I just noticed that many people still don't understand what GDP stands for and why this number has such a huge impact on the stock market. Every time a new GDP figure is announced, we see the SET Index go up and down accordingly, which is no coincidence at all.

The real meaning of GDP is Gross Domestic Product, which is the total value of all goods and services produced by a country within a certain period. It’s an indicator that tells us whether our economy is growing or shrinking, whether fast or slow. Therefore, investors and policymakers both pay close attention to this number.

Calculating GDP isn't as complicated as you might think. Generally, the formula used is GDP = C + G + I + NX, where C is consumer spending, G is government expenditure, I is private and public investment, and NX is net exports (exports minus imports). The most important component is consumption because when consumers are confident and spend a lot, the economy grows. Conversely, if people are fearful and save more, GDP contracts.

What many people don’t realize is that there are two types of GDP: Nominal GDP and Real GDP. The first is the figure that hasn't been adjusted for inflation, which can make growth appear larger than it actually is. The second is adjusted for inflation, providing a more accurate picture of true economic growth or just rising prices. That’s why economists prefer to use Real GDP when comparing across different years.

So, why is GDP important to the stock market? Think about it: companies listed on the stock exchange are the heart of the economy. When GDP is high, it means businesses are thriving, revenues are increasing, and profits are growing. As a result, stock prices tend to rise. Conversely, if GDP falls, investors worry that companies will face problems, and stock prices decline. The relationship between GDP and the stock market is inseparable.

Managing the economy requires various data, but GDP is considered one of the most important indicators. It helps the government plan policies appropriately and enables investors to make better decisions. That’s why everyone should understand what GDP stands for and how much it affects our lives.