July 15, 2020 16:26

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Revaluation of GDP will provide a more realistic economic picture

10:01 | 14/11/2019

VCN - According to Nguyen Bich Lam (pictured), General Director of General Statistics Office (Ministry of Planning and Investment), the increase of 25.4 percent for GDP in 2010-2017 is given a honest evaluation, helping to create a new picture for the Government and ministries and policies in making policies more suitable to reality.  

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revaluation of gdp will provide a more realistic economic picture
Nguyen Bich Lam, Director General of General Statistics Office.

Could you tell us how the re-evaluation of GDP is done?

GDP is an important macroeconomic indicator, which not only reflects the size and potential of the economy but also the grounds for calculating many other important leverage socio-economic indicators. In the preparation of GDP indicator, there are many problems that need to be reviewed and evaluated both in the short and long term. Therefore, the re-evaluation of GDP in accordance with international practice will be implemented by the statistics office when there is a better source of information and new provisions on the theory and methodology of statistics. But this re-evaluation still uses the annual method to recalculate GDP, which is the production method and the usage method to ensure consistency.

Is it consistent with the reality when the recalculation makes GDP growth in the period 2010-2017 increased to 24.5 percent?

The re-evaluation of the increase or decrease in scale of GDP growth depends on the actual situation of each economy. Compared with other countries which also re-evaluated this indicator, in some countries, it only increased about 6-7 percent, but in some other countries, it increased over 20-30 percent, even 60-70 percent. When the US conducted the re-evaluation, they only updated the new methodology but GDP in 2012 increased by US$560 billion, a relative number of 3.6 percent. China in 2012-2014 also reevaluated, the GDP increased over $300 billion, the scale increased over 3 percent. But in countries in Eastern Europe, the re-evaluation of GDP created an increase of nearly 30 percent. Some countries in Africa like Nigeria increased by 89 percent, Ghana increased by 60 percent, while Germany increased by only 0.7 percent

In the re-evaluation process there will be factors that are re-evaluated. As in the US, only the methodology was changed, and their information collection was very good, there was nothing missing, so the changewas small. But in Vietnam, upon the re-evaluation, there were four groups increasing GDP and one group reducing GDP. The groups increasing GDP meant it was not possible to collect all the annual information, so it was necessary to supplement information from the general investigation and administrative records. Moreover, when investigating economic entities, they did not provide real business data and often provided lower data than reality. In addition, the increase in GDP was also due to the statistical sector re-updating according to the international methodology, re-updating the changes in the classification of economic sectors and structure updating new theory on the national account system in 2008. Only the re-update of the economic structure changed the intermediate cost coefficient and the price index of the whole country, which reduced the scale of GDP at current prices. From all these reasons, I can affirm the increase in GDP is absolutely true and consistent with Vietnam's economic picture.

revaluation of gdp will provide a more realistic economic picture
Re-evaluated GDP increases partly thanks to the addition of 76,000 enterprises. Photo: H. Diu.

The GDP increase is still high, how will this affect the economy?

The Statistics Office always works with the view of honesty and serving the country, using the most advanced methodology for consistent statistical quality. What we publish is absolutely proved to bring a real picture of the economy. From this picture, the General Statistics Office will provide consultative reports to the Government and ministries and sectors on the impacts of GDP on policies. For example, when the re-evaluation makes the scale of GDP increase, the scale of GDP per capita also increases, which reflects different consumption structures. Or when the scale of GDP increases, a series of calculation indicators according to GDP, also known as leverage indicators, related to fiscal and monetary matters will also change. At that time, the Government must review to make new and suitable policies for the economy.

I take an example in the finance sector, when GDP increases, the ratio of mobilisation to the budget to GDP decreases, then the Ministry of Finance will have to re-evaluate the actual collection and tax policies which are appropriate to enable production development or not; and whether the tax policies really raise revenue or not. Moreover, the re-evaluation of GDP has considered a series of derivative indicators, finding Vietnam's indicators are quite consistent with the region and the world. For example, the tax rate according to GDP before reevaluation was about 20-22 percent, but when re-evaluation is conducted, the rate is 17 percent, which is consistent with regional countries and proposals on developing the socio-economic development strategy in 2021-2030 and the five-year socio-economic development plan

Thank you,

Dr. Bui Trinh, Vietnam Development Research Institute (VIDERI):

Reviewing the size of GDP is usual work for most countries in the world. But when raising GDP, the tax rate on products to Vietnam’s GDP decreases, possibly leading to the tax rate of Vietnam's GDP to the world’s lowest rate. Does this raise a concern that the consumers' taxes and fees will increase to conform to the world’s practices? Moreover, with this, is the Socio-Economic Development Strategy 2012-2035 and the 2021-2025 plan which was approved by all levels and sectors based on former data still appropriate?

Dr. Nguyen Minh Phong, economist:

GDP is relative and "open" rather than immutable, depending on the economic development, the calculation method and database. But GDP is precisely the indispensable requirement to serve economies in appropriate State management. Moreover, the full calculation of GDP also meets the requirements of publicity and transparency of the economy, ensuring social justice. Therefore, the concern about raising taxes or national debt upon the GDP increase is not unwarranted, but it absolutely is not a direct consequence of right and accurate calculation of GDP.

For Vietnam, through analysis, this re-evaluation of GDP scale is not a new calculation, but only updating more accurate data. The re-evaluation will not affect the GDP growth target in socio-economic development plan and strategy, but also benefit many State budget spending indicators for development and public services. It all depends on the management objectives of the State as well as the right policies from the more accurate data of GDP.

Bình Nam (recorded)

By Minh Chi/ Huyen Trang