New set of economic data flounders previous estimates

Published : 10:58 am  July 10, 2015 | No comments so far |  | 


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har1By Indika Sakalasooriya

The rebasing exercise carried out by the Department of Census and Statistics (DCS) has revealed that Sri Lanka’s economy grew only 4.5 percent in 2014 as opposed to the projected 7.4 percent.
DCS yesterday said a new base year would be introduced to calculate the country’s gross domestic product (GDP) and economic growth.

“…national accounts estimates will be published by DCS from the
second quarter of 2015 with new base year 2010,” DCS said in a statement.
“Therefore, GDP, its growth rate and other macroeconomic accounts compiled using new base year 2010 will be considered as official national accounts statistics,” it added.

Until now, economic growth rate has been calculated using the year 2002 as the base year.
According to Policy Planning and Economic Affairs Deputy Minister Dr.Harsha de Silva, the rebasing exercise has made the GDP calculation realistic.

“Since 2002, the structure of the economy has changed significantly. For example, the most aspects of the informal economy were not included in the calculations. But with making 2010 the base year, informal activities of the economy have been brought into the calculation of the GDP,” de Silva said.
He noted that the previous regime gave no priority to change the base year because in actual terms, the economy was sliding, as opposed to what was projected.

Usually, base year should be revised once in five years with the view of reflecting the changes in the economy.
 With the 2002 as the base year, Sri Lanka’s economy was estimated to have grown 7.2 percent in 2013. But with 2010 as the base year, the economy only grew 3.4 percent.

“I’m not saying that any body told us lies. They based their estimations at 2002 levels. So what they got was a flawed picture as the structure of the economy has changed.” Silva further said the credibility of previous economic growth numbers of over 7 percent is dubious with household income increasing by only 0.5 percent per year.

“I’m not saying that both numbers should be same. But there can’t be such a huge anomaly. So the question is at what rate the economy actually grew?”
Though the economic growth figures slid following the rebasing exercise, on a positive note, the budget deficit in 2014 has come down to 5.5 percent from previously estimated 6 percent.

Likewise, debt to GDP has come down to 76.7 percent from 80.7 percent. Silva said the rebasing and the improving of the compilation procedures of the national accounts is very important as it will help people to know “what is really going on in the economy.”

National accounts were calculated by the Central Bank of Sri Lanka (CBSL) as well as DCS until the year 2007. But thereafter, only DCS has been responsible for calculating national accounts.
The DCS said while introducing 2010 as its base year from the second quarter of 2015, it will continue with the 2002 base year till the end of 2015, only for comparative purposes.  

They further said several new data sources have been identified for economic activities for which there hadn’t been adequate data sources. Unavailability of proper data is a key constraint in calculating national accounts.
“Up to now it has not been possible to cover certain new activities of the economy due to practical difficulties such as lack of data. Uncovering some household economic activities is an example for that.
But, application of new methodologies and use of new data sources, the economic activities of Sri Lanka has been covered as much as possible,” DCS said.