1
$\begingroup$

The world bank shows UKraine's GDP on a tear, in dollar terms, from 2016 onwards. Specifically, between 2020 and 2021, Ukraine's GDP went up from USD 156Bn to USD 200Bn, a roughly 25% increase. The local exchange rate, in fact, actually depreciated ~23% in 2022. Further, Ukraine suffers under significant persistent inflation. How could GDP rise in dollar terms, that too such a large amount?

https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=UA https://bank.gov.ua/en/markets/exchangerate-chart

Improve this question
$\endgroup$

2 Answers 2

Reset to default
4
$\begingroup$

What happened to the exchange rate in 2022 does not matter for GDP in 2021 or any year before that. The exchange rate was quite stable in 2021 and the particular GDP number you look at is measured at purchaser's prices - hence the more inflation, the higher GDP.

If you would like to see a better description of actual growth, you may want to look at real GDP, for example here.

enter image description here

Improve this answer
$\endgroup$
2
  • $\begingroup$ So, given your input, the strange thing would be: despite the high inflation ~20% (order of magnitude), in 2021, the exchange rate did not drop, thus helping nominal GDP measured in dollars. $\endgroup$
    – Kiers
    Commented Mar 3, 2023 at 21:07
  • $\begingroup$ Where exactly do you see 20%. Looks more like core inflation was below 10%. $\endgroup$
    – AKdemy
    Commented Mar 3, 2023 at 23:32
3
$\begingroup$

How could GDP rise in dollar terms, that too such a large amount?

GDP can be measured at constant prices (real GDP) or at current prices (nominal GDP).

Nominal GDP can change by very large amount just due to effect of inflation. Indeed it is very rare for economy to get 25% more productive in real terms. So observing that would be quite strange (although not completely impossible if there was some large boom). However, when it comes to nominal GDP the effect will be skewed by change in prices. Having large inflation is not that unusual, and hence nominal GDP can sometimes increase by extremely large amount, not because economy would be more productive but just because average prices increased so much.

Improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.