There has been much talk as to whether President George Weah knows anything about Liberia’s present Gross Domestic Product (GDP) and how it affects the country’s overall economy and as to whether the allegation about a ‘missing’ L$16 billion may have any effect in the long run.
Reacting to political developments on the home front during his absence from the country, President Weah, speaking at the intercessory service held in his honor at the Dominion Christian Church upon his arrival home on Sunday, September 30, President castigated the statement by former President Ellen Johnson Sirleaf, when she suggested in an earlier BBC interview that the government under his leadership, might not understand what the country’s GDP is.
President Weah responded by asking why President Sirleaf, who is knowledgeable about GDP, did not use the knowledge to get things right in Liberia. “They know GDP,” said Weah in apparent derision, “They were in power for twelve years but could not fix the country.” According to political observers, President Weah’s rhetorical question simply underscores the fact that GDP could be a misleading indicator of the actual wellbeing of the people as compared to the Human Development Index. It could also, according to analysts, conceal real per capita income and present a somehow rosy but inaccurate picture of a country’s economic health.
For example, according to economic observers, Liberia during the 1960s recorded very high rates of growth and high GDP but, in reality, little or no development was achieved as the vast majority of the population remained mired in abject poverty. During the reign of President Sirleaf, Liberia attracted very high volume of direct foreign investment amounting to more than US$15 billion but, by contrast, economic conditions either deteriorated or remained the same with increasing numbers of Liberians falling below the poverty line-living on less than US$2 per day.
To determine actual wellbeing of the people, economists and social scientists tend to use the Human Development Index (HDI) to measure well-being within the country. The HDI is mainly a social measurement tool because it takes into account factors such as education measured in terms of the adult literacy rate, years of schooling, health care, life expectancy and also the economic factor of GDP.
History of GDP
GDP stands for Gross Domestic Product and its history can be traced to economist Simon Kuznets who developed the measurement (GDP) during the early 1930s. GDP measures the size of the economy by adding up the value of goods and services produced in the country during a period of time. Using the Expenditure approach, GDP is equal to Consumption + Gross Investment +Government Spending +(exports – Imports) expressed mathematically as GDP = C + I + G + (X-M).
According to Luke Metcalfe of Nation Master, most countries use GDP to measure standard of living. Economists, policymakers, international development agencies and even the media use it as an indicator of the economic health of a nation. The advantages offered by GDP is that it is widely and frequently used and its data requirements are readily available. Since the definition is common among countries, consistent comparisons can be made between and among them.
But there are limitations and disadvantages of GDP according to Metcalfe. For example, certain activities that have a negative impact on the people’s well-being could end up being recorded as positive contributions to the GDP. For instance, rising criminal activities can increase the country’s GDP through greater expenditures toward maintaining law and order (e.g., hiring of additional police officers, purchase of guns, building of prisons, etc).
Another example is the consequence of having depleted forests because of logging activities. GDP is increased when trees are cut down for lumber and other uses. The negative impact of deforestation is not taken into consideration. GDP is also criticized because it does not take into consideration other aspects that define human well-being like life expectancy and educational attainment.
According to Countryeconomy.com Liberia’s Gross Domestic Product (GDP) grew by 2.5% in 2017 compared to last year. This rate is 41 -tenths of one percent higher than the figure of -1.6% published in 2016. The GDP figure in 2017 was $2,158 million. Liberia, the report said is number 170 in the ranking of GDP of the 196 countries. The absolute value of GDP in Liberia dropped $1,120 million with respect to 2016.
The GDP per capita of Liberia in 2017 was $456, $254 less than in 2016 when it was $710. To view the evolution of the GDP per capita, it is interesting to look at 2007 when the Liberia’s GDP per capita was $400. The above indicates that Liberia’s population is among the poorest of the 196 countries whose GDP are published by countryeconomy.com.
Additionally, Liberia’s national debt in 2016 was U$928 million, (28.3% debt-to-GDP ratio) and its public debt per capita is 201$ dollars per inhabitant, according to Countryeconomy.com.
Compared to Sierra Leone, its Gross Domestic Product grew 4.2% in 2017 compared to 2016. This rate is 21 -tenths of one percent less than the figure of 6.3% published in 2016. The GDP figure in 2017 was $3,774 million, Sierra Leone is number 160 in the ranking of GDP of the 196 countries that we publish. The absolute value of GDP in Sierra Leone dropped $11 million with respect to 2016.
The GDP per capita of Sierra Leone in 2017 was $499, $23 less than in 2016, when it was $522. To view the evolution of the GDP per capita, it is interesting to look back a few years and compare these data with those of 2007 when the GDP per capita in Sierra Leone was $369.
If we order the countries according to their GDP per capita, Sierra Leone is in 185th position. According to this parameter, its population is among the poorest of 196 countries worldwide.