Per Capita GDP

What Is Per Capita GDP?

Per capita gross domestic product (GDP) is a financial metric that breaks down a country's economic output per person and is calculated by dividing the GDP of a nation by its population.

Understanding Per Capita GDP

Per capita GDP is a global measure for gauging the prosperity of nations and is used by economists to analyze the prosperity of a country based on its economic growth.

There are a few ways to analyze a country’s wealth and prosperity. Per capita GDP is the most universal because its components are regularly tracked on a global scale, providing for ease of calculation and usage. Income per capita is another measure for global prosperity analysis, though it is less broadly used.

At its most basic interpretation, per capita GDP shows how much economic production value can be attributed to each individual citizen. Alternatively, this translates to a measure of national wealth since GDP market value per person also readily serves as a prosperity measure.

GDP itself is the primary measure of a country's economic productivity. A country's GDP shows the market value of goods and services it produces. In the United States, the Bureau of Economic Analysis reports GDP every quarter. Economists watch this quarterly report closely for the quarter over quarter and annual growth figures that can assist them in analyzing the overall health of the economy. Legislators use GDP when making fiscal policy decisions. GDP can also influence central bankers when they are deciding on the course of future monetary policy.

Per capita GDP is often analyzed alongside GDP. Economists use this metric for insight on both their own country's domestic productivity as well as the productivity of other countries. Per capita GDP considers both a country's GDP and its population. Therefore, it can be important to understand how each factor contributes to the overall result and how each factor is affecting per capita GDP growth.

Applications of Per Capita GDP

Governments can use per capita GDP to understand how the economy is growing with its population. GDP per capita analysis on a national level can provide insights into a country’s domestic population influence. Overall, it is important to look at each variable’s contribution to understand how an economy is growing or contracting in terms of its people. There can be several numerical relationships that affect per capita GDP.

If a country’s per capita GDP is growing with a stable population level it can potentially be the result of technological progressions that are producing more with the same population level. Some countries may have high per capita GDP but a small population which usually means they have built up a self-sufficient economy based on an abundance of special resources.

A nation may have consistent economic growth but if its population is growing faster than its GDP, per capita GDP growth will be negative. This is not a problem for most established economies, as even a tepid pace of economic growth can still outpace their population growth rates. However, countries with low levels of per capita GDP to begin with — including many nations in Africa — can have rapidly increasing populations with little GDP growth, resulting in a steady erosion of living standards.

Global analysis of per capita GDP helps provide comparable insight on economic prosperity and economic developments across the globe. Both GDP and population are factors in the per capita equation. This means countries with the highest GDP may or may not have the highest per capita GDP. Countries may also see a significant increase in per capita GDP as they become more advanced through technological progressions. Technology can be a revolutionary factor that helps countries increase their per capita ranking with a stable population level.

According to World Bank data, global per capita GDP fell by an average of 4.5% in 2020, the largest drop on record. Economies such as China and India have achieved per capita GDP growth rates well above the global average in the 21st century despite their populations of over a billion people apiece, thanks to the financial reforms initiated by China in the late 1970s and India in the mid-1990s.

Nations With the Highest Per Capita GDP

Below are the top 10 nations with the highest per capita GDP as of September 2021, according to the International Monetary Fund (IMF).

Per Capita GDP

Country

GDP per capita (USD)

Switzerland

United States

Source: IMF

Many of the nations on the list have relatively small populations. Luxembourg, at the top of the list, has one of the smallest populations at 626,000 people. Most of the small population countries are energy exporters, regional financial centers, and export business powerhouses.

Per Capita GDP Forecasts

The IMF provides a regular outlook on global growth with insights on both GDP and GDP per capita updated in its data mapper. It expects little change in the rankings of the top ten countries as sluggish growth data is trending across the globe.

The IMF expects the global economy to bounce back from the coronavirus pandemic. The July 2021 IMF report projects GDP growth worldwide of 6.0% in 2021 and 4.9% in 2022.

How Do You Calculate GDP Per Capita?

The formula to calculate GDP Per Capita is GDP Per Capita = GDP/Population. GDP is the gross domestic product of a nation while the population would be the entire population of a nation. This calculation reflects a nation's standard of living.

Which Countries Have the Highest GDP Per Capita?

The countries with the highest GDP per capita from highest are Luxembourg, Switzerland, Ireland, Norway, United States, Denmark, Iceland, Singapore, Australia, and Netherlands.

What Is the Difference Between GDP Per Capita and Per Capita Income?

GDP per capita measures the economic output of a nation per person. It seeks to determine the prosperity of a nation by economic growth per person in that nation. Per capita income measures the amount of money earned per person in a nation. This metric seeks to evaluate the average per-person income for a given region in order to determine the standard of living and quality of life of a population.

Which Country Has the Lowest GDP Per Capita?

Burundi has the lowest GDP Per Capita. Other countries with low GDP per capita are South Sudan, Somalia, Malawi, Mozambique, Central African Republic, Madagascar, Sierra Leone, Democratic Republic of Congo, and Niger.