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In South Africa, GDP is calculated using the production method by Statistics SA (StatsSA)
and using the expenditure method by the Reserve Bank (SARB). Theoretically, all three
methods ought to be equal, but in reality, growth estimates between the SARB and
StatsSA can vary by more than 25%. Residual differences between the two methods in
2015 was as much as R24.4 billion or 0.6% of GDP in current prices.

Give Me a Number, Any Number Will Do

How GDP influences decision-making in markets is rather peculiar. One would assume
that if decisions were made on grossly incorrect GDP data, it would lead to less optimal
outcomes than if those decisions had been made with more accurate GDP data. One
would also expect the market to react, should the number be significantly revised. Only,
in the case of Nigeria prior to 2014, the GDP number was off by a magnitude of 89%.
Economic outcomes do not appear to have differed much between decisions made
prior to 2014 and those made subsequent to the Nigerian GDP revision. Furthermore,
market reactions were all but absent in response to an 89% GDP revision. All rather
peculiar, because government debt-risk levels, the price of debt and the government
budgets and expenditure, are all dependent on levels of GDP.

If you think the primary reasons of these massive revisions is because Nigeria is a
developing economy with less sophisticated and reliable reporting capacity and
methodologies – not so. These wild GDP swings prevail in OECD countries too. The Irish
Central Statistical Office (CSO) released the official Irish GDP statistics in July. The CSO
announced that the Irish GDP grew by a staggering 26.3% and industry, including
Construction, advanced by a colossal 87.3%. The annual growth is even more staggering
when considering that GDP declined by more than 2% over the first quarter under the
year of review.

10 QUARTERLY ECONOMIC BULLETIN 2016