Activity 5a: Calculating economic growth

- (Real GDP Dec 26 – Real GDP Dec 25) / Real GDP Dec 25 X 100
= (685 – 665)/665 = (20/665) X 100
= 3.0%
- The quarterly and annualised rates of growth for this period are calculated as follows:
(Real GDP Dec 26 – Real GDP Sep 26) / Real GDP Sep 26 X 100
= (685 – 680)/680 = (5/680) X 100
= 0.7% quarterly growth which equates to an annualised growth figure of 2.8% (i.e. 0.7% X 4)
- There is a difference in the two rates of growth because the figure 0.7% relates to the increase in production that occurred over the last three months of 2026. In contrast, 2.8% refers to the increase in production that would (hypothetically) occur over a period of one year if the economy grew at the 0.7% for 4 quarters.
- The quarterly rate is calculated as follows: (670 – 665) /665 X 100 = 0.8%. This equates to an annualised rate of 3.2% Given that a strong and sustainable rate of economic growth is generally considered to be within the range of 3 – 3.5% per annum, the government is likely to be reasonably happy with the outcome.
- The Dec 25 quarterly rate is calculated as follows: (665 – 670) /665 X 100 = -.07%. The year to end Dec 25 rate of economic growth is calculated as follows: (665 – 650) / 650 x 100 = 2.3%.
- This is because the negative rate of growth (i.e. the decrease in the real value of production) endured for only one quarter. All other quarters making up the annual periods experienced positive rates of growth.
- Since December 2024, the annual rate of growth in real GDP has trended up from 2.3% for the year to end December 2025 to 3.0% for the year to end December 2026.