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Peeping Tom’s uninformed economic comments
Dear Editor,
The Ministry of Finance notes with grave concern Peeping Tom’s ‘The Guessing Game,’ which was published in Kaieteur News on April 19, 2018, in which the writer demonstrated an obvious lack of understanding of the nature of economic forecasting.
Such uninformed and lopsided articles are, quite often, the source of public confusion and disorder. As such, the Ministry would like to offer the following clarifications.
First, any forecasting exercise requires the input of data, which are sourced from a range of entities. Forecasting of the Gross Domestic Product (GDP) requires inputs from both the public and private sectors, across all four major sectors of the economy – real, monetary, fiscal and external.
For example, the real sector consists of major industries, such as sugar and gold. Gold represented 9.7% of real GDP in 2017.The forecasting of growth in gold is highly reliant on the data provided by the private companies as well as the Guyana Gold Board’s reports on small and medium sized miners. Therefore, the accuracy of forecasts by the Ministry of Finance is highly dependent on the ability of our private and public sector partners to accurately forecast their respective performances.
Given that this is just one tiny sample of actors across all sectors of the economy, one can appreciate that the data used in the growth forecast and final outturn is an indication of the challenges faced at the sector level.
Second, several articles have pointed to the difficulties of economic forecasting. Business Insider (http://www.businessinsider.com/8-charts-prove-economic-forecasting-doesnt-work-2016-1) has contended that even the most revered institutions such as the Federal Reserve and the Congressional Budget Office of the USA miss the proverbial mark with respect to forecasting.
The Economist (https://www.economist.com/node/21685480) points out that even the International Monetary Fund’s projections from 1999 to 2014 varied, on average, by 1.5 percentage points, when compared with the actual data. The Ministry of Finance is well aware of what the Economist and others have been alluding, that is, that economic forecasting is nowhere close to an exact science. As such, expectations about accuracy should be managed rather than become melodramatic.
Third, in recognition of the need to improve data quality and the overall national statistical system, the Bureau of Statistics recently launched a workshop to start the process of articulating the National Statistical Development Strategy (NSDS) – a key feature of any national system that the previous administration failed to spearhead.
The NSDS aims to improve data quality, sharing and availability, amongst other things. Within the Strategy, a major activity will be to significantly bolster the public sector data collection and analysis capacities.
This is envisaged to allow for more accurate data to be fed into the GDP forecasting exercises of the Ministry of Finance. At subsequent workshops later in 2018, the private sector will also be sensitised on data and information management as part Government’s efforts to improve national data quality, timeliness and accessibility to support evidence-based engagements.
Finally Peeping Tom reported that the 2016 actual GDP growth rate was 2.6%.This is a clear indication that the writer failed to validate his or her data with recently published information. For the record, the updated sector production numbers for 2016 had caused a revision of the 2016 GDP growth rate to 3.4%.
This was reported in the End of Year Outcome Statement in April 2017. A similar occurrence took place in 2015. Contrary to the columnist cited figure of 3%, the growth rate was revised to 3.2% (See Appendix I of the 2018 Budget Speech).
The Ministry of Finance welcomes constructive interventions and dialogue in this and similar areas of the economy and public financial management. We invite readers to visit our website at www.finance.gov.gy
Yours faithfully,
Wanita Huburn
(PRO)
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