For the Record
On the “3rd Quarter 2012 GDP growth rate could be wrong”
This article seeks to clarify some of the points and misconceptions raised in the article entitled “World Bank: 7.1% 3rd Quarter GDP Rate Could Be Wrong,” written by Mr. Rigoberto Tiglao in the 14 January 2013 issue of the Manila Times www.manilatimes.net/index.php/news/top-stories/39317-world-bank-7.1-3rd-quarter-gdp-rate--could-be-wrong?
“The reported 7.1 percent Gross Domestic Product (GDP) growth rate the Aquino administration and its cheering squads have been euphoric over may be in fact an over-estimation, and the actual figure could be as low as 5.7 percent.”
“…Growth in the third quarter must be tempered by the fact that statistical discrepancy explains 1.4 ppt of the 7.1 percent growth. This suggests that either third quarter growth will be revised downwards or fourth quarter growth will be lower by around two percentage points as statistical discrepancy is zeroed out in the full year growth statistic.”(This portion of the article was lifted by Mr. Tiglao from the World Bank Report, Philippine Economic Update: Accelerating Reforms to Sustain Growth, December 2012, p7, footnote #1).
Ppt means percentage points, which means that if the 1.4 percentage points is deducted from the 7.1 percent growth figure, the country’s GDP growth rate in the third quarter would be at a lower 5.7 percent.
The “statistical discrepancy” refers to the differences between the results of the two approaches to measuring the GDP either as expenditures or as incomes. While these two measures theoretically should amount to the same figure, it often doesn’t, due to either misreporting or delays in data submission. However, these discrepancies are reported only for GDP estimates for each quarter, with the full year GDP corrected for such discrepancies.
This conclusion is based on the World Bank’s December 2012 “Philippine Economic Update.”
This is the first time that the World Bank in its regular quarterly updates on the Philippine economy drew attention to the magnitude of the “statistical discrepancy” and to emphasize that a GDP figure should be “tempered.”
Unfortunately, in the Philippine setting, there is no regular and frequent retail trade survey which can be used to estimate the Household Final Consumption Expenditure (HFCE) which accounts for at least 70 percent of GDP on the expenditure side. To address this, rough commodity flow approaches and related indicators, including the Family Income and Expenditure Survey (FIES) conducted by the National Statistics Office (NSO) every three years are used instead. This partly explains the weakness of the HFCE estimates and implies that users must be careful and must understand the limitations when analyzing the GDP growth on the expenditure side, or when assessing the relationships among the components of the two sets of accounts. The NSCB has made similar clarifications on similar concerns in earlier NSCB reports and several fora conducted on the PSNA.
With the PSNA’s migration to the 2008 System of National Accounts (SNA), the country’s national accounts estimates are subjected to an SUT analysis to check the consistency of the production and expenditure side of the accounts. On an annual basis, the SD is zero, while on a quarterly basis, the SD is pegged at 1% or less of GDP due to the limitations of the data in terms of quarterly allocation.
Other countries do not have discrepancies since the component/s of other approach/es in estimating GDP are estimated as residual/s. The PSNA chose to show the statistical discrepancy as a way of reflecting transparency in the estimates and to keep the users better informed on the limitations of the estimates, especially on the expenditure side.
The NSCB would like to thank Mr. Tiglao for his interest in statistics and the World Bank for providing the much-needed support to the NSCB towards the improvement of the PSNA, particularly on the revision/rebasing of the PSNA.
Finally, for better appreciation of the SNA, the 2008 SNA may be accessed at http://unstats.un.org/unsd/nationalaccount/SNA2008.pdf. Likewise, the readers can access the Technical Notes on the PSNA at www.nscb.gov.ph/technotes/sna/default.asp and the Technical Paper on the Major Revisions on the PSNA: Implementation of the 2008 SNA at www.nscb.gov.ph/announce/2012/0628_psnarevisions.asp, respectively.
For inquiries, please contact Director Raymundo J. Talento of the Economic Statistics Office of the National Statistical Coordination Board at telephone numbered (632) 895-2481, or through e-mail address: email@example.com.
Posted: 22 January 2013