On the flash estimate of the fourth quarter GDP

According to the flash estimate of the fourth quarter GDP as published today, real year-on-year change of GDP is -10.5%: the decline has been very steep indeed. Overall in 2008, this would mean a 4.6% decline of GDP, provided that the adjusted data for the first three quarters and the flash estimate for the fourth quarter reflect the actual situation in the economy.

The Central Statistical Bureau (CSB) has also made major revisions to the 2007 and 2008 GDP and its components - inter alia, the GDP growth registered in the first half of the previous year now turns out to be a decline; also, the downturn in the economic activity recorded in the third quarter has actually been more pronounced. Though some of the revisions made by the CSB to the 2007-2008 data are confusing as to their justification and economic rationale, the conclusion nevertheless is that the downturn in the first three quarters of 2008 has been worse than previously estimated - -2.4% instead of -0.5%.

On revisions to statistical data

There are several revisions in the data published by the CSB that are hard to explain from the economic aspect.

First, the revised growth rates for 2007 (on a quarterly basis): as opposed to the previous publications and dynamics of all key macroeconomic indicators, the economic growth rates for the first half of 2007 have been revised downwards, while the GDP growth rates have been revised upwards for the second half of the year.

Second, right now the seasonally adjusted data suggest a technical error: the real decline of GDP in the first quarter, allegedly -7.4%, is incompatible with the dynamics of gross value added (~ -1%): it is unlikely that taxes could affect GDP to such extent. This inexplicable decline of GDP in the first quarter is followed by positive growth rates, which contradict the actual status of the national economy as well.