StatsSA proposes changes to GDP metrics, for accuracy in trying times

Statistics South Africa says it will review its data compilation methods for monitoring the country’s Gross Domestic Product early next year. Annualised data showed large fluctuations as Covid-19 rattled the economy in 2020. Comparing this year’s data with corresponding periods last year certainly isn’t comparing apples to apples. StatsSA says its proposed new methodology will provide a more accurate overview of the economy’s performance even when shocks and anomalies occur. – Melani Nathan.

South Africa statistics agency may drop focus on annualised GDP

By Monique Vanek

(Bloomberg)– Statistics South Africa may move away from using the annualized quarterly change in gross domestic product as its main measure for the performance of the economy.

The statistics office will start consultations with its user community early next year about the possibility of switching focus to the non-annualized quarter-on-quarter seasonally adjusted figure, said Joe de Beer, deputy director-general of economic statistics.

Such a move would mean smaller fluctuations in the headline number when abnormal events, such as rotating power cuts or this year’s coronavirus-related lockdown, happen, De Beer said in an interview Tuesday in Pretoria. He was speaking after the release of third-quarter GDP data. It also would bring Africa’s most-industrialized economy more into line with some Organisation for Economic Co-operation and Development countries.

What Bloomberg economics says

“The change in Statistics South Africa’s reported GDP growth rate will reduce the large swings that we have come to see in the data, especially when the economy is hit by a shock. It will also help to reduce the confusion that we have seen around the correct interpretation of the statistics. It bring us in line with international reporting standard — making it easier to draw comparisons. This becomes important as we continue to track and compare the pace of recovery across different markets.”–Boingotlo Gasealahwe, Africa economist

The statistics office went to great effort this year to explain how annualized GDP data — which shows how the economy would’ve performed for the full year if the quarter-on-quarter rate were to occur four times in succession — could be misread.

Tuesday’s data showed the economy expanded by an annualized 66.1% in the three months through September from the previous quarter. That’s after contracting by an annualized 51.7% in the three months through June, when most activity was shuttered due to coronavirus restrictions.

However, on a non-annualized basis, GDP grew by 13.5% quarter-on-quarter, after contracting by a non-annualized 16.6% in the prior three months.

Different perspective

The annualized rate “provides a crude forecasting model that is useful in times of stable economic performance, but less so in a highly volatile environment,” Statistics South Africa said in its GDP report.

Users who will be consulted include the Statistics Council, academics, banks, the central bank, provinces and the National Treasury.

If the move is agreed to, the statistics office should start using the new measure with the release in June of the first-quarter’s data. The GDP data release will be accompanied with a new reference year and revised weights of the various sectors that are used to calculate output.

Statistics South Africa usually revises and updates GDP data every five years and the last overhaul was in 2014. The publication of the benchmarked and rebased GDP results was postponed from this year due to the pandemic.

The adjustment is unlikely to bring material changes to recent growth outcomes in an economy that’s stuck in the longest downward cycle since 1945 and strained by political and policy instability, poor business confidence and regular electricity cuts.

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