The problem with denial

May 07, 2018 Features / Columnists, Peeping Tom

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It is not the practice of this column to respond to criticisms, except where there is gross misrepresentation or the need to clarify issues. The public is smart enough to determine sense from nonsense and to weigh and assess arguments.
An April 19, 2018 Peeping Tom Column entitled “The guessing game” pointed to the problems of economic forecasting by the Ministry of Finance. The column advised the Ministry to obtain the services of an econometrist.
The column showed where not only had the economy failed to meet the Ministry’s projected growth rates but even mishit when it came to achieving its revised growth rates.
The column seems to have riled the Ministry, so much so that its public relations officer responded. That response typified the art of propaganda. Joseph Goebbels would have been proud of such a response.
The Ministry defended its failure to satisfactorily forecast real growth by arguing, firstly, that in making economic forecasts, the Ministry has to source information from a wide range of entities and sectors. In other words, the Ministry was diverting the blame for its poor forecasting to others.
This is lame excuse because by the Ministry’s own admission, the economy has for a long time been reliant on a small band of commodities. The Guyanese economy does not have a complex production structure and even if it did there are economic tools available for pre precise economic forecasting.
For the Ministry therefore to blame the quality of data and information received is inexcusable. It is the Ministry’s responsibility to establish a framework for credible data collection and transmission from the economic sectors, to aid in economic forecasting.
The Ministry inherited such a system from the previous administration. It benefitted from substantial technical assistance to improve budgeting and forecasting.
Second, the Ministry pointed to the problems of economic forecasting, arguing that it was not an exact science. No one ever said it was. It is for this reason that governments revise their targets based on real time performance. The problem with the Ministry is that even its revisions follow a pattern of poor forecasting.
Finally, the Ministry argued that Peeping Tom got his numbers wrong. It pointed out for example that the growth rate for 2016 was 3.4 % and not 2.6 %; and in 2015 it was 3.2% and not 3.0%, as reported by the Peeper.
What the Ministry did not state was that these ‘wrong’ numbers quoted by the Peeper were in fact numbers which were provided in the Budget speeches. But these do not negate the central argument that the Ministry is missing even its revised numbers.
It should be noted that the Budgets for a fiscal year are usually presented one month before the end of the previous fiscal year. The 2018 Budget would be presented in November 2017; the one of 2017 would be presented in November 2016 etc.
What this means is that one month before the end of fiscal years 2015 and 2016, the Ministry could not accurately forecast the growth rate for those years. In 2016, the revised growth was tagged at 4%. One month before the end of that year, the Ministry announced that the predicted growth would have been 2.6%. It ended up being 3.4%.
In 2015, the revised growth rate was set as 3.1 %. One month before the end of the year, the Ministry said that the rate was 3.0%. It ended being 3.2%.
The arguments of the Ministry support, rather than contradict, the contention that the Ministry has a problem with forecasting. The economy failed in 2016 to achieve the Ministry’s revised target. It failed in 2017 to do the same.
One month before the end of fiscal year 2017. The Ministry projected an end of year growth rate of 2.9%. This is what is stated in the Budget speech of 2018:
“Mr. Speaker, the overall real growth rate for 2017 was projected at 3.8 percent. By mid-year, an economic growth rate of 2.2 percent was achieved, up from 2 percent for the same period the previous year. In the Mid-Year Report, laid in the National Assembly, on August 4, the projection for 2017 was revised downwards to 3.1 percent, on account of expected weak performance in the mining and quarrying sector, and the sugar and forestry industries.
The projected outturn for real growth of the economy, in 2017, is 2.9 percent”
The growth for 2017 ended up being 2.1%. The Ministry also failed in 2015, 2016 and 2017 to achieve its original growth targets. These are serious deviations which affect economic predictability and therefore investment decisions. Far from contradicting the Peeper’s contention, the Ministry’s own arguments confirm them.
But when it comes to fact-checking, perhaps the PRO of the Ministry of Finance would wish to fact-check her contention that in 2008 the growth rate was 1.8%. Budget 2013 of the Ministry reported the 2008 growth rate at 2.0%.

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