15 Aug 2019
In the Central Statistical Office’s (KSH) latest reading, it was stated that Hungary’s Gross Domestic Product increased by 4.9% YoY in the second quarter. When talking about a country’s economics, the GDP is a term that we often use, but that doesn’t mean that we really understand its concept or use.
The GDP is used to measure the value of all the goods and services produced in a country over a specific period of time. Basically, it’s how we can see and compare countries together and decide how their economy is doing. After every quarter, the GDP figure is calculated so to give an indication of how the country is faring, when compared to the previous quarter or to the same period a year before.
And how is GDP calculated? There are two ways to determine the country’s GDP: either by adding up all income received or all the costs. So, by adding the private consumption, gross investment, government investment and the exports together and deducting the costs from imports. The nominal GDP isn’t really accurate as it does not consider inflation. It is calculated by taking the prices of when the product is made, and therefore any prices changes are not taken into account. On the other hand, GDP can increase by really having more valuable products and services showing the real GDP – which is the one that proves that the country is improving. The GDP is important as it influences your personal finance, investment and employment possibilities. We can determine whether people are living better now than they were 10 years ago.