Assessing the size of the economy is very important element of economic planning and policy making. The Gross Domestic Product reflects the size of country’s economy and it is measured in terms of the monetary value of all finished goods and services produced within a country’s borders within a specific time period, usually a year.A number of factors have prompted me to put back on the table a discussion around the subject of our GDP statistics and the reportage thereof.
The short question is: “How confident are we as a country that we have for a long time NOT neglected the statistical work needed to maintain accurate GDP figures?”
Should we finally awaken to the stark reality that there is a big possibility that our current statistical numbers that are completely out of line with what real estimates should be, given the dramatic and major structural shifts in the economy? Should we not, as part of the basket of strategies to revitalise our economy, seize the opportunity to re-base our GDP numbers if a robust case can be built?
This statistical issue has after all been a pervasive African problem. We must recall that in very recent memory, such events have been quite a common occurrence.
For instance, Ghana re-based its GDP figures in late 2010, with the result that overnight, its real GDP estimates jumped up 60 percent.
Ghana is actually not the only African country that realised the need for revising its GDP estimates. We know that in 2014 alone, Nigeria, Kenya, Uganda, Tanzania, and Zambia all implemented exercises aimed at re-basing those countries GDPs.
These exercises led to significant revaluations of these countries GDPs. For example Nigeria’s GDP as measured at fiscal year 2013 nearly doubled. Tanzania’s GDP figure was reviewed up by 33 percent, whilst Kenya and Zambia statistics increased by almost 25 percent. Uganda’s revision resulted in GDP estimates that were 13 percent higher.
A 2012 paper by Morten Jerven and Magnus Ebo Duncan explains clearly how such large revisions can justifiably happen.
All GDP estimates are based on sampling techniques over a relatively small number of firms, rather than involving asking every firm in the country to report its data to the statistical service every quarter or year.
To remain accurate, the sampling frame must be periodically updated, to make sure that the weights placed in each industry accurately reflect the actual importance of that industry in the country’s economy.
However, as Zimbabwe it is conceivable that we have for a long time placed low priority on that task; and may be continuing to use the same weights that we have been using for decades.
Over time, this means that the statistical system may have gone “blind” to even large cumulative changes in the economic structure of the country.
The impact of new firms that have come up, and even whole new industries that did not exist two decades ago for instance, especially in the financial services and telecommunications sector, can remain in a blind spot and therefore completely unrecognised in the official statistics.
There is also the large portion of the economy that now operates as the informal of grey economy, whose impact now needs to be captured in any exercise aimed at resizing the economy.
This is however not an easy exercise and by no means I am actually unsure if our Zimstats has kept up to date with changes in the structure of the economy.
For example, in the case of Ghana, by the time the Statistical Office got around to updating its registry of business and calculated new base weights, services made up 51 percent of GDP, versus 36 percent in the old numbers, while industry had fallen from 28,3 percent to 18,6 percent and agriculture was revised from 35,6 percent to 30,2 percent.
For a country to consider re-basing its national accounts series, the following needs to be considered.
(i) The is a need to review the methodologies being adopted;
(ii) The need to review the existing statistical database and make choices regarding our economic data sets
(iii) A review of the coverage of the various economic aggregates to take into account the emergence of new economic activities in the economy and to incorporate changes on account of possible omissions or duplications and the;
(iv) Adoption of new International Standards (e.g., New SNA)
When all these issues are said and done, a simple chain linking of the economic data series may not give the correct picture of the economy measured in the past few years, particularly in our case where there has been major shifts in the economy in recent years, for example, dollarisation in 2009.
Therefore each component need to be considered carefully to provide, to the extent possible, the real picture of the economy in the recent past.
Re-basing of our national accounts series is in my view, desirable for these and several other reasons, as mentioned earlier, including for capturing the structural changes in the economy and thus for reaching near to truth.
Another important question to explore is how often the national statistics should be re-based and the base period reviewed? Practices in this respect vary considerably, with some countries keeping the same base period for as many as 10 years or 5 years, and some changing the base period every year.
The writer is an economist. The views expressed in this article are his personal opinions and should in no way be interpreted to represent the views of any organisations that the writer is associated with.