Economist cautions on GDP use as measure of growth

University of Witwatersrand Political Economy professor Patrick Bond has cautioned on the use of gross domestic product (GDP) as, measure of economic growth in Africa, describing it as a misleading pointer for economic increase.

In an interview on the sidelines of a three-day training by the Tax Justice Network Africa (TJNA) in Johannesburg, South Africa, Bond said GDP is a terribly mistaken measure of prosperity because it ignores some important aspects.

He said GDP the total monetary value of all final goods and services that have been exchanged within a specific border over a set period of time is a bogus way to think of economic activity in Africa since non-renewable resources are ignored.

“GDP forgets to subtract nonrenewable resources that are taken out to get income. We should not give credit for GDP without debt because our natural capital are shrinking and GDP does not think of shrinking but only the addition which is the credit that is not debited,” he said.

He said the World Bank Conservation International, the Gaborone Declaration Strategy states that nations should take into account the role of natural capital in development by bring the value of natural resources from the margin to the centre of all economic decision making.

Traditionally, Malawi along with countries worldwide has used the GDP as a measure of economic growth which was initially developed in the United States of America in early 1930s.

This year, the Reserve Bank of Malawi (RBM) projected a 5.6 percent GDP growth banking hopes on the expected rebound of the agricultural sector.

Last year, the central bank projected that the economy will grow by 5.1 percent but was later revised by 2.2 percent points downwards to 2.9 percent.

The meeting is being held under the theme ‘Harnessing Africa’s mineral wealth to finance sustainable development’.