What is GDP?
GDP, or gross domestic product, is the total market value of all final goods and services produced within a country’s borders over a period, usually a year. Rice, garments, medicines, roads, rickshaw rides, doctors’ visits and teachers’ classes all count.
The word “final” matters. When yarn becomes fabric and fabric becomes a shirt, the yarn and fabric are not added separately, because their value is already inside the shirt’s price. Otherwise the same thing would be counted several times.
Imagine a tiny island that, in a whole year, produces only 1,000 kg of rice (Tk 60 a kg) and 200 haircuts (Tk 100 each). The island’s GDP = Tk 60,000 + Tk 20,000 = Tk 80,000. Next year it produces exactly the same, but all prices rise 10%. GDP now shows Tk 88,000, yet not one extra grain of rice was produced. The numbers are only an example.
Why it matters to an investor
- To read the business climate: when the economy grows fast, sales, jobs and incomes usually rise; when growth slows, many companies’ earnings come under pressure.
- To read headline figures correctly: “GDP growth of 4%” usually means real growth, with the effect of rising prices removed.
- To anticipate policy: the central bank sets interest rates and the government shapes its budget partly by looking at growth and inflation, which in turn affect returns on savings and investments.
- To remember that the stock market is not the economy: prices usually move on expectations about the future, so markets can fall on good GDP news, and the reverse.
Nominal, real and per person
Nominal GDP is measured at that year’s prices, so it rises whenever prices rise. Real GDP is measured at the fixed prices of a base year, so it rises only when actual output grows. “Growth” in the news usually means growth in real GDP.
GDP per capita is total GDP divided by the population. The “per capita income” reported in Bangladesh’s news is usually per capita GNI (gross national income), which also counts net income earned from abroad. So per capita income and per capita GDP are different numbers. Both are averages: they do not show how income is shared among people.
How it is measured
In Bangladesh, GDP is compiled by the Bangladesh Bureau of Statistics (BBS) for the July–June fiscal year. A provisional estimate comes first, then a final estimate once more data are in. The two can differ noticeably: for fiscal year 2024-25 the provisional estimate of growth was 3.97%, and the final estimate 3.49%.
- From production: adding up the value added at each stage across agriculture, industry and services.
- From spending: adding household consumption, business investment, government spending, and exports minus imports.
- From income: adding the wages, rent, interest and profits that production generates. In principle all three routes should give the same number.
In Bangladesh in recent years
According to the World Bank, Bangladesh’s real GDP growth was roughly between 6% and 8% a year for most of the 2010s (about fiscal years 2010-11 to 2018-19). It fell to about 3.4% in the Covid year (2019-20), recovered to about 7.1% in 2021-22, then eased to about 4.2% in 2023-24 and about 3.5% in 2024-25.
BBS’s provisional estimates for fiscal year 2025-26 put growth at 4.14%, GDP at current prices at about Tk 61.2 lakh crore (about $501 billion), and per capita income at $3,020. These may be revised later; BBS publishes the latest figures.
What GDP does not measure
- Unpaid work at home: cooking, raising children and caring for elders, much of it done by women, barely shows up in GDP.
- How income is shared: GDP can rise without everyone’s income rising equally.
- Environmental damage, depleted natural resources, leisure or happiness: none of these are in the GDP figure.
Worked example
- Say a country’s nominal GDP rises from 100 to 112 in a year. Nominal growth: 12%.
- Over the same period, the economy’s overall price level rises 8%.
- Real GDP ≈ 112 ÷ 1.08 ≈ 103.7. So actual output grew by about 3.7%.
Result: most of the big nominal number was just prices rising. Rule of thumb: real growth ≈ nominal growth − inflation. The numbers are only an example.
Common mistakes
- Mixing up nominal and real GDP; mistaking higher prices for more output.
- Treating per capita income as “what an ordinary person earns”. It is an average, and averages hide a lot.
- Treating a provisional estimate as final. GDP figures can change noticeably later.
- Assuming good GDP means the stock market will rise. Markets move on expectations about the future.
When you see a GDP headline, check three things: real or nominal, total or per person, and provisional or final.