The INE will modify the formula for calculating GDP after changes in management
“GDP is a very important indicator, but it has certain shortcomings. It does not reflect key factors of economic progress and, on the other hand, it is somewhat delayed due to its quarterly nature.” With these words, the First Vice President of the Government and Minister of Economic Affairs, Nadia Calviño, publicly questioned for the first time more than a year ago the Gross Domestic Product (GDP) as a faithful reflection of the country’s economic reality. And at that moment a debate was opened between the Executive and the National Institute of Statistics (INE) -and also in the academic world- which led to the resignation of the then president of the public body, Juan Rodriguez Pooand in the appointment of Elena Manzanera as a new manager.
Once the crisis in the organization was overcome, the Ministry of Economic Affairs has set to work to correct these deficiencies in GDP after addressing with Statistics the modification of the calculation formula with the aim of making the indicator more accurate by incorporating new data sources . Not surprisingly, Calviño’s team has been adopting as its main reference for months when measuring the pulse of the recovery of the economy a set of high-frequency indicators that allow it to measure daily activity and that are based on information on bank card expenses provided by banks, mobility patterns based on the data available to telecommunications operators, daily affiliation flows to Social Security and other confidence or production indicators.
Specifically, in the draft Draft Royal Decree approving the 2023 Annual Program of the 2021-2024 National Statistical Plan, prepared by the Ministry of Economic Affairs, reference is made in the actions and operational strategies to the need to “continue increasing the exploitation of administrative records in the production of official statistics” and “especially in economic statistics, so that that improve their quality and that of the summary statistics that use their results, such as the System of National Accounts”. And the “creation of integrated databases of conjuncture indicators for the modernization of the production system of the main quarterly aggregates of the National Accounts (GDP)” appears as a novelty.
INE sources explain to La Información that “in 2023 and in the Statistical Review 2024 progress is being made towards adapting the sources and methods of the quarterly accounts to the new developments foreseen in basic short-term statistics and the integration of new emerging sources of data”. In other words, next year they will begin to incorporate some of these novel high-frequency indicators for calculating GDP. And they add that, in particular, “work is already being done on a technological reengineering of its production process that guarantees greater efficiency and security in the storage and processing of basic information and in the compilation processes, making it possible to focus the available resources in a greater capacity for analysis”.
As we say, for months the government’s economic team has been working intensively to try to understand what is happening to the qualitative composition of GDP. The conclusion they have reached after much study is that both the crisis caused by the Covid-19 pandemic and the one that Spain is currently facing, with an energy component and a rupture in supply chains, are completely new and the traditional composition of GDP is not capable of reflecting its real impact. In this context, they are in favor of “modulating” the indicators based on the characteristics of each economic crisis and thus defend their alternative daily indicator chart to the INE National Accounts to sustain the strength of the economy in the face of the slowdown shown by the Statistics records.
From the organization that Elena Manzanera currently leads, they have also recognized that in recent times they have faced great difficulties in compiling statistics, usually. In addition to the problems derived from the pandemic itself, such as restrictions on activity, they have also encountered complications when it comes to adjusting to some realities, such as reductions in the hours of workers in temporary employment regulation files or the multiple errors calculation in business perspectives. In this context, government sources assure that they have been discussing the GDP issue with the INE for some time and agree that leading indicators are not reflecting well in quarterly data.
Academic sources agree on this diagnosis, while welcome the modifications that the INE is going to carry out in the GDP calculation formula starting next year. “It is something that they should have done a long time ago because quarterly accounting is estimated with econometric models and today the big data makes it possible to have more reliable information, at a lower cost, to obtain data in real time, just as the Tax Agency does”, they assure. In fact, these same sources affirm that the Treasury records based on the declarations of taxpayers and The companies show that the INE is underestimating the growth of the economy.In fact, according to the quarterly statistics of the VAT declarations of the Tax Agency, the GDP would have recovered pre-pandemic levels since the fourth quarter of 2021.
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