Gross domestic product (GDP, a government-produced measure of economic output) is one of the most widely discussed econometrics in financial headlines that Fisher Investments reviews. In our experience, investors, policymakers, businesses and the general public use GDP to assess the state of the broader economy, which can inform their decision-making (e.g., a politician’s tax proposal or a business’s investment plan). But as Ireland shows, GDP isn’t an all-telling measure of economic health—worth keeping in mind for investors.
The popular statistic goes back nearly 100 years, when U.S. economist Simon Kuznets created a standard way to measure gross national product (GNP, the predecessor to GDP) and collect data called the national accounts that underpin its tabulation.i The motivation behind the stat’s creation: The U.S. federal government wanted to measure the Great Depression’s economic fallout and whether its policy responses were effective.ii
GDP measures the total market value of goods and services produced in a period. It is the sum of consumer spending plus private investment plus government spending plus net exports (exports minus imports), often adjusted for inflation (the change in prices economywide) thereafter. Though Kuznets himself said no single measure could capture the economy’s complexity in one number, many commentators and experts treat GDP results as a definitive summary of how the economy is faring, based on financial publications that Fisher Investments reviews.iii We understand why. Since GDP is calculated similarly worldwide, it makes for a useful comparison among different nations. But it isn’t perfect, as countries can differ economically.
Take Ireland. The Emerald Isle’s low-tax environment has made it an attractive place for multinational firms—particularly tech and pharmaceuticals—to domicile.iv Some of these global companies are so large economically, their accounting moves can skew GDP. For instance, take a multinational pharmaceutical that moves its global headquarters and intellectual property (IP) to Ireland for tax purposes. That company’s international production and exports may get tallied in Ireland—thereby showing up in Irish GDP—since that is where its patents are domiciled.v Yet, Fisher Investments notes that much of the actual economic activity didn’t occur within Irish borders. This isn’t just theoretical: A multinational company moved a large chunk of its IP assets to Ireland in 2015, leading to 26 per cent Irish GDP growth that year.vi
Given multinationals’ outsized influence on Irish GDP, policymakers have devised ways to adjust for those distortions. Ireland’s Central Statistics Office uses a bespoke statistic called Modified Domestic Demand (MDD), which strips out multinationals’ effects, to track the domestic economy. For instance, it excludes IP—a big contributor to the aforementioned skew. But a blanket IP exclusion also risks not including domestic Irish firms’ innovations and economic contributions (e.g., patents for inventions or copyrights for creative work) in the headline MDD figure—therefore also not providing a fully representative estimate of Irish output.
Despite GDP’s popularity, it also isn’t the only way to assess the economy. There are variations, including GDP per capita (GDP divided by the country’s total population, which some treat as a standard of living measure). There are GDP derivations, too, including the debt-to-GDP ratio (debt as a percentage of GDP). Many use this metric to gauge a country’s debt affordability—a misperception, in Fisher Investment’s view, as what matters more to making interest payments is tax revenues. Government pays interest with its coming revenue, not out of the annual flow of total national economic activity. Still others have devised alternative ways to measure economic well-being. For example, the United Nations created the Human Development Index that focuses on health, education and standard of living.vii
For investors, the sheer number of indicators tracking the broad economy can be overwhelming. But none will provide a wholly comprehensive economic portrait. Not even GDP. For instance, consider how imports subtract from GDP—a calculation quirk that treats them as a detraction from growth. Yet rising imports represent healthy domestic demand and, in Fisher Investment’s experience, vibrant domestic demand is a positive.
So keep GDP’s limitations in mind whenever headlines trumpet the latest numbers—whether of a specific country, region or the global economy. It is an imperfect stat and, as Ireland shows, its meaning can vary wildly on a country basis.
Read Fisher Investments’ additional reviews of markets and financial topics.
i “A brief history of GDP – and what could come next,” Peter Vanham, World Economic Forum, published 13/12/2021, updated 3/6/2025.
ii “Meet the new GDP prototype that tracks inequality,” Greg Rosalsky, NPR, 19/7/2022.
iii Ibid.
iv“ Multinationals make Ireland’s GDP growth ‘clearly misleading,’” Shawn Pogatchnik, Politico, 5/2/2021.
v Ibid.
vi “Is Ireland really the most prosperous country in Europe?” Patrick Honohan, Central Bank of Ireland, February 2021.
vii Source: United Nations, as of 14/10/2025.
Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates. This document constitutes the general views of Fisher Investments and should not be regarded as personalized investment or tax advice or as a representation of its performance or that of its clients. No assurances are made that Fisher Investments will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts will be, as accurate as any contained herein.
Fisher Investments Management, LLC does business under this name in Ontario and Newfoundland & Labrador. In all other provinces, Fisher Asset Management, LLC does business as Fisher Investments Canada and as Fisher Investments.
Advertising feature produced by Fisher Investments. The Globe’s editorial department was not involved.