GDP Revision Launch
Opening Remarks By Kamal Malhotra, United Nations Resident Coordinator
Mr. Nguyen Bich Lam, Director General of the General Statistics Office of Viet Nam (GSO),
Senior GSO and Government Officials and UN Representatives,
Members of the international community, media representatives,
Ladies and Gentlemen,
It is a great pleasure for me to be here with you at such an important event at this critical time. First of all, I would like to thank the GSO leaders for inviting the UN’s contribution to GSO’s important work on GDP revision. This work is strategic for Viet Nam since the economy is transforming in an accelerated manner as a result both of the government’s huge efforts and the increasing role of the private sector and its dynamism. The GDP revision process requires that all economic, social and environmental aspects need to be reflected in official statistics in a comprehensive, consistent and coherent manner.
Countries make some revisions to their GDP computations from time to time in order to adopt new statistical systems, include new census and survey data or because of improvements in their data sources. More specifically, there may be new data from surveys such as the business enterprise census, agricultural census, rural census or other administrative data which can be collected from the national tax administration and line ministries and require updates in GDP figures based on the improvements in these surveys and censuses.
Furthermore, there may be methodological improvements in the estimation of GDP figures. In recent years, countries have started to revise their national accounts by switching their national accounting methodologies to the 2008 System of National Accounts (SNA). More specifically, the adoption of the 2008 SNA system necessitates some changes in concepts and scope, methodology, valuation and classification such as the capitalization of R&D and weapons systems, calculation of Financial Intermediation Services Indirectly Measured (FISIM), development of new Supply and Use Tables (SUT) and change in the base year.
Viet Nam’s economy has exhibited high growth rates in the last decade and the structure of the economy is significantly changing as a result of this dynamic process. The role of FDI as well as ICT in the economy is significantly rising, which creates a huge potential for domestic enterprises to access global production networks. This transformation in the economy should be taken into account in statistical terms, by adopting the most recent international statistical methodologies, standards and techniques to estimate the resulting economic shift in a better manner.
It is expected that these changes may result in GDP level size shifts but not have any impact on growth rates. For example, the reassessment of GDP in the Republic of Korea in 2014 increased the volume of GDP by 6.7 percent in nominal terms, but it affected the annual GDP growth rate by only 0.3 percentage points between 2000 and 2012. In the case of Kenya, the impact of GDP revision in 2014 on the nominal GDP level was 21 percent but its impact on real GDP growth was only 2.4 percent between 2006-2013.
The UN wishes to recognize the work of GSO in making the GDP revision by (i) filling in the missing data and incorporating updated information (from recent censuses and surveys), (ii) its efforts to align with the UN SNA2008 and (iii) its efforts to involve the IMF and the UN in the exercise to ensure that the revision is transparent and in line with international standards and practices. Noting that making regular GDP revision and rebasing are necessary: because GDP remains the most popular measurement, despite its many imperfections, the accuracy of GDP helps not just governments in macro-economic management but also market players in planning and doing their businesses.
But GDP revision should be viewed as just the first step. The next steps should include: (i) ensuring horizontal coherence by making the GDP revision in a consistent series (of the past years), (ii) collecting quality data and making quality GDP estimates while establishing the new base year, (iii) conducting GDP revisions more regularly, and transparently, at least once every 5 years (to avoid big jumps in number such as in this case) including by continuing to engage international organizations such as the UN and (iv) conducting pro-active communication to provide the public with clear and transparent explanations on the nature and scope of the changes.
More GDP revisions will need to be done in the future and more regularly. This is because economies and the world are changing rapidly. Manufacturing and agriculture made up more than half of national output in industrial countries in the early 20th century but now they make up far less, with the rest consisting of services. Measuring value added in manufacturing and agriculture production is much simpler than in services or the data we access through the internet (which has become more valuable than oil these days): There are significant difficulties in, for example, deciding whether to classify a Grab driver as an “own account”(household) business or worker of Grab while estimating the environmental costs of production pose challenges to statisticians in the world but are essential if we wish to make GDP a more accurate measurement.
GDP revision related communications are critical because: (i) building public trust and support for official statistics is important in the world of social media and biased judgements; (ii) clear communication is necessary to ensure that users (researchers and policy makers) understand and use the national account data correctly.
It is particularly important to also effectively communicate with policy makers: Viet Nam relies too much on simple rules on macro-economic and fiscal targets which is problematic because its institutions have limited capacity. This poses the risk of the large GDP revision (like this) making impacts on the real economy, through such rules, and thus there is a risk of viewing the GDP revision – a necessary and good work of GSO - as “negative”. There is a need, therefore, for better and more flexible rules/targets (say targets with wider ranges and escape clauses – for example a GDP growth target of 6-7.5% or government extra borrowing being allowed in recessions) and (b) stronger institutions for macro-economic and fiscal management.
It is also critical that the government of Viet Nam does not use the revised GDP figures in the context of pre-existing fiscal rules and regulations and national macroeconomic targets. The previous GDP should, instead, be used to evaluate the performance of these targets. Otherwise, building trust and communicating better will be very difficult and the credibility of the GDP revision will be questioned by the public.
The UN in Viet Nam has contributed to the GDP revision by focusing on sharing international experiences and best international standards in the construction of the national accounting system and GDP. In this context, the UN research paper “Revisions to National Accounts: International Experiences and Vietnamese Practices” which was shared with GSO, was commissioned quickly by the UN RCO and the UNDP in Viet Nam under my direct strategic guidance. This paper provides a diverse set of international experiences related to national account revisions, highlights their likely impact on macroeconomic and fiscal dimensions of the economy and provides suggestions on how to make the current GDP revision more satisfactory in Viet Nam’s political economy context.
The UN has a long history of support to the national statistical system. More broadly, the UN in Viet Nam has been providing significant support to statistical development at both a systemic overarching level and in thematic statistics areas such as the development of the Viet Nam Statistical Development Strategy, the Law on Statistics, different surveys including Viet Nam Living Standard Survey, the Enterprise Survey, the population census and women, children and disability related surveys. We will continue to support Viet Nam in collecting quality and timely data for GDP estimation in particular and SDG monitoring and reporting in general, through the work of the UN country team in Viet Nam as well as through UNESCAP and UNSD in DESA in New York.
The UN in Viet Nam will continue to help Viet Nam with regular updates to its GDP in a transparent manner as it should be normal and periodically necessary.
I thank you! Xin cảm ơn!