At the start of June, the World Bank cut the GDP growth forecast for South Africa to 0.6% due to the recent downgrades by ratings agencies.

More recently, the World Bank set the GDP growth forecast for Zimbabwe at 2.8%, due to the good harvest Zimbabwe experienced after the drought subsided during the second half of last year.

This means that the World Bank expects Zimbabwe to grow faster than SA in 2017. How can we draw this conclusion from these figures?

How is the GDP of a country made up?

The GDP (short for “gross domestic product”) is the main measure of a country’s wealth. It can be conceptualised for the layman as the sum of all value made within the country. In other words, the GDP of a country is the country’s riches, combined.

The GDP per capita is the GDP, divided by the population of a country. This is the average value contributed by each South African. The GDP per capita is the main measure of South Africans’ wealth.

Consequently, if the GDP grows at, say, 1%, and the population of South Africa grows at 1%, that means that South Africans are not getting richer or poorer. If the GDP grows with 5%, and the South African population grows at 2%, South Africans on average are becoming richer. Vice versa, if the GDP growth is less than South Africa’s population growth, that means that South Africans are getting poorer.

The World Bank’s 2015 estimate of population growth for South Africa and Zimbabwe respectively, are at 1.6% and 2.3% per year. Therefore, we can say that Zimbabweans will be growing richer this year, while South Africans will be growing a little poorer on average.

About The Author

Martina Marx

Martina Marx is currently completing a BCom degree in Quantitative Management to add to an Honours in Biotechnology. Martina is curious to the extent that her cooking is sometimes overdone because she’s reading, and impatient to the extent that she sometimes leaves food underdone, because there are things to read. To buy a 25cc motorbike she wanted when she was 7, Martina decided to start a mouse farm under her bed. This plan was foiled when her mom found the box to keep the mice in.

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