Is GDP an Effective Measure of Economic Growth?

The brief on 21 September reported that Namibia’s economy grew by N$7,3 billion to N$58,6 billion in the second quarter of 2023, which translated to economic growth of 3,7%.

Although the statistics are admirable, what do they mean for the layperson?

Namibia is rated as an upper-middle-income country, but what does that mean?

Is the gross domestic product (GDP) measurement effective in measuring sustainable economic growth and standard of living, especially for Namibia?

Before I answer the questions above, let me break down this economic measurement.

GDP measures the total value of goods and services at market prices produced by a country’s economy during a specified period.

It is calculated by adding up what everyone has earned or spent in a year.

Apart from GDP, the World Bank also uses the Gross National Income (GNI) per capita measurement.

This measurement uses United States dollars, converted from local currency, to classify countries into four income categories.

These groups range from high, upper and lower middle-income and low-income groups.

According to the World Bank, a country that is classified as a low-income country has a domestic production of about US$1 136 and less per person per year.

For upper middle-income rated countries it is between US$4 466 and US$13 845 per person per year.

For lower middle-income countries it is between US$1 136 and US$4 465.

For high-income countries, it is US$13 846 and higher.

Given the fact that these measurements were introduced a century ago, can they still be deemed effective in measuring a country’s economic growth?

Over the years, various innovations have emerged, and socio-economic environments have become complex.

Perhaps this measure can still be used for developed countries, but not for developing countries. Developing countries face an array of complex social issues that GDP does not consider.

Namibia, for example, is rated as an upper middle-income country, which means people in this country on average make between US$4 466 and US$13 845 per year.

Is that what is on the ground in this country? According to World Economics statistics, Namibia’s Gini coefficient index was 64,2% as of 2019.

The Gini index is a measure of how equal a country’s distribution of income is.

It is a score between 0 and 100, where 0 represents perfect equality and 100 represents perfect inequality.

If Namibia has a high Gini coefficient rate, but is classified as an upper middle-income country, does that data correlate?

Simon Kuznets is known for his views on the ineffectiveness of the usage of GDP to measure the standard of living of people.

He believes GDP indicators do not factor in the broad elements that impact a society.

For example, they do not factor in the literacy level of people, and how well people conserve the environment and natural resources.

Neither does it determine the health and well-being of people.

Going back to the article that cited that Namibia’s economy grew by 3,7% this quarter: Economists and those responsible for reporting GDP statistics need to change how they tell the economic growth narrative.

Every stakeholder asks: What is in it for me? Or says: So what!

A layperson would probably ask: So what if our economy grew by 3,7%?

What does that mean for me and my family? The Namibia Statistics Agency, as one of the custodians for national statistics, needs to find a way to bring more meaning and understanding to these numbers.

This would help in garnering buy-in from Namibians and develop a better appreciation for such statistics.

Perhaps there would be no challenges such as those faced by the census team, where numerous people, particularly from the informal areas, did not want to be counted, because they felt their participation in previous censuses did not yield any benefits for them.

The NBC reported that one of these people said they have not tasted the fruits of the government’s planning efforts and that is why they don’t want to be counted.

We need to adopt or find measures that suit our developmental aspirations and context.

It is time to assess whether measures such as the GNI or GDP are still relevant for our country.

• Morna Ikosa is a seasoned communications and stakeholder engagement consultant with a specific affinity for sustainable development, and is a certified workplace violence and sexual harassment expert. Find her on LinkedIn, or email her at micommunicationscc@gmail.com