Economic Growth

Economic growth means an economy is producing more than before. It is typically reported quarterly and annually, adjusted for inflation so that it reflects real increases in output rather than higher prices.

Growth comes from two broad sources: using more inputs, such as more workers or more machinery, and using inputs more efficiently, through better technology, skills and organisation. Over long periods, improvements in productivity have been the most important source of rising living standards.

For example, an economy growing at 3% a year will roughly double its output in about 23 years. Even small differences in growth rates compound into large differences in prosperity over decades.

Economic growth generally creates jobs, raises incomes and increases tax revenues, which can fund public services. However, growth can also bring costs, such as environmental damage and resource depletion, and its benefits are not always shared evenly. Governments and central banks aim for steady, sustainable growth, avoiding both recessions and overheating that leads to high inflation.