GDP Per Capita Defined: Applications and Highest Per Country

What Is GDP Per Capita?

Gross domestic product (GDP) per capita is an economic metric that breaks down a country's economic output per person. Economists use GDP per capita to determine how prosperous countries are based on their economic growth GDP per capita is calculated by dividing the GDP of a nation by its population. Countries with the higher GDP per capita tend to be those that are industrial, developed countries.

Understanding GDP Per Capita

GDP per capita is a global measure for gauging the prosperity of nations and is used by economists to analyze the prosperity of a country based on its economic growth.

There are a few ways to analyze a country’s wealth and prosperity. GDP per capita is the most universal because its components are regularly tracked on a global scale, providing ease of calculation and usage. Income per capita is another measure for global prosperity analysis, though it is less broadly used.

At its most basic interpretation, GDP per capita shows how much economic production value can be attributed to each individual citizen. Alternatively, this translates to a measure of national wealth since GDP market value per person also readily serves as a prosperity measure.

GDP Per Capita vs. Gross Domestic Product (GDP)

GDP itself is the primary measure of a country's economic productivity. A country's GDP shows the market value of goods and services it produces. In the United States, the Bureau of Economic Analysis (BEA) reports GDP every quarter.

Economists watch this quarterly report closely for the quarter-over-quarter and annual growth figures that can assist them in analyzing the overall health of the economy. Legislators use GDP when making fiscal policy decisions. GDP can also influence central bankers when they are deciding on the course of future monetary policy.

GDP per capita is often analyzed alongside GDP. Economists use this metric for insight into both their own country's domestic productivity as well as the productivity of other countries. GDP per capita considers both a country's GDP and its population. Therefore, it can be important to understand how each factor contributes to the overall result and how each factor is affecting GDP per capita growth.

Applications of GDP Per Capita

Governments can use GDP per capita to understand how the economy is growing with its population. GDP per capita analysis on a national level can provide insights into a country’s domestic population influence.

It is important to look at each variable’s overall contribution to understand how an economy is growing or contracting in terms of its people. There can be several numerical relationships that affect GDP per capita.

If a country’s GDP per capita is growing with a stable population level it can potentially be the result of technological progressions that are producing more with the same population level. Some countries may have high GDP per capita but a small population which usually means they have built up a self-sufficient economy based on an abundance of special resources.

Negative GDP Per Capita

A nation may have consistent economic growth but if its population is growing faster than its GDP,  GDP per capita growth will be negative. This is not a problem for most established economies, as even a tepid pace of economic growth can still outpace their population growth rates.

However, countries with low levels of GDP per capita to begin with—including many nations in Africa—can have rapidly increasing populations with little GDP growth, resulting in a steady erosion of living standards.

GDP and Population Growth

Global analysis of GDP per capita helps provide comparable insight on economic prosperity and economic developments across the globe. Both GDP and population are factors in the per capita equation. This means countries with the highest GDP may or may not have the highest GDP per capita.

Countries may also see a significant increase in GDP per capita as they become more advanced through technological progressions. Technology can be a revolutionary factor that helps countries increase per capita rankings with a stable population level.

According to World Bank data, global GDP per capita increased by an average of 2.3% in 2022. Economies such as China and India have achieved GDP per capita growth rates well above the global average in the 21st century despite their populations of over a billion people apiece, thanks to the financial reforms initiated by China in the late 1970s and India in the mid-1990s.

Nations With the Highest GDP Per Capita

Below are the top 10 nations with the highest GDP per capita as of May 2023, according to the International Monetary Fund (IMF).

Many of the nations on the list have relatively small populations. Luxembourg, at the top of the list, has one of the smallest populations about 650,000 people. Most of the small population countries are energy exporters, regional financial centers, and export business powerhouses.

Nations With the Lowest GDP Per Capita

These are the ten nations with the lowest GDP per capita, according to the CIA World Factbook.

GDP Per Capita Forecasts

The IMF provides a regular outlook on global growth with insights on both GDP and GDP per capita updated in its data mapper. It expects little change in the rankings of the top ten countries as sluggish growth data is trending across the globe.

The IMF expects growth in the global economy to slow down to 2.8% during 2023, according to a report released in April 2023. That estimate is 0.1% lower than the organization predicted back in January 2023. Global inflation is expected to drop to 7% during 2023 due to lower commodity prices. The IMF says it doesn't see inflation moving back up to the target level before 2025.

The Bottom Line

GDP per capita is a popular metric for the average prosperity and well-being of a country. Unlike some other measures of economic productivity, it takes population size into account, allowing easy comparisons between countries with different sizes.