annual GDP Growth rate for China is over 9%, while for the United States the rate is about –2.5% (i.e., negative growth).

GDP serves as the primary measure for identifying and measuring phases of the economy's business cycle, such as recession, depression, recovery, and expansion. Economic recession, for instance, is usually defined as two consecutive quarters of GDP decline. (For more on the cycle and these phases, see the encyclopedia entry business cycle). 

•  Reporting and comparing GDP, GNI, and GNP
•  Determining GDP, GNI, and GNP
•  Sources of GDP, GNI and GNP Data  
•  Example GDP and GNI figures
     –  GDP by per capita by country
     –  GDP by country
     –  GNI Per capita by country

Reporting and comparing GDP, GNI and GNP

GDP, GNI and GNP figures are often compared . . .

• Between quarters and years for a single country or groups of countries, to identify changes and trends in economic growth.
• Between countries, to show the size of a country's economy relative to other countries or groups of countries.
• Between countries on a per capita basis, to show the average wealth or poverty of individuals in a country compared to people in other countries.

Those who evaluate economic output figures across time usually prefer figures adjusted to compensate for inflation, so that GDP and GNP figures from different time periods accurately reflect changes in real purchasing power. Those who compare economic output figures between countries, of course, need to see all figures expressed in the same currency units. Most data sources use one of the following approaches in reporting financial figures:

• Economic data from a single country source, for a single year, may be expressed simply as totals and per capita figures in the local currency.
• Economic data from a single country source covering multiple years may be expressed in local currency units.
• Without adjustments for inflation and purchasing power (that is, on a nominal basis), or:
• With adjustments for inflation and purchasing power (that is, on a PPP basis).
• Comparisons between countries are most often expressed in terms of  "US dollars," either
• On a nominal or "exchange basis," that is, converted to US $ using average currency exchanges rates for the most recent year, (or for some other period such as the most recent three years).
• As International Dollars, which are adjusted to reflect average currency exchange rates and purchasing power parity (PPP).  

Determining GDP, GNI and GNP

Given the definitions of GDP, GNI and GNP above, there are several commonly used approaches to calculating their values. The so called expenditure approach for GDP for instance, is taken as the sum of aggregate consumption, investment, government expenditure and net exports. In principle, the so called income approach and output approaches should reach the same result by summing wages, rents, interest, profits, non income charges, and in some cases, foreign income earned. In reality, the different approaches usually produce slightly different results because, in all cases, the component figures are estimates and not known exactly, and because the different components are developed and revised at different times.

To business people generally, the most familiar approach is probably the expenditure approach illustrated here.

• GDP = Consumption + Investment + Government spending + Exports - Imports
• GNP = GDP + Net Income Receipts from assets abroad less income of foreign nationals within the country.
• GNI = GDP + payments by foreign nationals into the country for such things as investments (interest and dividends), less similar payments paid out of the country.

Sources of GDP, GNI, and GNP data

Comprehensive GDP, GNI and GNP figures are available from quite a few different sources. Three of the more frequently cited and more readily accessible sources are:

• The International Monetary Fund (IMF) World Economic Outlook, at
  http://www.imf.org/external/pubs/ft/weo/2009/01/weodata/index.aspx .
  IMF data are updated semiannually, in April and October. 
• The CIA World Fact Book, available at
  https://www.cia.gov/library/publications/the-world-factbook/|
  This source is updated every two-weeks with the latest available data from many different world sources.
• The World Bank Data pages, available at:
  http://data.worldbank.org/ 
  Data updates are incorporated when they are made available by individual sources.

These sources provide financial/economic data on most countries of the world, expressed either in nominal dollar equivalents or in International dollar units adjusted by country for purchasing power parity.

For the most recent data from individual countries, visit the internet sites of country government offices for statistical and economic data.

Example GDP and GNI figures

Example GDP and GNI figures for a few countries are listed below. In most cases these are World Bank data for the year 2009. "Nominal" figures are expressed in equivalent US$ for 2009, based on average exchange rates. PPP based figures are expressed in International dollars, adjusted to represent equivalent purchasing power per dollar. Country rankings are "approximate" because different sources may report slightly different dollar figures, and because sources sometimes differ in countries or economic regions listed. 

For more comprehensive country lists and the most recent available data see the sources listed in the preceding section.

     Gross domestic product per capita by country

Approx  Rank  PPP  Basis	Country	GDP Per  Capita  PPP  Basis  Intl $	GDP Per  Capita  Nominal  Exchange  Rate
1	Luxembourg	84,003	105,350
2	United Arab Emirates	57,827	45,615
3	Norway	55,672	79,089
4	Singapore	50,705	37,600
5	United States	46,436	46,436
6	Ireland	41,278	51,049
7	Netherlands	40,715	47,917
8	Australia	39,231	42,279
9	Austria	38,748	46,019
10	Canada	37,946	39,599
11	Sweden	37,905	43,654
12	Iceland	37,595	38,029
13	Denmark	36,762	55,992
14	United Kingdom	36,496	36,165
15	Germany	36,449	40,800
16	Belgium	36,048	43,430
17	Finland	34,650	44,491
18	France	33,655	41,600
19	Spain	32,545	31,774
20	Japan	32,443	39,727
21	Italy	31,909	36,400
22	Equatorial Guinea	31,825	15,397
23	Greece	29,663	29,240
24	New Zealand	28,723	29,000
25	Israel	27,674	26,175

     Gross domestic product by country

Approx  Rank  Nominal  Basis	Country	GDP  Nominal  Exchange  Rate Basis	GDP  PPP  Basis  Intl $
1	United States	14,256,300	14,256,300
2	Japan	5,067,526	4,138,481
3	China (People's Rep)	4,984,731	9,104181
4	Germany	3,346,702	2,984,440
5	France	2,649,390	2,172,097
6	United Kingdom	2,174,530	2,256,830
7	Italy	2,112,780	1,921,576
8	Brazil	1,571,979	2,020,079
9	Spain	1,460,250	1,495,683
10	Canada	1,336,067	1,280,279
11	India	1,310,171	3,752,032
12	Russia	1,230,726	2,687,298
13	Australia	924,843	858,168
14	Mexico	874,902	1,540,207
15	South Korea	832,512	1,324,360
16	Netherlands	792,128	673,066
17	Turkey	617,099	1,040,275
18	Indonesia	540,277	966,956
19	Switzerland	500,260	345,707
20	Belgium	468,522	388,917
21	Poland	430,079	727,086
22	Sweden	406,072	352,593
23	Austria	384,908	324,093
24	Norway	381,766	268,731
25	Saudi Arabia	369,179	594,886

     Gross national income (GNI) per capita

Approx  Rank  PPP  Basis	Country	GNI Per  Capita  PPP Basis  Intl $	GNI Per  Capita  Exchange  Basis
1	Luxembourg	57,640	74,430
2	Norway	56,050	86,440
3	Kuwait	53,590	43,930
4	Singapore	49,850	37,220
5	United States	46,730	47,240
6	Switzerland	41,830	56,370
7	Netherlands	40,510	49,350
8	Sweden	38,560	48,930
9	Austria	38,210	46,850
10	Denmark	37,730	58,930
11	Canada	37,590	42,170
12	United Kingdom	37,360	41,520
13	Germany	36,960	42,560
14	Belgium	36,520	45,310
15	Finland	34,430	45,680
16	France	33,980	42,680
17	Iceland	33,390	43,220
18	Ireland	33,280	44,310
19	Japan	33,280	37,870
20	Spain	31,630	31,870
21	Italy	31,330	35,080
22	Israel	27,040	25,740
23	New Zealand	26,430	26,830
24	Saudi Arabia	24,000	17,700
25	Czech Republic	23,610	17,310
26	Portugal	22,870	20,940
27	Slovakia	21,600	16,130
28	Romania	14,460	8,330
29	Argentina	14,120	7,570
30	Mexico	14,110	8,920
31	Malaysia	13,530	7,230
32	Brazil	10,260	8,040
33	China (People's Rep)	6,670	3,590
34	India	3,260	1,180

By Marty Schmidt. Copyright © 2004 - Solution Matrix Limited and Marty Schmidt+. All Rights Reserved.

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