Scrapping statistics

Scrapping over differing interpretations of official statistics takes place worldwide. In Malta we add an inclination to jump into making accusations regarding integrity. That is the latest round in the to-do over the Gross Domestic Product (GDP) estimate for 2005. The GDP figures have not only caught the critical attention of economists and columnists. They have become part of another political slanging match.

The Nationalists know the game. I assert that from experience. The Office of Statistics was part of my ragbag 1983-87 ministerial portfolio. Reno Camilleri, a committed professional, ran it. Early on he drew my attention to the fact that the Census of the Population was several years overdue (he had been instructed not to hold it). Good statistician that he was (and remains) he urged reconsideration by the newly arrived minister.

I told him to go ahead. That was my only contact with him, and how the 1985 census was conceived and the 10-year cycle resumed. My hands-off policy did not prevent the Nationalist Opposition from endlessly questioning the integrity of the statistics produced at the time. Political shots continued to be fired by them when they moved into government.

By my second ministerial tenure in 1996-97, Alfred Camilleri, another man of high ability and integrity, had started his 10 years in charge at the Statistics Office. It was only well after I left the Cabinet that I met him. Yet again, the Nationalists fired barbs.

I do not at all believe there are grounds to question the integrity of the NSO. One should attempt to understand its techniques, developed over the years via international and now EU methodology, so as to be neither inhibited from, nor presumptuous in critically analysing and debating interpretation of the figures.

That is what various economists and commentators have been doing in regard to what the official data tell regarding the GDP, to the government's obvious displeasure (the NSO itself cannot be part of any debate). On my part, I appreciate that the NSO's capabilities and methodology have been much improved, leaving room to become better. I take into account technical clarifications of how the Office works, such as those given to Business Today (March 22) by Tonio Fenech, the Finance Parliamentary Secretary, and in his reply to Opposition Leader Alfred Sant (The Times, March 25).

One such clarification emphasised that the primary measure of the GDP is from the output side, and that the change in inventories does not affect the GDP at market prices. I note the methodology but disagree with the interpretation. The output figures (the value added in the various economic sectors) also incorporate changes in inventories (stocks) in the total, though they do not identify them and add them up. Rather than asserting that the change in inventories does not affect GDP at market prices, Mr Fenech should stick to the observation that the approximate level of stocks, which are included in output, is established through specific surveys, minimising any residual error.

It is also true that the economy is made up of shifting strengths and weaknesses. Some sectors have gone up, others down. Manufacturing, for instance, has continued to shrink, to roughly a sixth of the economy. Its operating surplus relative to output is very low, similarly in the hotels and restaurants sector. Other sectors, such as real estate, have sharply increased.

The economic discussion should be about the unmistakable message flashed by the detailed GDP figures. Overall, the economy has been stagnant (in 2001), or shrinking (2003 and 2004). It grew in 2005, but 2.5 per cent in real terms is not enough to make up for the previous decline. One should not, as the PM does, compare 2005 growth to lower rates in stronger economies. Nor to the higher rates of some EU achievers.

What is relevant to Malta is the need for much stronger growth to come mainly from stouter exports of goods and services through higher utilisation of existing productive capacity, and investing in more and better capacity.

What can be done from within to achieve that and build a growth path running at a steady four to five per cent annually? That is and will remain the key question. Political scrapping cannot answer it.