A Brief Recap on the GDP Data
The Turkish Statistics Institute (Turkstat) introduced very significant revisions to the National Income Accounts (NIA) data in early December, at the time of the release of the third quarter growth stats. We learnt, among other things, that we were quite a bit richer than we thought -- by about 20% in 2015 – and that, rather unusually in the light of international experience, we had also grown markedly faster, particularly since 2012. We’ve written our thoughts and puzzlements in bits and pieces earlier, but we thought a brief recap on the technical and analytical aspects of the new series would be useful.
At a technical level, the new series is a significant improvement over the old one because it adopts the latest NIA methodology (mainly ESA2010) and utilizes new databases that Turkstat has long been after, particularly the administrative tax records. There are some missing components, like a breakdown of investment between private and public sectors, but the exercise is continuing, as we understand it, and Turkstat plans to provide the data in due course.
In terms of analytical content, the revisions seem driven mainly by a massive upward adjustment to the construction sector, which is particularly evident from the expenditure side of GDP. Specifically, close to 80% of the revision in the nominal GDP level in 2015 stems from investment, and close to 80% of that, in turn, stems from construction sector investment.
These revisions solve a long-running (statistical) puzzle of the Turkish economy. Just as Robert Solow had quipped on the U.S. economy back in the late 1980s, that “you can see the computer age everywhere but in the productivity statistics”, in Turkey’s case, one could see the construction boom everywhere, except in the GDP statistics. This sure is no longer the case after the revisions.
Then again, the new series pose a few puzzles of their own, like the incredulously high growth rates for 2013 and 2015, which are hard to square with disaggregated data or anecdotal evidence, as well as a fairly high and stable saving rate throughout the 2000s, which contradicts the analytical work done earlier.
In any event, it is worth reminding ourselves that these revisions change little regarding Turkey’s broader macro narrative. In fact, if anything, having experienced a colossal construction boom accompanied by a huge debt build-up, Turkey’s adjustment challenge as well as the growth outlook appear all the more troubling now.
Now read on...
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