eBusiness Weekly
Clive Mphambela
Assessing the size of the economy is a very important element in economic planning and policy-making. Gross domestic product (GDP) 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 numbers could be completely out of line with what real estimates should be?
Should we not, as part of the basket of strategies to revitalise our economy, seize the opportunity to rebase our GDP numbers if a robust case can be built?
This statistical issue has after all been a pervasive African problem.
Let us recall that such in recent memory such events have been quite a common occurrence. For instance when Ghana rebased 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 realized the need for revising its GDP estimates.
We know that in 2014 alone, Nigeria, Kenya, Uganda, Tanzania, and Zambia all implemented exercises aimed at rebasing the GDPs.
This 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, while 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 from a modest 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 and even whole new industries that did not exist two decades ago for instance, like financial services and telecommunications, can remain in a blind spot and therefore completely un-recognised in the official statistics.
This is however not an easy exercise and by no means I am actually unsure if our statistics body, ZimStat, 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 rebasing 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.
Rebasing 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 rebased 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. It is desirable to change base periods frequently, especially in times of large changes in relative prices and rapid economic development.
We must realise that GDP rebasing is a way to update the country’s GDP to capture the emerging sectors for accurate reflection of country’s economy size.
This may not however guarantee investment inflows unless the exercises is backed by relevant economic indicators, namely: strong infrastructure, political and policy stability, sustainable income distribution among others.
*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.
