Revaluation of GDP: Avoid making the measure become a development goal

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The re-evaluation of GDP scale will have an impact on the economic situation. Photo: collection.

Need to build trust in statistics

The statistics on GDP, on socio-economic development in all branches and fields are still released monthly, quarterly and annually by statistical agencies, so, it will give an overall and specific picture about situation of the country as well as the locality. The statistical offices always affirm these figures are done honestly, objectively and independently. But clearly, experts' skepticism about statistics is not non-existent, even some experts concerned that Vietnam's statistics still have differences compared to figures of foreign organisations.

The reason is explained thatusing the methodology, the method of calculationis different from each organisation, each country. But when GDP recalculation results were published for 2010-2017, the statistics increased to 25.4 percent compared to previously published figures. This makes experts wonder whether the calculation of GDP is accurate, appropriate and objective under the statistical agency. In 2013, GDP revaluation increased by only 9 percent, but this year's assessment has nearly tripled.

Assoc. Prof. Dr. Pham The Anh, Head of the Department of Macroeconomics, National Economics University, said for a long time, the quality of GDP statistics data of Vietnam still had some unsatisfactory points as it did not reflect all official economic activities, announcements were published before the end of the statistical period while revisions were not published publicly and there was no possibility of cross-checking. Therefore, the adjustment of GDP must be accompanied with explanations and the differences of two indices must be clarified to create trust and help authorities regulate appropriate policies.

Talking about "tragedy" in statistics in Greece, Nguyen Tien Phong, Assistant Representative of UNDP in Vietnam, said the lack of "integrity" in official statistics had contributed to the economic crisis of Greece. Politicians routinely intervened in statistical reports from 1997-2009, making false reports to reduce debt/GDP ratios and budget deficits. Therefore, Phong said it was necessary to build trust in statistics, to avoid considering statistics a goal which must be achieved, because “when a measure becomes a goal, it is not a good measure”.

With many doubts from experts, the leaders of the National Statistical Office still insist the reevaluation is carried out honestly and objectively, "without sending anyone for prior approval" and they will be publicised widely. The increase in GDP of more than 25 percent is due to many groups of causes, of which the most "surprising" ones is the addition of more than 76,000enterprises, including very large ones. Therefore, the press has quoted a lot of answers of a famous economist "shocked" with GDP recalculation not because of the increased figure but because of the explanation. However, recalculated GDP growth being more or less has been done by many developed countries, Vietnam cannot be an exception, so it must be accepted when these figures are published.

Great impact

Although there are conflicting opinions on how to recalculate GDP, the most important things right now are the direct impacts on the economy and the management policies, whether GDP increases or decreases.

According to the General Statistics Department's report, the re-evaluation of GDP will not affect the GDP growth target in socio-economic development plans and strategies because economic growth was very small change over the years. But a change of aggregate economic indicators could lead to the possibility of expanding State budget revenue and tax revenues, as well as spending and borrowing of the Government. However, the collection of revenues and taxes is based on the collection of taxes and fees, the rates of revenue are related and regulated by law, so the possibility of affecting the expansion of the space for budget revenues and expenditures is low.

Assoc. Prof. Dr. Pham TheAnh said that additional GDP would increase per capita income, reduce the proportion of public financial indicators associated with GDP, "neutralise" the ceiling levels supervised by the National Assembly. Specifically, the ratio of public debt/GDP decreased from 56.1 percent to 44.7 percent; Government debt/GDP decreased from 49.2 percent to 39.2 percent; Foreign debt/GDP decreased from 45.8 percent to 36.5 percent; budget deficit/GDP decreased from 3.6 percent to 2.9 percent.

But according to economist Assoc. Prof. Dr. Ngo Tri Long, the increase of GDP is cause for concern when revenues remain unchanged, the room for spending and borrowing will widen. In particular, this result does not mean much for the past and the present, because these figures happened in the past, the economy has been like that, while factors affecting the future are something to be concerned about. Moreover, recalculation of the economy must be accompanied by adjustment of target limits based on GDP, so these indicators will be changed in a more positive way. However, this problem is still double-sided; if spending and investing are effective, the economy will benefit; on the contrary, it will be a great burden to the economy. Moreover, according to this expert, it will be a risk if the National Assembly keeps the old economic development targets on the basis of the new GDP.

Despite the above effects, the re-evaluation of GDP is still considered necessary, especially when there are many limitations in the previous statistical evaluation. Moreover, Assoc. Prof. Dr. Pham Quy Tho, former Head of the Department of Public Policy, Institute of Policy and Development (Ministry of Planning and Investment) said Vietnam's statistics still had many errors due to both subjective and objective reasons, however, GDP was a measure of economic growth, so it needs an objective study to apply appropriately when Vietnam transformed into a socialist-oriented market economy.

Activities related to macroeconomics, especially figures and data related to policy making should always be carried out carefully, reasonably and appropriately, so they not only help people, enterprises and investors understand the country's development, but also help policymakers and management agencies to make decisions and policies that are appropriate and close to reality. This responsibility is placed on the role of statisticians, so it is necessary for them to be supported by modern tools, but must be working objectively, not subject to impacts or the subjective pressure, because otherwise there will be negative effects on the overall development of the economy.