Guyana’s most basic and fundamental economic statistics are its national accounts. However, most readers are probably not aware that, the very first effort at their construction was undertaken by Dr. Carleen O’Loughlin of the Institute of Social and Economic Research (ISER), University of the West Indies (UWI), Mona, Jamaica way back in the 1950s before Independence. That study is entitled “The Economy of British Guiana, 1952-1956: A National Accounts Study”. It is available in the ISER Journal, Social and Economic Studies, Vol 8, Number 1, and is published as a Special Number, March 1, 1959. Her study was a truly heroic endeavour, as national accounts construction is painstaking. Usually it requires the resources of national statistical offices in order to execute them effectively, and not individual scholars.
Dr. O’Loughlin’s study is invaluable; but, as a first effort, gaps in the dataset remained. Nonetheless, it reached minimum acceptable international standards, for that time. Not surprisingly thereafter, the Guyana Bureau of Statistics (BoS) took over the formal responsibility for the annual construction and presentation of the national accounts.
Growth sclerosis
Some readers would recall that, during the late 1990s to the mid-2000s, there was a spate of highly publicized analytical studies on “growth sclerosis in Guyana”. Growth sclerosis is “a term coined in the 1970s to describe stagnant integration, high unemployment and slow job creation in Europe [but has since] been used to refer to overall stagnation”.
These studies on Guyana were led by research papers produced by IMF and World Bank staff. Their staff had been exploring the identical query, raised in Gampat’s letter, which was discussed last week; that is, why does the high investment rate revealed in Guyana’s national accounts series, produce such anemic real GDP growth rates? For the benefit of readers’, a sample of those studies is presented in the paragraph below.
Before doing so, let me take the opportunity to remind readers that, these studies had been explicitly focused on what was described in the economic literature of the time, as “growth sclerosis” in Guyana. Gampat’s query therefore, revives a controversy at least two decades old! These well-known studies include 1) Staritz, Atoyan and Gold: “Guyana: Why has Growth Stopped? An Empirical Study on the Stagnation of Economic Growth”, IMF, Working Paper, April 2007 2) M. Da Costa “Colonial Origins, Institutions and Economic Performance in the Caribbean: The Case of Barbados and Guyana”, IMF, Working Paper, 2007 3) E. Faal “Currency Demand, the Underground Economy and Tax Evasion: The Case of Guyana” IMF, Working Paper, 2003 4) E. Weisman, “Sources of Economic Growth in Guyana” in Egoumé-Bossogo, et al (eds). “Guyana Experience with Macroecono-mic Stabilization, Structural Adjustment and Poverty Reduction”, IMF, 2003.
I should bring to readers’ attention here that this listing does not pretend to be exhaustive. More specifically, it does not include any references to a similar spate of post-graduate theses written by scholars interested in Guyana.
As would be expected these studies were concentrated on the causes and consequences of the “growth sclerosis”, evident from the behavior of Guyana’s GDP data. However, such studies abruptly came to an end, after Guyana’s GDP was rebased in 2006, at the IMF and World Bank’s insistence. Why was this the case? The answer is that the rebased GDP estimates posited that there were huge measurement errors in Guyana’s national accounts, prepared by the BoS, on the basis of the 1988 base year, then in force.
Why rebase the GDP measures?
The question that should be addressed at this stage is: why do statistical and economic theories underlying the construction of national accounts require the periodic revising and rebasing of these accounts? A full explanation of this is beyond the expected reach of this column. Simply put, though, the explanation argues that, in any dynamic economy (over time) its features will certainly change from those obtaining in the original year for which the construction of the existing series of national accounts statistics is based.
As a rule, such changes would include: 1) changes in the structure of economic production 2) changes in the patterns of consumption 3) as a consequence of 1 and 2, changes in the relative prices of goods and services in the market place 4) emergence of new products based on technological developments, such as cell phones 5) old products reappearing in new guises, such as mass-transport by buses, and not bicycles and, 6) because a global methodology informs the system for constructing national accounts, “other” changes are introduced from outside. It is clear from this narrative that, the driving motive behind any rebasing exercise in Guyana should be the need to provide a “truer” picture of its economic reality on the ground.
The rebasing exercise
In February 2010, the BoS reported “the launch of a rebased and revised series of national accounts;” 2006 was chosen as the new base year. This replaced the 1988 base year series, which had also utilized the older methodology of the System of National Accounts, (SNA) 1968. As noted last week the 2006 rebased GDP series utilizes the SNA for 1993.
This exercise was undertaken over two years: 2007-2009. This two-year period allowed for an “overlap” in which the national accounts could be computed using both the “old” (that is 1988), and “new” (that is 2006) base year. To the eternal gratitude of economists, econometricians, and statisticians who routinely mine Guyana’s economic datasets, the BoS has published its calculations of Guyana’s national accounts for the period of 2006-2010, utilizing both the 1988 and 2006 base years! As it has turned out, this action allows us to observe the immediate and dramatic impact of the rebasing exercise on Guyana’s reported GDP.
Next week I shall reveal this impact, as I continue with the saga of Guyana’s national accounts and its most basic economic statistics.
