JUST in case the ratios the finance minister presents in Wednesday’s medium-term budget aren’t austere enough for the market, he might be able to look to changes in SA’s national accounts later this year for a bit of help.
The best known of the national accounts numbers is GDP, which captures the level and rate of growth of economic activity. Measuring economic activity from the production or supply side is just one way of compiling GDP, which is also measured from the demand or expenditure side, reflecting consumption and investment spending by households, firms and government. As things stand, Statistics SA (Stats SA) does the output-side GDP, which it publishes each quarter, while the Reserve Bank does the expenditure side, which is released in its quarterly bulletin.
Two sets of changes are being implemented by the national accountants this year. Either or both might flatter the fiscal ratios by increasing the absolute level — but not necessarily the growth rate — of GDP. The result is that the budget deficit as a ratio of GDP, for example, might look a bit better. So might the GDP-to-debt ratio.
Every five years Stats SA rebases and rebenchmarks the national accounts figures to bring them up to date to reflect shifts in the economy and index them to a new base year. This is the year, with Stats SA due to reset the base year against which we measure real, inflation-adjusted GDP from 2005 to 2010, and revise them to take new sources of information into account.
The changes will be applied to the third-quarter GDP figures and, though this is unlikely to turn a weak growth rate into a stronger one, it does create some uncertainty among economists about what the figures will look like, and that includes historical figures, which will be revised too.
This year’s other change is that our national accountants will start to bring SA’s GDP in line with the updated set of global standards, the System of National Accounts 2008, which was published in 2009 and which many countries are phasing in — in some cases resulting in sizeable jumps.
This is the year, with Stats SA due to reset the base year against which we measure real, inflation-adjusted GDP from 2005 to 2010, and revise them to take new sources of information into account.
The new system counts research and development as investment spending, for example, and that has added 2.5% to the level (though not the growth rate) of GDP in the US and 1.9% in the eurozone. For SA there will also be changes in the way military and IT spending are measured as well as some financial services, and all of this will reflect in the expenditure side GDP figures in the Reserve Bank’s December quarterly bulletin.
But if this gets economists excited, there is another even bigger change that could change the face of SA’s national accounting in years to come. Stats SA is quietly building the capacity and expertise to take over the task of compiling the expenditure side GDP from the Bank. It has already started to compile figures but it will be another couple of years before these are "publication ready", and even then it may be a while before they are published.
The rationale is that this would improve the overall quality of SA’s national accounts statistics. It would also arguably make the expenditure side GDP "official" in a way it theoretically is not now, as Stats SA is by law our official statistics agency. It would also raise the question of which set would be the official GDP figure — the output side is now, but in some countries the expenditure side takes precedence.
Centralising the compilation of the national accounts in one agency would enable Stats SA to get better figures on some of the expenditure side items that are not particularly well measured now — investment spending particularly. Stats SA does a lot of data collection from firms and the government already and it is looking at upgrading and expanding some of the surveys it already does to ensure better measurement of capital spending by both government entities and business.
Doing both the supply and demand side GDPs would improve its ability to interrogate the figures and check the sets against each other. It might also speed up the expenditure side, which comes out much later than the output measure at present.
Some in the market might be uncomfortable with reducing two national accounts compiling agencies to one, and particularly with Stats SA monopolising the process.
But though there have been big issues with social statistics such as the national census, markets have long trusted the GDP numbers and the many Stats SA sectoral surveys that go into them. And the Reserve Bank would no doubt carry on compiling national accounts measures, if for no other reason than to keep a check on Stats SA.
It is early days yet, but a joint steering committee is working on a new approach and Stats SA is gearing up gradually. Not that SA is not well served by the agency and the Bank at present.
But just as the economy itself is dynamic, so are the methods of measuring it.