I must refer to the article carried in your Monday edition of the 28th April under the caption ‘There is no evidence of five per cent GDP growth’ under the pen of Sase Singh, Vincent Nauth et al. I have no problem with persons disagreeing with an official estimate, indicator or projection of any variable but when the effort to justify such disagreement becomes personal and seeks to disparage the ability and integrity of young public officers who have been trained, and continue to be trained in the complexities of National Accounting, as Chief Statistician I have to intervene in defence of my staff and say that I find such aspersions as ‘technicians are fudging the figures for political purposes or they are grossly incompetent at their basic arithmetic’ to be highly offensive and I and staff unequivocally reject such uninformed comments.
One strange phenomenon is that most of those who seek to disparage National Accounts estimates or give their lordly opinions of the lack of quality, acceptability of such basically do not have a clue of what goes into the compilation of the complete set of a country’s national accounts, much less the sources and sources of data and methodologies used to derive same. Let me make it clear that National Accounts is a career and even the best economist is not a trained National Accountant and cannot put together a detailed set of National Accounts. On the contrary, he/she is at best and hopefully a good interpreter and analyst of those accounts. The best ones are the proven sound economists who have had exposure in some degree to the compilation of the National Accounts. I cannot say in which category the contributors fall as I have no personal knowledge of any.
What I can say is that in a System which is based on an integrated system of Accounts, among them being accounts by industries and institutional sectors, and of which the GDP rate of growth is just one measured indicator, though one of the most important as it measures the performance of the economy over a fixed and continuous time frame, I found it rather disingenuous that the authors sought to focus almost exclusively on just one account (the Rest of the World Account), to justify or disparage the estimation of the GDP growth which is independently estimated based on the institutional/sectoral production performances which in many cases are independently reported in the media by the sectors themselves even prior to the calculation of the GDP growth and without a semblance of challenge from dissenters who subsequently emerge.
Thus as I kept reading and looking I could not believe that a challenge to a country’s growth estimate was being undertaken without a single word or reference to the economy’s sectoral sources of growth. An economy’s expansion as measured by GDP growth is an output concept. That is why it is defined at constant prices i.e. based on a specific year of measure so that all subsequent price movements relative to that year are neutralized and what is therefore captured is a measure that is as close as possible to an output (quantum) change only in all sectors and/or industries. As is the norm and as an Appendix to the Budget speech a GDP table at constant 2006 prices by Industrial Origin (see note immediately above) is annually presented (from the re-benchmarked year 2009).
Just to take a few examples from that table, and given that all of the components (sectoral performances) contribute to the whole (Overall growth) the table under reference shows, inter alia:
Sugar – Output declined by 14.4%. Thus if the overall growth of 5.2% is challenged, then sugar’s output decline of -14.4% has to be challenged also.
Rice – Output increased by 26.9%. Given all that is known and reported about Rice, do the challengers accept this reported growth in rice output?
Mining and Quarrying – A sectoral output growth of 8.0% has been measured and reported. But again, if the overall Real growth of 5.2% is unacceptable, then the dissenters have to reject the M&Q output performance. However, as a note of caution, included in this sector’s performance is Gold output which as reported by the oversight administrative agencies for the Gold sub-sector, grew by 9.7% (Is this accepted or rejected?). Bauxite suffered a 11% decline in output (Again – is this accepted or not?) And what of ‘Other Mining’ which recorded a 30.2% output growth (again Accepted or Not?). Note as the Hon. Minister reported in his Budget presentation that following the slide in gold prices there was a consequential improvement once again in Diamond Production, up over 2012 by 56.9% and stone continuing to support the construction boom up by 47.8%, solid contributors to the ‘Other Mining’ growth performance.
I ask these questions of the dissenters because sectoral economic activities and output do not occur at the Bureau here in Guyana nor in any Central Statistical Office globally, but rather and expectedly in the sectors themselves as reported by the sectors. So if the writers are debunking the measure of growth am I to understand that they are debunking the sources of all growth viz: the economic and output performances as reported by our specific sectors. Moreover in addition to the above, would they for example dispute the double-digit growth in the construction sector given the supportive data at our disposal and all that is being observed around in ongoing construction activity, even by them? Or the sustained robust growth of the Financial sector (an average growth rate of 11.2% over the last 6 years). Net domestic credit by the banking system was estimated to have expanded some 25.2% in 2013 alone, as reported by the Bank of Guyana. (Accepted or not?). What about the Reports from some of our industry leaders about the profitability of their performances over the past year, Banks DIH, DDL, the commercial banks, could these logically be achieved in an economy that is not even achieving moderate growth?
So in trying to debunk and query the rate of growth the writers have chosen to query not the source, the sector performances of growth, but rather one of the areas of potential manifestation of that growth ‘the Rest of the World Account’ and the components thereof.
It is very important that the Balance of Payments account is at all times interpreted accurately and conclusions drawn reflect the reality on the ground. I remind the writers that the Balance of Payment is an accrual and not a cash flow account as is clearly their interpretation when one reads their article.
Guyana is a very open economy (current trade/GDP ratio as high as 148.8%) and it is the mix of domestic and foreign market conditions which influences a close correlation between the external and production accounts. A close correlation does not necessarily always happen nor happen in a particular year. For example, despite the slide in gold prices from the lofty heights of 2012 to present we did not see a correlative decline in production in 2013. Business decisions would have been taken by entrepreneurs within the sector to sustain activities – the authors must have noted that ‘Credit to Mining & Quarrying Sector’ increased by 13.9% in 2013 alone (pg. 10 of Budget Speech).
End result – despite sliding prices in 2013, production in the end still surpassed the then record 2012 levels even though 2012 production was favoured by the peak prices. That is from the production side. For purposes of selling however the value of gold exports in 2013 was down on 2012 levels, prices being just one of the factors. Because a whole set of different parameters defining the world market come into play, when a policy/management decision is made when to sell/export and in many cases export sales are made out of stocks accumulated rather than from current production (the measure of GDP growth) as is also the case in other commodity sectors which have the capacity to accumulate significant stocks, such as Rice, Bauxite, Forestry. On the flip side, an increase in commodity imports is not just a straightforward indicator of increased demand by the Rest of the World on the Guyana economy to pay. Some imports may in fact be temporary imports and in fact precursors of service activities in the domestic economy rather than an indicator of increased intermediate or final consumption as such imports are ultimately cancelled out as Re-exports, a line item in the Balance of Payments. Further, for an open economy like ours, the concern will always be not just if overall imports are increasing or declining, but the composition of all imports, and the policy perspective will always favour a shift towards increased intermediate and Capital imports at the expense of Final Consumption imports. You have to be intimately acquainted with the data and knowledgeable of the compilation thereof before even attempting to analyse or just comment.
This country’s economy is measured and calculated according to the International Standard, the United Nations’ System of National Accounts. If there is a different standard or measure that the contributors know of or wish to share, we at the Bureau will be eager recipients of this additional knowledge. Our work and the input data received from sectors in the calculation of the GDP is subject to review and recheck by and submission to several international Agencies. In closing I remind the authors that the rebasing of the National Accounts in 2006 established and confirmed the shift in the axis of growth of the economy from the traditional commodity to the services sectors in addition to providing the updated benchmarks of the sectoral contributions to the overall economy. A cursory examination will show our services sectors especially the main ones are not export-oriented and their strong growth performances will not be reflected as a mirror-image in the external accounts, which by itself can only provide a partial image of the production performances.
The growth of this small open economy of ours is clearly driven by domestic consumption, more importantly domestic consumption of domestically produced goods and services, as I mentioned before the concentration by the writers on the Rest of the World Account was at the expense of examination of all of the other integrated accounts and key variables.
Finally, I must return to the fact that not only at the Bureau, but in many other key institutions of Government which are mandated with the task of monitoring, measuring and analyzing the macro-economy and social parameters within the economy, the key technicians are our young graduates of our own University who continue to distinguish themselves by their ability to absorb and learn quickly, and perform to levels of expectation. Some over years past have further distinguished themselves by moving on to regional and the very international institutions which themselves monitor our work. So it is a matter of extreme concern when persons such as the writers of the article can only see our graduate staff as persons who have an innate and wicked proclivity to be corrupt (they are supposed to fudge numbers for political purposes as soon as they start to work with Government) and now by definition have been allowed to graduate by UG despite their declared ‘basic arithmetic incompetence’ by the knowledgeable authors. Knowledgeable but not a whisper from them or sharing of what the economy’s growth has to be if it is not 5.2% as reported. Could it be also that the writers are just contemptuous of the ability of graduates put out by our own University? The statement by the writers that in their opinion those at the bottom 40% of the economic ladder cannot associate with the measured growth of the economy over the years is by no means a scientific approach to disparage the measured level of growth. A completely different aspect, the welfare aspects of growth and policy approaches to ensure the trickle down effects of growth is now being opened by the authors, by focusing on the wrong indicator, when we all know that there are several different specific and complementary measures and indicators that have to be used in order to assess the welfare aspects of growth.