Sun | Jan 20, 2019

Statin wedded to GDP methodology but plans update

Published:Friday | May 25, 2018 | 12:00 AM
Director General of the Statistical Institute of Jamaica, Carol Coy.

The Statistical Institute of Jamaica will continue to use the System of National Accounts, or SNA, to measure economic output, but the agency says it is in the process of updating to the latest revision done in 2008.

Statin is currently using the SNA methodology developed by the United Nations and international statistical bodies and first adopted in 1953, with five revisions since. Jamaica is currently using the 1993 revision.

Statin Director General Carol Coy defended the methodology on Tuesday at the quarterly briefing on economic perfor-mance by the Planning Institute of Jamaica, two months after Audley Shaw, who was then finance minister, urged a review of the methodology of measuring economic growth to ensure that it is in line with international standards. Shaw, who raised the issue as he opened the Budget Debate in Parliament, appeared to be suggesting an under-measurement of Jamaica's GDP amid anaemic growth.

Small and complex economies

Coy said such decisions can't be made based on perception.

"When you are dealing with statistics, changing methodologies from year to year or because persons feel that it doesn't fit in to their views of what is happening, we are moving down a dangerous path," said the Statin leader in response to a question at Tuesday's briefing.

"At Statin, all our statistics are based on international methodo-logies and Statin will stick to that process," she said.

Coy said the SNA, which covers all economies - whether small or large and complex - has undergone five revisions, but Jamaica, like the majority of developing countries, is still using the 1993 system.

Statin is in the process of converting to the 2008 SNA, she said, but notes the switch won't have a big impact on past growth estimates.

"The difference between the 1993 SNA and the 2008 is not as significant as when we had moved from the 1968 to the 1993. The methodology of calculating GDP remains the same. What you will find are some clarifications of certain issues. For example, research and development is now treated as investment so that it contributes to GDP. This will impact countries that have large research and development portfolios. We do not in Jamaica," Coy noted.

"Weapon systems are also being treated as investment," she added.

Coy said Statin will adjust the previous growth numbers for each year back to 2008.

"One thing you need to bear in mind is that when Statin changes to the 2008, it's not just one year - we correct the series back - so you might not see a significant change in the growth rates. There might be some upward movements in the level of the GDP itself, but I don't think it will be that significant."

The Jamaican estimates for GDP cover all activities recommended by the SNA, including production of all goods whether produced for sale, for own final consumption or for investment; production of services if sold on the market or supplied to other units; the production of domestic and personal services by employing paid domestic staff; housing services by owner occupiers - that is, an estimate of the service used by persons living in their own homes.

Counting illegal drug trade

Statin also counts informal sector production and illegal production, but illegal drugs are not included in Jamaica's GDP measurement because of the difficulty in collecting data on that activity, Coy said.

Statin tracks approximately 230 product groups based on the Jamaican Industrial Classification, a local adaptation of the UN International Standard Industrial Classification.

Coy said that while the focus of the national accounts is to ensure that all activities are included in the estimates, exhaustive coverage is often difficult to achieve due to data-collection issues or when the activity is concealed.

Under-coverage usually occurs when there is illegal production, informal sector production, production of households for own final use, and underground production.

She said Statin recognises that those units are not captured through basic data-gathering mechanisms, so alternate methods have been developed to estimate their output.