NAC’s estimated growth figures may have been fudged
ISLAMABAD:
The National Accounts Committee is alleged to have estimated a growth figure of 4.1 per cent for the current year by doctoring the estimates for the growth in the construction, livestock and the wholesale and retail sectors, say analysts.
Independent economists in and outside the government are sceptical about the projected 4 per cent growth for the financial year 2009-10. The National Accounts Committee (NAC) has projected that during the current fiscal year the economy would grow by 4.1 per cent, officials had revealed to The Express Tribune on Friday. Independent economists, however, have attributed this extraordinary showing of the Gross Domestic Product (GDP) to “creative accounting.”
The have found out that the government not only played with last year’s GDP growth numbers by revising them downwards but also allegedly fudged the growth numbers of some of the sectors for this fiscal year. It was not for the first time that economists have unearthed such discrepancies. Last year, the National Accounts Committee showed the GDP growth at 2.24 per cent. Only after criticism from economists did the government revise the numbers downwards to 2 per cent.
Economists said that in order to get advantage of the lower base, the government once again revised last year’s 2 per cent growth number to 1.14 per cent. The NAC is to meet on May 18 to discuss provisional growth figures for the outgoing and the final figures of the previous two financial years. The government earlier estimated that that the national output would remain at 3 per cent. Later on, the projection was revised upward to 3.4 per cent but the final figures are a surprise to many.
The IMF and the Asian Development Bank have also forecast less than 3.5 per cent growth for the current financial year. The Incremental Capital Output Ratio concept says that for growth, investment is needed. The NAC document, according to the officials, reported negative 3.5 per cent growth in fixed private investment in nominal terms and negative growth over 15 per cent in real terms .
“With negative growth in fixed private investment, over 4 per cent growth is surprising”, said a Finance Ministry official. According to an economist, who was the one of the main economic managers during the last regime, the NAC has projected 15 per cent growth in the construction sector. “How could there be 15 per cent growth in the construction sector when the public sector spending is less than the last year and no major construction activity is going on”?
The former Finance Ministry official said that 15 per cent growth in the construction sector would boost the economic growth by 0.3 per cent. Another economist, said private construction falls under ownership and dwelling, thus, 15 per cent growth in the construction sector is “out of the question.” Similarly, in the livestock sector the NAC assessed 4.2 per cent growth for the current fiscal year. Historically, growth in the livestock sector never went beyond 3.5 per cent, said the former official, adding, the manipulation in the livestock sector contributed 0.9 per cent in the total national outlook.
According to the provisional estimates of the NAC, the agriculture sector’s growth target was missed for the consecutive second year. This year the agriculture sector grew by 2.2 per cent against the target of 3.8 per cent. In the wholesale and retail sector the NAC has projected 5.1 per cent growth. “More than one-third growth in the wholesale and retail sector is led by growth in imports and with negative growth in imports over 4 per cent growth is astonishing”, said an economist working in the Ministry of Finance.
Published in the Express Tribune, May 16th, 2010.
The National Accounts Committee is alleged to have estimated a growth figure of 4.1 per cent for the current year by doctoring the estimates for the growth in the construction, livestock and the wholesale and retail sectors, say analysts.
Independent economists in and outside the government are sceptical about the projected 4 per cent growth for the financial year 2009-10. The National Accounts Committee (NAC) has projected that during the current fiscal year the economy would grow by 4.1 per cent, officials had revealed to The Express Tribune on Friday. Independent economists, however, have attributed this extraordinary showing of the Gross Domestic Product (GDP) to “creative accounting.”
The have found out that the government not only played with last year’s GDP growth numbers by revising them downwards but also allegedly fudged the growth numbers of some of the sectors for this fiscal year. It was not for the first time that economists have unearthed such discrepancies. Last year, the National Accounts Committee showed the GDP growth at 2.24 per cent. Only after criticism from economists did the government revise the numbers downwards to 2 per cent.
Economists said that in order to get advantage of the lower base, the government once again revised last year’s 2 per cent growth number to 1.14 per cent. The NAC is to meet on May 18 to discuss provisional growth figures for the outgoing and the final figures of the previous two financial years. The government earlier estimated that that the national output would remain at 3 per cent. Later on, the projection was revised upward to 3.4 per cent but the final figures are a surprise to many.
The IMF and the Asian Development Bank have also forecast less than 3.5 per cent growth for the current financial year. The Incremental Capital Output Ratio concept says that for growth, investment is needed. The NAC document, according to the officials, reported negative 3.5 per cent growth in fixed private investment in nominal terms and negative growth over 15 per cent in real terms .
“With negative growth in fixed private investment, over 4 per cent growth is surprising”, said a Finance Ministry official. According to an economist, who was the one of the main economic managers during the last regime, the NAC has projected 15 per cent growth in the construction sector. “How could there be 15 per cent growth in the construction sector when the public sector spending is less than the last year and no major construction activity is going on”?
The former Finance Ministry official said that 15 per cent growth in the construction sector would boost the economic growth by 0.3 per cent. Another economist, said private construction falls under ownership and dwelling, thus, 15 per cent growth in the construction sector is “out of the question.” Similarly, in the livestock sector the NAC assessed 4.2 per cent growth for the current fiscal year. Historically, growth in the livestock sector never went beyond 3.5 per cent, said the former official, adding, the manipulation in the livestock sector contributed 0.9 per cent in the total national outlook.
According to the provisional estimates of the NAC, the agriculture sector’s growth target was missed for the consecutive second year. This year the agriculture sector grew by 2.2 per cent against the target of 3.8 per cent. In the wholesale and retail sector the NAC has projected 5.1 per cent growth. “More than one-third growth in the wholesale and retail sector is led by growth in imports and with negative growth in imports over 4 per cent growth is astonishing”, said an economist working in the Ministry of Finance.
Published in the Express Tribune, May 16th, 2010.