Growth data debate raises the risk

There is a clear link between Mark Twain and Steve Hanks.

Twain, the great American writer and humourist, had once said facts are stubborn things, but statistics are pliable.

Many years later, Steve Hanke, an American economist and a member of the advisory council of the Society for Economic Measurement, an international body that advocates for strict data standards, said: "Once you lose confidence in the statistical services, it creates a lot of uncertainty in the markets. From the investor point of view, it raises a red flag."

Hanke was referring to sudden revelation that growth in the Indian economy is overestimated by about 2.5 percentage points.  

So when figures become pliable, according to the wish of those who churn them out, it becomes difficult for stakeholders to gauge the pulse of the economy.

The question that looms now is whether the same is happening in Bangladesh. We are talking about the recent debate on the GDP growth figure, the latest being raised by the Centre for Policy Dialogue when it said "The story of Bangladesh's economic growth has become like a kite not attached to its string and spool. The data on GDP growth show no connection with the reality. Such inconsistencies act against the economy."

Before that South Asian Network on Economic Modeling (SANEM), a non-profit research organisation, termed the recent economic growth of Bangladesh as "puzzling", saying that the GDP growth mismatched with the data and various indicators of the economy.

And all these debates have been generated because Bangladesh's economic growth suddenly seems to be on an irreversible upward trend since FY16. The curve is going up and up every year in leaps and bounds, denying the normal cycle of ups and downs.

But it is hard to link this growth with other indicators such as credit flow, revenue, investment, exports, imports or remittances. And hence the debate rages.

The government says Bangladesh has been witnessing a phenomenal rise in its informal sector and the growth is generated through consumption.

The problem is, the informal sector has always been out of the purvey of GDP estimation. So even if the unaccounted for segments of the economy are growing fast, which is actually happening, that cannot explain the reported phenomenal rise in formal GDP estimation.

That is the puzzle, as many economists point out.  You cannot explain changes in what is measured by changes in what is not measured.

So with the debate on GDP growth has once again come to the fore with the CPD's observation, it is time for a proper assessment of the economy. The situation demands that the Bangladesh Bureau of Statistics provide a detailed breakdown of the raw data that underpins the current growth estimates and if any correction is needed, that be done.