Tanzania economy overtakes shit hole Kenya

[Kim Jong-Un's Pajama Pants]

Let me help you. GDP is called National Accounts. It very simple maths.

Quantity * Price.

IT IS NOT DONE by economists. It done by BSC Maths - by Statistics bodies. It is the simplest of maths out there. Slightly harder than census

So you get list of all goods and services ( - UNSD has a little list of taxonomy for that - ISIC - list of economic activities)

You go to Agriculture -> Farming -> Pie - quantity produced 1M - average market prices in Tshs (2000) - GDP contribution - 1M*2000
If this pie was also converted into Pie Juice - then there is a manufacturing component to that.
Manufacturing -> Food Processing -> Pie Juice -> 10 million litres * price 1000.

So all computation is done at the national level in TSHS - based on the average market price in Tanzania.

Quantity is easy -- you just need to count or estimate.

Prices is also easy - statistic body will sample average prices from their markets, shops, supermarket.

Then TZ will declare their economy is 60 trillion TSHs.

End of story.

IMF and WB - then start their work there - because they need to compare countries.

The easiest - they convert 60 trillion TSH to USD using the current official exchange rate of USD to TSHs - it becomes NOMINAL GDP. USD is a de facto global currency. No long stories.

They also re-look at the market prices....and convert those to USD...and see if there are differences. Pie in Kenya and TZ should ideally be say 10 cents USD..but in TZ is cheaper...so there is a purchasing parity.

But it doesn't take into account why the price differences? Are the quality of Pies the same? Are folks earning the same wages and salaries?

Thanks for the info.  I'll check the links hopefully soon.  Mine is a question coming from genuine ignorance; not an assumption that I know better.  I am just curious.

To demonstrate my cartoonishly simple(perhaps wrong) understanding.  Kenya produces 2 pies, Tz produces 1 pie.  But according to PPP, an individual Tanzanian is able to afford a slightly larger piece of his pie than a Kenyan.  I can understand that bit.

What I find harder to wrap my head around is the leap that because a Tzian can get slightly more of his pie, that somehow Tz produces more pie than Kenya overall.  Does that really mean that Tz in actual fact produces more than 2 pies?

That's my understanding too.  In a nutshell.  The Tzian can afford more of his own pie with his shilling.  But not necessarily the same amount of pie from elsewhere.  And indeed it could be a worse(or better) quality pie.  When someone then uses it to say X has a bigger economy than Y without some heavy qualification, it just throws me off.