Forecast of Economic Growth

Forecast of Economic Growth

Tags:      Gig Economy     Economy     WTO     WTO Public Stockholding     MSP     Economic Growth     Masala Bond     Environmental Performance Index     Forecast of Economic Growth     Functions of the Finance Commission

Forecast of economic growth in all the major world economies is a keenly watched and monitored activity. This is because it is a key determinant for maintaining the fiscal health of a nation. It provides a needed direction in which governments must channelize their action for the greater good of their citizens. A growth forecast is done by using key variables and examining their relationships like inflation, exchange rates, population growth, house prices, etc. Thus, economic forecasts help policymakers to make better decisions as policy changes take time for implementation. For example, if there is a forecast for an economy to enter into a recession, the government may consider making use of expansionary fiscal policy, i.e., higher spending through financed borrowing, so that demand is maintained within the economy and a sharp downturn is prevented.

It is also important to understand the economic growth foundation because it highlights the various drivers and how they can be used optimally. Land, labour, capital and entrepreneurship remain the four main foundational pillars of economic growth. Land includes commercial, agricultural and natural resources that come from it. Labour includes all the people who are responsible for creating goods and services along with the effort that they put forth. While mentioning capital, it is important to highlight that it includes cash along with the assets that are used in business to produce goods and services. Entrepreneurship includes innovators and visionaries who aid the production process by combining all the other factors of production. Their success depends on a working business plan and it should have objectives, short-term and long-term goals.

Thus, economic growth and GDP (Gross Domestic Product) are closely related to each other because GDP provides information on the size of the economy and how effectively it is performing. That is why the rate of growth of real GDP is normally used as an indicator of the general health condition of a country. On a broader scale, an increment in real GDP figures can be read as a sign of an economy doing well.

An economic growth graph can also be used for the purpose and there are different types of graphs like Real GDP Growth Fan Chart, CPI Inflation Projection, etc. that help in determining the real scenario of an economy. These are wonderful graphical tools that help policymakers to frame the right policies.