GDP Trends

Summary

Driver description
Interactions with the Economy Domain
Interactions within the Social Domain
Interactions with the Environment Domain
Interactions with the Technology Domain
Impacts on Mobility and Transport

Driver description

  • “The growth of GDP per capita is a measure of the dynamism of an economy and its capacity to create new jobs. It reflects the phases of the economic cycle.” (Ref: CO_0197)
  • “This indicator is a measure of economic activity, namely the value of an economy’s total output of goods and services, less intermediate consumption, plus net taxes on products and imports, in a specified period. GDP can be broken down by output, expenditure or income components. The main expenditure aggregates that make up GDP are household final consumption, government final consumption, gross fixed capital formation, changes in inventories, and net exports, i.e. the difference between imports and exports of goods and services (including intra-EU trade).” (Ref: CO_0197)
  •  “The keys determinants of economic development are split into three groups:
    • Economic governance: the degree of monetary stability, political rights and the level of democracy, the rule of law, the size of government (with large government restricting activity).
    • Human capital: the level of education, health of the population and fertility rate.
    • The starting level of income per capita.” (Ref: CO_2026)
  • “So, what drives economic growth? It is tempting to assume that growth is driven solely by investment and, therefore, ultimately by savings. But experience tells us that the quantity of investment will not determine economic growth in the long run. This is because production becomes increasingly capital intensive and adding even more capital often leads to less overall output. This will translate into low growth figures over time.” (Ref: CO_0178)
  • “For the past 50 years, by far the largest share of global economic activity has been concentrated in North America, Western Europe, and Northeast Asia (see picture below).” (Ref: CO_5028)
Figure 1‑31 Global GDP is concentrated in a few world regions, 2006

Source: Reshaping Economic Geography (Ref: CO_5028)
  • “[In Europe] After the economic peak of 2000, GDP per capita grew rather slowly during the economic downturn between 2000 and 2003. This was followed by a period of higher growth rates until 2007. However, with the onset of the crisis, GDP per capita grew by only 0.1 % in 2008 and fell by -4.6 % in 2009 down to a level similar to that of 2005. GDP per capita grew by 1.6 % in 2010, and short-term statistics show 2.2 % growth of GDP in the first quarter of 2011 as compared with the same quarter of the previous year, but only 1.7 % in the second quarter.” (Ref: CO_0197)
Figure 1‑32 Real GDP per capita, EU-27

 

Source: Sustainable development in the European Union (Ref: CO_0197)

  • “Particularly affected by the crisis in terms of GDP per capita were Latvia (with the previous GDP per capita growth rate between 2000 and 2007 being 9.4 % on average), Estonia (8.8 %), Ireland (4.1 %), Lithuania (8.1 %) and Finland (3.2 %). However, some eastern European countries (in particular Poland, Bulgaria, Slovakia and Romania) were hit less severely, due in part to lower current account deficits and external debts at the start of the crisis, stricter banking policies, lower dependence on stock exchange performance and exports, more stable domestic demand and modest exchange rate depreciation (in Member States outside the Euro area). A moderate recovery began in 2010 for most EU countries, with the exception of Greece, Ireland, Latvia, Romania and Spain.” (Ref: CO_0197)
  • “We forecast that growth will remain weak, especially in Europe, and unemployment will remain high for some time.” (Ref: CO_0180)
  • “The euro area is still projected to go into a mild recession in 2012 as a result of the sovereign debt crisis and a general loss of confidence, the effects of bank deleveraging on the real economy, and the impact of fiscal consolidation in response to market pressures.” (Ref: CO_0180)
  • “Despite the recent economic crisis, it can be said that Europe is living in an age of unprecedented economic prosperity and material affluence.” (Ref: CO_0197)
  • “The (…) dithering by the European institutions to deal with the crisis (too little, too late) might lead to the default of a number of periphery states with unpredictable consequences on the global economy.” (Ref: CO_0300)
  • “The European crisis appears as the nth ‘this time is different’ [Reinhart and Rogoff] episode of the financial liberalisation sequence cum fixed exchange rates, capital flows from the centre to the periphery, housing bubble, current account (CA) deficit and indebtedness, default.” (Ref: CO_0301)
  • “The impact of economy on transport demand is a well-known phenomenon. GDP growth and trade relations are the key variables for predicting transport volume and assigning transport flows.” (Ref: CO_2041)
Figure 1‑33 Transport activity growth 1990-2030

Source: Backcasting approach for sustainable mobility (Ref: CO_1014)

  • “Changes in the transport sector may induce changes in various other sectors, which in turn may affect sustainable development. For example, they may induce macro-economic changes (e.g., lower production values in transport, and higher production values in trade and industry), resulting in changes in GDP and employment levels.” (Ref: CO_0042)
  • “Uncontrolled economic growth is unsustainable on a finite planet. Governments should recognise the serious limitations of GDP as a measure of economic growth and complement it with measures of the five forms of capital, built (produced), natural, human, social and institutional/financial capital, i.e., a measure of wealth that integrates economic, social and environmental dimensions and is a better method for determining a country’s productive potential.” (Ref: CO_0118)

Interactions within the Economy Domain

Employment

Good economic performance is expected to influence positively the employment rate, as a GDP variation upturn stimulates the demand of production factors, namely capital and labour.

Regional differences in economics

  • “Regional disparities in GDP in the EU fell from 35.5 % to 32.7 % during the period 2000 to 2007. Together with the reduction of regional disparities in employment it suggests a growing convergence of EU regions. Within-country dispersion of regional GDP remained high, in particular in eastern European Member States, where the rapid transition into market economies has led to an increasingly uneven distribution of wealth.” (Ref: CO_0197)
  • “In 2009, GDP per capita in the EU still varied widely between Member States. Among the countries with GDP per capita, in terms of purchasing power standards (PPS), higher than the EU average are Luxembourg (by 171 %), Ireland (by 27 %), Netherlands (by 31 %), Austria (by 24 %), Denmark (by 21 %) and Sweden (by 18 %). The countries with the lowest are Bulgaria (lower than the EU average by 56 %, Romania (by 54 %), Latvia (by 48 %) and Lithuania (by 45 %).” (Ref: CO_0197)
  • “High dispersion rates of regional GDP not only indicate a high inequality in how populations of individual regions enjoy economic and social resources, but also that economically disadvantaged regions are more vulnerable to economic shocks.” (Ref: CO_0197)
Figure 1‑34 Dispersion of regional GDP per capita, by country

Source: Sustainable development in the European Union (Ref: CO_0197)

  • “Over the period 1998 - 2007 (as a share of GDP) the worsening of the current account balance of the peripheral countries emerges pari passu with the improving surplus of the central countries.” (Ref: CO_0300)
Figure 1‑35 Current Account Positions, Euro-Area Member States (in % of GDP – 1999 to 2008)

Source: Germany and the European and Global Crises (Ref: CO_0300)

Availability of public and private resources and investments in the transport sector

  • “Balanced budget rules take the cynical view that all government debt is bad. This is also the view that governments are simply wasteful and do not contribute to the productivity of a nation. If one takes this view, then yes, a balanced budget rule makes sense. Such a view, however, is the expression of an economic fundamentalism that says that what governments do is bad, and what markets do is good.” (Ref: CO_0302)

Fiscal policy

  • “In the euro area, the fiscal withdrawal in 2012 is projected to amount to about 1½ percent of GDP, up from about 1 percent of GDP in 2011.” (Ref: CO_0180)

Interactions with the Social Domain

Migration flows

  • “Net migration is determined by levels of economic development and migration policy.” (Ref: CO_2041)

Income structure and distribution

  • “GDP per capita, however, does not reflect the equality of distribution of that prosperity, so is not representative of many social issues. (...) GDP per capita cannot be used as a holistic measure of the well-being of individuals.” (Ref: CO_0197)
  • “Income per capita should grow in all the countries that we consider. But demographic patterns vary significantly across the world and have a major influence on growth prospects.” (Ref: CO_2026)
  • “Household income correlates strongly with GDP per capita and could be thought of as a proxy to the latter for the estimation of transport demand.” (Ref: CO_2041)

Car ownership

  • “Economic growth generates wealth, which individuals invest in cars, airline flights and travelling.” (Ref: CO_6006)
  • “Evidently, higher economic growth results in more vehicle ownership and increased traffic and freight movement, especially in eastern markets.” (Ref: CO_0159)
  • “Economic development has historically been strongly associated with an increase in the demand for transportation and particularly in the number of road vehicles (with at least 4 wheels, including cars, trucks, and buses). This relationship is also evident in the developing economies today.” (Ref: CO_2038)
  • “The increases in economic growth and population, mainly in non-OECD Europe and Russia, will be associated with an increase in vehicle ownership. In 2005, OECD Europe vehicle ownership stood at 424 cars/1,000 capita while that of Eastern Europe and Russia stood at 149 and 134 cars/1,000 capita, respectively. Through 2050, vehicle ownership for OECD Europe is expected to increase slightly, but will almost double for Russia and non-OECD Europe.” (Ref: CO_0159)

Change of lifestyle and values

  • “Economic development is behind social change. Economic development is the process in which the growing technical efficiency of provision for basic needs allows society to shift its time progressively towards production and consumption activities relating to more sophisticated needs. Cultural change, change in habits and beliefs and values, is an integral part of the process. The developing society does not just engage in new forms of production, but also in new sorts of consumption. Its members can do new things with their time, and different sorts of leisure emerge.” (Ref: CO_5048)

Interactions with the Environment Domain

Climate change impacts

  • “There is a tension, however, between consumer demand generating freight and societal demands for environmental quality.” (Ref: CO_5009)
  • “Environmental outcomes are heavily influenced by the economy. The sheer scale of economic activity can lead to impacts on the environment that accumulate over time and can lead to large scale changes in the quality of the environment. Economic growth is thus an important determinant of the environmental outlook.” (Ref: CO_5009)

GHG mitigation

  • “The economic recession had a significant impact on the EU's total greenhouse gas (GHG) emission trends but a more limited effect on progress towards Kyoto targets. This is because emissions in the sectors covered by the EU Emissions Trading Scheme (ETS), which were most affected by the crisis, do not affect Kyoto compliance once ETS caps have been set.” (Ref: CO_0131)
  • “The economic crisis of 2008 has led to a prolonged downturn in economic activity and has had a significant impact on CO2 emission rates.” (Ref: CO_4016)
  • “Due to the economic crisis, emissions declined in 2008 (4 % below 2005 levels) and in 2009 (16 % below 2005 levels). In 2010 emissions started to rise again, but are still 13 % below 2005 levels.” (Ref: CO_0131)

Pollution levels and emissions standards

  • “(...) no evidence [has been found] that GDP growth will turn environmental degradation around after a certain point, as much of the literature has suggested. Instead, GDP's impact is mixed and conditional upon governance. Increases in GDP and progress of governance are associated with constant improvement of air and water quality. Specifically, water quality improvements are more dependent on governance, while GDP seems to have a greater impact on air quality.” (Ref: CO_0119)

Energy availability, production and consumption

  • “Energy intensity[1] is strongly linked to the economic cycle. Thus energy intensity decreased from 1996 to 2000, remained almost constant from 2000 to 2003 and fell again from 2003 to 2009. This is a result of GDP growth slowing faster than gross inland energy consumption during economic downturns. The overall decline in energy intensity by almost 12 % has been enough to meet the 1 % average yearly reduction target despite only minor improvement during the downturns.” (Ref: CO_0197)
  • “Rapid urbanisation and infrastructure development is expected to accompany economic growth, particularly among developing and transition economies. As such, industrial energy demand is highly sensitive to growth in these economies over the medium term.” (Ref: CO_2024)

[1] Total energy intensity is the ratio between the gross inland consumption of energy and the gross domestic product (GDP). Energy consumption comprises the consumption of solid fuels, liquid fuels, gas, nuclear energy, renewable energies, and other fuels. (Ref: CO_0197)

Scarce resources of raw materials

  • “Social growth, with its focus on education, health, care and climate protection, puts less pressure on natural resources than the conventional market-driven growth model.” (Ref: CO_0235)
  • “(...) in the past, economic growth has accelerated greenhouse gas (CO2) emissions and caused the price of many raw materials to rise. (...) The looming competition for access to raw materials will – in the ideal case – lead to more competition among importers of raw materials for the markets of the exporting countries (so that they are able to pay for those raw materials) and to a race to improve resource efficiency, but it could also turn into conflicts for territorial and economic control of natural resources.” (Ref: CO_0235)

Interactions with the Technology Domain

No particularly relevant interrelationships have been found.

Impacts on Mobility and Transport

Decoupling transport and GDP growth

  • “Economic growth creates a spiral of greater demand for mobility, and greater demand for goods and services. Providing more goods and services requires more transport, support and staff; increased wealth allows people to travel more and encourages more expensive modes of transport such as the car; and growth in property prices leads to longer commutes.” (Ref: CO_5018)
  • “The analysis of the relationship between transport and economic growth remains complex and difficult to specify because of the causal and feedback mechanisms that involves. Decoupling of economic and transport growth remains challenging subject of current and future analysis about how (and whether) economic growth could be compatible with ecological and social sustainability.” (Ref: CO_1014)
  • “According to the analysis presented in the EC DGTREN Baseline scenario to 2030, in the period 1990 to 2005, the GDP elasticity of transportation activity in the EU was estimated at 0.90 for both passenger and freight transport. This is a remarkably high value indicating great dependence of economic and social activity on transportation.” (Ref: CO_0034)
  • “The transport sector plays a central role in the European economy and accounts for continuous growth in terms of tonne and passenger-kilometres. Whilst goods transport grew on average by 2.8% per year between 1995 and 2005 in the EU-25, thereby surpassing the average growth in GDP (at constant prices) of 2.3%, passenger transport increased at a slower rate of 1.8% (based on data covering the 1995-2004 period). Overall, as against a 25% increase in GDP between 1995 and 2005, goods transport grew by 31%. Passenger transport went up by 18% between 1995 and 2004, as against an increase in GDP of 23% over the same period (figure below).” (Ref: CO_5008)
Figure 1‑36 Evolution of freight and passenger transport compared with growth in GDP, 1995-2004/5 (1995=100)

Source: Energy and environmental aspects of the transport policy (Ref: CO_5008)

  • “Individual demand for transport will continue to increase in line with GDP in the EU15 due to higher wages and the fact that people spend more or less the same percentage of their disposable income on transport.” (Ref: CO_2041)
  • “(...) the stable relationship between growth in GDP and traffic volume implies that world-travel demand will increase approximately in proportion to the projected level of income, from 33 trillion passenger-km in 2000 to 105 trillion in 2050.” (Ref: CO_0059)
  • “Decoupling is a key concept defined as maintaining levels of economic growth, but with lower levels of transport intensity-breaking the historic link between GDP growth (desirable) and traffic growth (undesirable).” (Ref: CO_4017)
  • “Therefore, the prime political strategy vis-à-vis the environmental goal, is to promote a decoupling of transport growth from GDP growth.” (Ref: CO_4017)
  • “Mobility cannot be restrained; even if one wanted to, economic growth implies a growth of transport. (...) Mobility is a major asset for competitiveness. One must break with the dogma of the decoupling of the growth rate of transport with the growth rate of GDP.” (Ref: CO_5048)

Increased demand for faster transport modes

  • “Demand for speed is directly linked to GDP and individual welfare and is far from saturation (Thisse, 2009).” (Ref: CO_5005)
  • “Increasing purchasing power, as a result of economic growth, allowed people to buy faster transport modes.” (Ref: CO_5048)
  • “The passenger demand for air-transport is assumed to be closely related to Economy developments represented in the method by GDP growth.” (Ref: CO_2042)
  • “While the travel-money budget translates rising per capita GDP into rising PKT per capita, the fixed travel time budget requires that the increasing travel demand be satisfied in the same amount of time. Since each transport mode operates within a known range of speeds, the increasing per-person travel demand can only be satisfied by shifting toward increasingly rapid transport. Future increases in per capita GDP will continue to cause a rise in PKT. At the same time, the fixed travel-time budget will continue to push travellers toward faster modes of transport. (...) At that high mobility level, most travel would be international. Prices would adjust, and so would income levels.” (Ref:CO_0059)