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Economic analysis, in contrast to financial analysis, defines the real resource flows induced by an investment rather than the investment's monetary effects. (JP Gittinger 1982 Economic Analysis of Agricultural Projects)

Financial analysis thus relates to the performance of a project from the viewpoint of a stakeholder - eg, a farmer or institution, and looks at investment, maintenance and operation costs and cash revenues after taxes, duties etc.

Economic analysis defines the impact of the project on the regional or national economy. It does not consider transfers between economic actors, such as taxes, duties etc. It values traded outputs/costs at their economic level (often defined by their world price net of import or export costs). Non-traded outputs/costs (ie, where price is not determined by "the market") can be valued on the basis of "willingness to pay" or shadow price.

Both economic and financial analysis should look at the with project situation compared to the without project (and not before and after) - ie, they take account of changes that would have occurred in the absence of the project investment.

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Q: What is the difference between project economic and financial analysis?
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