GDP vs. GNP: Which Metric Truly Measures Your Country's Wealth

Economic

Summary:

Explore the differences between GDP and GNP and discover which one better reflects a country’s wealth. Learn how each metric is calculated and their impact on economic analysis.

When evaluating the economic health and wealth of a nation, Gross Domestic Product (GDP) and Gross National Product (GNP) are two of the most important metrics used. However, while these terms might seem interchangeable at first glance, they actually measure different aspects of a country’s economy. Understanding the distinctions between GDP and GNP is crucial for understanding how a country’s economic performance is assessed. This article delves into the key differences between GDP and GNP, explaining how each is calculated, what they measure, and which one truly reflects a country’s wealth.

What is GDP?

Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country’s borders over a specific time period, typically a year or a quarter. It is one of the most commonly used indicators of a country’s economic performance. GDP takes into account only the economic activity that occurs within the physical boundaries of a country, regardless of whether the producers are domestic or foreign.

How is GDP Calculated?

GDP can be calculated using three main approaches:

Production Approach: This calculates the total value added at each stage of production in the economy.

Expenditure Approach: This measures the total spending on final goods and services in the economy. The formula is:

GDP=C+I+G+(X−M)GDP = C + I + G + (X - M)GDP=C+I+G+(X−M)

Where:

C= Consumption

I= Investment

G= Government spending

X= Exports

M= Imports

Income Approach: This sums up all the incomes earned by households and businesses in the economy, such as wages, profits, and rents.

Why GDP Matters

GDP is essential because it provides a snapshot of a country’s economic activity within its borders. Governments, economists, and businesses use GDP to gauge the economic health of a nation, determine whether the economy is expanding or contracting, and formulate policy decisions. It’s also commonly used in international comparisons to assess and rank the economic performance of different countries.

What is GNP?

Gross National Product (GNP), on the other hand, is the total monetary value of all goods and services produced by the residents of a country, both within its borders and abroad, over a specific time period. GNP accounts for the income earned by a country's citizens and businesses, regardless of whether that income is generated domestically or internationally.

How is GNP Calculated?

GNP can be calculated by adjusting GDP for the income received from abroad and the income sent out of the country by foreign nationals and businesses:

GNP=GDP+Net income from abroadGNP = GDP + \text{Net income from abroad}GNP=GDP+Net income from abroad

The net income from abroad includes:

Income earned by domestic residents from foreign investments (such as profits from overseas businesses)Income earned by foreign residents within the country, which is subtracted from the GNP calculation

Why GNP Matters

GNP provides a broader view of the economic health of a country, as it considers the economic contributions made by a country’s citizens and businesses outside its borders. This makes GNP particularly useful for understanding the economic strength of nations with significant overseas investments, such as multinational corporations or citizens working abroad.

Key Differences Between GDP and GNP

The primary difference between GDP and GNP lies in what each metric measures:

GDP measures

the total economic output within a country’s borders, regardless of who produces it.

GNP measures

the total economic output generated by the residents of a country, including income earned abroad and excluding income earned by foreigners within the country.

Which One Better Measures a Country’s Wealth?

The answer depends on the context and the perspective you’re interested in:

GDP is more commonly used when assessing a country’s economic activity, especially in terms of measuring domestic output and growth. It provides a clear picture of the economic activity that occurs within the physical borders of a country, which is particularly relevant for policymakers and businesses focused on the domestic economy.

GNP is a better indicator for understanding the wealth generated by a country’s residents, especially in cases where a significant portion of a country’s income comes from abroad. For countries with large multinational corporations or significant overseas investments, GNP provides a clearer picture of the economic well-being of its citizens and businesses.

GDP vs. GNP in Practice

Let’s consider two examples to illustrate how GDP and GNP can provide different insights into a country’s economic performance:

Country A is home to a number of large multinational corporations that have significant investments and operations abroad. In this case, the country’s GNP may be higher than its GDP because the income generated by its citizens and businesses overseas contributes to its national income.

Country B has little to no overseas investment and relies heavily on foreign workers. In this case, the country’s GDP may be higher than its GNP, as income generated by foreign workers within the country would be included in the GDP but excluded from the GNP.

Which Metric is Better for Economic Decision-Making?

While both GDP and GNP are important, GDP is generally favored for short-term economic analysis, as it gives a more immediate picture of the country’s economic health. It helps policymakers and businesses assess how well the domestic economy is performing.

However, GNP offers a better long-term perspective, especially for countries with a large number of citizens or businesses operating internationally. It highlights the economic wealth generated by a country’s residents, regardless of where they are located.

Conclusion

Both GDP and GNP are essential for understanding the wealth and economic performance of a country, but each offers a different perspective. GDP is focused on the economic activity occurring within a country’s borders, while GNP emphasizes the total income generated by a country’s residents, including their overseas activities.

For most domestic economic assessments, GDP is typically the go-to metric. However, GNP becomes particularly important when assessing the broader wealth of a nation, especially for countries with significant global business or expatriate populations.

In the end, the wealth of a nation cannot be understood through a single metric. Both GDP and GNP play vital roles in giving a fuller picture of a country’s economic strength and its place in the global economy.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Glendon

Economic

In the global economy, financial cities are the beating hearts of wealth creation, innovation, and economic power. These urban hubs attract high-net-worth individuals (HNWIs), multinational corporations, and investors, shaping the trajectory of global markets. From Wall Street’s towering skyscrapers to Singapore’s bustling financial district, these cities are more than just economic centers—they are symbols of ambition, luxury, and opportunity.

The Titans of Finance: New York and London

New York City reigns supreme as the world’s financial capital. Home to over 349,500 millionaires and 60 billionaires, NYC’s wealth is driven by Wall Street, the New York Stock Exchange (NYSE), and a diverse economy spanning finance, media, and technology. Manhattan’s luxury real estate market, with properties averaging $2.4 million, underscores its status as a global wealth magnet.

London, Europe’s financial powerhouse, follows closely. Despite Brexit challenges, London remains a hub for international finance, with 227,000 millionaires and 35 billionaires. The City of London and Canary Wharf are home to major banks and investment firms, while neighborhoods like Mayfair and Knightsbridge boast some of the world’s most expensive real estate.

Asia’s Rising Stars: Singapore and Hong Kong

Singapore has emerged as a global wealth hub, attracting 244,800 millionaires and 30 billionaires. Known for its pro-business policies, low tax rates, and robust financial services, Singapore is a haven for HNWIs and corporations. Its luxury real estate market, particularly in Marina Bay, reflects its status as a premier financial center.

Hong Kong, despite geopolitical challenges, remains a key player in Asia’s financial landscape. With 129,500 millionaires and a thriving stock exchange, Hong Kong continues to attract investors and businesses. Its strategic location as a gateway to China further solidifies its importance.

Innovation and Technology: San Francisco and Tokyo

The San Francisco Bay Area, encompassing Silicon Valley, is a global leader in technology and innovation. Home to 305,700 millionaires and 68 billionaires, the region thrives on its tech giants like Apple, Google, and Meta. The Bay Area’s real estate market, with median home prices exceeding $1.3 million, reflects its economic dominance.

Tokyo, Asia’s largest metropolitan economy, combines tradition with modernity. With 298,300 millionaires, Tokyo’s wealth is driven by technology, manufacturing, and finance. The Tokyo Stock Exchange and neighborhoods like Minato and Shibuya highlight its economic prowess.

Emerging Contenders: Dubai and Shanghai

Dubai has rapidly ascended as a global financial hub, attracting 6,700 millionaires in 2024 alone. Its tax-friendly policies, political stability, and luxury lifestyle make it a magnet for HNWIs. Dubai’s real estate market, with properties like the Burj Khalifa, symbolizes its opulence and ambition.

Shanghai, China’s financial capital, is a rising star in the global economy. With 165,000 millionaires, Shanghai’s wealth is fueled by its stock exchange, trade, and innovation. The city’s skyline, dominated by the Shanghai Tower, reflects its rapid growth and economic influence.

The Future of Financial Cities

As technology and sustainability reshape the global economy, financial cities are adapting to maintain their dominance. Investments in fintech, green energy, and smart infrastructure are becoming key priorities. Cities like London and Singapore are leading the charge, balancing economic growth with environmental responsibility1013.

Conclusion

The world’s top financial cities are more than just economic hubs—they are centers of innovation, culture, and luxury. From New York’s Wall Street to Singapore’s Marina Bay, these cities attract the world’s wealthiest and most ambitious individuals. As they evolve, they will continue to shape the global economy, driving progress and prosperity for decades to come.

This article highlights the world’s leading financial cities, exploring their economic power, innovation, and luxury lifestyles. The AI image prompt complements the theme, visually capturing the dynamism and global influence of these urban hubs.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

ING

Economic

How Europe can rekindle its romance with investors

If you’d asked me on the eve of Donald Trump’s re-election in November where European stock markets would be right now, I, for one, wouldn’t have guessed they’d be surging. And yet, here we are. Germany’s DAX 40 is up a whopping 17% since election day.

Maybe I’m missing something; I’m just a simple economist, after all. But having spoken to a load of UK-based investors this week, there's still not a lot of love in the air when it comes to the European outlook.

Perhaps it’s the macro data, which hasn’t been as dreadful as first feared. Maybe ECB rate expectations have fallen. It could be renewed hope for 'peace' in Ukraine. It might even be the fact that US equities are now so expensive that even Europe now looks more appealing - the stronger dollar helps.

And this raises an interesting question: Are we past peak pessimism in Europe, and if not, how can we get there?

I put this question to Carsten, our Head of Macro, and it won’t surprise you that much hinges on President Trump and whether Europe can escape the worst of a US trade war. Do take a read of our team’s detailed look at the continent’s options. But to cut a long story short, Europe won’t escape tariffs, and its ability to do a quick deal is questionable.

Sure, there are quick wins. Lowering the tariff Europe charges on American-made cars is an obvious starting point. But ultimately, the US administration needs revenue, and its trade-related grievances with Europe appear deeply rooted. And it’s not at all clear that the continent’s leaders have much sway over American officials, as this week’s US-Russia talks appear to demonstrate.

The substance looks tricky, too. On LNG – a key interest of the Trump administration – Europe already sources 40% from the US. Is there really much scope to ramp that up, especially given the EU itself can’t speak on behalf of buyers?

Then there’s NATO, which is what a lot of this boils down to. Europe will more than likely commit to greater spending – perhaps upwards of 3% of GDP annually. As for where the money comes from, well, good question.

We don’t detect much appetite for pan-European borrowing right now, though Carsten reckons bolstering the European Defence Fund or using the European Investment Bank (EIB) could come back into fashion after the German elections. Either way, national governments will need to do the heavy lifting at a time when investors are already flapped about budget deficits (*cough* France).

But if Europe really is going to surprise us this year, then fiscal policy surely has to be part of the story. And let’s face it, only Germany has the room to go big. Much hinges on next week’s election outcome, but once a government is in place, Carsten reckons stimulus is coming. He points us towards Sunday’s TV debate for further clues on relaxing the infamous debt brake.

But forming a coalition is easier said than done. A negotiation involving several parties - more likely if the FDP and others meet the 5% electoral threshold – could take quite some time. You only need to look at Austria, where coalition talks are back to square one after several months, to see how challenging this process can be. No coalition means no meaningful German fiscal boost.

I’m guessing that, so far, I’ve not exactly filled you with optimism. So try this instead: how about a renaissance of the European consumer?

Wage growth is still north of 5%, where inflation is close to 2%. Yes, the ECB expects pay growth to slow considerably this year. But what if it doesn’t? After all, on some metrics at least, the European jobs market remains more buoyant than the US. Vacancies are still 30% up on pre-Covid levels in France and Germany, versus 10% in the US, according to the same set of data from the hiring agency Indeed.

The European savings ratio is also higher than average, whereas the US is below. Whether that buffer gets deployed is another question, listening to Carsten, given relatively weak consumer confidence. But if that changes, it could just be the tailwind Europe needs this year to escape the gloom.

I’m not saying that’s our base case, though. And despite what might be happening in stock markets, ‘peak pessimism’ in financial markets could still be yet to come. Our FX team expect EUR/USD to hit parity in Q2 before drifting higher thereafter. Their latest forecasts are out today. And my Rates Strategy colleagues think investors remain sensitive to the downside risks in Europe. They see a decent chance that markets could briefly price the ECB’s terminal rate as low as 1.5%, even if we don’t expect officials to take things quite as far as that in practice.

Whatever happens, if Europe's going to win back investors' hearts in the long run, good news needs to come from somewhere. Let's hope the equity folk know something we don't.

Source:ING

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Cohen

Economic

South Korea's unemployment rate dropped sharply in January, highlighting how domestic political tensions have had minimal impact on the country's jobs market.

The unemployment rate dropped to 2.9% from 3.7% in December 2024, according to Friday data from Statistics Korea.

On the other hand, employment for those aged between 15 years old and 64 years old rose 0.1 percentage points to 68.8%.

The number of employed people exceeded the number of unemployed. About 135,000 people were employed, with the number of employed rising to 27.9 million people. The number of jobless people rose only by 11,000 to around 1.1 million people in January, the Statistics Bureau reported.

Public administration and health and social recorded the most hires among all industries, adding 65,000 people and 180,000 people, respectively.

"We found today's figures positive, as they suggest that the political upheavals in December had a minimal impact on the labor market," ING's South Korea and Japan senior economist, Min Joo Kang, said. "At the same time, it shows that the Korean labor market is heavily dependent on public programs, rather than the private sector."

South Korea's political landscape was shaken, especially in the first part of the year, after former President Yoon Suk Yeol was impeached, following the announcement of an emergency martial law.

Source:MT Newswires

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

ING

Economic

The jobless rate improved mostly in government-sector jobs while import prices rose mostly due to the weak Korean won. We expect more macro policy support in the coming months.

Unemployment rate fell in January, but most job gains were in government-backed programmes

The unemployment rate fell sharply from 3.7% in December to 2.9% in January, well below the market consensus of 3.2%. In fact, as we had suspected last month, it was public jobs that caused the largest monthly swing. Among the industries, public administration and health & social work added the most jobs with 65k (vs -23k in December) and 180k (-140k in December), respectively. This was confirmed by an increase of 209k in the number of temporary workers (compared with -212k in December). The public work programme usually starts in January-March with contracts lasting less than one year. We found today's figures positive, as they suggest that the political upheavals in December had a minimal impact on the labour market.

At the same time it shows that the Korean labour market is heavily dependent on public programmes, rather than the private sector. Apart from the public work programme, manufacturing jobs recovered slightly (13k) after five months of contraction, while information and communications added jobs at a fairly solid rate (22k). However, other major industries such as construction and transport continue to shed jobs for a prolonged period.

Import prices rose steadily in January mostly due to the weak KRW

Import prices rose 6.6% year-on-year in January, moderating from a revised 6.8% in December. The KRW weakness is adding to domestic price pressures, as import prices in the contract currency fell -1.8%, the sixth consecutive monthly decline. We expect consumer prices to hover around 2% with upside inflationary pressures building. Yet, the government is likely to introduce addtional policy measures to curb inflation if it surges sharply.

Macro policy will be committed to supporting growth

We expect the Bank of Korea to resume its rate cutting at its February meeting. The weak KRW was the main concern for the BoK to pause its easing back in January. Now we see the KRW stabilising while the private sector is showing a weak recovery. On the fiscal side, the two major parties started talking about the supplementary budget. We expect the government to propose a budget of 20-30 trillion won by the end of the first quarter.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Alex

Economic

With the Consumer price index (CPI) and producer price (PPI) data in hand, economists estimated that the core Personal Consumption Expenditures Price Index (PCE) price index rose 0.3% in January after gaining 0.2% in December, much lower than the 0.5% gain some had forecast following the CPI data.

Markets monitor prospects for a peace deal in Ukraine, which could boost the euro area's economy, while taking comfort that U.S. reciprocal tariffs were not immediately imposed.

Traders priced in 33 of Federal Reserve rate cuts from 32 late Thursday and 26 bps on Wednesday after U.S. data.

Germany's 10-year bond yield (DE10YT=RR), the euro area's benchmark, was flat at 2.42% and on track to record a 4.5 basis points (bps) weekly rise.

Money markets priced in a European Central Bank deposit facility rate at 1.94% in December (EURESTECBM7X8=ICAP) from 1.85% on Monday.

Germany's 2-year yield (DE2YT=RR), more sensitive to expectations for ECB policy rates, was unchanged at 2.09%.

Italy's 10-year yield was down one basis point (bp) at 3.49%. The yield gap between Italian and German yields (DE10IT10=RR) was at 106 bps.

Source:Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Owen Li

Economic

Banks are halting the sales of silver bars amid surging demand, driven by increasing global uncertainties brought by U.S. President Donald Trump’s tariff threats, industry officials said Friday.

Lenders also earlier suspended the sales of gold bars, which have emerged as the most popular safe-haven asset in recent months.

An official displays silver bars at the Korea Gold Exchange in central Seoul, Sept. 19. Newsis

Due to the surge in gold and silver prices and the resulting spike in demand, which has outpaced supply, the Korea Minting and Security Printing Corp. halted its supply of gold bars to banks on Wednesday.

The Korea Gold Exchange, for its part, had already suspended bank sales of 10-gram and 100-gram gold bars since October while continuing to sell 1-kilogram bars.

However, with silver bar prices also soaring, the exchange notified banks of the suspension of silver bar supply on Thursday. It also noted that the remaining stock of 1-kilogram gold bars would no longer be available.

The major banks affected by the suspension of silver bar supply are KB Kookmin Bank, Shinhan Bank, Woori Bank and NH NongHyup Bank. Hana Bank does not sell silver bars.

“As gold prices recently hit record highs, a shortage of gold bars emerged. Consequently, investors turned to silver bars as an alternative, leading to a surge in demand for silver bars,” an official at one of the major banks said.

Some lenders continued selling gold and silver bars by depleting their existing inventory or sourcing from alternative suppliers. However, sales are expected to end soon once their remaining stock is exhausted.

Gold is considered a safe-haven asset and tends to increase in value during periods of political and economic instability.

Following Trump’s election as U.S. president, demand for safe-haven assets has surged, driving prices higher. International gold futures prices have repeatedly hit record highs this year.

Source: Koreatimes

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Daily News

Remarks of Officials

Central Bank

Forex

FastBull Events

FastBull Featured

Devin

Mohammad Omar

Recent Searches

Top Searches

Markets

News

Analysis

User

24/7

Economic Calendar

Education

Data

GDP vs. GNP: Which Metric Truly Measures Your Country's Wealth

What is GDP?

How is GDP Calculated?

Why GDP Matters

What is GNP?

How is GNP Calculated?

Why GNP Matters

Key Differences Between GDP and GNP

Which One Better Measures a Country’s Wealth?

GDP vs. GNP in Practice

Which Metric is Better for Economic Decision-Making?

Conclusion

The World's Top Financial Cities: Where Wealth and Power Collide

The Titans of Finance: New York and London

Asia’s Rising Stars: Singapore and Hong Kong

Innovation and Technology: San Francisco and Tokyo

Emerging Contenders: Dubai and Shanghai

The Future of Financial Cities

Conclusion

THINK Ahead: Europe Needs More than Cupid’s Arrow to Woo investors

How Europe can rekindle its romance with investors

Source:ING

South Korea's Jobless Rate Drops in January

Source:MT Newswires

Korea: Jobless Rate Fell Sharply in January While More Policy Support Is Expected

Unemployment rate fell in January, but most job gains were in government-backed programmes

Import prices rose steadily in January mostly due to the weak KRW

Macro policy will be committed to supporting growth

Euro Area Yields Set for a Weekly Rise After Mixed US Data

Source:Reuters

Banks Halt Sales of Silver Bars Amid Soaring Demand

Source: Koreatimes

Risk Disclosure