Information Note - Three methods to calculate GDP

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is one of the main economic indicators. These main economic indicators are described in more detail in the accompanying Measures of the Economy Information Note. There are three ways to calculate GDP, but they should all lead to the same result. The CSO uses all three in our annual estimates. First, we can measure the value of goods and services produced in an economy (the Output approach). Second, we can measure the income received from producing goods and services (the Income approach). Third, we can measure how much is spent on goods and services (the Expenditure approach).

Estimates in the benchmark 2023 Annual National Accounts (ANA23) published in July 2024 (formerly known as the National Income and Expenditure or NIE) can be illustrated using these three methods of calculating GDP. GDP is consistent between the methods including the balancing item known as the statistical discrepancy which is the difference between the estimate by each method and the official GDP.

GDP measured using the Output/Production approach

GDP at basic prices (excluding product taxes and subsidies) is also known as Gross Value Added (GVA); that is, it is a measure of the gross value added to the economy by each producing unit. Broadly speaking, it is simply the sum of each company’s outputs (sales) less inputs (purchases).

The output of an organisation is approximately equal to the total value of sales (turnover) over a given period although account is taken of goods and services bought and resold without further processing as well as goods manufactured but held in inventory and work in progress. The final component of output includes any items of a capital nature created in-house for the companies own final use, for example certain software, databases, and other computer systems. These are valued and added to the other items to form an estimate for the total value of goods and services produced by an organisation – their Output at basic prices.

In producing these outputs, an organisation will have to purchase goods and services, for example raw materials, energy, and other intermediate inputs. These are subtracted from the output (including any taxes relating to these purchases) to yield GVA. It may be summarised as follows:

Output by Industry minus Intermediate consumption by Industry equals GVA by Industry.

The following shows the calculation of 2023 GDP using the Output approach, also known as the Production approach, as shown in the Annual National Accounts (ANA23) published in July 2024, formerly known as the National income and Expenditure (NIE). 

GDP measured using the Income approach

Gross Value added (GDP at basic prices) is also equal to the costs of employment, taxes less subsidies levied upon production (for example business rates) and Gross Operating Surplus (broadly analogous to profit plus depreciation on capital).

The following shows the calculation of 2023 GDP using the Income approach as shown in the Annual National Accounts (ANA23) published in July 2024:

GDP measured using the Expenditure approach

GDP (Gross Domestic Product at Market Prices) can also be calculated as the sum of total final demand minus total imports.

Total domestic demand comprises purchases (including all taxes that may apply) by: Households, Non-profit institutions serving households, Tourists (specifically expenditure by non-residents), and Government. Gross fixed capital formation, changes in inventories and valuables are also included.

Final demand also includes the value of exports. Imports include goods and services and includes expenditure by Irish residents outside Ireland.

The following shows the calculation of 2023 GDP using the Expenditure approach as shown in the Annual National Accounts (ANA23) published in July 2024: