Dear Editor,
Even using the Chief Statistician’s own measures create serious doubt about the claimed GDP growth rate for 2015.
I thank Mr Lennox Benjamin for his explanation in response to my letter questioning the claimed whole year (WR) GDP growth of 3% claimed by this government for 2015 when half year GDP growth from January to June (H1) was 0.7% (‘The annual growth rate is not calculated as the average of the sum…’ SN, February 4). Mr Benjamin clarified that “the growth rate for 2015 can never be the average of the sum of the growth rates for the two halves of the year.” He Benjamin uses the word “never”. He is wrong. While this may not be the method used in Guyana to calculate GDP growth rates, the average of the sum of quarters or halves in a calendar year (the method I used in my letter) is exactly the methodology used by many countries, including most developed countries, to calculate GDP growth rates. There are several methods of calculating GDP growth. I agree with Mr Benjamin that different activities and outputs in different intensities in different periods of the calendar year can have differing ‘weights’ or ‘impacts’ on overall GDP growth. However, I have serious concerns with the claims he made in his letter.
Mr Benjamin stated “The simple reality of this was that economic performance, and growth or recovery in the second half of 2015, was driven by some of the heavier-weighted sectors in the Gross Domestic Product profile, in particular gold, construction, wholesale and retail trade, transportation and storage sectors, information and communication. Secondly, Guyana’s economy is characterized by the seasonality of economic performance within sectors. Thus, the economy does not perform at one pace throughout the year, and historically and traditionally, the first half of the year contributes less to overall growth relative to the second half.”
Gold is the biggest sector listed in the quote. On average, world gold prices declined from June to December 2015 (H2) and there was no evidence of a considerable jump in gold production to offset the declining prices during the H2 period. This fact undermines Mr Benjamin’s contention here. The condition of wholesale and retail trade for the H2 period is best depicted by the escalating rate of deflation reported as of the end of the H2 period, the 17.7% decline in merchandise imports reported in the budget speech, the decline in the CPI (provided by Mr Benjamin) and the lower VAT collection. Again, these facts rebuke Mr Benjamin’s claim in this regard. Similarly, any casual observer will confirm that construction declined in H2 of 2015. By what measure are transportation, storage, information and communication heavier-weighted sectors? It is troubling that Mr Benjamin left out the real heavyweight sectors of the Guyana economy: the agriculture and commodities sector. There can be no economic advance in Guyana in any economic period without uptake in the agriculture and commodity sectors. The Finance Minister confirmed in his budget speech that these major sectors were all hammered by faltering world prices and reduced revenues for 2015. Again, Mr Benjamin is exposed.
While Mr Benjamin is correct that “…historically and traditionally, the first half of the year contributes less to overall growth relative to the second half”, the glaring problem is that historically and traditionally, the spread between the two halves is nowhere near as staggering as what happened in 2015. That is serious cause for concern. In 2012, the H1 GDP growth rate was 2.8% while the WY GDP growth rate for 2012 was 4.8%. This represents a 71.43% increase from H1 to WY in 2012. In 2013, the H1 growth was 3.9% while the WY growth was 5.2%, an increase of 33.33% from the H1 to WY GDP growth rate. Let us remember that 2012 and 2013 were high growth years for Guyana considering its GDP growth rates for the last decade.
In 2014, the economy was slowing down and the 2014 H1 GDP growth was 3.2% with WY growth ending up at 3.8% for 2014. That is an 18.75% increase in the H1 to WY GDP growth rate for 2014. Then in 2015, the H1 GDP growth rate was 0.7% and the WY GDP growth rate was 3%, which represents a shocking and stunning 328.57% increase in H1 to WY GDP growth rates! Clearly, the historical evidence is that even in periods of runaway commodity prices and fantastic growth, our commodity based and seasonal economy does not reflect the kind of staggering moon jump in GDP growth from H1 to WY as this government claims occurred in 2015. That this meteoric increase happened in an obvious deflationary spiral, sinking or flat commodity prices and generalized economic malaise is mind-boggling.
Mr Benjamin refers to 2015 as an abnormal year with business and consumer restraint guided by the May election. The problem with Mr Benjamin’s contention is that this ‘restraint’ started earlier in 2014 as the GDP growth rates and CPI index revealed. It is convenient to blame the May election, but it is not grounded in statistical truth. Plus, the budget and its massive influx of government funds have never historically caused the increase in GDP growth from H1 to H2 and to overall WY GDP growth to sky-jump 328.57% in the past, even in difficult years. If it didn’t happen when the budget is typically approved in April and spending typically starts in May, it certainly wouldn’t when the budget is approved in August and spending starts in September, and particularly not when deflation increased from H1 to H2 in 2015.
Mr Benjamin did confirm that deflation is measured by looking at the slide in the CPI. While he may not have cause to worry because the CPI did not slide 1.6% from June 2015 to December 2015, as Chief Statistician, he certainly should have cause to worry because the CPI did slide 2.07% year-over-year from December 2014 to December 2015. The CPI declined 0.22% from H1 2014 to H1 2015. Incidentally, that was correctly confirmed in the Finance Minister’s budget speech. Where it gets very troubling is that the Finance Minister claimed at paragraph 3.14 of that speech that deflation was at 1.8% by the end of December 2015 (ostensibly compared to December 2014). This is disputed by Mr Benjamin’s very own figures which put the CPI at the end of Dec 2014 at 113.94 versus 111.87 at the end of December 2015. That is deflation at 2.07%, not at the 1.8% claimed by the Minister of Finance in his budget speech! Mr Benjamin refers to imports of consumer goods increasing by quarter in 2015 as a “…proxy of consumers’ willingness to spend”. The Finance Minister at paragraph 3.8 reported a significant 17.7% decline in merchandise imports. How do we solve this telling contradiction between the Finance Minister and his Chief Statistician? Importing does not compute or translate to buying. Plus, VAT collections and remittances declined amidst falling export revenues. If this is Mr Benjamin’s definition of consumer confidence heading in the right direction, I don’t want to wait to hear from him when consumer confidence begins to head in the wrong direction.
Mr Benjamin admonished Stabroek News for failing to seek clarification on situations where a clear misunderstanding of fundamentals of the economy led to faulty analysis and confusion. It is clear that those with the supposed clearest understanding of the fundamentals of the economy are decidedly unclear on matters that require the utmost clarity. One has to wonder if it is time to consult the voodoo priest or obeah man to get straight advice about the real state of our economy. There is considerable doubt over this whole year 2015 GDP real growth rate number and this doubt casts serious doubt on the entire economy. If the numbers thrown out by the government do not meet the smell test, then the society has no clue if they are actually sinking or swimming.
Yours faithfully,
M Maxwell
