The global economy is set to slow this year and next as rising trade tensions dampen demand. If these conflicts are resolved with agreements that halve tariffs, growth could rebound in 2025 and 2026.
GDP measures the market value of all goods and services produced by a country in a year. This includes the production of all private and public goods, including construction. However, it excludes activities that are not marketed or bartered in a market, such as volunteer work and household production. It also ignores the depletion and degradation of natural resources.
Changes in COVID-19 deaths, lockdown restrictions (OSI), and exports all reduce GDP, although the size of these effects varies across economies and over time. The OSI effect varies between advanced and emerging markets and developing economies (EMDEs). The impact of the COVID-19 death effect is smaller in EMDEs than in AEs, as the poor are less likely to stop working during a pandemic.
Increasing GDP does not necessarily lead to higher levels of well being, because it only measures the market value of all goods and services. For example, traffic jams may increase GDP by generating more economic activity, but they do not improve citizens’ lives because they take away valuable leisure time and can cause pollution. Alternative economic indicators such as doughnut economics have been developed to capture these non-market effects. Also, GDP does not take into account quality improvements or the introduction of new products that enhance citizens’ standard of living.