Economic growth is defined as a rise in a country’s economic capacity to produce services and goods within a specific period of time. This term is associated with economic advancements and progress. Sustained economic growth has a positive impact on the level of employment and national income, which translates to better living standards among the country’s citizens. Economic growth also plays an essential role in stimulating the finances of a government by enhancing tax revenues. To measure the economic growth of a nation, one compares the level of Gross National Product (GNP) for the current year with that of the previous year. Economic analysis helps assess the causes of economic problems, such as economic instability, inflation and depression, and the best solutions to these problems. The following are factors that affect the economic growth of a country.
Natural resources are the main factor that affects the economic development of a country. Natural resources include minerals, soil quality and land area, forests, good climate, and oil resources. These resources depend on environmental and climate conditions. Countries with plenty of these resources enjoy good economic growth compared to countries with few resources. The effective exploitation and utilization of natural resources mainly depend on the availability of funds, technology, and human resource skills. Countries that have rich natural resources and skilled workforce take the economy on a growth path. Such countries include the United Kingdom, United States, France and Germany. However, countries such as Saudi Arabia have fewer natural resources, but the per capita income is high; hence their economic growth is high too.
Political and Social Factors
Social and political factors play a vital role in the economic growth of a nation. The social factors include beliefs, values, traditions and customs. For instance, a society that believes in superstitions and conventional beliefs struggles to adapt to modern technology and ways of living. In this case, it will be a challenge to grow the economy. Also, political factors such as the government’s participation in formulating and implementing policies impact economic growth.
Human resource is one of the most significant determinants of a countries economic growth. The quantity and quality of human resource directly affect the growth of an economy. The quality of human resource depends on its creativity, skills, education, and training. The output is of high quality if the human resource is well trained. A Shortage of skilled labour hinders the growth of an economy.
Technological development involves production techniques and the application of scientific production methods. Technological development aids increase productivity with a limited amount of resources. A country needs to choose the right technology if they want to grow an economy.